(Bloomberg) — Goldman Sachs Group Inc. is set to plow at least $30 billion into Asian alternative assets over the next five years after revamping its operations and starting an aggressive campaign to raise outside funds in a bid to overtake investment giants such as KKR & Co. and Blackstone Inc.
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In Asia, that means doubling investments to about $60 billion, betting on technology startups, real estate, consumer and renewable energy, said Stephanie Hui, the bank’s co-head of alternative investing in the region.
The challenge for Hui is deploying the money at a time when cashed-up rivals are bidding up valuations. Private equity firms must also navigate a Chinese regime increasingly suspicious of U.S. investments in its most-sensitive sectors, closing off once attractive targets, as well as a broad crackdown on large parts of its private sector.
Since 2003, Goldman has invested $6.3 billion in Asian growth companies alone, generating a realized gross return of 35% as of June, according to Hui. The top quartile of funds in Asia had a net return of a bit more than 20%, according to a Bain & Co. report.
Globally, the firm has already pulled in more than half of the $150 billion it’s targeting to raise for the alternatives business under a plan outlined by Chief Executive Office David Solomon in 2019. The inflows have helped swell assets under management to $416 billion, topping firms such as Carlyle Group Inc., but lagging behind KKR and Blackstone.
In an interview in Hong Kong last month, Hui offered a rare insight into how Goldman’s alternative investments are decided and what changes the team is making to navigate the political tensions that have stung investors in China.
The past year has brought a blizzard of regulation in Asia’s largest economy. President Xi Jinping’s crackdown on the private sector and push for more “common prosperity” has raised risks and put dominant firms under closer scrutiny, forcing Goldman to adjust its approach.
Hui’s team is now looking at second-tier firms with leading technology with an ambition to be sector leaders, rather than focusing on the most dominant. On top of investments in the latest enterprise software and financial services technology, it is also betting on consumer and health-care firms.
Helping Hui sift through the opportunities is a more integrated team after Solomon brought under one umbrella groups focused on private equity, credit, real estate and financial technology investing. The overhaul also included folding in the principal investment and special situations teams.
Globally, executives are now pushing to make the 3,000 …….