PARTNERS Group reported strong H1 2016 financials and net profit of CHF254 million. In H1 2016, the total average AuM in EUR increased by 22% to EUR 47.6 billion (H1 2015: EUR 39.0 billion). Management fees grew in line with AuM and increased by 26%, amounting to CHF 322 million (H1 2015: CHF 255 million). Performance fees increased to CHF 131 million (H1 2015: CHF 32 million), leading to overall revenues of CHF 453 million (H1 2015: CHF 287 million). Performance fees typically start to be earned six to nine years after an investment program commences its investment activities and once value creation in the portfolio has surpassed the program's performance hurdles. Several investment programs and mandates from a wide range of vintages experienced a shift in the timing of anticipated performance fee payments from 2010-2015 to 2016-2020, due to the longer asset holding periods caused by the financial crisis. While part of this performance fee potential was realized in H1 2016, Partners Group expects to continue to unlock further performance fee potential during the second half of the year and thus anticipates a comparably strong H2 2016. The actual development will, though, depend on the exit processes for underlying, globally diversified assets in which value has been created. André Frei, Partner and Co-Chief Executive Officer, Partners Group, said: "We currently manage over 200 diverse investment programs and mandates at different stages of their life cycle. Our established relative value approach allows us to capitalize on specific private markets investment opportunities at different points in the market cycle for our clients, who remain the principal beneficiaries of the returns generated. As our investment capacity grows, this implies that the number of investment programs at each stage of their life cycle should also increase. For this reason, we anticipate that performance fees will be paid more regularly going forward from a diversified range of vehicles, making them a quasi-recurring source of income for the firm that should grow in line with AuM in the long run. Assuming market conditions remain broadly supportive, performance fees are expected to represent around 20% of total revenues in the future." Despite the increase in performance fees, management fees derived from long-term client contracts will continue to dominate Partners Group's revenue streams in the years to come. Given the anticipated growth in the firm's AuM, management fees are expected to make up around 80% of total Partners Group's EBITDA margin increased to 60% in H1 2016 (H1 2015: 58%); EBITDA increased to CHF 272 million in H1 2016 (H1 2015: CHF 166 million). The firm continues to manage its EBITDA margin in a disciplined manner and reconfirms its ~60% target EBITDA margin for newly generated management fees (assuming stable foreign exchange rates), as well as for performance fees on existing and new AuM. In order to align long-term employee compensation with investment results for clients and the firm's overall financial success, Partners Group allocates ~40% of performance fees earned from investments to the firm's professionals through its compensation programs. Partners Group typically invests into its investment programs alongside its clients (around 1% of client commitments); the performance of these investments substantially contributed to a financial result of CHF 23 million in H1 2016 (H1 2015: CHF 19 million, excluding the CHF 51 million conversion gain from the Pearl investment program). In summary, the firm's IFRS net profit increased by 19% in H1 2016, standing at CHF 254 million (H1 2015: CHF 214 million).
