Goldman Sachs: is there anybody out there?

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One scoop to start: Chase Coleman’s Tiger Global has built a large stake in private equity firm Apollo Global as the hedge fund looks outside of the technology investments that have been its mainstay in recent years in a hunt for better returns.

In today’s newsletter: 

Goldman’s partners head for the exit

Goldman Sachs registered its lowest quarterly profit in three years last month — a double-punch from a costly retreat from consumer banking and the industry-wide dealmaking slowdown.

Business was picking up in another corner of Wall Street, however: recruitment firms overseeing the departures of some of Goldman’s top bankers.

The Wall Street bank has seen an exodus of senior talent in recent months, the FT reports.

The moves have added pressure on chief executive David Solomon’s efforts to shift its investment banking fee-dependent business model into more consistent areas such as wealth management.

“Goldman people, senior people, are more receptive than ever to take a call from me,” said one Wall Street headhunter.

Among the more notable departures was that of 25-year veteran Mike Koester, Goldman’s co-president of alternatives who left in April and plans to start his own venture in the private markets. He was described by one employee as a “beloved” figure inside the bank.

Others include:

• Julian Salisbury, chief investment officer for asset and wealth management, is joining Sixth Street as co-CIO.

• Dina Powell McCormick, who ran sovereign wealth fund coverage, will join Goldman’s former co-head of investment banking Gregg Lemkau as vice-chair of BDT & MSD Partners.

• Joe Montesano, who led equity trading for the Americas.

• Senior lawyers David Thomas and David Rusoff are becoming head of legal for global markets at Citadel’s hedge fund and chief legal officer for Citadel’s market-making arm, respectively.

• Lisa Opoku, who led the Goldman Sachs Partner Family Office.

According to some current and former Goldman employees, the turnover is in part due to pay reductions in 2022 when it had to cover losses at its consumer lending unit. A $504mn writedown on home improvement lender GreenSky in the second quarter, which it bought in 2021 for $2.2bn but is already in the process of selling, has added to the pain.

Others blame a reorganisation in which the bank cut thousands of jobs and slashed bonuses last year, Solomon’s second big overhaul since taking the helm less than five years ago.

The bank says such turnover is normal. “This is history repeating itself, it’s a natural cycle — and it creates a powerful ecosystem where former colleagues become loyal clients,” said Goldman spokesman Tony Fratto. 

Goldman’s class of 425 partners — historically one of the most coveted titles on Wall Street — are selected every two years and undergo regular churn to make room for new talent.

And the belief that Goldman has long operated on is that there will be no shortage of ambitious bankers ready to climb up the ladder. “The joke at Goldman is there’s no place that can regenerate itself faster than Goldman Sachs,” said one banker who left last year.

Though some current and former employees think that the Goldmanite-to-hedge fund and private equity firm client pipeline is moving faster than usual. And those are the ones that don’t defect to rival banks.

“It’s hard to watch, really,” said one former Goldman banker. “It used to be a place that really specialised in training people, and training them to be leaders. It’s just not the same place anymore.”

The coming months will test the long-held theory that a spot in Goldman’s upper ranks carries enough clout to never stay empty for long.

Marc Rowan offers bangers on buyouts

Count Apollo Global Management chief Marc Rowan among a growing chorus of prominent investors who believe an epic run for private equity returns has ended.

On Thursday, Rowan warned of a bleaker future for the buyout industry, as dealmakers are forced to work overtime for their gains, instead of riding a wave of cheap money and soaring valuations.

“In the [private] equity business, this year has really marked the end of an era,” said Rowan, whose Apollo is one of the world’s biggest private capital groups with $617bn in assets, on a quarterly earnings call.

His comments echo a stark warning he gave last year that the good times were ending as central banks began raising interest rates.

Apollo isn’t immune. Rowan said the New York-based investment group closed its newest flagship corporate buyout fund with about $20bn in commitments, short of the more than $24bn a predecessor buyout fund raised in 2018.

But he said an environment where investors are forced “to go back to investing in the old-fashioned way” played into Apollo’s strengths as a value investor. Top private capital luminaries from Warburg Pincus head Chip Kaye and GIC CIO Jeffrey Jaensubhakij have offered similar warnings to the FT.

It appears Rowan is comfortable offering an unvarnished read on the current market backdrop because he believes Apollo is well prepared for the new era of higher rates.

Since the 2008 financial crisis, Apollo has built a colossal credit investing business that is benefiting from higher investment yields as interest rates rise and a scarcity of capital.

It owns an insurance company, Athene, that has generated a swelling tide of fees and transformed the group — best known for leveraged buyouts — into a giant lender.

Apollo has built or acquired more than a dozen platforms to originate loans, including the former securitised products unit of Credit Suisse, once a crown jewel of the Swiss bank.

These non-buyout businesses constitute more than two-thirds of Apollo’s overall assets and position it to be a beneficiary of the higher interest rate environment, Rowan said.

Earnings from the spread income it gets from managing insurance assets hit a new record in the second quarter. Apollo’s lending business originated $23bn in loans in the latest quarter to finance companies such as semiconductor group Wolfspeed, AT&T and Air France.

“We are in the beginning of a secular shift in how credit is provided to businesses and a shift that I believe will continue to gather speed,” Rowan said.

For now, investors like the warnings they hear from Rowan, even if some of his competitors may take a more bullish view. Apollo shares rose 5.7 per cent to a record high on Thursday.

Job moves

• Paco Ybarra, Citigroup’s investment banking head and leader of the bank’s biggest business unit, is to leave the group in the most significant management departure since Jane Fraser became chief executive more than two years ago.

• New York-based hedge fund Millennium Management has hired Linklaters partner Pansy Wong as international general counsel, based in London.

• Kirkland & Ellis M&A partner Roger Johnson was asked to leave the firm after news leaked that he was in talks with a rival, Financial News reports.

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