Corrects to say first Goldman-T. Rowe alternative investments will be offered to wealthy clients by year end instead of retirement accounts in headline and first paragraph.
Goldman and T. Rowe Price to offer alternative investments for retirement accounts
New investments include private credit and equity, targeting $9 trillion in 401(k) accounts
Products tailored for different clients, with limits on alternatives in portfolios
By Tatiana Bautzer and Saeed Azhar
NEW YORK, Sept 15 (Reuters) - Goldman Sachs GS.N and asset manager T. Rowe Price, which announced a partnership earlier this month, plan to begin offering new alternative investments for wealthy clients by the end of the year, their executives told Reuters.
The plan comes after an executive order by President Donald Trump broadened access of 401(k) retirement accounts to alternative investments such as private credit, private equity and others. The move could give private asset managers access to about $9 trillion under management in 401(k) accounts.
Goldman and T. Rowe recently struck a deal in which Goldman will become a shareholder in the asset manager, taking a stake of up to $1 billion. Both will partner to offer products to retail investors. T. Rowe manages $1.6 trillion, of which around $1 trillion is retirement-related.
The alternatives will be tailored to different types of clients at the end of the year through the first quarter, T. Rowe CEO Rob Sharps told Reuters in an interview.
Some will be funds with a targeted retirement date, which are popular among investors. The portfolios would have a small portion invested in alternative assets and the rest in public and liquid investments. The proportion of alternatives may be reduced as the investor's retirement date approaches.
Other products, directed exclusively at wealthy clients, will be alternative portfolios mixing private credit, equity, or equity funds mixing private equity and stocks. They will begin to be offered to Goldman and T. Rowe clients, but may be distributed more widely.
"The idea is to be able to open the products to everybody," said Marc Nachmann, Goldman's head of wealth and asset management.
After the approval of alternative investments in retirement funds, analysts pointed to risks such as lack of liquidity and transparent pricing.
"New structures can provide some element of liquidity and daily pricing to give more comfort to individual investors," Sharps said.
There will be limits to the proportion of portfolios that can be allocated to alternatives, and managers will include alternatives in funds with retirement dates decades away, with the objective of getting higher returns.
"It's still very early days, today investors in alternatives are mainly large institutions as endowments or high net worth individuals," Nachmann said.
In the long term, alternative investments in retirement accounts could rise to 10% to 20% of the total, Sharps said.
The initial discussions for the deal began a year ago, when Sharps and Goldman President John Waldron talked about the convergence in markets and growth of private assets. The companies have a long relationship, and substantive deal talks began in the early summer, Sharps said.
(Reporting by Tatiana Bautzer and Saeed Azhar, editing by Lananh Nguyen and Sharon Singleton)
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