Goldman Sachs raises £4.5bn for biggest-ever buyout fund

Goldman Sachs yesterday clinched the title of having the largest private equity fund in the world, saying it had raised $8.5bn (£4.5bn) of new cash to invest in underperforming businesses.

Goldman Sachs yesterday clinched the title of having the largest private equity fund in the world, saying it had raised $8.5bn (£4.5bn) of new cash to invest in underperforming businesses.

It is the latest in a heated arms race between private equity players who are rushing to raise money so that their targets can be ever-larger blue chips.

Goldman's fund raising comes just weeks after the buyout specialists Carlyle Group raised $10bn, though that was split between a $7.85bn fund for investing primarily in the US and a $2.2bn fund to seek opportunities in Europe.

Funds being raised by Blackstone Group and the New York-based Warburg Pincus are also expected to approach $10bn.

Goldman will invest more than $2.5bn of its own money in the fund, or about 30 per cent of the total. The remainder comes from fund managers and wealthy individuals, the company said.

The investment bank's decision to bolster its private equity business has raised some eyebrows. While buyout specialists are increasing their firepower, several investment banks have decided to spin off or sell their private equity businesses due to conflicts of interest with clients.

Private equity firms use investment banks as advisors on deals, providing them with lucrative fees. This sometimes rests uneasily with the buyout business if the bank's private equity arm is a competitor on a deal.Richard Friedman, the head of principal investments at Goldman, said the bank "will continue to participate in the corporate buyout market".