Partners Group Holding AG

Good day, and thank you for standing by. Welcome to the Partners Group's announcement of AUM as of the 30th of June, 2025 webcast and conference call. I would now like to hand the conference over to your third speaker today, David Layton. Please go ahead, sir.

Hello, everyone. Welcome to Partners Group's H1 business update and outlook call. I'm Dave, CEO of Partners Group, and I'm joined today by Roberto, our head of portfolio solutions and our chief risk officer. Doris, our CFO, will join us for the Q&A. Earlier this year, January, February, March, it felt like 2025 had the potential to be a big rebound year for the industry. However, the volatility stemming from tariffs in April stole some of that momentum, and the environment during H1 turned out to be a bit more mixed. Gold buyout volume is holding steady, maybe up a little from recent periods. IPO activity remains subdued. Buyout exit volume fell year on year, and global buyout capital raised was down pretty meaningfully from the same period last year, a continuation of what we were experiencing in H2. Distribution levels continue to have room for upside, which could help to spark additional investor commitments in future periods. So for the industry, it's a bit of a mixed bag so far this year. Next slide. I believe our firm has been able to navigate this environment well. And we've again shown that we're built for any cycle. We have one of the most diversified and resilient platforms in the private markets. We raised $12 billion in new commitments during the period. That's up about 10% versus H-124. And we reconfirm our fundraising guidance for the year. This has the potential, we think, to be a strong vintage year from a returns perspective. and we invested $9 billion this period. You'll see us ebb and flow with where opportunity presents itself in the investment markets. We also realized $9 billion for our clients. Later on the call, we'll also provide some color on expectations for H1 performance fees. Things are on track there. Roberto will now give us some insight into our fundraising results for the period.

Thank you, Dave. I'm happy to provide some additional background on the $12 billion of new funds raised. In terms of asset classes we raised, you will notice it is similar to what we raised in 2024, with a stronger tilt toward lower fee-paying asset classes like private credit. Private credit was our strongest asset class, supported by our bespoke mandates and several insurance wins. Private equity was our second largest contributor, with flows primarily driven by our evergreen business. This was a combination of both our new launches and existing programs. I'll speak more about that later. Infrastructure and real estate were mainly driven by traditional fundraising. Note, though, that we recently launched two new infrastructure evergreens and are seeing strong flows into those new solutions as well. Our new royalties evergreens, both for institutional and private wealth clients, were recently launched, and we started seeing flows towards the end of H1. Challenges in the traditional fundraising have largely persisted. In general, this is reflective of a large industry trend where we see clients opting for more tailored solutions. We believe that in the current environment, this trend will be accelerated. Mandates remain a core focus for us as a firm. Our clients agree that mandates make investing easier. We have a very strong mandate pipeline at the moment and expect to share a few more successes with you later in the year. Our evergreens also continue to be a meaningful contributor. I'll speak about in more detail in the later slides. I would like to now deep dive on our mandates and evergreens on the next few slides. And let me start with the mandates first. The strength of these solutions is that we can leverage our full platform or only pockets of it, depending on what individual clients want. Unlike the standard approach of investing in just three or four funds, which limits flexibility, we have the ability to allocate investments line by line individually. Each client has a dedicated portfolio manager focused on meeting their specific investment objectives. This line by line approach enables us to efficiently build portfolios and adjust asset allocation based on relative value opportunities. Looking at our mandate AUM, direct investments are the foundation accounting for around 60%. However, we can also diversify our clients, giving them exposure to attractive secondary opportunities or primaries if they want mixed manager exposure. This would be more of a one-stop solution for a client's private markets needs. Our Evergreen clients also benefit from the same portfolio management approach. We have been running Evergreens for over 20 years, and after navigating through many challenging cycles, we have portfolio management down to a science. If you are partners with Evergreen clients, your main exposure will be to our direct investments with around 70%. Primaries and secondaries provide an advantage from a portfolio construction point of view complementing. Looking at Evergreen's flow, I've heard a lot of different commentary, and we'll address some of that on the next slide. But I would like to bring some more color to our H1 flows. In H1, our top three programs accounted for roughly 43% of total flows, These same solutions account for 73% of ROM. Our remaining evergreens, including our new launches, accounted for 57%. As more programs are coming online, we expect those flows to increase. When you look at performance, you have to consider different audiences. We have the strongest track record in the industry, proven capabilities of managing liquidity through cycles, and delivering on our long-term target returns consistently. We have not changed these targets since we first launched our PE40 Act Fund in 2009, and we continue to deliver. At the same time, we have managed to limit downside through some of the most adverse market environments for private markets. For sophisticated financial advisors and distribution partners who understand these solutions, This is a key point and outweighs short-term performance that can occur for various reasons. As evidence to this, we have added over 40 distribution partners globally over the last 12 months. We have learned a few lessons over the last 20 years. One of these is that temporary fluctuations in performance are part of navigating cycles. Recently, short-term performance has been below our long-term targets. for some of our large programs as part of their long-term 20-year plus track record with a return of 10% to 12%. They are currently annualizing at 7% to 8% when looking at the last three years. That's 2% to 3% below our long-term return. This is nothing new. We've been there before. For the end of H1, the three-year rolling return of our major private equity evergreens, we estimate to stand at 8.2%. This is already markedly improved from a 5% to 6% level we saw at the low point of this cycle during the second half of 2024. We've seen similar levels being reached before, not only in the GFC, but also in 2011 during the European sovereign debt crisis, and most recently in early 2020. And they all make part of our successful long-term 10% to 12% track record we have built our evergreen business on. Let me state at the outset that our portfolios are in good shape. Within those books, our direct investments are outperforming the very diversified primary portfolios, which are typically a closer reflection of the broad private equity industry performance. We believe the return potential of those portfolios is fully intact. When we look at the bridge from short-term to long-term performance, there are three elements which explain the differential. Slower EBITDA growth, valuation adjustments, and lower cash flow due to higher interest rates. The majority of those are related to the weighting of certain less favorable vintage years in our evergreens. From today's perspective, there's nothing wrong with those vintages, but those were the ones that were fully transitioning from the zero rate environment to today's world of higher interest rates. If you look at especially the 2019-2021 vintages, They entered a period with sharp rises in interest rates, limited financing ability, and a more challenged macro environment. This resulted in slower EBITDA growth and a one-off headwind on valuations. Now, the good news is that we believe that as an industry, we are largely through those changes, with the pickup in exit activity at valuations above the carrying value being the single most visible piece of evidence, and Dave will update a bit more on that later on. Note that further over time, those vintage shares represent a smaller share of the overall portfolio. From a high point of roughly 70% back in 2021, we expect the exposure to pre-2022 content approaching roughly 25% by the end of this year and to keep decreasing thereafter. On the flip side, by the way, we have seen those vintages seem to provide upside potential as exits are materializing. Something newer vintages don't usually have. If you turn to the right side, if you look at our newly launched evergreens, which are less exposed to this temporary valuation development and less favorable vintages, you're seeing strong growth, and this is further evidence that the Partnerscoop investment engine is humming. I wanted to give you this extra disclosure, as I know it is a topic on many of your minds. In summary, we think we are not far from getting back in our 10% to 12% target net return ranges for our established evergreens. As a matter of fact, we have been steadily moving towards that range over the last couple of quarters. With that, back to you, Dave.