Partners Group, the Swiss-based private markets investment firm that is also a major player in Luxembourg, has reported a significant decline in performance fees for the first half of 2024 because investment exits are being postponed and becoming more difficult.
The firm’s semi-annual results, released on Tuesday, show a 39 percent drop in performance fees to 161 million Swiss francs (171 million euro), down from 265 million francs during the same period last year. Performance fees accounted for merely 17 percent of total revenues compared to 25 percent in H1 2023 and down from earlier guidance of about 20 percent.
The two largest contributors to H1 performance fees were private equity exits from SRS Distribution, a building products firm sold to Home Depot in the US in June, and public sector firm Civica, acquired by Blackstone in May. A next major exit is foreseen for Aavas Financiers, which offers housing finance in India, the firm said.
Despite raising 11 billion dollars in new capital, bringing total assets under management (AuM) to 149 billion dollars as of 30 June 2024, the firm’s overall revenues fell by 7 percent to 977 million francs. In Swiss trading on Tuesday, its shares were down as much as 6 percent, just above a one-month low.
‘Slow recovery’
CEO David Layton acknowledged the challenging market conditions during the investor call. “While we are pleased with the solid inflow of new capital, the continued slow recovery of transaction markets has affected our ability to realise asset divestitures as planned,” he said. “This has, in turn, impacted our performance fees.”
Partners Group has been forced to postpone several asset sales across its private equity and infrastructure portfolios due to these market conditions. Despite a 69 percent increase in realisation activity year-on-year, the firm noted that much of this was concentrated in private credit and portfolio assets, sectors that typically generate lower performance fees.
Operating costs decreased by 9 percent to 371 million francs, largely due to lower variable personnel expenses linked to the reduced performance fees. However, profit for the period still fell by 8 percent to 508 million francs, in line with the decline in overall revenues.
Revenue from management fees rose 4 percent to 815 million during the first half.
Upbeat fee outlook, for 2026
Looking ahead, Partners Group remains optimistic. The firm reconfirmed its guidance for performance fees to account for 20-30 performance of total revenues for the full year 2024, although it anticipates this to be closer to the lower end of the range given the current market conditions.
The firm talked about “significant future potential” for performance fees in the coming years, as it expects to be able to exit private investments that normally take six to nine years to mature. “Today we believe that the recovery speed of exit markets will more likely deliver in 2025 than in 2024,” said chief financial officer Joris Gröffin during the investor call, adding that performance fee margins would move towards the range of 25 to 40 percent.
“We are confident they can account for 25 to 40 percent from 2026 onwards,” said Gröffin.
Juri Jenkner, partner and president, highlighted the firm’s strategic response to the market environment. “We are actively preparing for a market upturn. Our exit pipeline is robust and highly diversified, and we remain confident that our performance fees will see a material increase as the exit environment improves,” he stated.
Luxembourg accounted for 37 percent of the firm’s revenue last year. Partners Group in 2008 opened an office in Luxembourg to strengthen its international operations in private markets. The firm has been active as an AIFM since 2018. As AIFM, the firm supports the management of some 93 Reserved Alternative Investment Funds in the Grand Duchy.
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