Partners Group secondaries investment pace plummets

Partners Group‘s secondaries investment deployment plunged in the first half of the year as volatile public market valuations made it harder for the firm to execute with sellers on deals.

The Zug-headquartered firm invested around $0.3 billion into the strategy during the period, down around 79 percent from the $1.4 billion deployed in the first six months of last year, according to its semi-annual results published Tuesday.

“Our secondaries team has been extremely busy during this first half of the year, engaged in a number of conversations, but during a good portion of H1 we saw the dialogues that we were having with sellers disrupted by very rapid appreciation of public market valuations,” co-chief executive David Layton said on a call accompanying the results.

It was “difficult to walk a straight line” when negotiating on some secondaries portfolios, he added.

“We’ve been staying disciplined. We’ve been continuing to be very selective and we are buying assets that we know.”

Asked by an analyst on the call whether the firm’s drop in secondaries investments was due to LPs holding off until the second part of this year to sell assets, Layton said he expects there would be more activity as valuations stabilise.

“I would expect more opportunities there to manifest themselves,” he said.

Deal volume in the secondaries market fell 57 percent to around $18 billion in the first half of this year, compared with the same period last year, according to mid-year data from Greenhill. GP-led deals were down 57 percent to around $6 billion, the investment bank estimated.

Partners Group’s revenue from performance fees slumped 57 percent in the first half of the year to SFr 56 million ($61 million; €52 million) from SFr 130 million, year-on-year, as market volatility and the weak exit environment led to delayed exits. Total revenues decreased by 9 percent to SFr 623 million during the six-month period.

Investors have not amended long-term allocations to private markets, co-chief executive André Frei said on the call. Covid-19, which has led to postponements, has not affected the firm’s asset-raising potential, and demand remains intact for its evergreen programmes and separate account mandates, he added.

The firm expects gross client demand this year to reach between $12 billion and $15 billion.

Overall, Partners Group invests roughly the same amount as it raises in any given year, Layton said, adding that LPs’ frustrations with the asset class as a whole are that some GPs hold on to committed capital without deploying it.

“Today [investors] are much more focused on compounding value than they are having their commitments sit around for those long periods of time,” he said. “We try and match up the opportunities that we see with the capital that we raise.”