Goldman banker: Clients ‘relieved’ by Iran war serving as a ‘diversion’

Goldman Sachs Executive: Clients Welcome Shift in Focus Away from AI and Private Credit Worries

Kunal Shah, co-chief executive of Goldman Sachs International, recently remarked that some clients are relieved to discuss topics other than the risks associated with software investments and private credit. According to reports, Shah noted that the ongoing conflict involving Iran has provided a welcome diversion from anxieties surrounding artificial intelligence and the potential collapse of private credit markets.

During a client call, Shah observed that many were pleased the spotlight had shifted away from fears that AI could undermine established business models and concerns about instability in private credit. He explained, as cited by the Financial Times, that clients appreciated having a different subject to focus on, even if it was a distraction from more pressing financial worries.

Uncertainty about how AI might disrupt technology firms has contributed to turbulence in the private credit sector, which has significant exposure to software companies. This unease has led to sharp declines in the share prices of publicly traded private credit firms. For example, Blue Owl Capital, a lender specializing in technology, has seen its stock drop by nearly 40% this year and was forced to limit withdrawals from one of its funds after a surge in redemption requests.

A spokesperson for Goldman Sachs clarified that Shah was responding to a question about client sentiment and was sharing a range of perspectives he had encountered.

Legal & General Confident in Private Credit Holdings

Meanwhile, the chief executive of Legal & General expressed confidence in the company’s private credit investments, stating that they are “very comfortable” with their current exposure. Over 20% of Legal & General’s diversified annuity portfolio—which supports its obligations to policyholders and generates necessary returns—is allocated to private credit.

Recent months have seen heightened scrutiny of the private credit market, sometimes referred to as “shadow banking,” following several notable failures, including the collapse of UK-based Market Financial Solutions.

António Simões, CEO of Legal & General, emphasized that while private credit is attracting significant attention, the company remains confident in its own positions. Chief Financial Officer Andrew Kail added that Legal & General is highly selective in its investment choices, partly due to strategic planning and partly because insurance regulations limit the types of assets they can hold.

The recent volatility in the private credit market has been most pronounced in direct lending to technology companies, a sector facing challenges from rapid AI advancements. However, Legal & General’s private credit investments are primarily concentrated in infrastructure, utilities, and real estate rather than technology.

Strong Results and Strategic Growth

Legal & General’s latest annual results revealed that assets under management in private markets have grown by nearly a third, reaching £75 billion. Simões stated that the company is on pace to surpass its goal of £85 billion in assets under management in this sector by 2028, with a significant portion invested in the build-to-rent market.

The company also announced its largest-ever share buyback program, valued at £1.2 billion, though its stock price fell by more than 6%. Core operating profit rose by 6%, slightly below analyst expectations, and the group’s solvency coverage ratio—a key indicator of financial health—declined to 210% from 232%, which RBC Capital analysts described as a notable shortfall.

Goldman Sachs declined to provide further comment on the matter.