The New York-based bank is targeting to invest a quarter of its newly-raised $5.2 billion growth fund in the region, people familiar with the matter said, who asked not to be named discussing internal information.
In an interview this month, Stephanie Hui, co-head of alternative investing in Asia at Goldman Sachs Asset Management, said the bank has “dialed up” in India, while overall investors are diverting some emerging market capital that was previously earmarked for China.
“While there’s excitement about China’s reopening, the capital markets haven’t rebounded yet and deal flow consequently hasn’t fully bounced back either,” she said. “Public side investors are seeing some flows back into the stock market, but on the private side, there is still a bit of a time gap. In the meantime, India and Japan have been sharing the limelight.”
China is struggling to attract capital after the nation’s protracted Covid Zero policy and a crackdown on private enterprise, including on its biggest tech firms, stunted the economy over the past years. At the same time, India — and its fast-growing economy — has emerged as big bet for global financial firms, even though recent troubles at billionaire Gautam Adani’s business empire have dented the allure.
Also with rising interest rates and slumping stock markets, the global venture capital market has sputtered. Funding in India dropped to $2.7 billion last quarter, the lowest level in more than two years, according to CB Insights.
Asia has been the prime spot for the bank’s growth-related investments, comprising almost 50% of the total from 2003 to 2020, the people said. Goldman’s growth fund has an average investment size in Asia of $30 million to $50 million. The firm this week led a $150 million investment in Indian fintech startup InsuranceDekho, an unusually large investment round that will help it target an under-served domestic market. It has also invested Raputa Robotics in Japan, and LePure, a single-use bioprocessing solution provider in China.
Apart from India, the current bright spots are in Japan, Korea and Australia, Hui said.
The bank last year poached David Grayce from Pacific Equity Partners in Australia, rehired SJ Lee from TPG Capital for its Korea business and has built out its Japan team for growth investing to six people, said Hui, who’s also co-head of growth equity within the asset management division. Overall, Goldman now has 35 private equity investment professionals for its growth and buyout team in Asia. To strengthen its business in China, it relocated partner, Michael Hui, to Shanghai in the fourth quarter of 2022.
The firm has also beefed up its fund-raising capabilities, recruiting three managing directors, including Craig Balenzuela from Queensland Investment Corporation in Australia, Yugo Yamamoto from Guggenheim Partners in Japan and Meng Zhang from Ares Management in China. In late 2019, Stuart Wrigley relocated to Asia as head of alternative capital markets & strategy and was named a partner in November.
Last year, the firm raised $72 billion for third-party alternative platforms, including across real estate, private equity and credit platforms as part of an overhaul by Chief Executive Officer David Solomon to reduce its balance sheet investment portfolio. In 2022, the bank trimmed its on-balance sheet alternative investments by $9 billion to $59 billion, according to its latest earnings presentation.
More Balanced
While China’s economy is now improving after the nation removed its Covid Zero restrictions at the end of last year, the ongoing geopolitical tensions and political jockeying in the US ahead of the next year’s election means relations could remain strained.
“Previously, say two to three years ago, the private equity market in Asia was very concentrated toward China due to sheer scale,” Hui said in the interview. “Now we are more geographically balanced.”
Across Asia, Goldman will further build out its healthcare network and put capital to work in select enterprise software businesses and the consumer sector, while being more cautious on fintech, Hui said. In China, the team has also adjusted its focus in response to the broader environment while being “cautiously optimistic,” she said.
“We are calibrating accordingly. Our focus is on sustainability, healthcare and enterprise software, and we have investments in consumer, while being measured in tech.”