Goldman Sachs is marketing a new financing structure that would allow institutional investors to purchase capital call loans linked to their own private market funds, in a move that could reshape a growing segment of the fund finance market, according to a report by Bloomberg.
According to people familiar with the discussions, the bank’s fund finance team is proposing a structure under which limited partners (LPs) acquire subscription line facilities after they have been drawn by a fund. The arrangement would enable investors to earn interest on committed capital that would otherwise remain uninvested, while allowing Goldman to reduce the amount of capital tied up on its balance sheet.
The proposal represents the latest innovation in the rapidly expanding fund finance market, which Moody’s estimates has grown to approximately $1.3tn as private equity and private credit managers increasingly seek financing solutions that improve capital efficiency.
Subscription line facilities, also known as capital call lines, provide short-term financing secured against investors’ capital commitments. They allow private market managers to complete acquisitions before calling capital from investors and can improve a fund’s reported internal rate of return by delaying capital drawdowns.
Under the proposed structure, Goldman would arrange the financing as normal before transferring the loans to eligible investors once the facility has been utilised. The bank would retain part of the economics from the transaction while freeing balance sheet capacity to originate additional lending.
The strategy is primarily aimed at large institutional investors participating through separately managed accounts where they are the sole limited partner, although groups of investors could also participate in coordination with fund managers, according to the sources.
Investors purchasing the facilities would receive the interest generated by the loans, which sources said currently offer spreads of around 160 to 210 basis points over the relevant benchmark rate.
The proposal is designed to operate with minimal disruption to private equity and private credit fund managers, who would continue arranging subscription facilities through their existing banking relationships. Instead, the innovation changes who ultimately provides the financing, shifting exposure from bank balance sheets to institutional investors seeking low-risk, income-generating private market assets.
The initiative reflects broader efforts across the private markets industry to develop new financing structures as slower exit activity continues to constrain liquidity and increase demand for more efficient uses of capital. Market participants expect other lenders active in fund finance to explore similar structures if investor appetite proves strong.
