Goldman Sachs has emerged as the lead bidder in negotiations to acquire Palmer Square Capital Management, a Kansas-based manager of collateralized loan obligations with approximately $37 billion in assets under management. While a transaction may not ultimately be completed, the discussions signal Goldman’s strategic push to strengthen its position in alternative credit markets and compete more directly with established players in the space.
Collateralized loan obligations are investment structures consisting of pools of floating-rate loans, typically those below investment grade, that offer investors the potential for above-average returns in exchange for accepting elevated default risk. The appeal of these instruments has grown substantially in the current interest rate environment, as they can generate double-digit yields when rates stand around 5 percent. The structures incorporate various protective mechanisms, including diversification of underlying collateral and layered safeguards designed to mitigate risk exposure.
The timing of Goldman’s pursuit reflects strong market dynamics favoring CLO expansion. The global CLO market reached $1 trillion in 2021 and has since grown to rival the size of the US high-yield bond market. Additionally, retail investors have shown increasing interest, with more than $10 billion in CLO assets now held across exchange-traded funds. The sector has also demonstrated resilience during market turbulence, historically weathering downturns more effectively than high-yield and corporate bonds.
Goldman’s potential acquisition would position the bank to capitalize on robust investor demand while the private credit sector experiences a liquidity squeeze. The move represents part of a broader competitive dynamic, with other alternative asset managers making significant CLO moves. Blackstone’s flagship private credit fund sold a roughly $450 million CLO deal, while Ares Management priced a second European CLO offering. Apollo secured new credit line financing to support its debt origination and acquisition activities, following a previously issued $700 million CLO.
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