Private markets: A haven from turmoil?

[Goldman Sachs]( [BRIEFINGS] July 14, 2022 Can Private Markets Resist the Downturn in Public Markets? There are signs that private market fundraising has cooled slightly, but it’s [far from drying up](. Globally for the first half of this year, the number of series-stage deals that are larger than $100 million has fallen 8% and the volume of capital raised through those deals has fallen 22% compared with 2021. This is still about 55% and 28% more than the five-year average, respectively, according to PitchBook. Some of the capital has shifted to earlier- and mid-stage companies that won't go public for quite some time. And while hedge funds make many news headlines, pensions, sovereign wealth funds and family offices — which may have a longer time horizon for investments — are also a core part of the private-market ecosystem. “Companies advancing the technological revolution can be financed by patient capital, though there is a heightened focus on valuation and timelines to important milestones,” says Gaurav Mathur, head of U.S. equity private markets in the Investment Banking Division at Goldman Sachs. [Read the full article on how private markets are holding up amid stock market turmoil](. Private credit, meanwhile, has also evolved even as it faces headwinds. Historically, investors in private credit consisted of institutional investors, pension funds and limited partners, says James Reynolds, global co-head of private credit within Goldman Sachs Asset Management, in the[latest Exchanges at Goldman Sachs](. “You’re now seeing different types of vehicles targeting retail investments around the world…which is fueling the growth of this particular asset class,” he tells podcast host Allison Nathan. Private credit is also gaining breadth and depth. “One of the fascinating developments of the last couple of months has been these large LBO transactions that have been entirely funded on the private side. That's a paradigm shift,” says Lotfi Karoui, chief credit strategist and head of the credit research group in Goldman Sachs Research. “Private markets have also demonstrated their ability to commit and allow investors to deploy capital in these multibillion type of transactions.” But borrowers may face higher interest rates. “The reason is direct lenders lend in floating-rate terms. And so, if you think about it, what's going to happen over the next two to three quarters is an immediate shift in the cost of funding for these borrowers, and not all of them will have the ability to withstand that,” Karoui says. [Listen to the full podcast on how private credit has evolved.]( [Read article]( [Listen to podcast]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Can%20Private%20Markets%20Resist%20the%20Downturn%20in%20Public%20Markets%3F&body=https%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3D72llixuBtCg%26list%3DPLIyiGQywEp66lKvfhiDbiuZnCboYneuX2%26index%3D1) KKR’s Tara Davies: Finding Infrastructure ‘Opportunities’ in Uncertainty Being an investor isn’t easy, especially against a backdrop of slowing economic growth, rising inflation and geopolitical conflict. But KKR’s Tara Davies, global head of core infrastructure, is in the enviable position of investing across assets that can weather rising prices better than most. In the latest episode of [Exchanges at Goldman Sachs: Great Investors]( Davies tells Alison Mass, chairman of Goldman Sachs’ Investment Banking Division, that she and her team are focused on businesses that have pricing power at the top line. “A lot of infrastructure assets do genuinely have an inflation pass-through mechanic in the revenue line and they tend to catch up with inflationary conditions over time. So a pivot to real assets is what we’re seeing from a lot of our investors as a consequence of current market conditions.” Digital disruption — another structural force that is reshaping the economy — is also unlocking new opportunities for investors. “When I started in infrastructure, there was no such thing as an asset class that was digital infrastructure,” Davies says. “And I know everybody always talks about infrastructure being boring, but what people forget is that people’s needs actually change over time. And therefore, infrastructure actually has to adapt to the needs of people and service them in different ways.” That’s not the only reason Davies stands out. She also has an original approach to teamwork and transparency. The reason she thinks her team invests so well is because she champions a kind of constructive contentiousness and urges them to call out her blind spots and biases. “Advice is best received from those who know you very well,” Davies explained. “I tend to kind of leverage off the KKR partners within the infrastructure team because they know what my biases are in the space. They're very happy to tell me when they don't like something.” Subscribe wherever you get your podcasts [Spotify]( | [Apple]( | [Google]( | [Stitcher]( [Listen to podcast]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=KKR%E2%80%99s%20Tara%20Davies%3A%20Finding%20Investing%20%E2%80%98Opportunities%E2%80%99%20in%20Uncertainty&body=https%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3DH5E-qdbwCJ0) Small Businesses Are Braving a Stormy Outlook Small businesses are the first to be[buffeted by difficult economic conditions]( but even for the most agile and experienced among them, the current operating environment is particularly rough. Many small businesses were slammed when the COVID-19 pandemic tore through the global economy, and from surging gas prices to staff retention, the challenges keep coming. According to a June survey of more than 1,500 members of Goldman Sachs’ 10,000 Small Businesses program, 78% of small business owners believe the economy has worsened in the last three months, and 93% are worried about the U.S. economy experiencing a recession. This is a stormy outlook, but there are two reasons for optimism: the creativity, resourcefulness and fortitude of America’s small business owners, and their support for bipartisan policy solutions, including reauthorizing and modernizing the Small Business Administration. To learn more about bipartisan policy solutions that will help small businesses, their employees and their communities, visit the [10,000 Small Businesses Voices policy page](. Or, visit the [10,000 Small Businesses Summit page]( to learn more about Goldman Sachs’ 2022 Summit: Small Business. Big Voice. [Read more]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Small%20Businesses%20Are%20Braving%20a%20Stormy%20Outlook&body=https%3A%2F%2Fwww.goldmansachs.com%2Finsights%2Fseries%2Fexchanges-at-goldman-sachs%2F) BRIEFINGS Brainteaser: A Key Moment in French History Today is Bastille Day: The date commemorating the 1789 storming of the Bastille, a military fortress and prison in Paris. The act became a rallying cry for French revolutionaries. The key to the fortress has become a prized artifact. Do you know where it is kept now? A) The Louvre, Paris B) Mount Vernon mansion, Virginia C) The Tower of London, London D) Statue of Liberty Museum, New York [Check the answer here.]( [Take quiz]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=BRIEFINGS%20Brainteaser%3A%20Unlocking%20the%20History%20Behind%20Bastille%20Day&body=https%3A%2F%2Fwww.goldmansachs.com%2Finsights%2Fseries%2Fexchanges-at-goldman-sachs%2F) Goldman Sachs Media Highlights CNBC - July 12 [Goldman's Samantha Dart: The risk that Europe doesn't have enough gas to get through the winter is a very big issue]( Reuters - July 12 [Goldman hires Google exec to co-head applied innovation unit]( CNBC - July 12 [Expect S&P to trade in range between 3,700 and 3,900, says Goldman’s Kostin]( (3:58) [Subscribe]( [Unsubscribe]( Some of the images used in this newsletter are sourced via Getty Images. 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