Partners Group warns high valuations hitting private equity returns

Partners Group, one of Europe’s largest private equity fund managers, has warned record-high valuations are having a negative impact on future returns for private equity players.

The warning emerged as the Baar-Zug, Switzerland-based company proposed an increased dividend of SFr15 per share thanks to higher performance fees.

Revenues rose to SFr973m in 2016 compared to SFr619m a year earlier.

Performance fees increased to SFr294m last year compared to SFr64m in 2015, representing 30 per cent of total revenues in 2016 ( versus 10 per cent in 2015).

André Frei, co-chief executive officer at Partners Group, said the solid growth in performance fees was a result of the “increased maturity” of the company’s portfolios and the solid performance achieved over the last six to nine years.

Mr Frei said in a statement:

While clients will remain the principle beneficiaries of the returns generated in the underlying portfolios, higher performance fees stemming from such returns also benefit the firm’s shareholders.

However, Christoph Rubeli, the company’s other co-chief executive officer, warned of the impact of high valuations of assets to the future returns in the industry.

He said:

Valuations have been pushed up in all markets, in certain segments to record highs. Headwinds stemming from high valuations have also had a lowering impact on prospective future returns in private markets.

He said the industry could offset this by engaging in “active ownership, a long-term investment horizon and the ability to create value”.