Partners Group expects to see a jump in secondaries market opportunities amid the difficult economic environment caused by the coronavirus outbreak.
Speaking on the $94 billion investment firm’s annual results call on Tuesday, co-chief executive David Layton said the secondaries team was “ecstatic” about the opportunity presented by increased volatility in the market.
“As liquidity needs increase, the relevance of that investment type increases,” Layton said. “Our secondaries team is anticipating a large spike in opportunities at attractive levels coming their way.” This increase in opportunities has not happened yet, he added.
The firm also expressed confidence that it would not need to delay any ongoing fundraising processes. Secondaries Investor reported in October that Partners Group was targeting $4 billion for its latest flagship secondaries fund, a 40 percent increase on its predecessor.
“At this point, you don’t want to issue too many capital calls or too substantial capital calls because all the staff of clients may be working from home,” said co-chief executive André Frei. “I believe our business continuity [plan] is in place to make sure we can process all the clients’ interests.”
The impact of the coronavirus on Partners Group’s Asia portfolio started to be felt in late January, Layton said. The firm’s Chinese portfolio, which accounts for 4 percent of total net asset value, hit bottom in terms of revenue, traffic and production capacity on the week of 17 February and has been climbing since.
It is “completely premature to project with any accuracy” the broad economic implications that the coronavirus will have on Partners Group’s portfolio, Layton said. Many of the firm’s portfolio companies have drawn down revolving credit facilities in anticipation of a liquidity shortage, with education, restaurant and industrial assets particularly hard hit.
“We will see revenue shortfalls in many portfolio assets and we need to manage liquidity very closely,” he said.
A longer-term concern is how a prolonged period of isolation might impact consumer habits. “Once consumers find new, more home-based routines, it will likely take time to re-engage them in what was previously observed as regular observed economic activity,” Layton said.
The Zug-headquartered group’s average revenue increased 21 percent to SFr1.6 billion (€1.5 billion; $1.7 billion) for full-year 2019. This came on the back of a 14 percent year-on-year increase in management fees and a 46 percent increase in performance fees.