A minority stake helps cement a product partnership without the baggage of a full acquisition

“Goldman did not buy a friend, it bought a fast lane into 401(k) distribution since two-thirds of T. Rowe’s assets come from retirement accounts,” said Michael Ashley Schulman, CIO at Running Point Capital Advisors.

Reporter Pritam Biswas reached out to us for our thoughts regarding Goldman Sachs taking a $1 billion public equity stake (3 1/2%) in T. Rowe Price to tap retirement savings—”Goldman takes $1 billion stake in T. Rowe to tap retirement money.”

ADDITIONAL THOUGHTS

Goldman is investing $1 billion for a 3 1/2% stake in T. Rowe Price, but the most critical number in this equation is 401(k)s👨🏻‍🔬

Goldman is buying a public stake in T. Rowe because distribution is the new alpha and retirement is the big opportunity.

A minority stake helps cement a product partnership without the baggage of a full acquisition, letting Goldman pipe its private credit and private equity engines into the enormous defined contribution and wealth channels where T. Rowe already is a major player with nearly 65% of their assets in retirement accounts via target date funds and model portfolios.

For Goldman, think of it as renting the stage rather than buying the theater. Goldman supplies the private market acts and T. Rowe Price fills the seats across defined contribution plans and wealth channels.

Better diversification is the pitch but it comes with adulting conversations about liquidity gates and appraisal based valuations that sometimes lag reality.

Long term this could be the blueprint for more partnerships more cross selling and fewer managers trying to win a price war with passive funds.

If done well the result is less reliance on the same mega-cap growth stocks and a smoother ride through rate cycles.

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