Partners Group on $77bn-worth of deals

Partners Group generated $77 billion in private equity secondaries deal flow across 450 deals in 2014, but the firm remains selective in an increasingly competitive market, says co-head of private equity secondaries Adam Howarth.

How would you characterise Partners Group’s secondaries activity in 2014?

Last year was a strong one for Partners Group, both in terms of supply and for making investments on behalf of its clients. We saw record deal flow in private equity secondaries – $77 billion in terms of net asset value plus unfunded commitments – across 450 deals. This is up from 2013 when we recorded $70 billion worth of deals.

It is especially difficult to be a secondaries buyer at the moment, but we focus on remaining selective and striving to find quality assets. This means we have to be disciplined and quickly exclude the deals we know we’re not interested in. We think about our deal flow as a funnel – we like to have the funnel wide at the top to collect and see every opportunity. Then we like to very quickly narrow down the list and filter out the deals where we either do not have an interest or do not have a good angle.

What are your expectations for 2015?

On the supply side, we expect there will be more opportunities than in 2014. This is driven by the increasing trend of more active portfolio management in private equity and the compounding amount of NAV in mature private equity funds.  On the demand side, we expect the market to be flat in terms of deal volume. We have observed equilibrium in the secondary market over the past few years in terms of what is raised and what the market can digest. At Partners Group, we maintain a disciplined investment approach and pace across cycles and will look to invest a similar amount in 2015 as we did in 2014. In the current environment it takes a huge effort to uncover mispriced assets in the market. We are looking for quality, non-cyclical companies which are not over-levered. We believe these are the types of companies which have the potential to generate the most future value for our investors.

The majority of transactions seem to be large, widely-marketed deals. Do you think that’s an accurate reflection of the whole market?

Some of the larger deals which have dominated the headlines have been portfolio management exercises and widely shown to the buyer universe. While these deals drive a lot of the market volume, we do not think this is reflective of the whole market.  There are a number of discreet transactions, both small and large, happening all the time in the secondary market. These may be fund interests, secondary directs or even GP-led restructurings without the use of advisors.