Goldman, T. Rowe Team Up for Public-Private Offerings

There is no “I” in “team.” But there are plenty in “public-private investments.”

As access to and demand for alternatives continues to ramp up, Goldman Sachs and T. Rowe Price are joining forces. The high-powered Wall Street investment bank plans to invest up to $1 billion in T. Rowe stock with the intention of acquiring up to 3.5% of shares, the firms announced last week. Through the new partnership, the two companies will offer mass affluent and high-net-worth clients wealth and retirement products that have access to private markets. 

The team-up marks the latest collaboration between Wall Street giants in public-private investments and comes after T. Rowe experienced multiple years of outflows while Goldman’s retail ventures have floundered. “It’s a bit of a shotgun wedding,” said Jake Miller, co-founder of private markets platform Opto Investments. “Goldman may find a $1 billion investment far cheaper than building out this distribution directly and organically.”

Keep it Private

Under the partnership, Goldman and T. Rowe will offer target-date strategies, model portfolios, multi-asset products and a platform for advisors with managed retirement accounts, all of which will have access to private markets.

Private markets have traditionally been exclusive to high-net-worth clients and institutional investors due to the higher costs of entry and potentially greater risk. However, asset managers see plenty of opportunity in the mass affluent and retail investor space where access to alternatives is increasing, especially with the Trump administration’s moves to get private assets in 401(k)s.

On the path to private market dominance, many asset managers have teamed with a travel buddy or two:

• Blackstone, Vanguard and Wellington partnered for an interval fund that invests in public equities, bonds and private markets, in an effort to capture more retail investors.
• Capital Group and KKR teamed up to launch two public-private credit funds, specifically targeting retail investors.
• State Street and Apollo also launched two private credit ETFs this year.

Time Horizons. Miller said demand for private assets is growing somewhat among retail investors, and alternatives can have a meaningful place in 401(k)s, thanks to the accounts’ long time horizons and tax advantages. However, he argued many of the partnerships we’re seeing today aren’t delivering exactly what the average plan participant is looking for.

“[Paticipants] barely utilize the options available to them — 68% sit in the default target date fund — so the idea that they are clamoring for complex, semi-liquid investments is a bit absurd,” he told Advisor Upside.