Redemption wave is not scary! Wall Street big banks continue to "steady their troops", Goldman Sachs decrypts the "golden code" of private lending.

Wall Street executives continue to soothe the private credit market sentiment. Kristin Olson, global head of alternative investments at Goldman Sachs Wealth Management, said on Thursday that despite recent redemptions, private credit firms will continue to attract funds due to the high premium of these investment products. The Wall Street investment bank suggests that ultra-high-net-worth clients and family offices allocate about a quarter of their medium-risk investment portfolios to alternative investments, including private credit. Olson said, "If you can stomach illiquidity risk, clearly ultra-high-net-worth clients can, we believe that the private market portion of your investment portfolio can indeed deliver real alpha. So, if you can overcome illiquidity issues, then the risk-adjusted returns are quite attractive." At the time of her remarks, at least a dozen funds have received redemption requests, including many institutions such as Apollo Global Management and Ares Management that have restricted redemptions, as people are increasingly concerned about the investment risk in software companies threatened by artificial intelligence. Private credit firms have been trying to attract retail investors for years, and in the current environment, some companies are still launching new funds. Olson said that the current private credit environment is an "educational opportunity" that will benefit investors in the long run. She added, "You will see these assets continue to grow. Some erroneous information in the past has raised some concerns, and then people started testing the redemption window." Goldman Sachs is actively working on developing its asset and wealth management division, which manages $3.6 trillion in assets, including private equity, private credit, and public investment businesses. Wall Street executives reassure investors: don't panic, there's no big problem! This week, major U.S. banks have released their financial reports one after another, with bank executives sending signals to investors that there is no need to worry. Jamie Dimon, CEO of JPMorgan Chase and a veteran on Wall Street, said during a conference call that although the size of the private credit market has reached $1.8 trillion, it is still relatively small overall and will not pose any significant risks to the entire financial system. His peers have also expressed similar views. U.S. Treasury Secretary Scott Be In addition to soothing the market, Wall Street bank executives generally believe that their own significant advantages in the lending business could turn the current challenges facing private credit into important opportunities for banks. On the one hand, top banks have granted a large amount of loans to private credit institutions, and have mature risk control capabilities. This week, major banks disclosed their respective risk exposures in the private credit sector in detail: JPMorgan Chase about $50 billion, Wells Fargo about $36 billion, Citigroup about $22 billion, Bank of America about $20 billion. Facing these sizeable exposures, bank executives not only did not shy away, but also vigorously promoted their professional capabilities in issuing such loans, while emphasizing the various buffer measures and structural protection mechanisms that have been put in place. Citigroup even pointed out that there have been no losses during the duration of its investment portfolio. On the other hand, the advantage of banks in the lending sector is expected to allow them to seize the opportunity in the private credit industry adjustment period. Most banks have been in the lending business for over a century, with some banks having a history of hundreds of years, while the current private credit industry mostly developed gradually after the 2008 financial crisis. Morgan Stanley CEO Ted Pick vividly mentioned during a conference call that the current asset class of private credit is in a "learning stage, let's call it adolescence." Jamie Dimon said that when the credit cycle reverses, "people may be surprised to find that some participants are not good at handling this type of business," and banks will eventually regain access to this business. Goldman Sachs CEO David Solomon also revealed during the financial results conference call that the asset management company under their name raised $10 billion in the first quarter for its private credit strategy, while emphasizing Goldman Sachs' "excellent performance in the private credit industry over the past 30 years," demonstrating the bank's confidence and competitive advantage in the private credit sector. As Solomon said, there may be "some debate about the private credit market." But for now, the core message conveyed by bank executives is very clear: there are no significant systemic risks in the market, and the challenges facing private credit are indeed important opportunities for banks to leverage their strengths and expand their businesses.