By Bill Alpert

Investors asked to redeem just 3% of the shares in a Goldman Sachs private credit fund in the June quarter. Other big funds across Wall Street have had to limit redemptions as exit requests reached 10% to 17% of their shares.

A Wednesday letter from the $17 billion Goldman Sachs Private Credit Corp. told shareholders that the nontraded business development company would repurchase the entire 3% portion of its shares, since the requested total fell below the 5%-per-quarter cap enforced at most private funds. The fund's outflow still slightly exceeded second quarter subscriptions, but its net outflow was well below the average drain experienced across the private credit industry.

The coming reports from other firms will show whether the stickiness of Goldman investors is a vote of confidence in that firm, or a sign that outflows are easing across the industry.

The Goldman letter expressed gratitude that investors kept redemptions below the 5% cap in both the March and June quarters.

"We view this as a meaningful expression of shareholder confidence — particularly during a period when the broader nontraded BDC industry is experiencing meaningful repurchase pressure," Goldman said.

Like other private credit funds, the Goldman BDC uses leverage to boost the returns on its $9.2 billion in net assets. The total return has been 2.5% this year. Since the fund's start in 2023, annualized returns have averaged 9.6%.

Investor worries about private credit have focused on three things: loans to software firms threatened by new artificial intelligence tools; loans that let borrowers skip cash interest by adding to the outstanding loan balance with "payments-in-kind" (or PIK); and loans that are in arrears, or "non-accruing."

The Goldman fund said its software borrowers are using a relatively low 7% of PIK in their loans (versus 30% at some credit funds), and that 98% of its software loans are valued at 90% of their original amount. PIK from amended or restructured loans represents 0.3% of the fund's investment income. Just one loan in the entire fund is non-accruing.

Industry nonaccrual levels have accelerated this year, said Goldman, but the acceleration is concentrated at a small number of managers.

Write to Bill Alpert at william.alpert@barrons.com

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