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Goldman Sachs Plans $19-$20 Billion Leveraged Buyout Fund

Reuters
WATCH LIVE

Goldman Sachs Group Chief Executive Lloyd Blankfein said Tuesday the investment bank expects to raise around $19 billion to $20 billion for its next private equity fund.

"It might be a little more, it might be a little less," Blankfein told shareholders at the company's annual meeting in New York City.

That amount would make the fund much larger than those being raised by its prized private equity clients, increasing the chances that Goldman will compete with them on deals. Reports of the projected size of Goldman's fund surfaced last month.

Goldman's fund would be bigger than that of private equity firm The Blackstone Group, a major Goldman client that has raised $18.1 billion so far for its next fund, according to the prospectus for Blackstone's pending initial public offering.

Goldman's fund would also exceed the $14 billion raised last year by another private equity client, Texas Pacific Group, and the roughly $16 billion expected to be raised by
client Kohlberg Kravis Roberts.

Another client, Carlyle Group, is said to be targeting $15 billion for its next fund. The megafund will allow Goldman to take part in large leveraged buyouts that its private equity clients compete for. Private equity firms dole out billions of dollars in fees to Wall Street every year.

Goldman's approach to private equity investing is unique because all other investment banks have shrunk or spun off their buyout arms, fearing that they would interfere with LBO clients. Morgan Stanley , for example, is targeting a buyout fund of around $6 billion, according to sources.

Private equity funds buy companies by borrowing most of the money. Then they restructure the businesses and sell them later.

Goldman's buyout arm, known as GS Capital Partners, has been hugely successful in its private equity investments, with recent deals including the purchase of oil and gas pipeline company Kinder Morgan .