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A top Goldman Sachs executive has said that the bank’s clients in the private capital industry are “glad” that the Iran war is providing a “distraction” from questions over the sector’s exposure to software.
Kunal Shah, the co-chief executive of Goldman Sachs International and global co-head of fixed income, currencies and commodities, made the remarks on a call with clients on Wednesday, which also featured Sir Alex Younger, the former chief of Britain’s Secret Intelligence Service.
According to three people familiar with the call, which was titled “Strikes in Iran — End of the Beginning . . .?”, Shah remarked that the bank’s “private markets clients” were “just glad there’s something to talk about that isn’t software exposures and private credit”.
“And this is at least a distraction from that,” Shah added, in response to a question about the views of Goldman’s clients on the conflict.
Goldman Sachs told the FT: “He was asked a question about what he was hearing from clients and shared his observations from multiple points of view.”
Shares in listed private equity and credit firms have tumbled this year over rising fears about their exposure to software companies that could be disrupted by artificial intelligence.
Private credit firms with heavy exposure to technology companies have come under particular pressure. Shares in tech-focused lender Blue Owl Capital, which permanently restricted cash withdrawals from its inaugural private retail debt fund last month, have fallen almost 40 per cent this year.
The sector’s largest firms such as Blackstone and Apollo Global Management have also become much more focused on corporate lending rather than buyouts in recent years, meaning that they have been caught up in more general jitters around underwriting standards in the market for non-bank lending.
Corporate debt markets have been on edge since the twin bankruptcies of Tricolor Holdings and First Brands Group amid fraud allegations last September. JPMorgan Chase’s chief executive Jamie Dimon remarked in the wake of the collapses that more “cockroaches” could be lurking in credit markets.
The FT reported earlier this week that Goldman has pitched hedge funds on strategies to short private corporate loans, offering a way to bet against the debt of enterprise software companies and other industries threatened by AI.
The war with Iran has sparked wild gyrations in public markets, causing losses for some hedge funds due to volatility in energy, bond and stock prices.
Goldman’s call, which was open to its hedge fund clients, also featured commentary from senior executives in its oil and power trading divisions. Younger became a paid adviser to Goldman Sachs International in 2021.
Shah also said on the call that some of Goldman’s clients “are quite resilient” and “have lived through episodes that are similar in some ways”.
He added that “clients in the region, they’re finding it hard to adjust to these challenging risks. It remains intense.”