Goldman Sachs’ custodian has rolled out a new lending feature for some clients of RIAs on the platform. Eligible clients will now be able to borrow against some alternative investment positions in their portfolio. Up until now, Goldman Sachs Advisor Solutions, like other custodians, has allowed lending against equities and bonds, but not private assets.
The new lending feature is a collaboration between Goldman Sachs Advisor Solutions and Goldman Sachs Bank USA. It is exclusively available to clients with assets held on the GSAS platform and is in response to the growing interest in alternatives. This is also part of the broader One GS RIA Strategy, the firm’s coordinated effort to bring its capabilities across divisions to the RIA community. That initiative is led by Adam Siegler, head of the third-party wealth business, Americas, within the global banking and markets division.
This capability will enable clients to have a liquidity option where they can borrow against the value of the entire portfolio of traditional and alternative investments rather than just against stocks and bonds. Fees will be based on the rate of the loan, as determined during the underwriting process.
“Custodians will play an increased role in the growth of RIAs,” said Jeremy Eisenstein, managing director at GSAS. “In an environment where advisors and clients are demanding more of us, they really are expecting us to be more than books and records. We’re in a process of figuring out how much more can we offer and how can we make this this familiar and look and feel similar to other types of offerings they have today.”
Goldman Sachs Asset Management also has a long track record managing alternative investments. Given the firm’s experience with the asset class, GSAS is positioned to provide the ability to underwrite private assets to enable them to be used as collateral. It also saw lending as an attractive feature since it adds some liquidity to what are traditionally illiquid investments.
“We have a full underwriting team that looks on a case-by-case basis and can look at unique positions. They generate a liquidity profile and assess collateral,” Eisenstein explained. “We are asking clients to bring their alts here. And our relationship with managers allows us to do above-line reporting, to do valuations and to underwrite to provide the lendable value.”
Goldman has more than 1,000 different alternative investment strategies it custodies for today, running the full spectrum of alternative asset classes. Ultimately, Eisenstein sees the functionality as key for servicing RIAs as demand for alternatives grows.
“We have a straight-through digital process for subscriptions, life-cycle events and the operational side. We want advisors to come here and have confidence on the use of these asset classes,” he said. “We are in the early innings in developing this proprietary platform. We’re shining a light on the lending feature today, and empowering RIAs with additional choice is what we are going to lean into. This is one of our differentiators, and I think we’re just getting started.”
Since Goldman launched its RIA custodian several years ago, the firm has tried to differentiate itself by targeting a segment of advisors serving high-net-worth and ultra-high-net-worth clients looking for bespoke investment products, such as structured products and other alternatives not easily accessed outside of firms like Goldman, with its extensive investment teams and relationships with businesses and institutions.