PGPHF - Partners Group Holding AG (PGPHF) Q4 2023 Earnings Call Transcript

2024-03-19 12:11:03 ET

Start Time: 04:00

End Time: 05:38

Partners Group Holding AG (PGPHF)

Q4 2023 Earnings Conference Call

March 19, 2024, 04:00 AM ET

Company Participants

David Layton - CEO

Joris Gröflin - CFO

Steffen Meister - Executive Chairman

Philip Sauer - Head of Corporate Development

Conference Call Participants

Daniel Regli - ZKB

Mate Nemes - UBS

Nicholas Herman - Citi

Hubert Lam - Bank of America

Presentation

Philip Sauer

Good morning, everybody. Dear shareholders and media representatives, we would like to express a warm welcome that you came to listen to our 2023 Annual Results Presentation. My name is Philip Sauer. I'm heading the Corporate Development Business Unit at Partners Group, and all of us today are very excited to share with you some of our highlights and achievements from the past year.

Over the weekend, we returned from Miami where we held our Annual General Meeting for our clients. This was a great event with a new record, over 300 clients from over 35 countries worldwide participated. In total, the clients in attendance represented more than $10 trillion of assets under management. We saw 45% representation from North America. We welcomed this, because we aimed to gain further market share in that region.

We also dedicated substantially more time in our agenda for our private wealth solutions and our distribution partners. Listening to their ambition to further increase the private market allocations of their private wealth clients provides us with enormous confidence about the future growth of our business. This is one of our more important growth segments.

At the AGM, Steffen Meister, here on my right side, our Executive Chairman, took clients on a journey of what truly shapes the private market investment paradigm over the next decade and that the only constant in our economy is the acceleration of change. Today, he is with us and shares with you the same perspectives as he shared with clients last week. Thereafter, we listen to Dave. He will provide us with a business update of 2023 and also with an update on the IOM outlook for 2024. Last but not least, we would like to welcome our new CFO, Joris Gröflin. Welcome. He will explain our 2023 financials and give you more insights in our performance outlook for the future.

So, without losing any more time, Steffen, the floor is yours.

Steffen Meister

Thank you, Philip. Good morning, everybody. It's great to have you. We really appreciate your time here. As Philip said, I'd like to kick this off with some perspectives on what's ahead of us in the next 10 years. What's the game changers for the investment paradigm in the next 10-15 years and what are not game changers? I can assure you that last week in Miami, that is something very, very high on the minds of our investors and I assume also shareholders at this inflection point in this environment.

So, the four considerations that typically come up are around the macro economy reset, geopolitics and what are the potential implications on deglobalization, labor and demographics and the next generation of technologies. Let me walk you a little bit through that. I'll do this somewhat briefer than in Miami. We don't have quite as much time, so bear with me. I'll not go through all the numbers, but you've got the materials.

So the first question about the macro economy resetting, what you see here is on the left-hand side, the gray bars is fundraising that has been relatively insulated from market cycles and also returns, that's the top line you see is actually relatively independent. There's a simple reason for that and this is in the valuations. So, if you look on the right-hand side, what you see is a little math exercise here.

If you take a, let's say, low double-digit growth asset that creates 20% returns with a 50% leverage at 5% cost of capital, so it's a bit of bull market kind of asset financing, you bring down now the finance to 40%, double the cost to 10%, that creates a return of 17%. Now you fix the exit price, but you enter the asset at a valuation which is one turn lower, you'll be back at 20%, okay? And that's exactly what happened over the last 12 months. It's actually probably more than that. ...

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