Zug-based Partners Group, specializing in private market investments, is grappling with a market recovery that has not materialized as the firm had expected: it had anticipated a recovery in the first half of 2024. While fundamentals such as valuations and financing conditions have indeed improved, this has not yet translated into activity in the transaction markets, according to a statement released on Tuesday.

As a result, half-year profits fell 8% from the previous period to 508 million francs. A closer look at the two revenue drivers—management fees and performance fees—quickly reveals the challenges faced by the firm.

Assets under management increase

Non-performance-related management fees increased by 4 percennt to 815 million francs, in line with the growth in assets under management, which rose from 126 billion to 129 billion francs (in U.S. dollars, the industry’s benchmark currency for private market investments, this increase is even more impressive at 5 percent, due to currency effects).

However, performance fees plummeted by 39 percent to 161 million francs, as the challenging transaction environment continued to weigh on the firm’s ability to realize gains. Partners Group has delayed several planned exits in private equity and infrastructure investments.

Smaller deals yield less impact

While realization activities increased by 69 percent they were largely concentrated in private credit and portfolio assets, where the contribution to performance fees is typically smaller. One notable successful transaction mentioned was the sale of of Civica, a software provider.

On the bright side, the decline in performance fees is also reflected in reduced personnel expenses. These fell by 12 percent to 300 million francs, as the performance-related compensation component decreased by 38 percent to 59 million francs. The company employs 1,800 people globally.

Is the target realistic or overly optimistic?

Despite the setback, Partners Group is maintaining its forecast for new client commitments, citing an expected normalization of the business environment. The firm expects to raise 20 to 25 billion Dollars in new capital for the full year (with 11 billion dollar secured in the first half).

Shareholders, employees, and the broader industry are hopeful that the Swiss market leader, which holds considerable influence in the international private equity scene, is accurate in its outlook this time—and that this optimism will not prove to be misplaced.