Partners Group Holding AG

Great to be with everyone. Welcome to our annual results call.

My name is Dave Layton, I’m the Chief Executive of the firm joining from the U.S. I’ll be on today with my partner and our Chairman, Steffen Meister, as well as our partner and our CFO, Hans Ploos.

We’re excited to present our results. But before we get into it, I wanted to provide you all with a little window into our 4-day investor conference, which we just finished wrapping up here in the United States.

We had a few hundred attendees from more than 20 different countries. And after virtual events in 2020 and 2021, this was the first in-person conference that we’ve been able to hold in a few years, and we are very, very pleased with the take-up.

We actually held the event inside of our Americas headquarters in Colorado, which was a unique and a meaningful venue. We got updates from many of our clients on their outlooks and their reactions to the current market dynamics.

And it’s sufficient to say that despite geopolitical turmoil at the moment and the noise and volatility in the market, we continue to feel very good about the private market industry’s structural tailwinds and about our positioning. Last week, last week, we discussed with our investors, what we see happening in the broader market, how we’re positioning ourselves as transformational investors and as business builders.

We held detailed investment reviews and portfolio reviews. We walked our clients through each asset class, and we provided deep insights into our new investments, exits, our portfolio developments across asset classes, and our thematic investing topics as well as numerous examples and case studies of the impact of our entrepreneurial governance approach, which enables us to successfully navigate today’s very complex market.

Now in the first section of the presentation today, we thought it would be interesting to share with you all our outlook for the industry, which we discussed in detail with our clients last week. And with that, Steffen, we’ll hand it over to you.

Thank you, David. Good morning, everybody.

Also from my side, it’s a pleasure to have at least partially an in-person annual conference event again. As Dave said last week, we spent quite a bit of time with our investors talking about the business.

Overall, but also the outlook sharing some perspectives. And I want to start today and kick this off actually with the same presentation, sharing the perspectives around private markets that we shared with our clients.

We think it’s of similar interest for shareholders, for analysts, for media. I’ll use the same materials, but I don’t have as much time actually as I had last week in Denver.

So to warn you, I’ll do this a little bit faster, okay, I’ll use the slides. We’ll not go through all details of the slides, but I’m sure if there’s questions, we’ll find some time in the Q&A or after the presentation on a more bilateral basis.

So the title is private markets have become the new traditional asset class, that’s a pretty bold side. I realize that.

So let me try to walk you through our considerations here in 4 steps. One is we want to talk about the change of roles between public and private markets over time and as we see that to continue.

The second topic is how we see the broader economies in the future increasingly being built in private markets actually. The third one is with all of that, we’ll see growth, maturities in market competition, and that will eventually lead to bifurcation, active and passive investing also in private markets.

And we’ll explain that and also our answer to these opportunities and challenges. So with that, let me dive back a few decades, just to give a little of context.

This industry started with buyouts mostly that were essentially highly leveraged investments into household names with some form of dismounting strategy in mind. So a bit like an event driven hedge fund strategy.

So very, very opportunistic. These are the good old times of the IPO.

So when public markets looked for household names, brand, stability, robustness in a very risk-averse way, actually, and IPOs at that time were the pinnacle of corporate developments of companies. That started to change quite a bit 20 years ago.

On the one hand, what we saw was private markets, more institutionalized by then, less transaction oriented, certainly with less leverage at operating, reaching out to the broader economy and becoming much more of a standard allocation for many investors globally. At the same time, we saw public markets changing quite a bit their stance towards investments.

They developed this incredible appetite for start-up companies at the turn of the millennium. And so suddenly, they start to finance not only profitable businesses for corporate development reasons.

But suddenly, they also gave essentially capital at a valuation that was unthinkable in venture capital and growth markets in private markets. And that was the start of a bigger change.

And in the last 20 years, I think this only continued. We see today private markets nearly a bit the more boring asset class, very long-term oriented, leverage has come down pretty much across the economy, financing mostly profitable businesses.

And today, public markets, if anything, they focus really on nonprofitable businesses, we’ll see that and offering essentially a valuation arbitrage and really disproportionally rewarding speculative growth that you would actually not see in private markets happening. So let me try to put some numbers behind that.

So the first is an observation here that the composition of the public markets or the dependence of the broader economy has certainly come down. So you look at here the S&P 500 index and the allocation to the more traditional economic sectors has come down by about a quarter only in the last 10 years.

And why is this happening? One big reason is because the IPOs do not represent any longer the broader economy.

And you see it’s really in the year 2000, where we saw the start of a new era in IPOs. There’s one fundamental thing that happened at that time.

The ordinary company would not do an IPO anymore because they got the financing for capital formation or they got the proceeds for an exit for known references for an asset in private markets. There are really only 2 main reasons left in the last 20 years to do an IPO.

One was if an asset was too large for private markets, still as of today, if an asset has an enterprise value of $20 billion, $30 billion, $40 billion above, that’s very hard actually to transact in private markets. But the second reason more often is the valuation arbitrage but the valuation arbitrage is not just across the economy.

It’s with a particular focus on these assets that show more of the speculative growth. I want to show you this, we are using, here, one dimension that the profitability of companies that get IPO-ed over the last 30 years.

What you see is that this percentage has come down from -- or close to 100% 40 years ago to about 85% in the ‘90s. That’s by the way, U.S.

IPOs, I should say, to about 20% today. So today, it’s 1 out of 5 companies that has a positive earnings per share number during the IPO.

So what are the companies that actually do an IPO today. The last 2 years, about 2/3 are specs.

So that’s very far away from traditional IPOs. And about 1/4 is actually, I would say, the more traditional type of IPOs that we know from the time maybe 20, 30, 40 years ago.

Now what’s interesting is if you look at this quarter, 26%, and we ask the question, where are these companies coming from? Who has financed these companies previously?

You’ll see that 89% had a venture capital or private equity background. So in other words, in a very ironic way, it’s the private markets that now drive this kind of piece of the IPO market that is still a bit more the traditional part of it.

So why are private market firms doing this like ourselves? It’s not that we believe public market is so much a better place for our companies.

Actually, it takes quite a bit of convincing of owners, of the boards, of management teams to go into the public market process. The simple reason is exactly that valuation arbitrage.

We have a fiduciary duty to get maximum out of our realizations. And so often, this can be the IPO that has a better valuation tag than the private markets.

But there’s clearly attendance here, I mean that these are companies that are of the more growth capital oriented and that will appeal to the public markets. Now I think what’s important is to quickly pause for a second and just kind of think about what that really means, what’s happening in public markets.

It’s important, I think, to understand the psychology of public markets and private markets. The IPO used to be a strategic corporate development to 30, 40 years ago.

Today, the IPO is a tactical financial instrument for capital formation or for realization of investors. So it’s a massive change of the psychology and what an IPO actually means.

Let me take a bit of an additional perspective beyond profitability and this will be more complicated I have to warn you, but I think it’s important to understand what’s going on between public and private markets. So I want to introduce here a little definition, I want to refer to certain activities in the economy as foundational as far as they concern the creation of services products, providing critical infrastructure and installations of the more human or capital intensive.

So you see some keywords here, R&D, supply chain, machinery installations. A typical company like Rovensa here at the lower end, you see one of our portfolio companies.

It’s a biological agriculture support product company, very typical foundation, so very, very strong, very future economy-oriented. However, B2B a little bit operating behind the scenes.

And then as companies that are not behind the scenes that will be more in the front of the curtain on the stage, we call them that’s really for a lack of better word, spotlight maybe oriented activities, those that focus a little bit on the delivery of end customer branded IP services products. High public awareness, often less human and capital intensive.

You see some of the success factors, network effects, information capital brand intellectual properties. So companies like Google would certainly be part of that group.

Let me be clear that companies that flow all the way through this iceberg here, I mean, a company like Nestle, I mean, clearly has a spotlight effect, but also a lot of foundational elements. The second comment I would make, this is not judgmental.

There’s great companies on either side here of this water line. But there’s one comment I want to make that is that the public markets disproportionately value the spotlight elements.

There’s thousands of examples, I want to just take 1 we have come across last year then investing in one of our portfolio companies, a health care apparel business. So the company that produces the medical uniforms, crops for nurses, for surgeons, for doctors with special textiles, materials and things like that very strong company.

They had one of their competitors in public markets, actually. I would say a little bit less foundational in their activities and strong, but very oriented towards the direct-to-consumer health care strategy.

With that, that got a valuation which was at a peak 10x higher than and what we actually paid in the private market space. So you wonder maybe why is this happening?

Why is there this kind of bifurcation and valuation on these businesses between public and private markets? I think there’s 2 reasons.

The first reason is that there is probably an expectation that some of these nonfoundational activities though a bit simpler, they can get more viral. They can probably grow faster.

There’s a little bit of winner takes it all effect. I think in some cases, that’s true in some other cases, probably not so true.

And also keep in mind, winner takes it all means that usually 1 or 2 winners, there’s not thousands of winners. Often the hurdles of entry aren’t actually that high in these businesses, but let’s leave it there.

But the second reason is that increasingly, it seems that public market investors have a sense that the new economy, the most successful business in the future, they need less these foundational activities. They all look a little bit like the spotlight kind of companies.

And that is extremely wrong. Now I want to quickly walk you through one example here.

I picked the food value chain or the modern, the future food value chain as an example. So food value chain is one of our what we call internally a mega theme, which is really a cluster of themes where we see a lot of trends changing the future activities in that part of the economy.

If you look at the typical food value chain today or the modern chain, you have delivery with companies like DoorDash, $30 billion market cap, negative earnings, at least the last time I looked it up, typical kind of spotlight company. And then you have the actual value chain or ecosystem of the food value chain.

And there -- and this is a very simplified way of looking at it, between restaurants, food production, food processing, agriculture plus then, of course, the derivative or the second layer, which is supportive functions like water treatment and irrigation and food packaging and a lot of other things, very simplified. But what you’ll see is that below this water line, these companies that are more foundational, a little more B2B.

There are very strong companies that are driving the new economy, maybe more than actually the last mile delivery companies, but they all happen to be in private markets. And this is exactly because they prefer private markets, size-wise it works for them.

And there’s just no reason for them to do an IPO. Most of them will never do an IPO, actually.

And so this is clearly showing in this example, at least how these foundational elements that are financed by private markets, much more from the public markets are extremely critical for the future. Now you can generalize that, and I’ll do this very quickly here.

If we look at the other 11 out of about total 24 mega themes we have in our corporate equity business. And for each, I do a similar kind of analysis of the whole value creation, and I look at whether they are a little more foundational than we fill this lower part of the iceberg here or a bit less foundational and it is the other part of both might be filled.

And if you look at this systematically through all these mega themes, and I do the same our real assets mega-theme, you will see that the vast majority of these mega themes that, in our opinion, will be absolutely critical for the next 10, 20 years, the building of a new economy of new businesses they are very foundational. In other words, this future economy will still be driven largely by these foundational events.

But what that means in turn is that a lot of that will actually be driven by private markets and not necessarily by public markets. So I want to pause here and just summarize, I mean, our perspective.

What that means is with the current way of how public and private markets operate, we see that there is a tremendous opportunity in the 10, 20 years ahead of us as it is concerning the building of the new economy through private markets. That’s the good news.

Now it gets a little bit more challenging. So I’m going to turn from the investment side to the fundraising side.

So how big is actually this private market economy going to be? I thought, first, maybe with an observation that I don’t think it’s actually so well known in the market out there.

So since 5 years, when you look at the new activities, so new fundraising private markets equity capital relative to traditional issuance and IPOs, you see there’s more fundraising actually in private markets over public markets. I think it’s important because most people when you look at public/private markets, they look a little bit into the mirror and they look at the past.

And of course, public markets are 100 years older. So there’s a big stock of companies out in public markets are bigger.

But if you look at the change, you see actually there’s more happening in private markets already these days. Is this going to change?

We don’t think so. We have seen on the institutional investor side.

There are some numbers for the largest 25 in the world, a doubling of allocations over the last 10 years. Many of them are actually our clients.

When we speak to them, we expect actually with what they also see in private markets happening a very similar development in the next 10 years. But as more than that, there’s new pockets of capital, we see that DC markets increasingly open up.

It started in Australia. We see it happen in U.K.

And I think also eventually in the U.S., these markets will not be shielded anymore from the better private market returns and there’s a lot of push that there’s more activity there. And then finally, I mean, you hear a lot about the democratization of private markets.

There’s clearly also a trend that there’s more private clients, more retail programs eventually coming up. So all of that probably means that there is a good chance we see again a tripling of the size of the market like in the last 2 decades.

And to be honest, it doesn’t really matter so much whether it’s getting to $20 trillion to $30 trillion to $40 trillion, that’s not even so much the point. But the point is as we go directionally to this kind of number, there’s probably one problem, which is there is hardly any large investor that will not in one or the other way, try to be active in private markets.

So what that will mean is a massive competition in private markets, much more similar to what we know from the public markets for the last 30, 40 years. So next 2 thousands of private market firms, you have corporates, our large asset managers, some wealth funds, i.e., read out a weekend actually 10 days ago, that hedge funds invested in ‘21, $180 billion in private markets.

So that’s a big change here. With that structurally high valuations, there’s nothing like a free lunch, very, very effective markets.

And there’s also these timelines for transactions, which come down I mean, a little bit like block trades, nearly in public markets at times, which are completely crazy. I mean, there’s no way you can be transact in these timelines unless you prepare these investments well ahead of the actual transactions.

So what’s the outcome of that? Well, I think it’s a little bit similar to what we’ve seen in public markets, but with a little bit different, let’s say, meaning.

So let me go quickly through that. We’re actually convinced that we see more of a bifurcation in private markets between more passive and more active investments.

And especially a lot of these newer players, a lot of the GPs are today, but also a lot of the newer investors will be more passive. Now passive means something different in private markets than public markets.

Passive means that investors dedicate most of their time and their resources on the transactional side of things. So that means they try to understand with brokers in the media, what kind of transactions come to the market, they try to get involved.

They do this maybe based on some form of, I don’t know, sector analysis over the crude, a bit like what we know from public markets. That’s the passive side.

Active means nearly the opposite. Active means you spend your resources and your time either before the actual investment transaction that can be a year, 2, 3, 4 years’ time, or you spend it once you own an asset on the asset working with the company and to create value in the company.

We believe we see some of that bifurcation already today. Let me explain that.

We have last year seen a report -- a pretty interesting report coming out of Preqin. That’s one of the largest provider of data, especially performance data on private markets.

And what they did is an analysis of the largest 30 bad firms globally, and they looked at the average rating quartile rating of their funds since the global financial crisis. The logic was they said, well, after financial crisis, we have seen a new ERM in private markets with much more focus on value creation or that’s at least what people say they are doing.

And so they wanted to look a little bit at how does performance stack up relative to the positioning and the promises of people. It was interesting because when we looked at that in more detail, we found that there’s a little bit of a clustering actually between their performance and some of their positioning.

And so what we did is actually, we looked at that from a little bit different perspective and actually taking the large 50 groups in the world by AuM. So overall AuM, the largest 50 in the world, and we look at the quartile ranking of the bad funds between 11 and 13 vintage years relative to size.

And what is interesting is what you see here is that on the right-hand side at the bottom that some of the most successful firms in the world, successful measured by AuM growth, how large these are, in the meantime, there a couple of hundred billion dollars in average these large firms. They’re not quite holding up there in terms of performance relative to the best.

Then there’s a group of firms that somehow lost a little bit their positioning. Some of them were actually brand names back in the ‘90s, very early players in private markets, but are kind of a little bit stuck between either size or resources or active investing.

And then you see a group of very successful but smaller firms, they cannot play at scale, but very, very successful. And you have a number of firms, including Partners Group that are fairly large, that clearly go for scale, but don’t compromise scale versus return.

Everybody here says they’re active, okay? So let me have a word quickly on what really active means in our opinion.

Active with what I said before in terms of the pre-transaction phase and the actual ownership phase means essentially you are a business builder, business or an asset builder. That’s the only way you can really be active.

Everything else is probably more of an upper branding thing. Where do you learn to be a business builder?

I have to tell you, and I told this very bluntly at our LP community last week in Denver. This is not something you learn in private markets actually because the market historically has not very transactionally oriented.

It’s actually something you learned from, for instance, the best conglomerates. This might sound a little bit controversial because there’s also terrible conglomerates at field, but there’s also very good ones.

There’s a lot of similarities, right? Conglomerates have like a corporate entity to centralize and have a portfolio around it.

Their centralized resources, centralized investment, divestment decision making and so forth. So what you learn from the best conglomerate is really 5 things, and that’s why we hired a lot of people not from the industry, actually, but from these kind of institutions.

You learn about the strategic rigor in the industrial logic in whatever you do. The second thing you learn is the operational value creation, meaning you don’t focus on large M&As, you focus maybe on smaller ones, platform building, a lot of organic growth, R&D and things like that.

You learn about a very managed -- very actively managed playbook based managed but decentralized very entrepreneurial governance, which is really the secret for the success during the holding. And then you learn about how you apply best-in-class system processes and how you go about leadership development, recruiting in a centralized way so that you can dispatch actually the best talent across the portfolio over time again and again and again.

So as you have heard us in the past, and you’ll hear a lot in the future talk about thematic transformation investing, transformation investing is really our playbook for business building. And is really the answer to these challenges and opportunities ahead of us.

And you see that’s based on these 2 pillars. One is the thematic investing.

That’s the pre-transaction pillar and the actual entrepreneurship at scale. And Dave will talk a bit about that later on.

So in summary, what we shared last week with our investors and what we’d like to leave with you today is that we have a clear conviction that we are actually in the next decade seeing private markets become the new traditional asset class for many, many investors. And we see this because we believe there is a clear change overall between public and private markets.

The broader economy is clearly built increasingly in private markets. But with that, we see more competition.

We see that bifurcation change of the dynamics in the industry and yes, that’s why our answer to this business building or transformation investing. Thank you.

Thank you, Steffen, and it’s so true. And as you give you all a very good context as to why we’re putting so much emphasis on transformational investing and on business building.

Let’s turn now to the next slide, then quickly recap 2021. This will be an important introduction to our financials.

Last year was clearly an exceptional year. You may recall in 2020, I told you that I was feeling positive about realizations and investment activity for 2021, and this positivity was clearly manifest in our results.

We had $31.7 billion in new investments. We operate in a competitive market, as Steffen just mentioned, an attractive private market content is indeed a scarce resource.

We felt very good about our ability to secure this level of attractive investment for our clients. We also had $29.1 billion of realizations during the period.

As we mentioned on our last call in January, both investment and realizations were aided by a pipeline rollover effect from 2020. We also took advantage of the strong market to bring forward a small number of realizations that may have, at one point in time, been projected for 2022.

This level of realizations was quite exceptional, and our clients are expecting this to normalize next year. Looking into 2022, we know that it’s an uncertain global situation.

But based on our insight to date, we don’t believe that the Ukraine crisis has fundamentally impacted the demand for quality private markets assets. Private debt financing continues to be available from private funds and investors seem to be keeping a long-term view.

Accordingly, we continue to feel good about our 2022 outlook. But we will, of course, do recognize that a prolonged period of market volatility, maybe extreme instability caused by the geopolitical crisis in Eastern Europe, inflationary spiraling or more extreme supply chain disruptions, these things could, of course, lead to a further weakening of economic growth.

It’s been a strong start to the year, but we will, of course, watch these factors closely and keep you all updated on market throughout our results calls during the year. We’ve already onboarded some exciting new investments to the portfolio this year, which is great.

Let’s move to the next slide. We spent a lot of time as a leadership team selecting new investments in our investment committee with a strong focus on quality.

As you all are aware, we’ve put a lot of emphasis on developing those assets to their full potential with our governance approach. This quality focus and the impact of our strong ownership approach shows through in our portfolio performance.

This was another solid year for us from a performance perspective for essentially all of our asset classes. Maybe just one word on infrastructure.

In 2021, we had a record number of new investments within private infrastructure. Those new investments were obviously added to the track record at cost, which weighed on our overall net performance figures, resulting in a 9.7% IRR during the period.

Mature assets in this asset class continued to develop as expected in the mid-teens. Moving to the next slide.

In the first section, that Steffen mentioned, we provided you all with an overview of where the industry is at. We believe that the private markets industry has the potential to grow to $30 trillion in assets under management over the next 10 to 12 years.

As a firm, we’re focused on being a high-quality institutional private market solution provider that can be one of the platforms prepared to absorb this continued shift of investor demand from publics to privates. I want to let you all inside some of our executive team’s planning and walk you through some of the strategic initiatives that we believe will aid us to achieve sustainable growth over the coming years.

Our strategic pillars are divided across the categories of investments, clients and people. Our investment business will focus on transformational investing and on scaling investment activity.

Our client teams will be focused on continuing to differentiate us with bespoke solutions and on growing our client base in the U.S. And then lastly, but also very important as an organization we will be focused on developing our next generation of leaders and organizing for scale.

Let’s talk just a little bit about these dimensions. Our first strategic focus area is that of transformational investing.

And we’ve talked a lot about that in the past, and we’re going to continue to talk a lot about that in the future. Simply put, this is our approach to focusing on the most attractive sectors, which we believe will benefit from transformational trends.

Our sourcing is concentrated in those areas. And then after we successfully make acquisitions, we seek to roll up our sleeves and drive transformational change.

The end objective is to own well-positioned market leaders in areas of the economy that we believe have the potential to grow at above average rates for the next 10-plus years. It’s our firm belief that there’s very little inefficiency left in the private markets.

And if it does continue to develop along the lines as Steffen just outlined, increasing to $30 trillion in size, you better believe all of the inefficiency that does remain will be gone. Accordingly, we continue to strongly emphasize a continued shift away from the more transactional side of the business towards a more active approach.

We’re no longer in the "deal business". We’re in the business of transforming assets.

In order to maintain a growing pipeline of target companies to meet our investors’ demand, we have been developing a very strong set of thematic teams, focused on subsectors that we believe have structural tailwinds and we will further invest in research, increasing our research capabilities will in turn increase the number of themes that we can cover at any point in time. We have dozens and dozens of lines in the water today, but we feel that we can do more and that we can go deeper.

We’ve also built out a dedicated team focused on helping us to strengthen entrepreneurial governance across our global portfolio. And on finding directors of our portfolio companies that can help drive specific impact in various cases.

These are external resources that are very close to our teams and they give us a tremendous amount of expertise and frankly, leverage. We’ll also continue to invest in developing our investment leaders.

We want them to think and operate as entrepreneurial Board members of our companies with a mindset of a founder not that of a typical financial investor. Transformation isn’t just about financial performance.

It’s also about impact, and we’ll talk about ESG a little bit later. Let’s move to the next slide.

We’re a firm that’s always thought about how to build an institution and an institutional approach in this industry. Before becoming CEO, I was operationally leading our direct strategy, which for any of you who have followed us for the past decade or so, will recall that, that being -- that was a big area of emphasis for us.

Direct assets have indeed been a strong growth driver, increasing at a 24% CAGR over the past few years. We will continue to scale this part of the business.

We will likely, however, be slowing down the treadmill a bit, extending holding periods for long-term winners. This is in line with the request from clients.

And every year, they seem to focus a little bit less on liquidity and a little bit more on compounding value. With all of the attention that we put on driving growth on the direct side, we have, however, not put as much strategic emphasis on our portfolio investing strategies during that period of time.

And our growth in this category was only 11% over the past few years, which is obviously below the overall growth rate. Well, it’s not like the market for portfolio assets is any less robust, and we believe that we can reinvigorate growth here on this side of the business.

We were perhaps a little bit less excited about the last 6 to 7 years of the secondary market, for example. We saw a huge influx of investment capital, lower and lower yields for secondary purchases.

We picked our spots more carefully, and we grew a little below some of our peers as a result. However, if you look at the market today and where it’s going, you see much more value-added underwriting, more concentrated portfolios, more potential for relationships to help influence outcomes with GP now controlling more divestiture decisions.

And we think today’s market plays more to our strength. In addition, we’re going to continue to scale our private debt platform through program innovation in both closed-ended and open-ended programs.

A prominent example of this is our growing activity in the BSL market. In order to fully capture these opportunities as well as the wealth of data in the secondary market, we’re going to enhance our data analytics support and our investment analysis to drive further effectiveness in our underwriting.

Let’s turn to the next slide. Moving into the future, as demand for private markets grows across a variety of investor types, we believe that the requirements for more sophisticated products and client solutions will also increase, we’re positioning ourselves to be a leader here.

The reality is that line partnerships were tools to develop for individual wealth creation in the 1970s and ‘80s. And today, they’ve been jerry-rigged to now hold trillions of dollars of assets.

They’re not hyper sophisticated tools. They don’t tell investors when their capital will be called.

They don’t give them the ability to steer exposures during their life, and they don’t tell investors when to expect capital back. It’s possible that high levels of wealth creation in the industry may have pacified innovation, but we believe that as a client-centric firm, we can do more to improve the client experience and we see the demand firsthand.

We’ve now reached 66% of total assets under management in bespoke client solutions. These are structures either created for the needs of a specific investor for the needs of a group of like investors.

And in these structures, we can really showcase our unique portfolio management capabilities, which enable us to tailor investment content to the specific objectives and parameters of each client’s risk return profile and predefined target investment level. We’ll continue to position ourselves as innovation leaders for the influx of smaller investors and private individuals seeking to access private markets for the first time for whom traditional solutions are not always appropriate.

For those clients, we will expand our differentiated Evergreen Solutions, which provide access to the same private markets investments as larger institutions get, but the wrapper is more conducive to their needs. When people think about Partners Group, when they see our puzzle ball logo.

We want them to think that that’s the firm that pulls together investment solutions from across asset classes in the comprehensive custom solutions. We have great traditional funds for people who want individual puzzle pieces.

I think our flagship funds stack up very nicely against our competitors in terms of performance. But what truly differentiates us on the client side is our platform’s ability to build bespoke solutions.

This is more challenging for some of our competitors because of how siloed many of them tend to be. Let’s move to the next slide.

One additional area of strategic emphasis for us is the growth of our U.S. client base.

We’re actively working to increase our presence here and to transfer the success that we’ve had creating tailored portfolios for European clients to the U.S. While the U.S.

typically accounts for around 50% of our incremental investment activities each year, it only makes up about 19% of our incremental fund raising. We’ve been expanding our team and our reach in the market, and we’ve increased our overall mix of U.S.

investors from where it was just a few years ago. It shouldn’t be a surprise to anyone that we held our investor conference in the U.S.

this past week with a number of key prospects sitting alongside our long-time investors. The DC market is still on the come in this market, but we will continue to position ourselves as thought leaders here, leveraging the same product innovation and the same technology that we’ve used in the wealth space in the U.S.

with very good results. While this has been a strong market for us, growing at above average growth rates, we’ll continue to invest in growing our incremental share of fundraising stemming from the U.S., we have the ambition to be above 30% incremental phasing from the U.S.

market in the medium term. Let’s continue to our final 2 strategic focus areas on the next slide.

It goes without saying that our people are our most valuable asset. Every year, we look internally to promote leadership, aiming to retain our diverse and highly talented group of professionals who are responsible for our firm’s growth.

We took our foot off of the gas a little bit on hiring during COVID, but we’re back hiring again full steam, and we expect to onboard several hundred employees this year. The last few periods have been some of our strongest for onboarding diverse talent, which we’re very proud of.

We’re also investing millions into our training and development program income, particularly for our emerging leaders. We should equate centralized organization, and it’s true that at certain times in the past, we may have put more emphasis on execution, the leadership development but we’re working hard to ensure that the uptime generations of leaders understand and live our values and culture that has differentiated us as a firm.

These values, we think really help us to be independent thinkers, and we’d like to see that continuing. At the same time, we’re investing into technology, which will allow us to organize for scale and further improve our processes.

In other words, we want to manage increasing assets under management with the same degree of operational excellence across our service platform. To sum up, we strongly believe that these 6 strategic focus areas will help us to build on our strong foundation and will help us move forward into executing our vision over the next few years.

On the next slide, we believe that we’re uniquely positioned in the industry. As you can see, our assets under management are very diversified across programs and structures.

We currently have around 300 various private markets portfolios that we oversee. Some of these funds are specific to a particular asset class and others blend together content from multiple asset classes into more comprehensive solutions.

From an investment perspective, we are diversified across more than 90 sectors. This means we’re less likely to run into material issues with supply chain disruption or sector-specific volatility.

Let me give you some numbers. In oil and gas and drilling and exploration, we have an NAV exposure of about 3%.

In agriculture, including farm equipment and related topics, our exposure here is about 1%. From a country perspective, we’re also geographically very well diversified.

We have no direct investments in Russia or Ukraine, and our indirect assets under management exposure is only via third-party funds, and that is only 0.2% of our total assets under management. Our direct and indirect assets under management exposure to China is approximately 4%.

Our strong diversification helps us to avoid a lot of concentration issues that other places have encountered. While we’re aware of potential supply chain issues and volatility in the future, but we continue to believe that our portfolio demonstrates strength.

Today, we don’t see any meaningful impact of supply chain-related disruptions on our returns. Let’s turn to the next slide.

As a firm, we have a steadfast commitment to responsible investment and stakeholder impact. We have our CSR report coming out in a few weeks, and I don’t want to front run that too much.

But in that report, you’ll see us establish clearly defined targets on both the corporate level and the portfolio level for our controlled assets. As a firm, we will aim to achieve net zero emissions for Scope 1, Scope 2 and a detailed Scope 3 greenhouse gas emissions as part of our carbon reduction program.

And at the portfolio level for controlled assets. We will implement our climate change strategy in order to create long-term value by investing in the low-carbon economy and leading assets on their path to net zero.

We also have a meaningful social and governance ambitions, which we’ll be touching on that call later. Let’s move to the next slide.

We’ll discuss -- we discussed our outlook for 2022 on our last assets under management call in January. We know a lot has happened in the world since January.

But based on the results so far this year in the first couple of months, we remain confident for the year ahead, and we affirm the guidance that we provided on our last call. We expect gross client demand of $22 billion to $26 billion.

Let me provide some sensitivity on that range. at the lower end of the range, that assumes more potential market uncertainty and the conditions in transactional markets will soften to a certain extent.

And at the upper end of the range, that assumes a continued reasonably supportive market environment for fundraising and investments throughout the year. And with that overview, let me now hand it over to my partner, Hans, who will cover the financials.

Thanks, Dave, and also a warm welcome on my behalf. 2021 was an exceptional year and we’re pleased to report a strong set of financials.

Assets under management grew 17% to $127 billion, management fees increased by 25%, as we had the benefit from late management fees. Total revenue grew 82%, driven by a record increase in performance fees to 46% of revenue.

Profitability remained strong at a 63% EBIT margin. We proposed a dividend of CHF 33 or an increase of 20%.

This is underpinned by continued strong AuM growth, healthy cash flow and reiterates the confidence that our business will continue to deliver strong profitable growth. Let’s look at revenue in more detail, starting with the management fees.

Management fees grew 25% ahead of the AuM growth of 17% as we had the benefit of higher late management fees following the closing of traditional funds, including our direct equity Fund IV flagship funds. Late management fees are reported on the other revenue from management services and more than doubled to $132 million.

If you look at the performance fees, we saw the performance fees increase to $1.2 billion and 46% of revenue. As mentioned by Dave, we had 2 things in 2021, which made the performance fees exceptional: First, we had the benefit of catch-up activity following the COVID year 2020; second, we had the benefit of some select portfolio realizations, which were originally planned in 2022, which we brought forward to 2021 as we were already delivering on our value creation targets.

This makes the year exceptional and it’s important to say 2 things to that: First, it’s a testimony for the demand of the quality assets we’re building, and that follows through in very strong performance fees; secondly, this exceptional year we need to watch when we go into 2022 and then look at the future that performance fees will normalize back to the 20% to 30% of revenue as we always have been delivering in the past. If we go to the next slide, we see the diversification of our performance fees.

Performance fees come over 70 different products and mandates with portfolios across multiple vintage years. If you look at the diversification across investments, over 70 direct investments and hundreds of portfolio assets did contribute to the performance fees, which confirm the strength of the diversification.

If you look at the largest investment, GlobalLogic, that contributed 23% of the performance fees recall we made a 5x return on that investment. If you look at the investment programs, the largest contributing program was a mature private equity ever gain program, which contributed 17% of the performance fee, all confirming the strength of the diversification.

Let’s now look at performance fees over time. Performance fees over time will grow with AuM growth.

It’s just a time lag of around 6 to 9 years. If you look at the period since 2017, we delivered over $3 billion in performance fees over the 5 years since 2017.

They stem and come from investments from the period 2011, 2016. If you look what we invested in the 5 years following that, 2017 to 2021, we invested more than double, which confirms that we continue to build a strong pipeline of performance fees.

And let’s not forget that the newer programs are more performance fee heavy as we have more direct investments into the mix. If we turn to the next slide, we see the revenue margin.

The first thing to call out, which is important that we have management fee stability because if you look over the longer period, our management fee margin is around 125 basis points or 1.25%. Yes, they vary in any given year, but that’s more related to the timings of fee clock.

So we have underlying strength of price discipline as we also continue to innovate in new client solutions to keep driving against the client expectations so that we can keep that management fee stability. You see that this year performance fee margin is higher because of the exceptional year of 2021.

Let’s turn to profitability. Our EBIT margin remained strong at 63%.

The largest part of our cost is personnel costs, which are 88% of our cost structure. They increased by 100%.

First, we had higher performance-related personnel costs, which correlate with our performance fees. We allocate 40% of the performance fees to our employees, so the increase in the performance-related cost is a direct outcome of the exceptional performance fees.

Regular personnel cost increased 28%. We had 2 things there: First, we had a higher bonus as we had higher management fees; second, we had an increase in social security cost, which is related to the equity program as our stock price increased by 45% in 2021.

If we look at the FTEs, as Dave already mentioned, our FTEs were up 4% to 1,573 FTEs. We had the benefit still from the hiring activity of the previous periods as we ended 2021, which gave us the capacity to deliver the growth.

We also recognize the importance to continue to invest in the teams and the growth and started to step up the hiring activity in the second half of the year to make sure we keep delivering on the growth and have the right headcount to support the future growth and build out our investment platforms. If you look at the EBIT margin over a longer period, you see that we have delivered.

And this year, we’re also delivering on our target margin to be above that 60%. One thing to pull out is exchange rates.

We’re a very international business. 44% of our revenue comes from euro-based programs and 41% comes from U.S.-based programs.

In 2021, that only had a modest impact on the margin by 0.2%. So exchange rates had not much impact in 2021.

If we turn to the next slide, we see the items below EBIT and our balance sheet. Along with our clients, we invest CHF 70 million into our investment programs.

We delivered a 16% return on those programs, which yielded a CHF 76 million financial result in the P&L. If we look at the tax rate, our tax rate increased from 13.3% to 15.2%, following 2 items: First, we recreated a dividend from the U.S.

on which we have to pay withholding tax; and secondly, as our business becomes ever more global, that will have an impact on the tax rate. Therefore, we guide our tax rate to be between 14% and 17% in the years to come as our business is becoming more global.

That leads to a net profit of CHF 1,464 million, which is an increase of 82%. Let’s look also at the balance sheet.

We have very strong liquidity of CHF 1.6 billion. That consists of a cash of CHF 900 million, and we have CHF 1.5 billion invested in short-term loans to our products.

It’s important to remember that in that calculation, we deduct our long-term debt of CHF 800 million, all confirming that we have a very strong level of cash and liquidity. Turning to the last point, our dividend proposal.

We proposed a dividend of CHF 33 per share, which represents a 20% increase. Since the IPO, we have been growing our dividend in line with AuM growth at around 18%, and we continue to follow this aggressive dividend strategy that we grow our dividend in line with AuM because in the end, AuM growth is future earnings growth in management fees and performance fees.

With that, it concludes the presentation. We would like to start with questions.

We would propose that we first do the questions from the room. We have a microphone.

It’s important to use the microphone so that everybody can follow the questions here, and then we open the questions to the wider group.

This is Daniel Regli from Credit Suisse. I have a couple of questions.

I think I start with 3 and then pass the mic on and maybe ask more questions later. My first question is about the valuation levels currently in the private markets.

And then how far do you see danger to valuation levels in private markets coming from, let’s say, higher inflation and consequentially higher interest rate levels? I would assume that your discount rates are quite sensitive to interest rate levels.

And thus, if we have higher central bank rates, we also have higher discount rates and thus, lower multiples in the market. And then my second question is just regarding investments and realizations.

I just noted that over the last 2 years, you had -- if you deduct the realization from the investments, you only had about CHF 1.1 billion net investments, if you want to maybe correct me if my view is wrong on this one, but is discussing any problems that you have kind of ample investment needs or you have an overhang in investment need in the next couple of years. And then maybe just my third question and last question for the moment regarding the timing of performance fees versus investment, does the recent events like the pandemic and the corrections around the pandemic and now the Ukraine war, do you expect this time between investment and performance fees to be have become rather shorter or rather longer?

Maybe I’ll start with the last one. And Dave, you pick the first 2 questions.

So as we said in the presentation, this year was an exceptional year on the performance fees, and we expect performance fees to get back to what we have been done in the past between 20% and 30% over time. And it’s important over time, we don’t see that from the timing, the 6 to 9 years that, that is structurally changing, and we believe the strength of our investment and how we build the assets that will continue to do so.

What can happen in any given year, which we have seen in the year of COVID, if there is a little bit more volatility, that’s last -- 2020 was a little lower, but what’s in the pocket stays in the pocket and it came back when the volatility goes a little bit away. So we don’t see any structural change in the ratio of the performance fees and in that time lag of investing to performance fees.

Dave?

So on the topic of valuations, you have the academic impact of rate increases and then you have the reality on the ground of really strong demand being present for high-quality assets. Yes, it is true that the rates do have an impact on valuation.

But we see real capital continuing to gravitate towards the type of businesses that we look to develop within our portfolio. And for the exit discussions that we’ve been having and exploring.

There’s not a huge difference actually in the types of valuations that people are talking about right now versus what they were talking about 6 months or so ago. The private markets industry does tend to have a very long-term valuations remain quite robust.

And obviously, we’re going to have to watch it very carefully. We have debates constantly in our investment committee every Tuesday on our buying levels and looking at comps and what’s happening to them.

But there’s not been any structural shifts that have occurred within private market valuations over the past point in time. With regards to investments in realizations, it’s an interesting way to look at it to kind of net the 2 out.

If we had 100% open-ended vehicles that would be an interesting way, particularly interesting way to look at it. But we have 20-something percent open-ended vehicles that need to redeploy the realizations that they harvest.

And the reality is that you should compare the realization numbers with the investment levels about 6 years ago on average. And that’s a more fulsome way to look at the impact that we’ve had as an active owner and you’ll see quite strong uplift over that period of time.

And the vast majority of the capital that we generate from realizations, we return to our investors, but there is about 25% of those realizations that we end up redeploying particularly those in evergreen structures.

To that quickly, just last point. So we try to have our dry powder around like 1.5 to 2x annual investment level.

That’s how we kind of steer also the thematic investing side of things, the pipeline and I think we’re pretty much also there at the moment. And you see, of course, then depending on when realizations happen and last year was very active.

You might see a little bit more lumpy in 1 year than other. 2020 was, of course, a very, very slow realization here, but it’s really the dry powder that we talked when we built our pipeline.

Andreas Venditti, Vontobel. Your equity keeps on building.

You’re approaching CHF 3 billion now, I guess that’s well above regulatory capital. Maybe Hans can say a word on that.

And maybe to you, Steffen, I know you never considered share buybacks. What would make change your mind on this?

And then another point on competition. You mentioned that it’s getting hotter.

We could read recently also relating to mid-market, more competition probably from both sides from larger ones and smaller ones. Can you maybe talk a bit more on this, how you see yourself positioned on this one?

Sure. Maybe, Dave, you talk a bit about the competition.

Shall I quickly go first? So I mean, we actually buy shares all the time.

So we should not quite forget that we do buy shares because we want to cover our equity programs, which has been a very material part of our compensation system 20 years ago, but it’s still quite relevant today actually as far the executive team or also the broader leadership team is concerned. And we’re pretty much the same number of shares than at the time of the IPO actually, the 26.7 million.

I think beyond that, I think we’re a little bit hesitant to not necessarily reduce further our share capital. Now you could argue maybe you can optimize something around that.

And we do have some debt on our balance sheet. I mean we do have about $1 billion nearly of investments alongside our clients that are a little bit liquid.

So I think we see a little bit more, you can say, maybe as a conservative entrepreneurial I don’t know a freestyle measure of robust and solidity. So I don’t expect that this is something that is going to change.

So we feel pretty comfortable, and I would say the marginal impact you have with a little bit of share buyback, we don’t necessarily attribute so much importance to that or relevance.

Which I think is consistent with being builders of business versus financial engineering on -- yes, we have a strong balance sheet, and I think we prefer that some balance sheet. The question relates probably with the dividend.

We believe it’s important that we grow our dividend in line with AuM because over time, that is, in essence, where over the years, the business performance will follow through. Last year, we had a higher payout ratio because we grew it with AuM, but last year, performance fees were lower and the payout ratio last year was 90%.

This year, it’s a little lower. But I think that from a long-term perspective, it gives a good predictable dividend in line with our business growth, which then yields future things, and that is underpinned with a healthy balance sheet.

And with regards to competition in the middle market, the middle market has always been competitive. It’s a little less competitive than maybe some other segments, but it will surprise you sometimes because you have the smaller firms that every once in a while will punch above their weight class, and you’ll have competitors that you weren’t expecting, where you’ll have some of the larger firms that will move down a weight class every once in a while and add to competition.

So the mid-market is, in fact, a competitive segment of the market. And one of the things that we’re finding is that in order to differentiate ourselves because there’s a lot of money in almost every segment of the market today being early and spending a year, 2 years, 3 years in advance of a formal sale process kicking off, getting to know that specific business.

And everything there is to know about from an outside in perspective is really the way that we’re standing out in a lot of the processes that we’re competing in. And we’re willing to spend those speculative resources on businesses that won’t be for sale for 1, 2, 3 years.

A lot of firms with less resources haven’t been willing to spend on and we’ve been able to outmaneuver a number of our friendly competitors as a result of that. And so it is competitive, but we’re finding our way just fine.

There is still some questions over the phone.

Firstly, on the performance fees. Just sort of taking what you’re saying.

I think I mean it sounds as though given the increase in direct investments, should we be thinking [Operator Instructions] so in terms of performance fees, it sounds as though given the increase in direct investments, we should be thinking perhaps upper end longer term of that 20% to 30% range. But then, I guess, for 2022, are you saying it should be in the 20% to 30% range or you simply don’t have enough visibility.

So it’s possible it could dip slightly below like 2020, but that it’s just a delay. That’s kind of the message is to make sure I’ve got it.

Secondly, on the investments in terms of FTEs, should we expect that there might be a bit of a dip in 2022 in EBIT margins because you are -- there’s a bit of a catch-up in terms of investment in headcount in the platform? Or am I sort of overreading?

And then finally, on the point around sort of active, passive within private markets, would it be true to say at the moment that the kind of the competition on the passive side is strongest in VC and gross equity, i.e., for hedge funds and long-only who perhaps don’t do the transformation work, so it’s just kind of putting capital in? Or is that too simplistic?

Let me start with the performance fees. I learned a new phase in Switzerland once, don’t get ahead of our ski tips, which means make sure you deliver what you need to deliver.

So we think that 20% to 30%, we are able to replicate and it’s good to recall that over the last 5 years, we’ve already had a fair share of direct investments, we were in the middle of that range to be precise 26%. I think it’s too early to talk about specifically 2022, we have a strong start of the year, but there’s also some volatility.

So it’s very hard to give a specific number for any given year because of that. I think what is always important to remember with the quality of assets we built that what’s in the pocket like we have seen with COVID comes back because there is just high demand for the quality of assets we build.

So I was just modeling with that in mind, and I think that’s a good statistic to use. On your question on the headcount, yes, we will see some catch-up into the hiring into 2022.

Should also not forget exchange rates might be a little bit more challenged this year, but we will continue to deliver a margin of 60 plus as we invest in the future growth of the business, but in any given year, right, because of the ebbs and flows, it can be a little bit different. But that structurally continues to be a strong margin.

Dave, if you can talk about the...

Yes, on the active versus passive. I don’t think the -- and Steffen you can clarify, I don’t think it’s limited to growth in VC investors in that passive category, Bruce.

I think there’s a lot of private equity firms thousands and thousands and thousands of bio firms out there, a portion of which we believe have been going long leveraged equity with a more of a transactional mindset. And I think the distinction is much more with regards to how you orient yourself as a business, do you orient it around more transactional buying and selling and trading activities or do you orient yourself around rolling up a sleeve and fundamentally impacting the companies in which you invest.

So maybe I don’t know if there’s anything you add. It was your classification.

I think the involvement with the growth capital business, obviously, VC business is quite different than with an established firm. So if we talk about, for instance, this entrepreneurship at scale, what it is really is about bringing this institutionalized way of business building to these companies, whether that’s now how we operate the Board, how we define these value-creation initiatives in a very systematic way, and we are pretty brutal in how we actually implement this in a very, very systematic way, also the playbooks and things like that.

That is very different from a growth capital business. If you have an entrepreneur who started the business, I mean that is maybe even still negative on the EBITDA.

It’s different type of decisions that you have to make or not to make to bring that business to success. And it’s probably not the fine-tuning of the playbook on how you run HR and supply chain and things like that.

It has much more to do with the, I would say, the crude strategic analysis of how you position of product, how you position a service, how do you think about competition. So I would say in both cases, I think an active investor can make a hell of a lot of difference.

But I do think it’s 2 quite different ways of interacting with the entrepreneurs of the management teams between the two. What we see is clearly, I mean, where there has been an influx of massive amount of capital like from hedge funds.

I mean, hedge funds $180 billion that has mostly been put into growth capital in VC. I mean that is where we actually see lease involved on an active basis.

It’s pretty passive financial investment by many of these firms.

I’ve got 2 questions. Firstly, can you discuss the performance of your private asset fund year-to-date?

How have your investments been affected by lower market valuations, particularly for the sectors you’ve invested, which tend to be more growth-orientated, certainly have returns to be negative this year? That’s the first question.

And the second question is, can you talk about the realizations you’ve seen so far this year? And how much of your exits depend on the IPO market versus private sales?

And lastly, the question on the tax rate. I know you’re guiding for 14% to 17% going forward.

What are your assumptions there? Do you think this will change going forward, just possibly be even higher going forward just given the global minimum tax rate?

Or is this already assumed in that 14% to 17% assumption?

Yes. Maybe I start with the tax rate, and then Dave and Steffen give some more color on the market and the early realization.

So the tax rate of 14% to 17% reflects that our business will become more global as we grow our business. We talked about more U.S.

into the business mix as well. That assumes the current tax rate.

That does not yet include the impact if we would go to the minimum tax rate of 15%. Remember, in Switzerland, the tax rate is a little lower given our location.

But it’s too early to give an indication to that because there might be other things which come into the mix, and that’s still too premature. But that’s the one to watch is that that’s still something which might come, but there are also other things.

And that’s why we give a range 14% to 17%.

It is fair Hans throughput add that the tax rates we see in Switzerland, there are -- they are to digital below the 15% anywhere else, they’re pretty much anywhere above that. So it’s not that we expect fundamental demand.

No, that won’t be -- that’s good too. It’s not something to get spooked about because it’s only in Switzerland where it’s 12% to 15%.

And in the other jurisdictions you’re already above the 15% [indiscernible].

Yes. And on the performance year-to-date on both investment performance as well as realizations, there’s nothing that I would flag in particular about the performance of realizations that have happened so far this year.

We’re still early in the year. Many of the sectors that we invest into, as you’ve announced our growthy in nature.

There are structural tailwinds behind them, but they are not the areas of high tech that had the large corrections that we saw in the first 2 months of this year. They have been more stable in nature than many of those areas.

We haven’t concluded a lot of realization so far this year. But from the discussions that we have been having.

We see no reason to alter any of our realization plans to date and continue to see really, really strong demand at similar valuation levels that we have seen in years past. We have very little expectation of large-scale IPO activity within the portfolio and our exit pipeline doesn’t depend particularly on the IPO markets for us to achieve our objectives.

I may just quickly add one word here. I mean what’s important is to understand is the mandate that we have from our clients.

So that’s by large an outperformance compared to public equity and ideally outperformance compared to other people in private markets. And so far, I mean, we have achieved that.

But it’s important to keep that in mind because realistically, I mean, if you looked at the 10-year returns in private equity net returns, and that’s including all the new investments that are still going through a J-curve, right? That’s a 20% net return on direct investments for 10 years.

For the realized direct investments that’s much more than that. That is clearly a reflection of 10 years that were extremely benign as an environment with multiples going up during the time with central banks giving support.

So I think everybody in our firm is completely realistic about that. And of course, the outperformance was there even though there was a bull market.

Now in an environment which might change, and I don’t think we have the crystal ball to see, I mean, how the next 5 to 10 years will look like, but the environment is clearly going to change. There will be some headwinds here with inflation.

I mean there’s other questions around how long some supply chain issues are going to loss and things like that. So it’s a different environment.

And in that different mine, I think there’s a good chance that returns across the industry also our own return, they will come down. But that’s not something we’re so necessarily concerned about as long as we have the feeling that we can further create that outperformance, and creating outperformance in the past at least, I mean, the last 25 years of Partners Group was actually easier to achieve in a more difficult environment than in a very, very bull market type of environment.

So that’s why you see us a little bit kind of -- with 2 kind of reactions here, a little bit cautious about the outlook, but not necessarily concerned about our mandate for our clients.

I’ve got 3 questions, please. Firstly, if I remember historically, when discussing investment opportunities 6 months ago, you were talking a bit more cautiously about deploying and the competition for new investments.

And given what you’ve said around purchase price multiples, not adjusting significantly recently, I’m wondering how you’re viewing the pricing levels currently? My second question is around performance fees.

So ballpark it sounds like GlobalLogic was about CHF 275 million in your performance fee contribution. We talk quite a bit more.

I’m wondering whether some of the performance fees are generated by GlobalLogic, didn’t necessarily crystallize in all your mandates. And therefore, there’s more GlobalLogic sitting in the tank for future periods or helping towards achieving the hurdle rates for those specific mandates.

And my third question is, could you talk about how a market turn, how do you expect that to impact flows in your other green vehicles if it’s how to continue to materialize?

So with regards to pricing levels, I think we’ve always been an organization that has been thoughtful with regard to deploying capital. We’ve always been an organization and be thoughtful with regard to deploying capital, but also steadfast in seeking a relative value that we see in any given year.

And so we’re not an organization that typically tries to time the market and come in at this time and none of that time. In any given year, we’re looking for the best opportunities that we can find in that particular vintage year.

And sometimes you have some better vintage years than others. But if we’re able to outperform based on our very rigorous investment selection process, based on the research that we do to get out ahead of interesting opportunities, based on our thematic work picking sectors we feel good about that.

And so we continue to invest. We’ve already onboarded a number of new investments this year and feel very good about those new additions to the portfolio.

We invest with a view of often times 5, 6, 7, 8 years business plan. We’re looking to develop those companies across.

And we continue to feel like we can drive outperformance within our existing business. And so we’re not pumping the brakes because of the valuation environment.

In fact, if you think back to that presentation, that Steffen just provided about how the industry is going to develop, you’re going to see a maturation within our industry, and you’re going to continue to see time lines come down. You’re going to continue to see valuations go up and competition go up.

And we’re looking to differentiate ourselves based on how well we can drive value within our portfolio in the precision market. And so we can invest and feel good about the investments that we’re making.

Hans, do you want to talk a little bit about as what we’ve seen in Evergreens so far year-to-date.

Yes, we had a little bit of breakup. So I’ll just repeat what I said.

So GlobalLogic was in the performance fees of 2021, the way we recognize performance fees and how it flows through the different mandates and programs. It’s important following that exceptional year that we keep reiterating that performance fees will return to the level we have been delivering over the years between that 20% to 30%.

And during the break up, did you talk about the Evergreens that -- our evergreen vehicles have not anything out of the ordinary in the volatility that we’ve seen in the first couple of months of this year and continue to operate within the bans that we have been expecting. We’ve now been managing open-ended structures and evergreen vehicles for a very, very long period of time through a variety of different cycles and continue to feel good about the stability that they represent even in an environment like 2020, where you had huge corrections in the market, we still have net inflows within our evergreen structures.

And so that’s a segment of the market that we continue to feel a lot of appetite for, and we believe we’re one of those providers that knows how to steer those vehicles around various market situations.

Just to be clear, I mean, they have come down in valuations, so down maybe year-to-date, something like 2% or so. So it’s not massive.

But of course, they cannot escape from the change in market valuations because I mean, all these mutual funds, these open-ended evergreen funds, I mean they have effectively some form of market to market. So they look at peers in the public market and then will apply similar kind of correction of valuation.

So it’s not that they will be independently valued from public markets.

I have 3 questions, please. First one, just referring back to Dave’s comments at the beginning of the presentation in your discussions with your LPs.

Could you perhaps share what your LP see as the main end points in the current environment? And also perhaps longer term, is that the denominator a fact, is it higher interest rates, longevity?

Any color on that would be appreciated. Secondly, on your comments regarding the activation of growth in portfolio assets, could you clarify what that means exactly?

Or be like see a higher pace of growth relative to direct perhaps even a shift towards portfolio assets or it’s just direct perhaps gain share at a lower pace? And my last question is on M&A.

I know that historically, you’ve been quite conservative or quite cautious with the topic for a number of reasons, including culture, governance, valuations and so on. You’ve seen a number of transactions in the industry.

One of your European competitors as well did a fairly significant deal in Asia just a couple days ago. I’m just wondering, in the current environment, do you see merit in doing perhaps bolt-on M&A in certain segments or regions that could help you accelerate building out the business?

Any comments on that would be appreciated all.

So maybe I’ll take a crack at some of these and then we’ll pass it around. So first of all, we did do some survey work with our clients at the conference.

And of all of the topics kind of that are on people’s mind today, inflation was one of the kind of current topics that they were most interested in and believe it requires the most steering. And we shared with them a lot of the work that we’ve been doing with our portfolio.

We’re quite a centralized firm as mentioned. So we have a centralized effort to send out instruction to our teams with regards to having these conversations at the Board level to report back on the various forms of inflation that they’re seeing on various pricing strategies that they have on sharing best practices on inflation with other boards and companies and how to manage pricing dynamics.

And then we have an inflation plan that we have for each of our assets. that we’re going through and making sure that our teams are operating according to.

And so that’s one of the maybe more near-term events. Over the long term, as you talk to clients, the thing that they all want to figure out as it relates to private markets is how to better compound value within our asset class.

You have a lot of people that are trying to put $1 billion to work with the capital calls, distributions coming back. They have a hard time hitting their NAV targets and compounding at the level that they’d like to hit.

The returns on the segment of the portfolios that are at work are doing quite well. But that’s the thing that we hear time and time began, and that’s where we’ve been able to really differentiate ourselves with our bespoke solutions.

With regards to the reactivation of growth on the portfolio side, I don’t think that it comes at the expense of our direct investment activities. The teams, while they do coordinate quite a bit, it’s not a shared pool of resources that they operate from.

We have 2 separate teams, and we believe that we can drive incremental growth and a higher growth rate by some of the strategies that we have implemented in particular, on the secondary side, where we see that part of the market coming to us. And so I don’t think it comes at the expense of our direct investment business, but I think it’s incremental.

And on the M&A side, we’re an organization that is a little different than some other firms. We are not a portfolio of franchisees, each operating their own separate fund series who kind of have shared economics with the house, we are truly a unified platform.

And so we have looked at M&A in the past. We’ve had a lot of intense discussions about M&A in the past.

But for an organization like ours, M&A might mean something than it does at another institution where an acquired company might operate -- continue to operate somewhat independently with their own investment committees and their own series of funds. But within Partners Group, it would be quite integrated company, and I think it would look a little bit different than it does for some of our peers.

And so we have an integrated model that I think serves us well that allows us to do a number of things, in particular, on bespoke solutions side, where we benefit from that integrated platform, but it does require a little bit more of a platform approach as opposed to a portfolio of different product types that we put through the same distribution channel. The economics work a little bit differently within a firm like ours for M&A than it does perhaps with another organization.

But we consider it, but we are an integrated firm, which just adds another level of complexity to that.

Maybe quickly on the portfolio asset side of things. Also here, there’s a passive and an active approach.

I mean passive approach for portfolios, secondaries or loan books, it’s essentially market share approach. So if there’s any large portfolio coming in the market, there might be a lot of large groups, so wealth funds out of large pension funds, some GPs that essentially bid the highest price and they try to get some share often they team up.

And that is, I guess, what they’ve talked about, I mean, there’s a lot of activity in separate market actually in this kind of format, and we weren’t super impressed by these opportunities. And we have arguably actually lost market share and we were one of the very early second players, but we were so intrigued by these kind of situations.

What we see now in the last 3, 4 years is there’s really new interesting opportunities coming out of that market by, for instance, other GPs, peers, competitors that want to hold on to certain individual assets for longer. And they form so called contribution funds where they often need someone like Hans moving out a GP to take a bigger part actually to also verify the pricing, make that legitimate for the LPs when they actually roll this and keep maybe that asset for another 4, 5, 6 years.

So there’s new forms coming out, which really allows us also with an active approach in the portfolio side, which is asset-by-asset underwriting at least at that level to be active. And I think with that, I think we will see some growth coming back also in this area.

Two questions if I may. One also regarding hiring.

If I understand you correctly that you’re planning on hiring several hundred of professions this year having employees in total that you imagine at the end of this year. And my second question is you said Partners Group has now value addition plans in the [indiscernible] programs.

Do you have [indiscernible] in other programs? Do you have mandates with Russian clients?

Maybe -- the line was a little bit, so if I don’t fully answer the question, feel free to tell me. The first question, I think, was linking about the growth of our professionals for 2022.

Headcount grew a little less last year. As I mentioned, which is important, we had still the benefit of some intensified hiring over the 2019 period.

So when we ended the year, we had good capacity to support the growth. We have stepped up to support the future growth and prepare for the growth in the future.

So you will see some catch up into the hiring when we enter 2022. And we will report that as we go along.

So yes, we will continue to focus to invest in the business, while we also deliver on an EBIT margin target of 60% plus. I believe the second question was related to clients in Russia.

We do not have in any closed-ended funds version clients as we speak today.

We do have the reason why we -- the reason why we qualify that as indirect Russian clients because we do have some distribution relationships with banks and other people where the partner that we’re distributing through and we don’t have transparency in that. For the funds that we manage, where we have transparency, we don’t have any Russian clients.

We have had a lot of debates and fights about whether or not Russian clients in the past, but we have no exposure today.

And regarding the first question, I think [indiscernible] did I understand that correctly?

It’s a bad line. I think you’re looking for kind of where could we potentially end up at the end of this year from a headcount perspective.

[Indiscernible].

So directionally, directionally, if we end up at around 1,800 employees at the end of this year, I wouldn’t be surprised.

Just 2 questions from my side. In the outlook, I think you sort of referred to that as the asset class becomes more traditional, we may be some more regulatory scrutiny.

Is that sort of more of a general comment? Or are you seeing any regulatory developments already in the pipeline?

That’s the first question. And then the second 1 is just on client return expectations, any feedback from perhaps your conference or anything you’re hearing more broadly around what clients are expecting across the different asset classes for returns?

So I’ll firstly with...

No, go, why don’t you do the regulatory side, Steffen, I’ll talk about the client return expectations.

So I mean, it’s both. It’s a generalized, but it’s also a more concrete comment.

I mean, you might have seen that specifically in the U.S., I mean, there was a bit of a discussion with the SEC or by the SEC around maybe potential new rules around private market activities A little bit hard to say. I mean, what will eventually make it into law and what’s the process because it’s a question of what can be done by the SEC, what is actually a change of law which I think it’s much more difficult with the current situation of the house.

So I think that we don’t want to speculate too much around this. It’s something I can assure you we look at very closely working group is just to make sure we are prepared.

We know what it means in practice. We’re not so worried about that because we believe that like in the past, when we have seen the AFM in Europe for instance happening that I would say, at the margin, the larger firms usually had a little bit of an advantage over the smaller firms with some of these new rules popping up.

So it’s not something we’re deeply worried about. It’s just something monitoring and it could lead to maybe, I don’t know, different investment programs, different type of reporting around ESG, for instance, other big thing in Europe.

But I don’t think it’s something that should diminish our opportunities going forward.

Yes. I agree.

And we have been managing clients’ expectations, I think, on returns for a couple of years now. returns continue to be very, very strong.

I think aided by market tailwinds as well as strong impact that we’ve been having within our own portfolio. But I don’t think it fundamentally changes the calculus.

I think Steffen laid out the cages very, very well that our expectation and our clients’ expectation is actually we deliver relative outperformance. I find them to be quite understanding if the absolute levels of return come down with changes in the environment, growth in the asset class and more competition as well as other factors that we have been talking about.

And so I think as long as we can deliver consistent outperformance to our clients, I think we’ve done our job, and that’s where we orient ourselves.

Yes. So that was the last question.

I think -- to add the question, I think what’s important to emphasize that the structural goes towards the asset classes in introduction, we see continuing. We reiterate our outlook for the year.

And I mean, the client group yesterday, we see continued demand coming in. So lots of questions on inflation and things which you also asked with the client the month continues as we speak.

While there will just maybe a little bit more volatile, and we will clean to deliver strong AuM growth supported with those performance fees as we discussed. Well, thank you for your attention.

Thanks a lot for being with us today. It is good to have a settled it partially, but have a in-person event again.

Thank you for the presence. And I guess, yes, hopefully, stay touch if there’s more questions anyway.

Thanks for joining us.

Thank you. Appreciate it.

Have a good day.