AGM Unscripted: Goldman Sachs' James Reynolds - From Mezzanine to Moats: Over a Quarter-Century of Goldman Sachs Private Credit

What It Covers

James Reynolds, global co-head of private credit at Goldman Sachs Asset Management with over 25 years experience, explains how Goldman built its private credit business starting in 1996, the importance of selective underwriting over rapid deployment, and why origination capabilities combined with Goldman's broader ecosystem create competitive advantages in a market now approaching $3 trillion.

Key Questions Answered

• •Investment Culture Over Deployment: Successful private credit requires saying no frequently and maintaining cautious underwriting standards rather than forcing capital deployment. Goldman slowed deployments over the past 12 months in markets showing overheating signs, redirecting capital to better opportunities. Teams need experienced members who have weathered multiple cycles together and maintain transparent decision-making where analysts and partners equally voice opinions during investment screenings.
• •Origination Moat Through Ecosystem Access: Goldman's 700-plus portfolio companies create barriers for new entrants who cannot access these relationships without undercutting pricing significantly. The firm covers 12,000 corporates through banking relationships, providing access to financing opportunities six months before deal announcements. This early-stage involvement allows conviction building through direct management team access and proprietary due diligence before competitors enter discussions.
• •Performance Dispersion Emerging After Rate Cycle: The 2022 shift from zero to 5 percent interest rates marked a new cycle start, now three years in, exposing capital structures unfit for current conditions. This environment creates the first significant performance dispersion across private credit managers in 15 years. Platforms lacking restructuring expertise and board-level operational capabilities will underperform as lenders increasingly take control of distressed assets requiring active management.
• •Europe Offers Structural Advantages for Incumbents: Goldman invested slightly more capital outside the US over the past decade, with Europe providing complexity that favors established players. Fragmented jurisdictions, multiple regulators, language barriers, and varied legal frameworks create pricing opportunities and relationship moats. New entrants face higher infrastructure costs and must undercut pricing to access deals, disadvantaging their investors while established 28-year relationships provide preferential deal flow.
• •Technology Disruption Requires Proactive Underwriting: Credit investors must assess AI and technology disruption risks across all industries, not just tech sectors. Goldman turned down opportunities two years ago based on AI disruption concerns, demonstrating forward-looking risk assessment. The firm leverages internal Goldman technology teams as reference customers, interviewing engineers about software selection criteria, performance metrics, and competitive alternatives to gain unfair advantages in underwriting technology-dependent businesses.