Goldman Sachs Group Inc. is wisely playing safe with the landmark initial public offering of its Petershill Partners Plc private-equity business. The valuation range mimics July’s successful listing of Bridgepoint Group Plc, a stock that’s already up over 50%. But investors eyeing a piece of this IPO shouldn’t assume it’s a giveaway on the same scale.

The stock market is in thrall to the private equity industry. The attraction is getting a slice of the management fees on the ever bigger funds focused on private assets such as leveraged buyouts, real estate and infrastructure. A scarcity of publicly-traded firms means IPOs get lapped up.

Goldman and Petershill must nevertheless tread extremely carefully. Petershill is not a simple buyout shop. It’s a holding company for minority stakes in 19 alternative asset managers currently owned by clients of Goldman’s asset management unit. The IPO provides them with only a partial exit. Goldman also has a strategic interest in this stock performing well far beyond day one. It will continue to manage the Petershill portfolio and may want to launch similar vehicles to bring private assets to market.

This probably explains why the IPO valuation is not as ambitious as it could be. The top of the price range values Petershill’s equity at $5.9 billion. That’s around 22 times Petershill’s potential earnings for 2022 (assuming revenue grows to $350 million, and deducting $26 million in ongoing fees to Goldman, $23 million in likely interest and costs, and 12% tax).

Bridgepoint listed at a similar multiple yet is now trading at some 36 times next year’s expected earnings, in line with Swiss peer Partners Group Holding AG. Sweden’s EQT AB is on 44 times.

Might Petershill deserve to trade that highly once listed? The fact is it’s a different business. Matching European competitors’ trading valuations will be hard. For a start, Partners Group’s rating is a reflection of years of consistent performance.

Meanwhile, the revenue stream from Petershill’s portfolio is less concentrated in private equity than EQT or Bridgepoint, as it includes not just real estate and private credit but also stakes in some hedge funds. Plus while its greater diversification means growth is less lumpy, Petershill won’t have the sudden expansion EQT and Bridgepoint show when they raise new flagship funds.

Perhaps the better benchmark is diversified U.S. behemoth Blackstone Inc. This trades on 29 times forward earnings.

The U.K. company’s smaller size — its portfolio firms manage $187 billion of assets, against Blackstone’s $684 billion — suggests it should be able to grow relatively faster. What’s more, its revenue looks unusually reliable: To compensate for being a minority investor, Petershill gets a fixed cut of its partners’ management fees, which protects this revenue from being hit by any profligate spending by the majority owners.

That could argue for a valuation slightly above Blackstone’s. But achieving this also depends on getting comfortable with Goldman’s role as Petershill’s external manager. Goldman’s resources and network can support Petershill’s existing investment firms and source new ones. The U.S. investment bank’s fee rises and falls with Petershill’s revenue, seemingly aligning their interests. Goldman nevertheless faces potential conflicts in how it serves Petershill versus other clients.

An independent board at Petershill, led by Standard Chartered Plc Deputy Chair Naguib Kheraj, will police this. That provides comfort. Still, the market may take time to price in the benefits of the Goldman tie. Investors in the IPO shouldn’t be too miffed. Even if Petershill ends up trading at a modest discount to Blackstone, that’ll still be well above where they look set to be getting in.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

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