00:00Elsewhere in the world, Goldman is revving up its deal-making push.
00:03Sources telling Bloomberg the bank has emerged as the lead bidder to acquire Palmer Square,
00:08a credit manager that oversees $37 billion.
00:11Bloomberg Chief Wall Street Correspondent Srinath Rajan joins us for more.
00:15So Palmer Square, I take it, mostly does CLOs.
00:17Why would Goldman be interested in this?
00:19Well, you have to go back to last week when David Solomon was speaking at an industry conference,
00:23and he was explaining on stage the rationale for the spree of deals
00:26that we have seen from Goldman Sachs over the last year.
00:28And he was very clear, wherever we have gaps, we want to close that gap.
00:32So if there are opportunities, they want to pounce on that.
00:35And that's been visible over the course of the last 12 months.
00:38In fact, one of the most interesting side stories out of Goldman Sachs in the last year for me,
00:42yes, everyone's been focused on the deal-making pace and the trading activity.
00:45And yes, they have been going gangbusters,
00:48but it has also given Goldman the cover to go out and look for deals,
00:53allowing it to bulk up its $4 trillion asset manager.
00:56Remember the story here, Goldman Sachs is the preeminent advisor on corporate takeovers,
01:01but it doesn't really, historically, doesn't do a good job in acquiring businesses.
01:06That's something that they've been trying to change.
01:08They're not going after massive deals.
01:10They're going after small deals that are very specific in certain niches.
01:15That can fill some gaps.
01:16Goldman is not a big issuer of CLOs.
01:18That's why their interest in Palmer Square right now makes sense.
01:22CLOs kind of raise a red flag when I start seeing people buying them.
01:26I was at the Fed during the crisis.
01:27This was kind of the core.
01:28But these aren't the same kind of things anymore.
01:31These are more about data centers.
01:32These are different.
01:33These aren't necessarily just consumer loans, right?
01:35So is this like part of a broader push by Goldman or, you know,
01:38into a more diversified loan portfolio?
01:41Or like, how do I want to think about it?
01:42Because it kind of does sound a little alarming at first.
01:44Think about it more in terms of a diversified business as an asset manager must have.
01:48Not necessarily your view on the corporate loan market or the corporate loans getting bundled into bonds
01:53and being turned into CLOs right now.
01:55Because if you think about that asset class, especially in the U.S.,
01:59CLO, the market for CLOs has more than quadrupled in the last 15 years.
02:02We're now talking more than $1.3 trillion of U.S. CLOs outstanding.
02:07So whether the Fed is hiking rates or reducing rates, whether it is risk on or risk off,
02:12that might have an impact today and tomorrow and the next week,
02:15but does not impact the sustainability and the durability of this asset class.
02:19So if this asset class is here to stay,
02:22and you're one of the biggest alternative investment managers,
02:25which Goldman does believe it is, it is one of the top five, top six,
02:28but it doesn't have the same sort of CLO machine like some of the other bigger managers
02:32like Carlyle and Blackstone and BlackRock and the others,
02:34that's what Goldman is trying to solve for if they go ahead and pull the trigger on this deal.
02:38So I love, like, whenever I talk to the private credit people from Goldman Sachs,
02:41they're always like, we've been in private credit for so long.
02:43Like, we are a behemoth here. Don't discount us.
02:46But what do you make of the fact that along with this,
02:48so many of the deals, be it the ETF one they did or otherwise,
02:52are specifically around the asset management business?
02:55I mean, that's the only place where they're looking.
02:57In fact, you can make an argument,
02:58you don't really need to grow the banking side or the trading side.
03:01You're really top of class there anyway.
03:03So why would you want to grow there?
03:05This is the part of the business where they need to grow.
03:07They have had a very strong merchant banking franchise.
03:10Just on the traditional asset management side, not so much.
03:13That's why a couple of the deals we've seen gives them scale on the active ETF front,
03:17the Innovator Capital deal, the NEOS deal that they announced last month.
03:20So those two deals actually immediately scales them up in active ETFs.
03:23If they go ahead with Palmer Square, that can give them optionality on CLOs.
03:26But what is clear is they're actively on the hunt.
03:30So if this deal comes through great, even if it doesn't come through,
03:33they will be looking for other opportunities.
03:35Because when Goldman Sachs CEO goes out there and says,
03:38will we be looking for more deals?
03:40Yes, probably.
03:41You should take that as a very strong signal
03:43because he's very deliberate about the kinds of words he chooses.
03:46And that's the signal he's giving the market right now.
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