BREAKINGVIEWS-Goldman’s new retail gambit is all about control

By Stephen Gandel

NEW YORK, Sept 4 (Reuters Breakingviews) - Goldman Sachs GS.N boss David Solomon is living by the old adage: if at first you don’t succeed, try again. The Wall Street firm stumbled in its big push to snare the masses with retail bank accounts. Now, it’s teaming up with asset management giant T. Rowe Price TROW.O to stuff its in-house bundle of private equity, infrastructure and credit into funds for individual investors. Solomon might not be going it alone this time, but the unusual twist on a wave of recent such tie-ups ensures he stays firmly in control.

Investment banks are somewhat late to the party when it comes to linking so-called alternative assets with retail products. In March, buyout shop Apollo Global Management APO.N announced a partnership with State Street, one of the largest providers of individual investor-focused exchange-traded funds, to launch a novel product blending public and private credit. A month later, Blackstone BX.N unveiled its own deal with index giant Vanguard and fund manager Wellington.

Linking arms is unusual for Goldman, which tends to be one of the biggest control freaks on Wall Street. It long nurtured its own alternative asset division, despite a regulatory clampdown, rather than just distributing buyout funds run by others. This is also true in the rapidly growing realm of private credit, even as peers like Citigroup C.N and Wells Fargo WFC.N sealed partnerships with the likes of Apollo or Centerbridge. It’s clear who is in the driver’s seat for this new deal, though: Goldman will buy up to $1 billion worth of T. Rowe Price’s public stock, giving it a stronger voice in the tie-up.

A careful approach is needed to calm any investors with a nasty sense of deja vu. Goldman has retreated from a retail banking push once central to Solomon’s strategy. Its core businesses of investment banking and trading also seems in less need of spicing up, given that a rebound in both has lifted shares by more than 50% in the past year.

This new push seems much better-timed. For a start, T. Rowe’s share price has languished since 2021, making for an attractive entry point for Goldman. Think bigger-picture, though, and Americans have about $12 trillion in 401(k)s and other similar retirement accounts, according to the Investment Company Institute. Last month, Donald Trump signed an executive order that seeks to open these plans up to private equity and other alternative assets from which they long steered clear. Better yet, this opportunity is still early enough that Goldman won’t be battling with long-established incumbents. For DJ-in-chief Solomon, it all strikes a much less discordant tune than his last gambit for the masses.

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CONTEXT NEWS

Goldman Sachs and T. Rowe Price announced a partnership on September 4. The two firms plan to create target date funds and other investment products aimed at retirement accounts that blend public and private assets. As part of the deal, Goldman Sachs is investing directly in T. Rowe Price, spending up to $1 billion to buy a stake in the asset manager through open-market purchases.