Partners Group reports continued management fee growth; performance fees in line with guidance; dividend up 12% to CHF 37.00 per share

• Management fees grew 12% year-on-year to CHF 1’603 million, in line with average assets under management (AuM)[1] growth in CHF
• Performance fees accounted for 14% of total revenues, within guidance communicated
• Revenues decreased by 29% year-on-year to CHF 1’872 million due to lower performance fees
• EBIT stands at CHF 1’132 million; EBIT margin at 60.5%, in line with target margin of ~60%
• Profit decreased in line with revenues by 31% to CHF 1’005 million
• Dividend proposed to increase by 12% to CHF 37.00 per share
• Reconfirmed guidance of expected gross client demand of USD 17-22 billion in 2023

Summary of key financials 2022 (in CHF million)

2022

2021

Revenues[2]

1’872

2’629

-29%

Management fees[3]

1’603

1’432

+12%

Performance fees

269

1’197

-78%

Personnel expenses

-596

-861

-31%

Other operating expenses/D&A[4]

-144

-118

+23%

EBIT

1’132

1’650

-31%

EBIT margin

60.5%

62.8%

Net finance income and expenses

-2

76

Income taxes

-124

-263

Profit

1’005

1’464

-31%

David Layton, Partner and Chief Executive Officer, says: "We are pleased to report a solid set of financials for 2022, driven by the continued growth of our business. In today’s more volatile environment, it is especially valuable to focus on transformational value creation. In fact, this emphasis resulted in average double-digit EBITDA growth across our direct private equity portfolio in 2022. We will continue to build resilience in our portfolio by focusing on a hands-on, entrepreneurial ownership approach to growing businesses and assets in sub-sectors backed by transformative trends. With this approach, we believe we are best positioned to deliver sustained outperformance for our clients and other stakeholders.”

2022 financials

Total revenues are composed of management fees and performance fees. In 2022, continued management fee growth was offset by lower performance fees and, as a result, revenues decreased by 29% to CHF 1’872 million (2021: CHF 2’629 million) at a revenue margin[5] of 1.51% (2021: 2.41%).

• Management fees grew by 12% to CHF 1’603 million (2021: CHF 1’432 million), supported by growth in average AuM in CHF of 14%. Management fees represent the majority of revenues and are recurring based on long-term client contracts.
• Performance fees amounted to 14% of total revenues, or CHF 269 million (2021: CHF 1’197 million), in line with prior full-year guidance. Following last year’s exceptional performance fees of 46% of total revenues, performance fees this year were mainly driven by two factors. First, in 2021, select realizations originally planned for 2022 were brought forward because Partners Group had already met its value creation targets and exit conditions were particularly favorable. Second, planned realizations of several mature businesses and assets were postponed in 2022 in view of the changing market environment.

Hans Ploos van Amstel, Partner and Chief Financial Officer, adds: “Client demand for bespoke solutions continued to increase, making up 70% of total funds raised, and providing the basis for further growth of management fees. At the same time, the robust operational results we have been seeing across our portfolios provide the foundations for future performance fees. They support our expectations for performance fees to return to our mid- to long-term range of 20% to 30% of revenues in 2023, with a skew to the second half of the year."

Total operating costs decreased by 24% to CHF 740 million (2021: CHF 978 million). The decrease was mainly driven by lower variable performance fee-related personnel expenses and was partially offset by increased investments in talent, cost inflation, and a normalization of travel.

• Total personnel expenses (80% of total operating costs) decreased by 31% in 2022 to CHF 596 million and consist of both regular and performance fee-related expenses. Regular personnel expenses grew by 18% to CHF 496 million, ahead of average FTE growth of 13% largely due to higher compensation to account for a more competitive talent market and for the effects of inflation. Performance fee-related personnel expenses decreased in-line with performance fees to CHF 100 million (2021: CHF 441 million). The firm applies its EBIT margin target of ~60% to all performance fees generated.
• Other operating expenses increased by CHF 26 million during the period and amounted to CHF 104 million (2021: CHF 78 million). This was driven by a normalization of travel post-COVID and investments in technology to continue supporting the firm's growth. Partners Group expects those expenses to move in line with management fees going forward. Depreciation & amortization remained stable at CHF 40 million (2021: CHF 40 million).

EBIT was mainly influenced by the year-on-year decrease in performance fees and amounted to CHF 1’132 million (2021: CHF 1’650 million). The EBIT margin decreased to 60.5% (2021: 62.8%), aligned with the firm's ~60% margin target. This was driven by two factors: first, rising labor costs due to a more competitive environment for talent and the effects of inflation, and second, foreign exchange effects such as the strengthening of the CHF against the EUR.

Net finance income and expenses amounted to CHF -2 million (2021: CHF 76 million). Value creation activities continued to steer operational performance in 2022, mitigating the effect of valuation changes from public market devaluations, and contributed CHF 14 million (2021: CHF 120 million), whereas negative foreign exchange effects, hedging, and other costs resulted in a negative contribution of CHF -16 million (2021: CHF -44 million).

Income taxes totaled CHF 124 million (2021: CHF 263 million) at a tax rate of 11.0%. This was mainly driven by a one-time recognition of goodwill in the tax accounts in 2022. Adjusting for the effects from the recognition of goodwill, the tax rate for 2022 would have been 15.4% (2021: 15.2%).

In summary, the firm's profit developed broadly in line with revenues to CHF 1’005 million (2021: CHF 1’464 million). Partners Group's Board of Directors proposes a dividend of CHF 37.00 per share (2021: CHF 33.00 per share) based on the solid development of the business and its confidence in the sustainability of the firm's growth. The proposal represents an increase of 12% year-on-year and a payout ratio[6] of 95% (2021: 60%).

Outlook

Partners Group confirms its full-year 2023 guidance on expected gross client demand of USD 17 to 22 billion with a tilt to H2, together with USD -10.5 to -12.5 billion in tail-down effects stemming from the more mature closed-ended investment programs and redemptions from evergreen programs. The firm expects client demand to be diversified across its traditional programs and bespoke client solutions. Partners Group further expects performance fees for full-year 2023 to return to its mid- to long-term range of 20% to 30% of total revenues, also with a tilt to H2. It bases its guidance on the assumption that financing markets stabilize sufficiently during H1 to promote a more benign exit environment and thus gradually lead to a normalization of exits in H2. Partners Group will continue to target a ~60% EBIT margin on newly generated management fees as well as on all performance fees as it builds out its resources in preparation for the future growth of the firm. For 2023, Partners Group anticipates the tax rate to be in the range of 15% to 17%. As for 2024 and onwards, it expects the tax rate to increase to around 18% to 19% assuming the OECD domestic tax base erosion and profit shifting (“BEPS”) Pillar II initiative will be implemented in 2024.

Steffen Meister, Partner and Executive Chairman of the Board, concludes: “In our view, private markets are becoming the new ‘traditional’ asset class, offering investors access to segments of the real economy that are often no longer accessible through public markets. We believe this fundamental shift will lead to greater diversity in private markets strategies, with a bifurcation between active and passive managers. Active private markets investors, such as Partners Group, are those that aim for long-term outperformance through governance-driven operational value creation, bringing in their own organization and network to build better businesses. This hands-on investment approach will remain key to delivering sustained outperformance at scale for clients in an era with higher rates and without valuation tailwinds.”  

Conference call today & publication of 2022 Annual Report

Partners Group's senior management will hold a conference call today at 9:00am CET at the Widder Hotel in Zürich, Switzerland. To register for the call, please click link or use the contact details at the end of this press release.

The annual report as of 31 December 2022 is available for download at www.partnersgroup.com/financialreports.

Key dates 2023

24 May 2023

Annual General Meeting of shareholders

13 July 2023

Announcement of AuM as of 30 June 2023

5 September 2023

Publication of Interim Financial Results as of 30 June 2023

14 September 2023

Publication of Interim Financial Report as of 30 June 2023

^[1] AuM is an Alternative Performance Metric (APM). A description of the APMs can be found in Partners Group's 2022 Annual Report on pages 32 and 33, available for download at www.partnersgroup.com/financialreports.

^[2] Revenues include management fees and performance fees.

^[3] Management fees and other revenues, net, and other operating income.

^[4] Depreciation and amortization

^[5] Revenue margin is an Alternative Performance Metric (APM). A description of the APMs can be found in Partners Group's 2022 Annual Report on pages 32 and 33, available for download at www.partnersgroup.com/financialreports.

^[6] Dividend payout ratio is defined as the (proposed) dividend per share divided by diluted earnings per share