Together, Goldman Sachs and T. Rowe Price will provide wealth and retirement clients with more private market investing possibilities.
In response to growing demand for assets outside conventional equities, corporate bonds, and Treasury notes, Goldman Sachs Group Inc. and T. Rowe Price Group Inc. announced on Thursday that they are collaborating to provide customers with wealth and retirement investments in both public and private markets.
In a partnership between the two money-management behemoths, Goldman Sachs (GS) will purchase up to $1 billion worth of T. Rowe Price shares (TROW), as an asset class that was previously restricted to the ultrawealthy and institutional investors continues to expand to include individual investors. The investment might amount to 4.1% of the $24.42 billion market capitalization of T. Rowe Price as of right now.
While some investment professionals have warned against it, President Donald Trump has encouraged the use of nontraditional investments, such as private equity, in 401(k)s.
With Goldman Sachs acting as a third-party provider of private-market strategies, the Goldman-T. Rowe Price solutions will include co-branded target-date strategies for retirement funds. It is anticipated that the target-date strategies will go into effect in the middle of the next year.
In afternoon trading, T. Rowe Price’s stock was up 6.1%, which was sufficient to keep up with the SPX gainers in the S&P 500 index. The stock of Goldman Sachs increased 1.8%.
Illiquid solutions like private credit have been demonstrated to improve the long-term performance of retirement funds, according to Marc Nachmann, global head of asset and wealth management at Goldman Sachs.
“Everybody likes higher returns, so that’s why people should care about alternatives,” Nachmann stated. “They’re part of a diversified portfolio known to increase returns over time.”
The partnership between the two companies comes as T. Rowe Price continues to experience net asset outflows due to industry competition, according to CFRA analyst Catherine Seifert. As a result, its managed assets are still “heavily weighted” toward actively managed stocks.
“We are encouraged by this initiative as it enhances [T. Rowe Price’s] diversification and product expansion efforts, though we note no financial metrics were disclosed,” Seifert stated. She still projects a flat to 5% sales growth for T. Rowe Price in 2025.
“Trowe Price offers its leadership role in active target-date funds with retirement managers and individuals, while the Goldman Sachs brand is strong with institutions,” he said.
With T. Rowe Price holding private-credit lender Oak Hill Partners since 2021 and Goldman Sachs currently managing $3.3 trillion in assets under supervision and $540 billion in alternative assets through its Goldman Sachs Asset Management Unit, both companies have strong roots in the private markets.
The two companies want to introduce model portfolios for wealthy and high-net-worth clients that will comprise mutual funds, exchange-traded funds, privately-market vehicles, and independently managed accounts in addition to co-branded target-date strategies.
Additionally, they are developing multiasset products, such as a single investment pool that provides access to private infrastructure, private credit, and private equity in a diversified portfolio via a single vehicle. The alternative would merge private and public equity investments in the United States into a single offering.
Additionally, they intend to provide adviser-managed accounts and tailored counsel.
The two companies would combine “Goldman’s decades of leadership innovating across public and private markets and T. Rowe Price’s expertise in active investing,” according to David Solomon, chief executive of Goldman Sachs.
To create investment pools for affluent people, banks like Wells Fargo & Co. (WFC) have partnered with private-credit managers.
A new product from investment management firm BlackRock (BLK) enables 401(k) retirement participants to add private equity investments to their portfolios.
However, some in the asset-management industry have criticized private-market investing because to its lack of transparency and higher fees compared to standard equities and bonds.
