Custodian Goldman Sachs has introduced a new lending feature to some RIA clients on the platform. Eligible customers will now be able to borrow against several alternative investment positions in their portfolio. Until now, Goldman Sachs Advisor Solutions, like other custodians, has allowed lending against stocks 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 growing interest in alternatives. This is also part of Broader Strategy A GS RIA, the firm's coordinated efforts to bring its capabilities across divisions to the RIA community. This initiative is led by Adam Siegler, head of the third-party wealth business, Americas, within the global banking and markets sector.
This capability will enable clients to have a liquidity option where they can borrow against the value of their entire portfolio of traditional and alternative investments and not just against stocks and bonds. Fees will be based on the loan rate, as determined during the underwriting process.
“Custodians will play a larger role in the growth of RIAs,” said Jeremy Eisenstein, managing director at GSAS. “In an environment where advisors and clients demand more from us, they really expect us to be more than books and data. We're in the process of figuring out how much more we can offer and how we can make this stand out and look and feel similar to other types of offerings that they have today.”
Goldman Sachs Asset Management also has a long history of managing alternative investments. Given the firm's experience with the asset class, GSAS is positioned to provide the ability to secure private assets to enable their use as collateral. He also saw lending as an attractive feature as it adds some liquidity to what is traditionally illiquid.
“We have a full underwriting team that looks at case by case and can look at unique positions. They generate a liquidity profile and evaluate the collateral,” Eisenstein explained. “We're asking customers to bring their alts here. And our relationship with managers allows us to do superior reporting, make appraisals and ensure lending value.
Goldman has more than 1,000 different alternative investment strategies it maintains today, spanning the full spectrum of alternative asset classes. Ultimately, Eisenstein sees functionality as key to serving RIAs as demand for alternatives grows.
“We have a straightforward digital process for subscriptions, lifecycle events and the operational side. We want advisors to come here and have confidence in using these asset classes,” he said. “We are in the early stages of developing this proprietary platform. We're shedding light on the lending feature today, and empowering RIAs with additional choices is what we're going to lean on. That's one of our differentiators and I think we're just getting started.”
Ever since Goldman launched its RIA custodian a few years ago, the firm has been trying to do just that to differentiate by targeting a segment of advisors serving high net worth and very high net worth clients seeking bespoke investment products, such as structured products and other alternatives not readily accessible outside of firms such as Goldman, with its extensive teams of investments and relations with businesses and institutions.