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Billionaire Michael Dell’s investment vehicle has agreed to back two former senior Goldman Sachs executives who are launching a private credit investment firm.
Dell’s family office, known as DFO Management, has agreed to provide the first outside capital to 5C Investment Partners, according to people briefed on the matter. Dell’s vehicle will take a passive stake in 5C and invest in the firm’s first fund, which plans to provide senior loans to mid-sized and large businesses.
The firm is led by Tom Connolly and Mike Koester, two heavyweights in the business who in their time at Goldman helped turn the bank and its asset management arm into a powerhouse in junk bond and leveraged loan markets.
The pair were part of the teams responsible for some record-setting fundraisings in the private debt sphere, records that went untested until the turn of this decade, Preqin data shows. That included a $13bn fund just before the onset of the financial crisis in 2008 as well as a $10.5bn vehicle that closed after Lehman Brothers had filed for bankruptcy.
DFO’s investment in 5C will put several names from Goldman back on the same side of the ledger. Dell’s family office is chaired by Gregg Lemkau, one of the bank’s former top dealmakers who left in 2020 to work with Dell with the mandate to supercharge the investment firm set up by the billionaire businessman.
Koester retired last year as co-president of alternatives within Goldman Sachs’ asset management division, while Connolly — who once led the investment bank’s leveraged finance business — departed as co-president of private credit in 2022.
Private credit has become fashionable in the asset management industry, with money managers piling into the area as higher interest rates damp the appeal of traditional private equity.
“We believe that the long-term outlook for credit-oriented investments is attractive and that now is an ideal entry point for our team to leverage its experience and capabilities to serve our clients,” Connolly said in a statement.
Ructions in financial markets last year, including the decision by many banks to pull back from corporate lending, allowed direct lenders such as Ares, Sixth Street, HPS Investment Partners and Blackstone to step in to finance leveraged buyouts and provide liquidity to companies in need of cash.
While banks have shown more appetite this year to fund risky transactions, even winning some deals back from private lenders, investors believe US banks will be reluctant to provide the scale of credit they willingly underwrote before the financial crisis.
That has created an opportunity for people like Connolly and Koester to pitch their investment and lending acumen. The pair plan to focus on providing senior secured loans to companies, traditionally known as direct lending, according to a filing with the Securities and Exchange Commission.
A diaspora of former Goldman executives have had considerable success in the area. Sixth Street, which manages more than $75bn, was co-founded by Goldman partner Alan Waxman. All five of the governing partners at HPS spent time at Goldman, with chief executive Scott Kapnick running the investment bank from 2001-06.
Dell’s family office has backed other outside managers before. In 2016 it invested in credit investment firm Owl Rock Capital. Now known as Blue Owl Capital, it is among the most prominent lenders in credit markets.
