Baar-Zug, Switzerland, 1 September 2016
Partners Group publishes market outlook for H2 2016: 'The tide is high and waters are rougher: seek stable assets and create value'
Partners Group today publishes its H2 2016 Private Markets Navigator. The Private Markets Navigator shares the firm's outlook for all private markets asset classes over the next six months.
Introducing the report, Christoph Rubeli, Co-CEO, Partners Group, says: "While global economic growth remains modest but solid, we expect to see increased volatility in capital markets going forward. In this environment, we are focused on finding more robust assets that can hold their value throughout economic cycles on the one hand, and that offer the potential to create value on the other."
A short summary of the views presented in the H2 2016 Private Markets Navigator:
Private equity: high purchase prices continue to be a hallmark of the LBO deal environment, as they were throughout 2015. In this market environment, we are focusing our efforts on finding companies in higher-growth niches that have preserved their value over several cycles. We continue to look for platform companies with strong management teams and infrastructure, which offer the potential to grow via add-on acquisitions, and we actively screen sub-segments of specific industries benefitting from trend-based tailwinds to identify the category winners in those sub-segments. We also search for niche leaders with strong defensive capabilities, such as long-term recurring revenue streams, sticky customer contracts and highly visible cash flows, as illustrated by our recent acquisition of Foncia, France's market-leading provider of residential property management services.
Private real estate: with market sensitivity and late cycle volatility likely to continue, we have sharpened our focus on making investments in robust property types and still see the greatest potential in real estate that can be adapted to accommodate shifts in demand. We continue to target properties located in rebounding markets that can be bought below replacement cost, as well as older buildings in great locations where we can implement a 'buy, fix and sell' strategy through owner-oriented asset management. We also selectively develop core properties in markets with strong long-term fundamentals and trends that support additional absorption. One recent example of a 'buy, fix and sell' investment is our acquisition of Bank of America Plaza, a 20-story office tower in Nashville, Tennessee, that allows us to pursue a value-added business plan to bring the property's occupancy levels to capacity.
Private debt: as markets evolve away from the traditional bank syndicated debt model for certain types of transactions, private lenders continue to be well-placed to act as solution providers and have increased negotiating powers with regard to economic terms. In this environment, our approach is to offer creative structures, focus on financing resilient companies active in niche markets protected by high barriers to entry, and support successful sponsors and their management teams in their buy-and-build strategies by providing add-on acquisition financing. For example, we recently lead-arranged the junior debt financing of ADB, the global leader in airfield ground lighting products and systems, to support its add-on acquisition of Safegate, the second largest player in the market.
Private infrastructure: as investor appetite for infrastructure assets continues to lead to lofty valuations in the crowded core segment, we maintain our focus on select greenfield or brownfield value-add opportunities with the aim of capitalizing on transformative shifts in infrastructure use or needs. We continue to seek out investment opportunities that offer the potential to enhance operational value via growth and efficiency improvements, as well as opportunities where the demand for building a select type of infrastructure is supported by strong long-term fundamentals or evolving infrastructure needs. We also aim to build out market-leading infrastructure platforms, as illustrated by our recent investment in a Taiwanese solar power development platform.
To request a copy of the report, please contact Milevka Grceva: milevka.grceva(at)partnersgroup.com