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Goldman Sachs has agreed to invest as much as $1bn in US asset manager T Rowe Price as part of a tie-up in which the two businesses will pitch private investments to retail and wealth clients.
Goldman said on Thursday it would buy T Rowe Price shares on the open market and expected to own up to 3.5 per cent of the investment group, making it one of the Baltimore-based company’s largest shareholders.
The investment is the latest tie-up between traditional investment managers such as T Rowe Price and giants in private market investing, amid an all-out push by the industry to begin offering stakes in leveraged buyout funds and private credit vehicles to everyday investors.
Goldman and T Rowe Price plan to offer target date funds — where portfolios are adjusted over time based on a retiree’s age and expected retirement date —and model portfolios to investment advisers, mixing both publicly traded and privately held assets.
The partnership arrives as each of the major US asset managers attempts to stake out their own strategy in private equity and credit, as well as real estate and infrastructure investing.
Vanguard has formed a strategic alliance with Wellington Management and Blackstone, while Capital Group has teamed up with buyout pioneer KKR. BlackRock has forged ahead into private markets with an acquisition spree of its own, buying investment groups Global Infrastructure Partners and HPS Investment Partners.
T Rowe Price has struggled over the past five years as the investing public has shifted to low-cost exchange traded funds and passively managed bond funds over actively managed funds. That has resulted in a wave of redemption requests from clients, sending its stock down more than 20 per cent over the period before accounting for dividends.
Chief executive Rob Sharps said the deal with Goldman would build “on our broad capabilities across public and private markets to offer clients the ability to unlock the potential of private capital”.
For Goldman, the deal offers a road map for its asset management arm to tap the millions of retail investors —and 401k retirement plan participants — who may soon have access to the world of private markets.
The US investment bank has long offered private investment funds — including its flagship private credit franchise — to large endowments, pensions and sovereign wealth funds. But as those institutional investors have slowed their pace of deployment, the industry has looked to retail investors and wealthy individuals to power its future growth.
US President Donald Trump last month signed an executive order that sought to pave the way for the inclusion of private equity and credit in 401k plans, following a heavy lobbying push.
“With Goldman Sachs’ decades of leadership innovating across public and private markets, and T Rowe Price’s expertise in active investing, clients can invest confidently in the new opportunities for retirement savings and wealth creation,” said Goldman chief executive David Solomon.
T Rowe Price shares rose 8 per cent in pre-market trading to $114.07. Goldman shares were unchanged.