Partners Group on tweaking the PE model

Side Letter: Partners Group on tweaking the PE model.


Partners Group’s results call on Tuesday was unsurprisingly heavy with covid-19 discussion (more on that below). However, the firm also unveiled a potentially important shift in the way it engages with portfolio company employees.

Driven in part by the negative public attitude to PE (see our analysis of that here), Partners Group will discuss with its institutional clients a proposal to divert a percentage “of the value that is created” at its portfolio companies to employee programmes that could be in education, the environment, social initiatives or more straightforward financial support (a share in the profits at exit). There was also mention of a portfolio-wide hardship fund (sort of an internal insurance programme) to account for business failures and job losses.

Executive chairman Steffen Meister (pictured) posed the question: while private equity firms can credibly claim to outperform other ownership models when it comes to returns and job creation, can it claim to be better at engaging with employees? “I think we have to take a step back and agree: no we cannot,” said Meister. Why not? “It’s not a lack of willingness or intention. It is cost. These initiatives come with costs.”

Next the firm will discuss the plan with LPs before moving it forward.

On the subject of covid-19:

  • Portfolio: liquidity plans are “perhaps the most frequent conversation at the moment”, said co-CEO David Layton. “We have drawn many of [the revolving credit facilities] down at the asset level out of caution, and we have over $15 billion of dry powder available at the fund level.”
  • Dealflow: The firm is “widening its origination efforts into areas that were closed up until now”, said Layton. This includes public targets that had been “prohibitively expensive”, and privately owned business that require more capital: “It’s a little bit early, but I wouldn’t be surprised if you see us approaching owners of over-leveraged, solid assets with capital solutions.”
  • Fundraising: The firm declined to give guidance on how fundraising would be affected. Last year the firm raised $16.5 billion across its various programmes.
  • Operations: Hiring will be slow this year, not for financial reasons, but because PG’s process involves a lot of in-office face time, something not currently possible, the firm said.