Goldman's Nachmann on Private Credit's Coming Test

In Brief:

A credit cycle is inevitable, and when it arrives, it will expose which private credit managers have maintained rigorous underwriting standards and which have succumbed to deployment pressure from evergreen fund flows. Marc Nachmann, global head of asset and wealth management at Goldman Sachs, sat down with CNBC's Leslie Picker at the firm's alternatives conference in New York to discuss how Goldman quietly built a $542 billion alternatives powerhouse over three decades—and why the coming credit cycle will create clear winners and losers in an asset class that has grown explosively during a period of relative calm.

Big Picture Drivers:

• Origination advantage: Goldman's integration with investment banking gives its private credit business access to deals competitors don't see, allowing the firm to reject most opportunities and remain highly selective

• Secondary momentum: The secondaries business is experiencing secular growth as the primary alternatives universe expands and LPs seek liquidity amid lower distributions

• Retirement opportunity: The 401(k) system represents an ideal home for illiquid alternatives, particularly for young workers with multi-decade time horizons

• Deployment pressure risk: Evergreen fund growth is creating pressure on some managers to deploy capital into suboptimal deals, potentially compressing future returns

Key Themes:

• Cycle preparation: The private credit industry has grown during an unusually calm period, and the next credit cycle will differentiate managers based on underwriting discipline and experience through prior downturns

• Platform integration: Being embedded within Goldman Sachs provides origination flow, deal access, and the ability to offer clients both private and syndicated alternatives

• Democratization with caution: Expanding alternatives access to retail investors makes sense given 85%+ of companies are private, but requires extensive education about illiquidity

• Organic over inorganic: Despite recent acquisitions of Industry Ventures and a T. Rowe stake, Goldman's primary strategy remains organic growth with a high bar for deals

Key Insights:

• Selectivity as strategy: Goldman turns down most private credit deals it sees because its massive origination flow allows the firm to be extremely selective, providing investors peace of mind that there's always another deal tomorrow

• Secondaries secular tailwind: As the primary alternatives universe grows, the secondary market—currently a small fraction of primaries—will expand disproportionately as investors seek more dynamic portfolio rebalancing

• Credit cycle differentiation: When the inevitable credit cycle arrives, it will reveal which managers maintained discipline and which compromised on underwriting, ultimately redirecting fund flows toward proven performers

• Evergreen fund complexity: Running evergreen funds requires matching today's inflows with deals that close months later, a challenge best managed when evergreen vehicles are a smaller percentage of a manager's overall universe

• Retirement as ideal alternatives home: A 24-year-old starting a 401(k) has decades before needing liquidity, making illiquid alternatives a natural fit for target date funds

• AI already affecting underwriting: Goldman's investment committee rejected a software deal two years ago specifically over concerns about AI's future impact on that business—demonstrating forward-looking credit analysis

Memorable Quotes:

• "We haven't seen a credit cycle in quite some time... We will see a credit cycle again. I don't know if it's next year, the year after or whenever, but there will be a credit cycle at some point again." — Marc Nachmann, on why managers should prepare now for inevitable market stress

• "We turn down most deals that we see and take a very very small fraction of our origination flow that we actually invest in." — Marc Nachmann, explaining Goldman's selectivity advantage in private credit

• "These are illiquid private assets... They're not semi-liquid. They're illiquid." — Marc Nachmann, emphasizing what retail investors must understand about democratized alternatives

• "I don't have deployment targets for my team because the last thing I want is anybody feeling like they have to deploy for any reason." — Marc Nachmann, on avoiding the pressure that degrades returns

• "There are stories out there of investment committees overruling teams to actually do a deal when teams say don't do a deal." — Marc Nachmann, warning about deployment pressure corrupting investment decisions across the industry

The Wrap:

Nachmann's message is clear: the private credit boom has occurred during fair weather, and the real test lies ahead. Managers who have maintained underwriting discipline, avoided deployment pressure from evergreen flows, and built experience through prior cycles will emerge stronger when stress arrives. For Goldman, the strategy combines organic growth with selective acquisitions like Industry Ventures and strategic partnerships like T. Rowe Price—all while keeping the bar high and the focus on returns over asset gathering. The coming credit cycle won't destroy private credit, but it will separate the disciplined from the desperate.