Getting the Best out of Private Markets Portfolios
With the number of public companies in the US having fallen by 50% in the last 25 years, it is becoming clear to many investors that the widest range of opportunities now lies in private, rather than public markets. However, with many investors still structurally underweight to private markets, are they making the most of their private markets allocations? In this paper, we argue that investors need to be more active in the management of their private markets portfolios in order to achieve their return objectives.
Thematic investing is key to unlocking value
Coming out of the sharpest contraction since the Great Depression, the world continues to adjust to a new economic reality. While the initial recovery has been strong, we believe there are still clouds on the horizon, including inflationary pressures and more modest growth prospects. To navigate this environment, we maintain strong conviction in our transformational investing approach, which combines thematic sourcing with hands-on value creation.
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In our latest Quarterly Loan Market Commentary, we look at how the US leveraged loan market is poised to shatter all records, with issuance close to 2017 highs, and the appetite of loan buyers, who continue to look past uncertainties in the market. In Europe, the red-hot issuance market has pulled back but with Q3 new CLO issuance hitting record levels, additional CLO warehouses opening, and a healthy new loan issue pipeline slated for Q4, this pause should be short lived. Our spotlight topic looks at the rapid improvement in default rates over the past year and how, while the worst of the COVID crisis seems to have passed, not all pandemic-related issues have yet been resolved.
Meet our D&I Leadership Team
In this PG perspectives post, we speak to Kelly-Marie Henry, Senior Compliance Officer and leader of Partners Group's Black Network. Kelly-Marie has been at the firm since 2013, joining as a junior member of the compliance team in London and now based in New York with responsibilities spanning the US and Canada. In this post, Kelly-Marie tells us about her journey at PG, the priorities of the Black Network, and how private markets offers opportunities for graduates of all backgrounds.
In our latest Quarterly Loan Market Commentary, we look at how the US and European loan markets were very much open for business in Q2 2021, repeating a familiar theme of the last three quarters, with investors having shaken off most COVID-related concerns.
In the US, the post-COVID "re-opening trade" remained center stage, boosting appetite for both new-issue and secondary-traded loans across all sectors. Meanwhile in Europe, private equity firms launched numerous buyouts, tapping both the loan and bond markets at levels not seen since before the Global Financial Crisis.
Meet our D&I Leadership Team
In this PG Perspectives post, we speak to Antony Esposito, one of our Diversity & Inclusion leaders and co-Head of our LGBT+ Network. Antony has been at Partners Group for over eight years, joining as a junior member of our client solutions team and rising to Head UK Consultant Relations and Head UK DC Client Solutions. In this post he tells us about how significant D&I has become for clients and consultants, and why we should all celebrate Pride Month.
Measuring and managing impact at Grassroots
In this case study, we outline the ESG initiatives Partners Group has introduced at Australian renewable energy platform Grassroots to help reduce the environmental impact of its wind farms and protect local flora and fauna species. In addition, Partners Group has also established community benefit funds for each of the company's wind farms which will contribute to local organisations and projects.
Protecting health & safety at Ammega
In this case study, we outline the ESG initiatives Partners Group has introduced at portfolio company Ammega in order to enhance its approach to health & safety and reduce the risk of serious incidents. These initiatives have led to a measurable improvement across key metrics, including Lost Time Injury Frequency Rate, and resulted in Ammega becoming a health & safety best practice example in our portfolio.
Meet our D&I Leadership Team
In our latest PG Perspectives post, we speak to Claude Angéloz, Co-Chair of our Diversity & Inclusion Committee and Sponsor of our LGBT+ Network. Claude has been with Partners Group for more than 20 years, joining the firm as employee number 33. In a Q&A, he shares with us what inclusion means to him and what he has enjoyed about working at Partners Group all these years.
Why does technology adoption and integration vary so much across different sectors? How can private equity firms transform fast-growing technology businesses? What are the biggest future trends in the technology sector?
Fresh from Partners Group's recent exit of US digital engineering services business GlobalLogic, at a valuation of USD 9.5 billion, our Head of Private Equity Technology Bilge Ogut looks to address these questions and more in this new Q&A.
Bilge also discusses the outlook for the technology sector in the post-COVID era and how Partners Group's thematic investing approach is helping it identify opportunities.
In the latest issue of our Quarterly Loan Market Commentary, we analyze the red hot conditions in the US loan market, which saw the highest quarterly volume of new institutional loan issuance on record. Investors quickly jumped out of the gates at the start of the year, as growing cash balances, attractive CLO issuance conditions and a growing optimism over a post-COVID economic recovery fueled investor demand. The European loan market also experienced one of its busiest quarters on record. However, despite attractive headline numbers, investor demand was left unsatiated, as new money loans only made up a small portion of total loan issuance, meaning investors had to turn to the secondary loan market or the bond market to satisfy their demand.
We also shine a spotlight on inflation, which has resurfaced as a popular topic in financial markets following the fiscal stimulus measures taken in response to the pandemic, and reflect on its potential impact on debt markets.
TRANSFORMATIVE TRENDS | Power Reliability and Flexibility
The conversation around enhanced power stability is more pertinent today than ever as we continue to witness the increasing impact of climate change. As we work to transform assets that support the energy transition, securing our power supply remains a critical issue.
In the latest episode of Partners Group's 'Transformative Trends' podcast series, Julien Bedin, Lead Infrastructure Investment Researcher, discusses Power Reliability and Flexibility, highlighting the role natural gas can play in supporting the energy transition, and why power stability will be an attractive opportunity for infrastructure investors for many years to come.
POWER RELIABILITY AND FLEXIBILITY
The global shift to net zero carbon is one of the key sector themes driving our sourcing strategy across the infrastructure asset class. By 2050, more than 60% of global power production will come from renewable sources, where this is less than 20% today, increasing the need for a resilient and flexible grid.
We are pleased to share Partners Group's latest Thematic Research paper on investing in power reliability and flexibility infrastructure, discussing the six power reliability and flexibility solutions that we believe offer the most compelling risk/reward.
In the latest issue of Partners Group's Quarterly Loan Market Commentary, we look back on a momentous year for loan markets. For many loan investors, 2020 returns were largely driven by whether they sold in the market trough, thereby locking in deep losses, or held on.
THE INDUSTRY VIEW | Entrepreneurial Governance
In this episode of the Partners Group Podcast, we get "The Industry View" from one of our Lead Operating Directors, Luisa Delgado, Chair of Partners Group portfolio company Schleich, one of Germany's largest toy manufacturers. Luisa talks to our Global Head of Communications Jenny Blinch about the impact of business on society, leadership through difficult times, and how working with Partners Group changed her mind about private equity.
TRANSFORMATIVE TRENDS | Thematic Sourcing
Our first episode of the Partners Group Podcast's "Transformative Trends" series features Christina Han, our Head of Investment Research, who explains her work on Thematic Sourcing at the firm. As Christina says, Thematic Sourcing is the fundamental process behind how Partners Group identifies the assets we want to invest in – beyond those already available on the market. Honing this strategy is more important than ever as competition for good assets becomes increasingly fierce.
The Industry View
In this interview, Luisa Delgado, an entrepreneur with extensive board experience and Chair of Partners Group portfolio company Schleich – one of Germany’s largest toy manufacturers – discusses ESG and sustainability at Schleich, the growing consumer attention on the environmental and societal impact of businesses, and what it has been like working with private equity to build resilience and create value for the long term.
Offense remains the best defense
The uncertainty we see today creates challenges, but also opportunities, for companies and their investors. In this climate, we firmly believe that offense remains the best defense. Our thematic investment strategy, which targets transformative trends, combined with hands-on value creation at asset level, is guiding our investment efforts and helping us to steer our portfolios through these choppy waters.
In this issue of the Quarterly Loan Market Commentary, we discuss how the US capital markets wrestled with the many challenges presented by the Covid-19 pandemic throughout the summer of 2020. However, US leveraged loans remarkably stabilized further in Q3, with institutional loan investors again returning in force with a "risk-on" mentality. In Europe, the loan market also remained reasonably constructive in Q3, despite the typically quiet vacation month of August. Spurred by demand from new CLO formation, institutional loan issuance in Europe was only slightly below Q2 levels.
Creating the office of the future
The pandemic has been a massive global experiment in remote working and the shift to virtual communication has been more successful than many business leaders anticipated. Indeed, many now expect flexible working to become the norm. But what does this mean for the management of office space? In this Q&A, Head of Private Real Estate Asset Management Jessica Wichser explains how Partners Group has continued to create value in the office sector through the crisis and how the pandemic may shape the office of the future.
The great Australian renewables opportunity
Following Partners Group's investment in Murra Warra II Wind Farm in July 2020, our Private Infrastructure Asia team discusses the advantages of wind farm platform strategies, the rigors of transacting in the midst of a global pandemic, and the next generation of energy transition investments across Asia Pacific.
The debate on including PE in 401(k) plans
BY DAVID LAYTON, CO-CEO
In this blog, David Layton, Co-Chief Executive Officer, Partners Group, says it has been largely overlooked that American businesses stand to become a principal beneficiary of the Department of Labor's guidance in June that defined contribution plans can prudently include private equity strategies in their investment options.
The secondary approach: maintaining discipline during a crisis
As investors absorb the impact of the COVID-19 global health crisis, many perceive secondaries investments to be a rare bright spot in an uncertain market. Anthony Shontz, Managing Director and Co-Head Private Equity Integrated Investments Americas at global private markets investment manager Partners Group, explains how discipline, creativity and flexibility are key to successfully navigating a global private equity secondaries platform through today's unprecedented environment.
Steering the Global Investment Committee through rough seas
As Chairman of Partners Group's Global Investment Committee, René Biner not only evaluates hundreds of new investment opportunities every year, but also keeps a close eye on the firm's existing portfolio of companies and assets spanning multiple sectors and geographies. With the COVID-19 global health crisis affecting almost every segment of the economy, neither of these tasks has been easy. However, while René believes social distancing may be around for longer than we might wish for, he has reason to be optimistic about the future of private markets investments.
How to stay cyber safe during a global pandemic
One of the side-effects of the COVID-19 global health crisis has been a large spike in online criminal activity. Cyber attackers are using every conceivable strategy to take advantage of the crisis, from fake Coronavirus cures and ransomware attacks on vaccine test centers to attacks on the World Health Organization itself. In our latest Q&A, we speak to Patrik Bless, Chief Information Security Officer at Partners Group, to understand what the risks are and how businesses and private individuals can continue to protect themselves against them.
In this issue, we report the impact of the COVID-19 global health crisis on US and European loan markets. While the first quarter of 2020 began with strong new loan issuance volumes, the outbreak of the pandemic brought the market to an abrupt halt in both regions. With no reliable timetable as to when commercial activity will normalize, we believe it is critical for investors to focus on debt issuers' abilities to prudently manage cash and financial resources, maintain adequate liquidity and service debt obligations until economies can move into recovery mode.
In the latest issue of our Quarterly Loan Market Commentary, we highlight leveraged loan investors' increasing focus on US loan default rates as fears of the next recession linger. But as long as default rates remain range bound and well spread across multiple industries, could the US expansion have further to run?
Offense is the new defense
Against a challenging backdrop of low growth and geopolitical uncertainty, we believe “offense is the new defense” in private markets investing. We seek opportunities to build resilience instead of buying it by focusing on assets with value creation potential in sub-sectors with above-average growth rates.
In our Quarterly Loan Market Commentary, we highlight the rising trend for loan market investors to adopt a bifurcated approach to credit risk across their portfolio. In search of both higher yield and reduced credit risk, many investors are supplementing higher yielding, lower rated loans with lower yielding, higher rated loans. Could the bifurcated approach be a prudent way to prepare for the next credit downturn?
How to build an effective board
As former CEOs and current portfolio company board members, Christoph Rubeli and Christian Unger know a thing or two about corporate governance. Today, they lead the Operating Directors & Entrepreneurial Governance business unit at Partners Group, which has been tasked with unlocking the full potential of private markets governance across the firm’s portfolio. In a Q&A, they share with us their insights into what makes an effective board and how and why you should evaluate board performance.
The current state of the leveraged loan market
In this White Paper, Partners Group analyzes the growth in the leveraged loan market and looks at how credit conditions have changed in recent years. Our conclusion is that while growth has been rapid in the leveraged loan market and certain credit metrics have weakened, there is no resemblance to the 2008 subprime market, as some commentators have suggested. Moreover, we see recent market volatility as more of a welcome correction – one that may generate attractive private debt investment opportunities – than a threat.
Entrepreneurial ownership holds the key to private markets outperformance
While our base case economic outlook projects a period of continued modest growth, we are aware that the ride may become bumpier as multiple challenges emerge. In this environment, we believe entrepreneurial ownership and strong value creation skills are the only way to generate outperformance.
The Rise of "Governance Correctness"
This paper provides a practitioner’s perspective on the increasing divergence between the corporate governance regimes of public and private markets and the resulting impact on value creation for investors.
Leveraging the winds of change
As the chances of a deviation from our base case macroeconomic outlook of low but steady growth continue to rise, we are focusing on sectors benefiting from the global megatrends that we believe will continue to generate attractive investment opportunities in the long term. These include digital transformation, new generation living and consumption, and the energy revolution.