Partners Group fee income exceeds €1bn for the first time

The Swiss investor posted its largest ever fee income last year, but its performance fee pool was down by one-third despite overall performance fee growth.

Partners Group’s management fee income grew almost 30 percent last year, a level the firm labelled “disproportionate” due to its closing of flagship funds over the year, including 6 billion for Partners Group Direct Equity 2016 Fund.

The firm racked up more than SFr1.2 billion ($1.25 billion €1.02 billion) in management and performance fees, with performance fee growth rising from SFr294 million in 2016 – itself a threefold increase – to SFr372 million last year.

The amount set aside as compensation for employees in its performance fee pool was around one-third lower than 2016, which the firm attributed to “a shift in the investment mix towards higher volumes deployed in credit markets (which have a reduced potential to generate performance fees).” The size of the performance fee pool varies year to year and consists of up to 40 percent of projected performance fees from the firm’s investments in that year. Across the firm’s asset classes the stand-out performance fee rise was in infrastructure, where fees increased from SFr8 million in 2016 to SFr71 million last year.

David Layton

The firm’s highest=paid employee last year was its 36-year-old head of private equity, David Layton, who took home more than SFr4.8 million. His income surpassed the firm’s co-chief executives Andre Frei and Christoph Rubeli, who were paid just under SFr4 million, SFr3 million less than the previous year. Layton, who is based in the firm’s Denver headquarters, became sole head of private equity last year, after Stephan Schäli became chief investment officer.

The firm also outlined a shift in the compensation structure for its seven-strong executive committee, which includes Frei, Rubeli and Layton. This group will no longer benefit from the ‘Management Carry Plan’, which sees a portion of the firm’s potential future performance fees from investments ‘pre-allocated’ to investment professionals. Instead, this group will see a portion of their remuneration tied to a new ‘Management Performance Plan’ which consists of an option-like component focused on the firm’s share performance, and a performance fee component dependent on value being created in the underlying investments.

A spokeswoman for the firm said that achieving one component but not the other will result in no payout and the change is intended to ensure strong alignment between management and investors.

The firm says that while it expects management fees to continue to grow alongside assets under management in the coming year, it expects lower late management fees – those paid by late-coming investors to a fund – and believes that the growth seen last year will not be repeated.

Last year the firm merged its primary and secondaries teams to enable it to be more of a one-stop-shop for investors.