Goldman Sachs Targets Australia’s Ultra-Rich for Private Banking Expansion 

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Is Goldman Sachs on the verge of uncovering Australia’s next big wealth opportunity?

Goldman Sachs, the global investment banking powerhouse, is set to bolster its local private banking arm in Australia, honing in on the country’s 400 wealthiest families as one of Australia’s most promising opportunities. This strategic move follows UBS’s recent acquisition of Credit Suisse, paving the way for UBS to re-enter Australia’s wealth management sector after a six-year hiatus.

Opportunity in Australia’s Wealth Management Sector

According to Simon Rothery, Goldman Sachs’ local chief executive, Australia’s ultra-rich represent a substantial and overlooked opportunity in the private wealth landscape of the country. These high-net-worth individuals seek attractive returns from a diversified range of assets, including cash, equities, and alternative investments like personal credit.

“[High net worth] opportunity has been overlooked in Australia,” remarked Mr Rothery. “There has been a huge amount of wealth created, plus you’ve got the dynamic of Australia being the number one migration destination for ultra-high-net-worth people.”

Targeting the Affluent Segment

Goldman Sachs aims to serve clients in Australia with investible assets exceeding $100 million, a benchmark consistent with the global average. This often corresponds to families with fortunes hovering around $500 million in Australia, many actively engaged in various businesses.

The bank’s unique approach, One GS, seeks to elevate the services provided to family offices, placing them on par with super funds. 

Rebecca Hill, Morgan Stanley’s head of wealth management, acknowledged the growing sophistication of Australian high-net-worth individuals and family offices, which require access to diverse products and investment insights.

Expanding the Wealth Management Team

To cater to this burgeoning clientele, Goldman Sachs will expand its wealth management team by adding 12 advisers. 

Notably, five of these advisers will be drawn from within the bank, highlighting the institution’s commitment to nurturing internal talent. This expansion aligns with the ongoing shift in the capital formation landscape, as fewer public deals are being executed in debt and equity markets.

Private Credit: A Lucrative Avenue

Goldman Sachs recognises private credit as one of the most lucrative avenues for wealthy clients. McKinsey’s latest asset class review reveals that global assets under management in private markets have grown at an impressive rate of almost 20% annually since 2017, reaching over $17 trillion by June last year. 

Firms such as Pacific Equity Partners and Reach Alternative Investments actively target high-net-worth individuals and family offices for fund opportunities in private markets.

“[The] returns are as good as we’ve seen in the last decade,” stated Mr Rothery.

He highlighted mid-market corporate lending to sponsor-backed European and US businesses as attractive, potentially delivering returns between 12 and 13 per cent annually.

Goldman Sachs’ private banking clients are also delving into private equity, taking advantage of 25% to 30% discounts on net asset values. Falling asset prices have compelled pension and sovereign funds to offload stakes, providing opportunities for private equity investment.

Competition and Future Prospects

As Goldman Sachs seeks to capitalise on Australia’s burgeoning wealth management market, the bank faces competition from other financial institutions. One of the main rivals is whether family offices in-house their investment teams. This indicates that private banking is not only about providing financial services but also hinges on the ability to deliver tailored and sophisticated investment solutions.

The expansion of Goldman Sachs’ private banking arm in Australia signifies the growing prominence of high-net-worth individuals in Australia’s wealth management landscape. With a focus on personal credit and private equity opportunities, the bank aims to leverage its expertise to cater to the unique needs of affluent clients, presenting them with a diverse suite of products and investment insights. 

As Australia’s wealth management sector continues to evolve, institutions like Goldman Sachs are primed to seize this unprecedented opportunity for growth and expansion.

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