Company Reports

Narrow-moat Partners Group's results for the first half of 2024 confirmed that the firm is on track to meet our expectations for fiscal 2024. Partners also reaffirmed their longer-term guidance. The market expected more, with the shares closing 9% down on the day of the results.

We initiate coverage with narrow moat ratings on all three major European-based private market firms: CVC Capital Partners PLC, EQT AB, and Partners Group Holdings AG. We expect all three firms to remain highly profitable, and the private market industry benefits from established secular growth trends. However, the eye-watering mid-20s EV/EBITDA multiples the firms trade at currently suggest that the market already prices in these strong fundamentals. We do not believe that higher interest rates mark a structural change in the industry, but we expect near-term dealmaking to remain muted.

Most private market firms focus on dealmaking, with less consideration of clients' risk/reward or liquidity needs. Partners Group took a different approach. Around 40% of its AUM comes from separately managed, bespoke mandates developed for large institutional clients, where it has the investment, capital market and legal expertise to structure creative alternative vehicles. Partners Group is also one of the pioneers and market leaders in semi-liquid funds that enable individual investors to get exposure to private market investments. Semi-liquid funds account for around 30% of AUM. For both mandate and semi-liquid clients, Partners Group offers relative value strategies that allow it to make tactical asset allocation decisions across the full spectrum of private market assets: private equity, private credit, real estate, and infrastructure.