Partners Group Holding AG · SIX:PGHN
Partners — FY2018 Earnings Presentation
50 slides from Partners's earnings presentation, Mar 19, 2019
Slide 1: Annual results 2018
19 MARCH 2019 Annual results 2018 Steffen Meister Executive Chairman | André Frei Co-CEO | David Layton Co-CEO | Philip Sauer Co-Head Group Finance & Corporate Development Cyrus Driver Head Private Equity Asia | Sara Odebunmi Head Product Management For Institutional Use Only – Not for Public Distri
Slide 2: Table of contents
ANNUAL RESULTS 2018 2 Table of contents 1 Investments 2 Clients 3 Financials 4 Changes to the Board 5 Private markets perspectives
Slide 3: Partners Group 2018 investment platform overview
INVESTMENTS 3 Partners Group 2018 investment platform overview Investment platform update USD 19 billion1 invested across the globe Professionals North Asia-Pacific/ • >1'200 professionals across 19 offices globally Europe America Rest of World Investments1 29 direct 42 direct 7 direct • USD 19.3 bi
Slide 4: Only the most attractive assets on a global basis are selected for investment
INVESTMENTS 4 Only the most attractive assets on a global basis are selected for investment Deal flow 2018 Direct assets Portfolio assets USD 145 billion Private equity >2'800 portfolios Private debt assets 492 private markets managers Private real estate Private infrastructure 3% invested # 78 exec
Slide 5: Private markets investment activities in 2018 across the globe and all asset classes
INVESTMENTS 5 Private markets investment activities in 2018 across the globe and all asset classes Private markets investments in 20181 Prim. North Europe Portfolio Equity America USD USD 36% assets 47% Direct 19 billion 40% Sec. 19 billion assets 60% Debt Asia-Pacific/ Rest of World 17% 1 Figures e
Slide 6: Private equity
INVESTMENTS 6 Private equity >58 19.0% ~300 65 USD billion net IRR on direct private lead and joint-lead invested in lead/joint-lead equity direct buyout private equity1 investments1 specialists2 investments1 Key investment strategies Selected investment sub-sectors that exhibit transformative growt
Slide 7: Private debt
INVESTMENTS 7 Private debt >28 6.3% ~100 0.24% USD billion net IRR on private senior loan invested in private debt debt annualized private debt1 investments1 specialists2 default rate3 Key investment strategies Selected investment sub-sectors that exhibit transformative growth themes Creative struct
Slide 8: Private real estate
INVESTMENTS 8 Private real estate >16 13.2% ~100 79 net IRR on USD billion private direct real estate invested in real estate real estate opportunities private real estate1 specialists2 investments1 portfolio1 Key investment strategies Selected investment sub-sectors that exhibit transformative grow
Slide 9: Private infrastructure
INVESTMENTS 9 Private infrastructure ~10 14.5% ~100 39 USD billion net IRR on private direct invested in private infrastructure infrastructure infrastructure infrastructure1 direct investments1 specialists2 investments1 Key investment strategies Selected investment sub-sectors that exhibit transform
Slide 10: Partners Group's three building blocks for entrepreneurial ownership
INVESTMENTS 10 Partners Group's three building blocks for entrepreneurial ownership Board building and Implementing Ongoing board assessments 1 2 3 onboarding entrepreneurial governance and adjustments • Excel in board design • Creating a high operating • Review board work alongside tempo all value
Slide 11: Partners Group's unique governance framework is the key driver of success
INVESTMENTS 11 Partners Group's unique governance framework is the key driver of success Our board members are engaged, aligned, and accountable We own the board Our boards are close to our assets Our boards' decisions are transparent to PG Board work is evaluated annually Board members fa
Slide 12: Key drivers of private markets performance
INVESTMENTS 12 Key drivers of private markets performance Value creation-focused approach 2018 results1 Sector growth Value creation Exposure Equity control / long-term / governance / full insight Economic Financial Corporate Business >200 ongoing value Revenue growth development development devel
Slide 13: Table of contents
ANNUAL RESULTS 2018 13 Table of contents 1 Investments 2 Clients 3 Financials 4 Changes to the Board 5 Private markets perspectives
Slide 14: Sustained growth in assets under management over the last decade
CLIENTS 14 Sustained growth in assets under management over the last decade Total assets under management1 (in EUR billion) 72.8 AuM Private Development over the last decade 9 61.9 infrastructure # employees 12 Private • AuM: 16.7% p.a. 54.2 1203 real estate • Employees: 13.3% p.a. 46.0 1036 Private
Slide 15: 2019 Annual General Meeting for clients in Singapore
CLIENTS 15 2019 Annual General Meeting for clients in Singapore • 12-14 March 2019 • >200 clients attended • >30 countries represented • EUR >5 trillion AuM represented
Slide 16: Institutional investors continue to embrace illiquid assets
CLIENTS 16 Institutional investors continue to embrace illiquid assets Anticipated changes to 2019 asset allocations of institutional investors representing over USD 7 trillion in AuM reduce increase Equities -37% High yield -8% Reallocating risk in search of uncorrelated Hedge funds -2% sources of
Slide 17: The development of the private markets industry
CLIENTS 17 The development of the private markets industry Private markets AuM 2018 (in USD) Private markets Market size by Market growth AuM growth1 asset class3 by asset class (CAGR, last five years)4 (CAGR, last five years)5 6.0 5.6 trillion USD Private equity Private equity Private markets:1 10%
Slide 18: AuM diversified across regions and type of client
CLIENTS 18 AuM diversified across regions and type of client AuM by region (as of 31 December 2018) AuM by type of client (as of 31 December 2018) Asia & Australia Distribution partners / Middle East 5% Switzerland private individuals 16% Public pension 9% 16% funds South America Asset managers, 22%
Slide 19: AuM well-diversified across client base and program structure
CLIENTS 19 AuM well-diversified across client base and program structure AuM by client (as of 31 December 2018) AuM by program structure (as of 31 December 2018) Largest client 3% Top 2-5 clients Perpetual/structured 8% programs Top 6-10 clients ~20% 6% Mandate Top 11-20 clients solutions EUR 7% EUR
Slide 20: Partners Group's Expected Return Framework – as of H1 2019
CLIENTS 20 Partners Group's Expected Return Framework – as of H1 2019 Private equity Private real estate Private infrastructure Public markets 18 Equity/debt 18 Equity/debt 18 Equity/debt 18 Equity/debt Gross return by component 16 16 16 16 14 14 14 14 12 12 12 12 10 10 10 10 8 8 8 8 6 6 6 6 4 4 4 4
Slide 21: Applying relative value and scenario thinking to model private markets portfolios
CLIENTS 21 Applying relative value and scenario thinking to model private markets portfolios Return-focused portfolio allocation in our base case1 Economic scenarios applied to return-focused portfolio2 15% Private infrastructure 12.2% 20% Private equity [10-40%] 50% 10% 8.9% ∆ 4.4% 7.6% 7.2% [20-60
Slide 22: Expected client demand in 2019
CLIENTS 22 Expected client demand in 2019 AuM, client demand and other effects (in EUR billion) Full-year 2019 expectations 13 - 16 Client demand 13.3 72.8 13.3 61.9 9.2 54.2 (-6.5 to -7.5) Tail-downs &1 (-2.4) redemptions 8.4 46.0 (-5.5) -4.8 +/- FX & others2 37.6 (-1.0) Tail-downs & (0.0) -2.6 -4.
Slide 23: Table of contents
ANNUAL RESULTS 2018 23 Table of contents 1 Investments 2 Clients 3 Financials 4 Changes to the Board 5 Private markets perspectives
Slide 24: Strong results across the board
FINANCIALS 24 Strong results across the board 2018 financial highlights Avg. AuM¹ Management fees Revenues2 EBITDA (in CHF billion) (in CHF million) (in CHF million) (in CHF million) +18% 78 +15% +7% +7% 1'002 1'326 66 873 1'245 882 825 2017 2018 2017 2018 2017 2018 2017 2018 Driven by Attributable
Slide 25: Sustained development of management and performance fees
FINANCIALS 25 Sustained development of management and performance fees Revenues1 (in CHF million) 1'326 Revenues1 1'245 69 324 Performance fees (24%) 372 (30%) 84 late management fees & other income3 99 1'002 Management fees2 (76%) 873 (70%) 2017 2018 1 Revenues include management fees and performan
Slide 26: Continued solid performance fee development
FINANCIALS 26 Continued solid performance fee development In the long run, performance fees are expected to grow in line with AuM growth 500 72.8 450 61.9 400 54.2 372 350 AuM (EUR billion) 324 46.0 294 300 294 Performance 37.6 fees 250 6-9 years 31.6 (CHF million) 200 27.8 24.1 150 20.7 15.5 16.6 1
Slide 27: Management fees will continue to be the main source of revenues
FINANCIALS 27 Management fees will continue to be the main source of revenues Outlook on performance fees around Performance fees around 10% 24% 20-30% Performance fees1 “quasi-recurring” Over 300 programs, highly diversified across vintage years, regions and industries around Management fees2 70-80
Slide 28: Stable revenue margin on management fees
FINANCIALS 28 Stable revenue margin on management fees Revenue margin1 1.89% 1.74% 1.71% 1.35% 1.36% 1.36% 1.39% 1.39% 1.38% 24% 1.25% 1.26% 1.23% 1.33% 1.33% 1.29% 1.25% 1.26% 1.30% 1.26% 1.31% 1.24% 1.23% 1.18% 1.23% 1.24% 1.22% 76% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Slide 29: Costs grew in line with revenues
FINANCIALS 29 Costs grew in line with revenues Revenues, costs and EBITDA development (in CHF million) 2017 2018 Revenues 1 1'245 +7% 1'326 Total costs, of which -420 +6% -444 Personnel expenses -359 +5% -377 2 Personnel expenses (regular) -210 +17% -247 Personnel expenses (performance fee-related)
Slide 30: Target EBITDA margin of ~60% for newly generated management fees
FINANCIALS 30 Target EBITDA margin of ~60% for newly generated management fees as well as for performance fees on existing and new AuM EBITDA margin development 80% 2 70% 66% 66% 1.8 61% 62% 61% 60% 59% 62% 1.6 ~60% 60% 1.4 1.23 EUR/ 1.21 1.23 1.21 50% 1.11 1.15 CHF 1.07 1.09 1.06 1.2 for newly gene
Slide 31: Foreign exchange rates and their impact on the EBITDA margin
FINANCIALS 31 Foreign exchange rates and their impact on the EBITDA margin Currency exposure in 2018 others others 6% 6% GBP GBP 9% 9% Others EUR EUR EUR ~15% ~5% 49% 49% USD ~25% ≈ ≠ GBP AuM EUR Management ~15% Costs1 56% fees CHF USD USD ~40% 36% 36% EUR/USD foreign exchange fluctuations have a gr
Slide 32: Solid profit contribution and balance sheet
FINANCIALS 32 Solid profit contribution and balance sheet Key financials (in CHF million, except for per share data) Balance sheet (as of 31 December 2018) 2017 2018 Revenues1, of which 1'245 +7% 1'326 Management fees2 Performance fees 873 372 +15% -13% 1'002 324 1.2 39% CHF billion return on Total
Slide 33: Proposed dividend of CHF 22.00 per share
FINANCIALS 33 Proposed dividend of CHF 22.00 per share based on solid operating results and confidence in the future potential of the business Dividend payment since IPO (CHF per share) 24.00 Dividend/share 1 22.00 80 Total AuM (in EUR billion) 19.00 70 20.00 60 Dividend/share in CHF Total AuM in EU
Slide 34: Table of contents
ANNUAL RESULTS 2018 34 Table of contents 1 Investments 2 Clients 3 Financials 4 Changes to the Board 5 Private markets perspectives
Slide 35: Entrepreneurial governance enables a long-term approach to value creation
CHANGES TO THE BOARD 35 Entrepreneurial governance enables a long-term approach to value creation Proposed changes to the Board composition1 • Dr. Peter Wuffli, current Vice Chairman and Lead At Partners Group, we believe the Independent Director, will retire from the Board role of the board is crit
Slide 36: Proposed Board of Directors & committees
CHANGES TO THE BOARD 36 We embrace the private markets approach to governance in a public markets context Partners Group: proposed1 Board of Directors & committees Steffen Dr. Eric Strutz, Dr. Marcel Michelle Alfred Grace del Dr. Martin Patrick Urs Meister, Lead Independent Erni Felman Gantner Rosar
Slide 37: Table of contents
ANNUAL RESULTS 2018 37 Table of contents 1 Investments 2 Clients 3 Financials 4 Changes to the Board 5 Private markets perspectives
Slide 38: Four key developments that investors should watch out for
PRIVATE MARKETS PERSPECTIVES 38 We believe there are four key developments that investors should watch out for 1 2 Economic challenges ahead Era of disruption Jittery global economy and Combination of technologies more geopolitical frictions from different sectors may generate headwinds leave operat
Slide 39: Economic challenges ahead: the future outlook vs. the past two decades
PRIVATE MARKETS PERSPECTIVES 39 1 Economic challenges ahead: the future outlook vs. the past two decades A. Support from interest rate cuts… B. Support from growing leverage… 10-year US Treasury rates and average US purchase price multiple1 Total global nonfinancial sector debt2 Yield (%, left side)
Slide 40: Economic challenges ahead: focus on transformative growth themes in sub-sectors
PRIVATE MARKETS PERSPECTIVES 40 1 Economic challenges ahead: focus on transformative growth themes in sub-sectors Select sectors Technology Industrials Consumer products Select Outsourced Product Development Automation Personalization & customization sub-sectors:1 Legacy custom app. 3D printing, Opp
Slide 41: Era of disruption: the journey has started
PRIVATE MARKETS PERSPECTIVES 41 2 Era of disruption: the journey has started Sub-sectors The good old days The disruption The aftermath Online Supply chain Retail1 Traditional retail format Online retail corners market retail solutions Offline retail stores Economies of scale in • 564+ million produ
Slide 42: Era of disruption: search for upside disruption potential when feasible
PRIVATE MARKETS PERSPECTIVES 42 2 Era of disruption: search for upside disruption potential when feasible Sub-sectors The good old days The disruption The aftermath Smart Data Sub-metering Traditional metering Modern sub-metering sensors analytics services1 Manual meter reading • Auto-reading in hou
Slide 43: Public markets dynamics: signs of "governance correctness" fatigue
PRIVATE MARKETS PERSPECTIVES 43 3 Public markets dynamics: signs of "governance correctness" fatigue A. "Shift to passive" attitude dominates public markets B. Proxy advisors take over from shareholders Asset under Management of Global ETF1 (USD bn) "… many asset managers automatically rely on proxy
Slide 44: Public markets dynamics: turning challenges into opportunities
PRIVATE MARKETS PERSPECTIVES 44 3 Public markets dynamics: turning challenges into opportunities Decision makers are searching for long-term focused, entrepreneurial partners Public markets Leadership opportunities Ownership opportunities Passive public investors Private markets firms Absorb Team up
Slide 45: Private markets challenges: competition is increasing due to a multitude of factors
PRIVATE MARKETS PERSPECTIVES 45 4 Private markets challenges: competition is increasing due to a multitude of factors A. More players are entering private markets each year B. Structural shift to higher private markets valuations Private capital fundraising in the market1 Public and private market v
Slide 46: Private markets challenges: our (continued) strategy for the next decade
PRIVATE MARKETS PERSPECTIVES 46 4 Private markets challenges: our (continued) strategy for the next decade Business excellence Ownership excellence Strategic pipeline development Systematic value creation Entrepreneurial ownership Long-term investing strategy 100% 80% Growth / Returns 60% Relative V
Slide 47: Our portfolio investments benefit from the significant resources we provide
PRIVATE MARKETS PERSPECTIVES 47 Our portfolio investments benefit from the significant resources we provide • EUR 73 billion assets under management • >1'200 professionals • 19 offices globally Business excellence Ownership excellence Corporate assets EUR 36 bn AUM1 We honor our long-term commitment
Slide 48: Business & ownership excellence in private markets
PRIVATE MARKETS PERSPECTIVES 48 Business & ownership excellence in private markets: our approach to private markets Entrepreneurial Ownership Partner to Business • Longer-term business-oriented entrepreneurial governance • We have a bias towards trusted, long-term relationships to is at the heart of
Slide 49: Contacts
49 Contacts Zugerstrasse 57 Investor relations contact: 6341 Baar-Zug Philip Sauer Switzerland Tel.: +41 41 784 66 60 T +41 41 784 60 00 Email: philip.sauer@partnersgroup.com partnersgroup@partnersgroup.com Media relations contact: www.partnersgroup.com Jenny Blinch Tel.: +44 207 575 25 71 Email: je
Slide 50: Disclaimer
IMPORTANT NOTICE 50 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 — FY2018 Earnings Presentation on 6ix