Partners Group, the Zug-based private market investment manager, is “confident of strong fundraising in 2019”, as it expects a rise in investor commitments for the year.
The firm expects commitments of between €13 billion and €16 billion across its private markets strategies this year, together with about €7.5 billion in tail-down effects from its more mature programmes and potential redemptions from liquid and semi-liquid programmes.
“2019 is still young, many variables will drive the actual outcome but we are confident that 2019 will be a strong fundraising year,” André Frei, partner and co-chief executive, said on its 2018 AUM call on Tuesday.
Its capital raising efforts include PG LIFE, a social impact fund with a $1 billion target, and Partners Group Direct Equity 2019, its fourth global buyout fund, which is reportedly seeking up to €5 billion.
This month, the firm brought on board former UK prime minister Gordon Brown as part of an external advisory group for PG LIFE, which will focus on investments that meet the United Nations’ sustainable development goals such as poverty alleviation and improving access to healthcare.
Frei said the 2019 guidance assumes that the benign fundraising and investment environment will continue.
Partners Group received €13.3 billion in commitments last year, bringing total assets under management to €72.8 billion as of 31 December. This represented a net growth of 18 percent from the previous year’s €61.9 billion. Of the capital raised, 39 percent was for private equity, 37 percent for private debt, 22 percent for private real estate and 16 percent for private infrastructure.
Structural growth in institutional AUM globally, rising allocations to private markets and concentration of capital with larger firms all helped drive asset growth, said Philip Sauer, co-head group finance and corporate development.
Private equity – which makes up the lion’s share of the firm’s AUM – decreased slightly from 51 percent in 2017 to 49 percent or €36 billion last year, while private real estate remained unchanged at 17 percent or €12 billion. Private debt increased from 18 percent to 21 percent or €15 billion, and private infrastructure slid from 14 percent to 13 percent or €9 billion.
The firm invested $19.3 billion last year across private market assets including reinvestment of distributions. Direct transactions across all asset classes made up 60 percent or $11.5 billion of total investment volume, and the remaining 40 percent or $7.7 billion were in primary commitments (€2.5 billion) and secondaries (€5.2 billion).
The firm’s priorities for 2019 include building out its industry value creation team as well as broadening its operating directors circle. Hiring is also a focus – the firm increased its staff number by about 15 percent in 2018 and will continue to ramp up onboarding of senior executives and investment professionals this year to meet client demand, Frei added.
On challenges for private equity in 2019, David Layton, partner and co-chief executive, said these include the level of competition that has pushed asset prices up significantly; the quality of earnings, which have become harder and more laborious to assess; and shorter sale process timelines.
Formal sales processes have shortened to as little as 60 days from around five months, Layton said.
He added that the firm navigated volatile market conditions last year by “focusing on assets it already knows it wants to own and did less of the opportunistic deal chasing, which has been for the better”.