Partners Group Holding AG · SIX:PGHN
Partners — FY2019 Earnings Presentation
47 slides from Partners's earnings presentation, Mar 17, 2020
Slide 1: Annual results 2019
17 MARCH 2020 Annual results 2019 Steffen Meister Executive Chairman | André Frei Co-CEO | David Layton Co-CEO | Philip Sauer Co-Head Group Finance & Corporate Development Dr. Anette Waygood Head Corporate Legal | André Frei Co-Chief Executive Officer For Institutional Use Only – Not for Public Dist
Slide 2: Table of contents
ANNUAL RESULTS 2019 2 Table of contents 1 Investments 2 Clients 3 Financials 4 Shareholder & stakeholder impact
Slide 3: Global buyout investments were lower, but at healthy levels; more challenging exit environment
INVESTMENTS 3 Global buyout investments were lower, but at healthy levels; 2019 saw a more challenging exit environment, caused by market uncertainty at the beginning of the year Global buyout investments1 vs. Partners Group Global buyout exits1 vs. Partners Group Global private equity buyout invest
Slide 4: In 2019, we successfully invested USD 14.8 billion in private market assets
INVESTMENTS 4 In 2019, we successfully invested USD 14.8 billion in private market assets… Private equity USD 6.4 bn Private infrastructure USD 1.6 bn One of the top five US independent outpatient Leading developer, owner and operator of power physical therapy services provider One of Germany's larg
Slide 5: …and generated USD 11.0 billion in gross portfolio realizations for our clients
INVESTMENTS 5 …and generated USD 11.0 billion in gross portfolio realizations for our clients Private equity USD 4.9 bn Private infrastructure USD 1.0 bn Leading Dutch provider of outsourced 396MW offshore wind farm in the German hospitality and premium catering services Operator of the only passeng
Slide 6: Relatively conservative debt levels
INVESTMENTS 6 Relatively conservative debt levels US buyout market1 vs. Partners Group Average net debt/EBITDA Current net debt/EBITDA level for US buyout level for our transactions1 direct equity portfolio2 100% Greater than 7x 12% • Relatively conservative debt levels compared to the US buyout mar
Slide 7: Our systematic approach to governance and value creation generates transformative growth
INVESTMENTS 7 Our systematic approach to governance and value creation generates transformative growth Measurable results across our portfolio companies in 2019 • Entrepreneurial governance framework 11% revenue growth in 20191 Tailoring of board compositions to support investment thesis early on in
Slide 8: COVID-19: economic impact will depend on the duration and severity of the outbreak
INVESTMENTS 8 COVID-19: economic impact will depend on the duration and severity of the outbreak Assessment of potential impact of Coronavirus COVID-19 on Partners Group and its portfolio 1. Health & safety Early measures undertaken to ensure the health & safety of Partners Group and portfolio compa
Slide 9: The strength of private markets investing in times of uncertainty
INVESTMENTS 9 The strength of private markets investing in times of uncertainty Significant advantages of being owned by private equity Select examples of COVID-19 portfolio impact Global pharmaceutical • Long term view & capital services outsourcer offering packaging and clinical & drug • Significa
Slide 10: Private equity buyout programs raised during turbulence have historically had higher returns
INVESTMENTS 10 Private equity buyout programs raised during periods of economic turbulence have historically had higher returns Historical returns for US private equity buyout programs Periods of marked economic turbulence Pooled net returns in % to Limited Partners 35% 30% 25% 20% 15% 10% 5% n.a. 0
Slide 11: Table of contents
ANNUAL RESULTS 2019 11 Table of contents 1 Investments 2 Clients 3 Financials 4 Shareholder & stakeholder impact
Slide 12: Strong growth across all asset classes
CLIENTS 12 Strong growth across all asset classes Breakdown of assets raised by asset class in 2019 Net AuM development by asset class (in USD billion) Private real estate (15%) • Real estate opportunities 94.1 • Global integrated Private infrastructure (12%) • Customized mandates • Global integrate
Slide 13: AuM diversified across regions and client type
CLIENTS 13 AuM diversified across regions and client type AuM by region (as of 31 December 2019) AuM by client type (as of 31 December 2019) Asia Australia Distribution partners / 5% 7% Switzerland private individuals Public pension Middle East 16% 18% funds 3% South America 20% Germany & Asset mana
Slide 14: AuM well-diversified across programs, client base and program structure
CLIENTS 14 AuM well-diversified across number of programs, client base and program structure Breakdown by private market programs and mandates1 Breakdown by client and program structure1 Largest client Top 2-5 clients 3% 7% Top 6-10 clients 6% USD Top 11-20 clients >850 other 7% 94 billion instituti
Slide 15: 2019 net returns of Partners Group's select large mandates
CLIENTS 15 2019 net returns of Partners Group's select large mandates Private equity Private debt Private infrastructure Private real estate Insurance, US, Pension fund, Europe, SWF, Asia, USD 1.5bn USD 2.0bn USD 0.5bn 16% 24% 34% +12% +14% 49% 14% +24% 60% 6% 25% 70% 2% 78% 14% 9% 40% 19% 41% 10% 9
Slide 16: Due to COVID-19, the firm withholds confirming its 2020 guidance
CLIENTS 16 Due to COVID-19, the firm has chosen to withhold from confirming its 2020 guidance on full-year as of today and will provide an update with next AuM announcement in July AuM, client demand and other effects (in USD billion) Temporarily +16.5 withhold from +15.7 94.1 confirming the 83.3 20
Slide 17: We are consistently recognized for our ESG, impact and sustainability initiatives
CLIENTS 17 We are consistently recognized for our ESG, impact and sustainability initiatives "Partners Group has "Sapphire Wind Farm "PG LIFE has "PG LIFE has one of the "PG LIFE has helped effectively integrated has engaged directly translated the high- most thoughtful & define minimum these standa
Slide 18: 2019 Corporate Sustainability Report: defining our strategy on climate change
CLIENTS 18 2019 Corporate Sustainability Report: defining our strategy on climate change Strategy definition Embedded into investment and ownership process • We are developing a platform-wide Climate Change Strategy1 • Formalize Partners Group's approach to managing climate risks and impacts across
Slide 19: Table of contents
ANNUAL RESULTS 2019 19 Table of contents 1 Investments 2 Clients 3 Financials 4 Shareholder & stakeholder impact
Slide 20: 2019 financial highlights
FINANCIALS 20 2019 financial highlights Avg. AuM1 Mgmt. fees2 Revenues3 EBIT Dividend4 (in CHF billion) (in CHF million) (in CHF million) (in CHF million) (in CHF per share) +14% +14% +21% +17% +16% 88 1’610 1’138 1’326 1’008 78 29% 1’002 865 24% 25.50 22.00 2018 2019 2018 2019 2018 2019 2018 2019 2
Slide 21: Sustained development of management and performance fees
FINANCIALS 21 Sustained development of management and performance fees Revenues1 (in CHF million) 1'610 Revenues1 1'326 473 1'245 69 (29%) Performance fees 324 372 (24%) Other revenues from (30%) 94 management services & other operating income 84 99 1'138 Management fees2 1'002 (71%) (76%) 873 (70%)
Slide 22: Over 85 investment programs and mandates contributed to performance fees in 2019
FINANCIALS 22 Over 85 investment programs and mandates contributed to performance fees in 2019 Performance fee contribution by investment programs & mandates in 2019 Rest (>65) Top 1 • Over 85 investment programs & mandates 18% 16% contributed to 2019 performance fees CHF • Dozens of direct assets a
Slide 23: Management fees will continue to be the main source of revenues
FINANCIALS 23 Management fees will continue to be the main source of revenues Outlook on performance fees around Performance fees around 10% 29% 20-30% Performance fees1 “quasi-recurring” Around 300 programs, highly diversified across vintage years, regions and industries around Management fees2 70-
Slide 24: In the long run, performance fees are expected to grow in line with AuM
FINANCIALS 24 In the long run, performance fees are expected to grow in line with AuM AuM development in USD billion and performance fee development in CHF million 800 94 100 ~20-30% AuM (in USD billion) of total 90 700 83 revenues Performance fees (in CHF million) 80 74 600 …translates into 70 473
Slide 25: In the long run, performance fees are expected to grow in line with AuM
FINANCIALS 25 In the long run, performance fees are expected to grow in line with AuM AuM development in USD billion and performance fee development in CHF million 800 94 100 …translates into ~20-30% AuM (in USD billion) of total significantrevenues future 90 700 83 Performance fees (in CHF million)
Slide 26: Stable revenue margin on management fees
FINANCIALS 26 Stable revenue margin on management fees Revenue margin1 1.89% 1.82% 1.74% 1.71% 29% 1.35% 1.36% 1.39% 1.25% 1.26% 1.36% 1.33% 1.39% 1.38% 1.23% 1.30% 1.31% 1.33% 1.29% 1.29% 1.25% 1.24% 1.23% 1.26% 1.26% 1.23% 1.24% 1.22% 1.18% 71% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 201
Slide 27: Platform build-out accelerated; personnel expenses grew disproportionally
FINANCIALS 27 Platform build-out accelerated; personnel expenses grew disproportionally Revenues, costs and EBIT development (in CHF million) 2018 2019 Revenues 1’326 +21% 1’610 Total operating costs, of which -461 +31% -603 Personnel expenses -377 +30% -490 Personnel expenses (regular) -247 +24% -3
Slide 28: Target EBIT margin of ~60% for newly generated management fees
FINANCIALS 28 Target EBIT margin of ~60% for newly generated management fees as well as for performance fees on existing and new AuM EBIT1 margin development 80% 2 1.8 70% 65% 65% 63% 59% 60% 59% 59% 61% 1.6 58% 60% 1.4 ~60% 1.23 EUR/ 1.21 1.23 1.21 50% 1.11 1.15 1.11 1.2 CHF 1.07 1.09 1.06 40% 1 US
Slide 29: Foreign exchange rate changes impacted the firm's EBIT margin by approx. -1%-point
FINANCIALS 29 Foreign exchange rate changes impacted the firm's EBIT margin by approx. -1%-point Currency exposure in 2019 others others 6% 6% GBP GBP 10% 10% others EUR EUR EUR SGD 6% 4% 46% 46% 12% USD 28% ≈ ≠ EUR Management GBP AuM Costs2 56% fees1 12% CHF USD USD 38% 38% 38% EUR/USD foreign exch
Slide 30: Key financials and strong balance sheet
FINANCIALS 30 Key financials and strong balance sheet Key financials (in CHF million, except for per share data) Strong balance sheet (as of 31 December 2019) 2018 2019 Revenues1, of which 1’326 +21% 1’610 Management fees2 Performance fees 1’002 324 +14% +46% 1’138 473 1.0 42% CHF billion return on
Slide 31: Proposed dividend increase of 16% to CHF 25.50 per share
FINANCIALS 31 Proposed dividend increase of 16% to CHF 25.50 per share (payout ratio of 76%) Dividend payment since IPO USD 94 billion 30.00 Total AuM (in USD billion) 1 90 25.50 25.00 Dividend/share (in CHF) 80 22.00 70 20.00 19.00 60 15.00 50 15.00 10.50 40 10.00 8.50 30 USD 11 billion 7.25 5.00 5
Slide 32: Table of contents
ANNUAL RESULTS 2019 32 Table of contents 1 Investments 2 Clients 3 Financials 4 Shareholder & stakeholder impact
Slide 33: Private markets have systematically outperformed public markets…
SHAREHOLDER & STAKEHOLDER IMPACT 33 Private markets have systematically outperformed public markets… Investment horizon excess returns excess return excess return 12% 7% 9% 4% 20-Year 5-Year 20-Year 5-Year Source: Bloomberg (quarterly returns in local currency), Thomson Reuters (Cambridge Associates
Slide 34: …leading to increasing private market relevance
SHAREHOLDER & STAKEHOLDER IMPACT 34 …leading to increasing private market relevance While the private market industry has grown,1 the number of listed public companies has decreased 10x growth in the size 0.35x reduction in number of private markets2 of listed public companies1 USD 7.5 trillion 17’0
Slide 35: But investor excitement meets mixed public perceptions
SHAREHOLDER & STAKEHOLDER IMPACT 35 But investor excitement meets mixed public perceptions Private markets perceptions Private Equity Too Complacent In The Face Of … Pirate Equity: How Wall Street Firms are Everyone now believes that private Public Opprobrium? Pillaging American Retail markets are b
Slide 36: What will it take to sustain the growth and success of private markets?
SHAREHOLDER & STAKEHOLDER IMPACT 36 What will it take to sustain the growth and success of private markets? 1 Shareholder impact superior results for our investors and their 2 Stakeholder impact "return" for employees and other stakeholders at our beneficiaries portfolio companies To preserve outper
Slide 37: Much more challenging environment
SHAREHOLDER & STAKEHOLDER IMPACT 37 Relevant challenges in today's market 2018 annual results presentation, March 2019 Much more challenging environment than in the late 20th century For illustrative purposes only. Source: Partners Group (2020).
Slide 38: Our private markets investment formula to preserve outperformance
SHAREHOLDER & STAKEHOLDER IMPACT 38 Our private markets investment "formula" to preserve outperformance Business Excellence Ownership Excellence Research: study and build strong Thematic Sourcing: map out the Operating directors: maintain a Board design: high-performance conviction for themes in mos
Slide 39: What will it take to sustain the growth and success of private markets?
SHAREHOLDER & STAKEHOLDER IMPACT 39 What will it take to sustain the growth and success of private markets? 1 Shareholder impact superior results for our investors and their 2 Stakeholder impact "return" for employees and other stakeholders at our beneficiaries portfolio companies To preserve outper
Slide 40: Bifurcated views on private markets
SHAREHOLDER & STAKEHOLDER IMPACT 40 Bifurcated views on private markets Shareholder Stakeholder "We find better buyout fund performance than has previously "Elizabeth Warren declares war on been documented – performance private equity 'vampires' in 2020 plan" consistently has exceeded that of July 2
Slide 41: Is private equity as bad for stakeholders as portrayed?
SHAREHOLDER & STAKEHOLDER IMPACT 41 Is private equity as bad for stakeholders as portrayed? We have outperformed public markets in job creation Weighted annual job growth rates Job growth by holding year PG Portfolio 150% After 4y: 14.4% 7.0% p.a. more 13.2% S&P 500 PG +44% job growth on 12.1% Portf
Slide 42: As a responsible owner, we positively impact stakeholders in our portfolio…
SHAREHOLDER & STAKEHOLDER IMPACT 42 As a responsible owner, we positively impact stakeholders in our portfolio… Satisfaction & Engagement Personal Growth & Development Financial Access • Engagement surveys • Leadership training • Employee hardship fund • Annual employee awards • Development training
Slide 43: …but do we sufficiently outperform in our stakeholder engagement?
SHAREHOLDER & STAKEHOLDER IMPACT 43 …but do we sufficiently "outperform" in our stakeholder engagement? Work environment Financial benefits Corporate & Development Stakeholder Engagement Compensation Benefits Team Culture Opportunities Incentives We actively implement select Portfolio stakeholder As
Slide 44: Systemic Stakeholder Benefits Program under consideration
SHAREHOLDER & STAKEHOLDER IMPACT 44 Systemic Stakeholder Benefits Program under consideration We want to allocate a portion of the value created to generate significant stakeholder impact Year 1 2 3 4+ • Re-investing a percentage of EBITDA growth Task during ownership in Stakeholder Benefits Program
Slide 45: In a next step, we will open the dialogue with our investors and the industry
SHAREHOLDER & STAKEHOLDER IMPACT 45 In a next step, we will open the dialogue with our investors and the industry Broaden the discussion Structured dialogue based on with our stakeholders stakeholder and investor feedback Near Term Develop the concrete Design reporting initiatives framework Medium T
Slide 46: Contacts
46 Contacts Investor relations contact: Zugerstrasse 57 Philip Sauer 6341 Baar-Zug T +41 41 784 66 60 Switzerland philip.sauer@partnersgroup.com T +41 41 784 60 00 partnersgroup@partnersgroup.com Media relations contact: Jenny Blinch www.partnersgroup.com T +44 207 575 25 71 jenny.blinch@partnersgro
Slide 47: Disclaimer
IMPORTANT NOTICE 47 Disclaimer NEITHER THE INFORMATION IN THIS DOCUMENT NOR ANY RELATED MATERIALS MAY BE TAKEN OR TRANSMITTED INTO THE UNITED STATES OR DISTRIBUTED OR REDISTRIBUTED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN. This presentation is strictly confidential t
Partners Group Holding — FY2019 Earnings Presentation on 6ix