(Feb 26): Goldman Sachs Group Inc has clinched US$1 billion (RM4.8 billion) from Mubadala Investment Co to scour for more private credit deals in Asia.

The Abu Dhabi sovereign wealth fund and Goldman’s asset-management arm struck a partnership to invest alongside each other in the Asia-Pacific region, with a particular focus on India. The pact follows a similar mandate the New York-based firm received from the Ontario Municipal Employees Retirement System in September.

“Some of the investors might be underpenetrated across private credit in general and they are looking at getting more exposure across this asset class,” James Reynolds, the head of direct lending at Goldman’s money management unit, said in an interview. “That’s where partnering with these powerful institutions creates a win-win.”

The US$1.7 trillion private credit market has more than doubled in size over the past five years as investors flocked to the asset class seeking higher returns. It’s quickly established itself as a permanent investment bucket for pension funds, endowments and sovereign wealth funds and become a major source of funding for companies and private equity firms.

For years, investors across the Middle East showed little interest in private debt: the asset class offered yields that were too low for their return targets. Yet higher interest rates and the market’s overall growth have recently led to a shift in sentiment.

Institutions like Mubadala and the Abu Dhabi Investment Authority have struck partnerships to strengthen their presence in the market and managers including Blue Owl Capital Inc and Hayfin Capital Management have expanded their presence in the region to drum up business.

While North America and Europe have gotten crowded with dozens of private credit firms looking to lend money directly to companies — mostly in the context of leveraged buyouts — the market is significantly less developed in Asia Pacific. Goldman is among the few private credit titans making a big push into the region. Som Krishna helps run the asset management unit’s credit business in Asia.

“What these markets need is a blossoming, growing private equity industry,” Reynolds said. “We want to partner up with investors who want to have Asia exposure and they want to go with a platform that has experience and track record.”

Private credit tie-ups have been on an upswing in the Middle East over the past year. Barclays is pursuing a partnership with AGL Credit Management with anchor capital from the Abu Dhabi Investment Authority, while Mubadala has already struck deals with Ares Management Corp and Blue Owl.

Mubadala, which has around US$300 billion in assets under management and is one of Abu Dhabi’s three main sovereign wealth funds, is looking to double its exposure to Asia by 2030 to capitalise on faster-growing economies and diversify its investment portfolio.

Goldman oversees about US$110 billion in private-credit assets and has outlined plans to double that in the coming years. In pursuit of that target, the firm recently tapped Greg Olafson as its new global head of private credit and elevated Reynolds to his current role.