Price sensitive ("ad hoc") releases
Baar-Zug, Switzerland, 17 March 2020
- USD 14.8 billion invested across all private markets asset classes (2018: USD 19.3 billion) on behalf of the firm's clients; gross client inflows of USD 16.5 billion (2018: USD 15.7 billion) across regions, and size and type of client
- Assets under management (AuM) grew to USD 94.1 billion as of 31 December 2019, representing net growth of 13%
- Revenues increased by 21% to CHF 1,610 million
- Management fees increased by 14%, amounting to CHF 1,138 million, in line with average AuM growth
- Performance fees increased by 46%, amounting to CHF 473 million; they represented 29% of total revenues for the full year and were driven by a combination of strong underlying portfolio performance and successful divestment activity in the second half of the year
- EBIT increased by 17% to CHF 1,008 million; a combination of the strong build-out of the platform (average number of FTEs grew by +20%) and the growth in performance fee-related compensation (in line with performance fee development) resulted in total personnel expenses increasing at a higher rate (+30%) than total revenues (+21%); the EBIT margin stands at 63%
- Net finance income/expenses were driven by solid investment performance across the firm's investment programs, which continued to support profit development and amounted to CHF 30 million
- Profit increased by 17% year-on-year to CHF 900 million, in line with EBIT growth
- Dividend of CHF 25.50 per share proposed; an increase of 16% and a payout ratio of 76%
- Confirmation of guidance on full-year expected gross client demand withheld as of today; update on expected gross client demand and potential tail-down effects and redemptions to be provided in next AuM announcement on 14 July 2020, or at another appropriate time
2019 was another strong year for Partners Group, supported by sustained demand across all regions from clients, who entrusted the firm with USD 16.5 billion in new commitments. North America, the UK and Switzerland represented the largest share of client demand, together contributing over half of the total inflows in 2019. In terms of investor types, institutional investors such as pension funds, insurance companies, sovereign wealth funds and asset managers, as well as family offices, continued to be the key contributors to AuM growth, representing 80% of total client demand during the period. Distribution partners, which provide access to our products to private individuals and smaller institutional investors, accounted for 20% of client demand. After a record investment year in 2018, the firm invested a total of USD 14.8 billion (2018: USD 19.3 billion) on behalf of its clients across all private markets asset classes in 2019, maintaining its highly disciplined and selective approach.
Summary of key financial figures (in CHF million)
Net finance income/expenses
1 Revenues include management fees and performance fees.
2 Management fees include recurring management fees and other revenues, net, and other operating income.
Financials in 2019
Revenues increased by 21% to CHF 1,610 million (2018: CHF 1,326 million) for the full year 2019. The management fee margin remained stable and amounted to 1.29% (2018: 1.29%). Performance fees brought the total revenue margin to 1.82% (2018: 1.71%) during the same period.
Management fees increased by 14%, amounting to CHF 1,138 million (2018: CHF 1,002 million), in line with average AuM growth of 14%. The growth also included other management fee-related revenues of CHF 94 million (2018: CHF 84 million), which included income earned for fundraising and investment services, as well as other operating income earned for treasury management services. Management fees will continue to dominate the firm's revenues in the years to come. Given the anticipated growth in the firm's AuM, management fees are typically expected to make up around 70-80% of total revenues in a calendar year (2019: 71%).
Performance fees amounted to CHF 473 million (2018: CHF 324 million) and represented 29% of total revenues for the full year 2019 (2018: 24%). Supported by a benign exit environment in the second half of the year, performance fees contributed meaningfully to total revenues and amounted to CHF 343 million in H2, as compared to CHF 130 million in H1. The significant increase in performance fees in H2 2019 was due to a combination of strong underlying portfolio performance and successful divestment activity. In 2019, more than 85 investment programs and mandates contributed to performance fees, which were driven by dozens of underlying assets.
David Layton, Partner and Co-Chief Executive Officer, Partners Group, states: "We have created substantial value in our client portfolios over the last decade and are proud that this contributed to a strong increase in performance fees in 2019. We remain confident in the merits of our investment approach: sourcing conviction assets in attractive sub-sectors, building and managing high-performing boards for our portfolio companies, and working together with management teams on targeted value creation initiatives. This enables long-term, sustainable growth and in tandem generates significant mid- to long-term performance fee potential."
To support underlying business growth, Partners Group has intensified the build-out of its teams across the entire platform over the last twelve months. The growth in the average number of FTEs was 20% in 2019, which resulted in an increase of regular personnel expenses of 24% in 2019. The strong increase in performance fees (+46%) led to a corresponding increase in performance fee-related compensation, lifting total personnel expenses disproportionally by +30% compared to the 21% growth in total revenues. As a result, EBIT increased by 17%, amounting to CHF 1,008 million (2018: CHF 865 million), and the EBIT margin decreased to 63% (2018: 65%). Partners Group will remain disciplined in its approach to cost management and continue to steer the firm towards a target EBIT margin of ~60% for newly generated management fees (assuming foreign exchange rates remain stable), as well as for all performance fees.
The net finance income/expenses amounted to CHF 30 million (2018: CHF 23 million). Partners Group invests into its investment programs alongside clients (typically around 1% of the program's size); the value creation and performance generated on these investments was the largest contributor to the financial result and amounted to CHF 61 million (2018: CHF 35 million). However, this positive contribution was partially offset by a negative foreign exchange result. In combination with higher corporate taxes, this led the firm's profit to increase by 17% year-on-year to CHF 900 million (2018: CHF 769 million), in line with EBIT growth.
Based on the strong development of the business in all asset classes and regions, the operating result and their confidence in the sustainability of the firm's growth, Partners Group's Board of Directors will propose a dividend of CHF 25.50 per share (prior year: CHF 22.00 per share) to its shareholders at the Annual General Meeting on 13 May 2020. This represents a dividend increase of 16% and a payout ratio of 76% (prior year: 77%).
For the full year 2020, Partners Group previously provided guidance that it expected gross client demand of USD 15-19 billion together with tail-down effects and redemptions of USD -7.5 to USD -9.0 billion. However, while annualized fundraising activities in Q1 2020 have so far been in line with this guidance, the firm anticipates that future client commitments may be somewhat delayed by the current market volatility and general disruption caused by COVID-19. The firm has therefore chosen to withhold from confirming its guidance on full-year expected gross client demand as of today and expects to instead provide an update on expected gross client demand and potential tail-down effects and redemptions in its next AuM announcement on 14 July 2020, or at another appropriate time.
André Frei, Partner and Co-Chief Executive Officer, Partners Group, comments: "We expect to receive around USD 5 billion in client demand for our private markets solutions in the first quarter of 2020, but we acknowledge that the current situation leads to uncertainties around the timing of future client commitments. For the same reason, we also expect many exit activities to be postponed. As a result, we estimate that performance fees in 2020 will be significantly skewed to the second half of the year and – depending on how the current situation develops – are likely to fall below our long-term guidance of 20-30% of total revenues. However, we are a long-term investor and, based on our prior experience of working through periods of market disruption, we do not anticipate material and lasting impact either on our investment portfolio or on the growth trajectory of our AuM."
Separately, in 2020, Partners Group plans to build on its reputation as a leading responsible investor within private markets with the launch of a significant, new initiative related to its broader stakeholder impact.
Steffen Meister, Executive Chairman of the Board of Directors, Partners Group, explains: "While existing investors in private markets remain excited about the returns and sustainable impact our investments generate for their beneficiaries, the public discourse around private investing frequently frames the industry in a less positive light. Our Board has the ambition to clearly demonstrate that we are better owners of companies, not only for our clients and beneficiaries, but on behalf of all stakeholders. Our dual goal is to continue to assure outperformance for our investors and shareholders on the one hand, and to generate superior 'returns' for a broader set of stakeholders, including portfolio company employees, on the other hand."
He continues: "We will spend even more time and resources elevating the work environment and financial benefits of our portfolio company employees in 2020. Our first step will be to more systematically apply some of Partners Group's own corporate initiatives across our portfolio, focusing on corporate and team culture, employee engagement, learning and development. In a second step, we will consider a new 'Stakeholder Benefits Program', which aims to reinvest a portion of achieved value creation for the benefit of our portfolio company employees and other stakeholders. The exact format of this Stakeholder Benefits Program will be discussed with clients and other stakeholders throughout the year."
Press conference and Annual Report 2019
Partners Group's senior management will hold a conference call to discuss the annual results today at 9.00am CET. To register for the conference call, please click here or use the contact details at the end of this press release.
The Annual Report as of 31 December 2019 was published today at 7.00am CET and is available for download at www.partnersgroup.com/financialreports.
Key dates 2020
02 April 2020
Publication of Corporate Sustainability Report 2019
13 May 2020
Annual General Meeting of shareholders
15 May 2020
18 May 2020
Dividend record date
19 May 2020
Dividend payment date
14 July 2020
Announcement of AuM as of 30 June 2020
08 September 2020
Interim results and Interim Report as of 30 June 2020; presentation and conference call at the London Stock Exchange, London, 9am BST