NEW YORK - Goldman Sachs Group Inc. has raised a $1 billion fund to acquire stakes in venture capital and buyout partnerships from other investors, according to people familiar with the financing.
The new fund is designed to help Goldman profit from the bursting of the Internet bubble that Wall Street helped create. The firm plans to buy stakes in companies - usually at a discount to their net asset value - held by others seeking to exit investments they have held for as long as 10 years.
"The demand by investors for liquidity is higher today than it has been in the past," said Stephen Can, a managing director at Credit Suisse First Boston Corp. who oversees that firm's $832 million pool to buy interests in venture and buyout funds.
Analysts and investors say Goldman, which last year raised $5.25 billion for its own venture capital investments, is betting that the original investors' need for cash now will enable Goldman to pick up assets whose returns will beat benchmark indexes.
Investors, such as pension funds and wealthy individuals, are cutting back on private equity because the plunge in technology stocks has dried up the market for initial public offerings and reduced the value of their holdings.
"It's probably a good time to be investing in secondaries, because a lot of people are looking for liquidity," said Chris Wagner, investment officer for alternative assets at the Los Angeles County Employees Retirement Association.
Andrea Rachman, a spokeswoman for Goldman, declined to comment.
As many as a third of the U.S. venture capital firms are expected to fail because of losses stemming from the collapse of Internet start-ups, according to a survey of Silicon Valley and East Coast venture capitalists released this week.
Analysts estimate between 1% and 4% of the funds raised each year get new owners as investors exit them early. Institutions may weed out older funds or poor performers, while individuals needing cash may sell their stakes in venture capital funds as young as two years.
General partners of a buyout or venture fund usually must approve transfers of ownership, and secondary sales don't necessarily indicate that the funds aren't performing well. Institutions routinely adjust their holdings to meet allocation targets for different types of assets.