Cyrus Driver Head Private Equity Asia | Sara Odebunmi Head Product Management
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Annual Report 2018
Achieving outperformance through
business and ownership excellence
Contents
Key figures
Message from the Chairman and the Co-CEOs
2018 at a glance – Partners Group’s business model and review of financial performance
Investments
Clients
Client outlook
Financials
Market commentary
Key definitions and alternative performance metrics (APM)
Consolidated financial statements
Financial statements of Partners Group Holding AG
Compensation Report
Corporate Governance Report
Contacts
4
6
9
14
18
19
25
33
35
110
126
148
178
2018 was another solid year for Partners Group as we further
cemented our position as one of the leading private markets
investment managers globally.
We successfully raised EUR 13 billion and invested a record
amount of USD 19 billion on behalf of our clients in attractive and
resilient businesses and assets. These achievements, combined
with our stable margins and a balance sheet-light approach to
business, also translated into solid financial performance across
the board.
We would like to thank our clients, our business partners, our
shareholders and – not least – our colleagues for their continued
trust in Partners Group.
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Partners Group | 3
ANNUAL REPORT 2018 Key figures
1'203
professionals
CHF
1'326
million
revenues1)
19
EUR
73
billion
offices around
the world
assets under
management
CHF
882
million
EBITDA
CHF
769
million
1.71%
revenue margin1)
CHF
22.00
per share
profit
proposed dividend
Total AuM2)
(in EUR bn)
46.0
37.6
31.6
27.8
72.8
61.9
54.2
Number of professionals
701
746
625
1'203
1'036
930
840
2012
2013
2014
2015
2016
2017
2018
2012
2013
2014
2015
2016
2017
2018
Profit3)
(in CHF m)
752
769
558
396
336
265
292
Share price development since IPO4)
1'200%
1'000%
800%
600%
400%
200%
0%
-200%
Partners Group
+1’046%
Bloomberg European Financial Index
-52%
2012
2013
2014
2015
2016
2017
2018
2006
2008
2010
2012
2014
2016
2018
1) Revenues from management services, net, including other operating income. 2) Assets under management exclude discontinued public alternative investment activities and divested
affiliated companies. 3) Partners Group adjusted its profit for specific non-cash items related to the capital-protected product Pearl Holding Limited until 2014; the successful conversion of Pearl in
September 2014 has consequently made Partners Group’s adjusted net profit equal to its IFRS profit from 2015 onwards. 4 ) As of 28 February 2019.
4 | Partners Group
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ANNUAL REPORT 2018 Key figures
Key performance indicators
Assets under management as of the end of the year (in EUR bn)
Revenue margin1), 2)
Revenues (in CHF m)2)
EBITDA margin
EBITDA (in CHF m)
Financial result (in CHF m)
Profit (in CHF m)
Net liquidity position at end of year (in CHF m)3)
Shareholders’ equity (in CHF m)
Return on shareholders’ equity (ROE)
Equity ratio
ANNUAL REPORT 2018
2017
61.9
1.89%
1'245
66%
825
36
752
1'266
1'956
43%
67%
2018
72.8
1.71%
1'326
66%
882
23
769
1'226
1'968
39%
67%
1) Based on average AuM of CHF 77.6 billion in 2018 (2017: CHF 65.8 billion), calculated on a daily basis. 2) Revenues from management services, net, including other operating income.
3) Comprises cash & cash equivalents and short-term loans for investment programs provided by the firm, net of long-term debt.
Share information as of 31 December 2018
Share price (in CHF)
Total shares
Market capitalization (in CHF bn)
Free float1)
Diluted shares (weighted average)
Diluted earnings per share (in CHF)
Dividend per share (in CHF)2)
Dividend yield per share3)
Bloomberg ticker symbol
Reuters ticker symbol
596.00
26'700'000
15.9
84.96%
26'849'976
28.65
22.00
3.7%
PGHN SW
PGHN.S
1) According to the SIX Swiss Exchange definition. 2) As per proposal to be submitted to the 2019 Annual General Meeting of shareholders. 3) Yield as of 31 December 2018.
Corporate calendar
15 May 2019
17 May 2019
20 May 2019
21 May 2019
16 July 2019
Annual General Meeting of shareholders
Ex-dividend date
Dividend record date
Dividend payment date
Assets under management announcement as of 30 June 2019
10 September 2019
Publication of Interim Report as of 30 June 2019
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Partners Group | 5
ANNUAL REPORT 2018
Message from the Chairman and the Co-CEOs
Dear clients, business partners
and fellow shareholders,
2018 was a solid year for Partners Group in terms
of the development of our financial performance
and a highly successful year as regards our ability to
deploy a significant amount of our clients' capital in
attractive private markets assets.
Performance review
With EUR 73 billion in assets under management and over
1'200 professionals globally at the time of writing this letter, we
operate a significant number of businesses and assets in various
industries and sectors across the globe. Today, our professionals
are responsible for over 220'000 employees who work for
our largest portfolio companies and for creating long-term
value for over 200 million beneficiaries who are served by our
clients. Our focus on "business and ownership excellence" aims
to realize the full development potential of the companies, real
estate and infrastructure assets in which we invest.
Strong growth in our industry has
increased competition for quality assets,
applying upward pressure on valuations
and increasing transaction speed.
In 2018, favorable, long-term underlying client trends,
buoyed by the expectation of continued private markets
outperformance over public markets, remained the driving
force behind the demand for comprehensive private markets
offerings. These industry dynamics, combined with our long-
term track record, enabled us to generate client demand of
EUR 13 billion during the year. We also demonstrated the
strength of our investment platform in 2018, investing USD
19 billion on behalf of our clients in attractive private markets
companies and assets, despite challenging market conditions.
6 | Partners Group
André Frei Co-CEO, Steffen Meister Executive Chairman, David Layton Co-CEO
Assets under management grew by 18%, net, to EUR 73 billion
and management fees grew by 15% to CHF 1'002 million.
Revenues and EBITDA increased in tandem by 7% year-on-year
to CHF 1'326 million and CHF 882 million, respectively. Based
on the solid development of the business in all asset classes and
regions, the operating result and confidence in the sustainability
of the firm’s growth, Partners Group’s Board of Directors will
propose a dividend of CHF 22.00 per share to shareholders at
the next Annual General Meeting, representing a year-on-year
increase of 16%.
Complex dynamics ahead
Investment management in private markets has significantly
increased in complexity in recent years. We believe there are
four key dynamics that private markets managers should watch
out for in particular.
Economic challenges ahead: Geopolitical and economic dynamics
will come with significant headwinds and less predictable
growth. Therefore, "understanding" sectors is no longer
enough; Thematic Sourcing is the future. This approach
identifies and targets the most promising companies in those
sub-sectors that we believe offer significant potential for
outsized growth in the medium-to-long term.
Era of disruption: At the same time, technological disruption can
rapidly shift industry landscapes and threaten many businesses.
In today’s market, competition or industry disruption can come
from completely unexpected directions, often leaving traditional
operators blind-sided. In contrast, investing in disruption-based
growth themes with highly specialized or category-leading
businesses can provide substantial upside.
Public market dynamics: We are convinced that the historic
benefits of a public listing have been somewhat eroded by
the increasing burden of adherence to blanket corporate
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ANNUAL REPORT 2018 Message from the Chairman and the Co-CEOs
ANNUAL REPORT 2018
governance codes and industry "best practice." Selectively,
this "governance fatigue" can also limit IPO exit options for
private markets firms. We therefore see continued private
markets ownership as an alternative for leadership teams that
want to continue to realize potential within an entrepreneurial
governance framework. In parallel, this will result in more
public-to-private investments and only partial (public market)
exits.
Private markets challenges: Strong growth in the private
markets industry, evidenced by record fundraising over the
last few years, has greatly increased competition for quality
assets, applying upward pressure on valuations and increasing
transaction speed. The ability of private markets managers to
perform depends on their ability to respond to competitive
dynamics. The only way to generate outperformance over
the coming decades will be through highly resource-intensive
"business and ownership excellence."
Thematic Sourcing
While our relative value framework remains core to our process,
we have also dedicated substantial time and resources to
building out our Thematic Sourcing capabilities over the past
year. We combine top-down sourcing themes with bottom-up
insights from our platform and proprietary private markets
database (PRIMERA), which allows us to develop hundreds of
investment leads in parallel – sometimes building relationships
with potential acquisition targets for several years before taking
action.
One key focus of our Thematic Sourcing efforts is the industry
disruption that we referenced earlier. An example of where we
sought the proven disruptor within a particular sector in 2018
is our acquisition on behalf of our clients of Techem GmbH, a
market leader in the provision of heat and water sub-metering
services, based in Germany. Techem’s smart sensors and meters
aim to replace traditional metering services, enabling auto-
reading at hourly intervals and contributing significantly to
energy savings in buildings.
Business excellence
Hands-on value creation throughout the life of an investment is
the only way to generate outperformance now and in the future.
Once we have invested in a company, we leverage our Industry
Value Creation (IVC) team, which combines deep sector
and functional expertise with long-term, business-oriented
ownership to form our approach to value creation. Due to the
emphasis we place on value creation as the core of our business,
our IVC team continues to be the fastest-growing team within
our investment platform.
In 2018, we were gratified to have our value creation efforts
recognized for the second year running by Private Equity
International’s Operational Excellence Awards. We received
the 2018 Operational Excellence award for the successful
value creation program we led at Hong Kong-headquartered
apparel label and brand identification solutions provider, Trimco
International, which we exited at the start of 2018.
Ownership excellence
Our view is that the role of the board is critical to value creation.
Each board member, individually and as part of the combined
leadership group, must be able to actively contribute to defining
and driving forward company strategy. They must equally commit
a meaningful amount of time to achieving ambitious business
objectives by directing the company management's execution of
the board strategy.
For this reason, we have focused on further formalizing our
growing network of experienced Operating Directors to ensure
an effective use of knowledge and the seamless implementation
of our approach to portfolio governance. Partners Group
Operating Directors are experienced industry experts with a
track record of success in a sector that is an area of investment
focus for us. We believe that our portfolio companies and assets
are able to benefit from the hands-on approach to strategy
implementation and value creation that the appointment of an
Operating Director to their board provides.
Hands-on value creation throughout
the life of an investment is the only
way to generate outperformance now
and in the future.
Denver campus opens in 2019
We will see the fulfilment of an important milestone for Partners
Group in 2019, with the completion of the construction of our
corporate campus in Denver. The move to Denver, which was
announced in 2016, is a strategic initiative to position our firm for
long-term, sustainable success in the Americas.
The Denver campus will be a hub for our Americas business
activities in the same way that our headquarters in Zug,
Switzerland, and our office in Singapore serve as hubs for
Partners Group in Europe and Asia. Recruitment in Denver has
far surpassed the expectations we had at launch and we expect
to have more than 200 professionals on the ground in the near
term.
Partners Group | 7
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ANNUAL REPORT 2018 Message from the Chairman and the Co-CEOs
Outlook
We expect global demand for private markets investments to
keep growing as these asset classes represent an increasingly
important component in the portfolios of many leading
institutional investors worldwide, which contribute substantially
to the enhancement of their overall returns across economic
cycles.
However, while the key structural growth drivers for the private
markets industry remain intact, given the macroeconomic and
market challenges ahead of us, we believe that private markets
managers will only succeed over the long term if geared for
"business and ownership excellence."
Partners Group’s approach favors trusted, long-term
relationships. As such, we believe that we are ideally positioned
to be partners to, and successful entrepreneurial owners of, our
investee businesses, now and in the future.
With that in mind, we would like to thank our clients, our
business partners, our shareholders and – not least – our
colleagues for their continued trust in Partners Group.
Yours sincerely,
Steffen Meister
Executive Chairman
André Frei
Co-Chief Executive Officer
David Layton
Co-Chief Executive Officer
8 | Partners Group
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ANNUAL REPORT 2018 2018 at a glance – Partners Group’s business model and
review of financial performance
Investments
USD 19.3 billion invested on
behalf of our clients in attractive
and resilient businesses and assets.
Entrepreneurial governance and hands-on value
creation are key to growth
Private markets investments during 2018
(based on volumes)
In 2018, we expanded our platform to 1'203 employees (2017:
1'036) across 19 offices with the aim of systematically sourcing,
investing and developing an even larger set of businesses and
assets. We continued to pursue our highly disciplined and
prudent approach to source and execute the most attractive
investment opportunities in a competitive market predominantly
characterized by high valuations.
Guided by this approach, we invested a record amount of USD
19.3 billion (2017: USD 13.3 billion) on behalf of our clients
across all private markets asset classes in 2018, including
the reinvestment of distributions in evergreen investment
programs. Of the total amount invested in 2018, USD 11.5
billion (60% of total investment volume) was deployed in
direct assets, of which USD 6.3 billion was invested as equity
in individual businesses and USD 5.2 billion in corporate debt.
These equity investments are underpinned by our focus on the
entrepreneurial ownership of businesses and assets, whereby
business-oriented governance and hands-on value creation
remain the key to generating strong outperformance.
To complement our direct assets, we invested USD 7.7
billion (40% of total investment volume) in portfolio assets.
These portfolio assets include USD 5.2 billion of secondary
investments in globally diversified private markets portfolios
and USD 2.5 billion of primary commitments to select best-in-
class managers in the private markets industry.
Investment activities continued to remain geographically
diversified in 2018, with 36% of capital invested in Europe, 47%
in North America and 17% in Asia-Pacific and emerging markets,
reflecting our global reach and scope.
North
America
47%
Europe
36%
Portfolio
assets
40%
Prim.
Equity
Equity
USD
19 billion
Sec.
USD
19 billion
Direct
assets
60%
Debt
Debt
Asia-Pacific/
Rest of World
17%
Note: figures exclude investments executed for short-term loans, cash management purposes
and syndication partner investments.
Only the most attractive assets on a global basis are
selected for investment
The potential for more challenging macroeconomic conditions
demands careful asset selection for downside protection. We
therefore remained highly disciplined in assessing risk/return
parameters in our investment selection process during the
period. In addition, in this late stage of the economic cycle, we
are focusing on businesses and assets that are well positioned
to withstand a variety of alternative economic scenarios and
include prudent assumptions that market valuation multiples will
come down in our underwriting for new investments.
On many occasions, we did not win a transaction because we did
not compromise on pricing. This is important to us as we have to
adhere to the target underwriting returns communicated to our
clients and only select the most attractive assets with long-term
potential.
When searching for new opportunities, our investment
professionals are guided by well-developed investment themes
and target the most promising companies in those sub-sectors
that we believe offer significant potential for outsized growth
over the mid- to long-term in today’s market.
Partners Group | 9
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ANNUAL REPORT 2018 2018 at a glance – Partners Group’s business model and
review of financial performance
Target assets are developed over very long periods of time,
which means that it can be difficult to precisely predict when
they will become actionable. We therefore focus on deepening
our understanding of and relationships with these target assets
by tracking them over several months and years ahead of a
potential sales process. This allows us to develop an investment
thesis for these assets early on and be ready to act in a
reasonably short timeframe when they become available for
investment. While transaction speed can be a decisive factor in
winning competitive situations, we are also seeing businesses
become more demanding and look for partners with deep
sector and functional knowledge that have the capabilities to
propel growth.
In 2018, we screened over 2'800 direct transactions across
asset classes. Of these, we invested in only the most attractive
3%, resulting in 78 completed transactions and a decline rate
of 97%. Furthermore, our integrated investment professionals
generated USD 145 billion in secondary private markets assets
deal flow, investing in less than 4% of this, and screened over
490 fund offerings by leading private markets managers.
Deal flow 2018
Private equity
Private debt
Private real estate
Private infrastructure
Direct assets
Portfolio assets
>2'800
assets
492 private markets
managers
USD 145 billion
portfolios
3% invested
#78 executed1)
Executed
USD 6.3 billion in equity
USD 5.2 billion in debt
USD 5.2 billion in secondaries
USD 2.5 billion in primaries
1) USD 6.3 billion invested in 31 equity investments and USD 5.2 billion invested in 47 debt
investments; debt investments exclude investments executed for short-term loans, cash
management purposes and syndication partner investments.
Our success is driven by "business and
ownership excellence"
As a partner to business, we have a bias towards trusted,
long-term relationships to develop businesses and real
assets with a long-term perspective. For that purpose,
we leverage our global reach and local expertise across
private markets to grow these businesses and real assets
in an active and systematic manner. Beyond the deep
sub-sector experience and research insights of our
large Industry Value Creation team, our global platform,
portfolio and network provide extensive synergies and
opportunities for owners and entrepreneurs.
Long-term entrepreneurial governance is at the heart of
our investment approach. This means that once we have
invested in an asset, our focus is on active value creation.
As part of this approach, we ensure that our portfolio
company boards are the center of vision, strategy and
accountability for the business. Our portfolio companies
can thus leverage and benefit from our network of
experienced Operating Directors, who have a hands-on
approach to strategy and value creation. In addition,
through our strong governance structures and incentive
schemes, we ensure strong alignment between all
stakeholders for the ultimate purpose of advancing
businesses and assets.
Looking ahead, we will continue to build out our Thematic
Sourcing and research capabilities to access a greater set of
leading businesses and attractive assets. With the aim of cutting
through the competition for such assets in this crowded market,
we will dedicate substantial resources to further strengthen
our platform, our Industry Value Creation team and network of
Operating Directors in 2019.
10 | Partners Group
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ANNUAL REPORT 2018 2018 at a glance – Partners Group’s business model and
review of financial performance
Private markets investments in 2018
Private debt
One example that illustrates our ability to offer individual
solutions and back successful companies in our debt portfolio
with add-on acquisition financing is our investment in
Independent Vetcare. Headquartered in the UK, Independent
Vetcare is a veterinary platform specializing in the treatment
of smaller animals for both routine and complex treatments.
Founded in 2011, the company is one of the leading
consolidators in the industry. Since 2017, under its current
ownership, the company has increased its footprint via
acquisitions, expanding beyond the UK. We have supported
the company’s growth ambitions by providing follow-on debt
financing and have participated in multiple debt raises since
our initial investment.
Independent Vetcare operates in a highly attractive sub-
sector. A prominent theme we expect the company to benefit
from is the continued adoption of specialized pet care, which
is a by-product of the megatrend toward the humanization of
pets, whereby pet owners are increasingly treating their pets
like family members. The proportion of dog and cat ownership
within the population is generally stable and is driven by
underlying human population growth. The percentage of pets
under insurance coverage is expected to increase, benefiting
the company as a specialty care provider. The number of pets
in households without children is increasing more rapidly, and
there is a willingness to pay for care along with more advanced
treatments and early diagnosis.
Our financing structure provided the company with the
flexibility to use a revolving credit line for acquisitions and then
subsequently repay the credit line with an additional term loan,
enabling speed of execution. The target return for the first lien
financing is 5.7% (GBP).1 The loan also benefits from a financial
maintenance covenant providing downside protection.
1 For illustrative purposes only. There is no assurance target returns will be achieved.
An overview of our current investment themes for each asset
class can be found in the market commentary section on page 24
of this report. Select 2018 investment examples for each asset
class are shown below.
Techem
Private equity
In May 2018, we acquired Techem, a global market leader in
the provision of heat and water sub-metering services, based
in Germany, for an enterprise value of EUR 4.6 billion. Techem
provides services and devices for the metering and billing of
energy and water, plus device sales, hire and maintenance.
In addition, it delivers heat, cooling, flow energy and light, as
well as the planning, set-up, financing and operation of energy
systems and energy monitoring and controlling services.
Techem is currently one of the market leaders in Germany,
the largest sub-metering market in the world, and holds
a leading position in other European markets. Techem's
footprint comprises over 400'000 customers with 58 million
devices installed in 11 million apartments across more than
20 countries. The business operates in a non-cyclical market
with high customer stickiness, long-term contracts and high
barriers to entry. In addition, as sub-metering reduces energy
consumption by 20-30% on average, Techem solutions today
account for 6.9 million tons of CO2 emission savings per year,
thus contributing to global climate protection objectives.
Techem's business benefits from increasing awareness of the
need for energy efficiency solutions, as well as from regulatory
incentives and the trend towards home automation. Going
forward, together with our consortium investors, we will
support the development of the company in its existing markets
and aim to expand its presence geographically. We will focus on
introducing new technologies to enhance its current offering
and consolidate its position as a leading energy efficiency
provider.
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Partners Group | 11
ANNUAL REPORT 2018 2018 at a glance – Partners Group’s business model and
review of financial performance
Private real estate
Private infrastructure
In September 2018, we agreed to develop Block E Belleview
Station, located in the Denver Tech Center (DTC) submarket of
Denver. DTC was formed in 1962 as a masterplanned business
center and is home to approximately 10 million square feet
of office space and a very diverse set of companies. The DTC
submarket is well connected to Denver CBD and the airport by
a rail and bus system. The daytime employment base is rapidly
increasing in the area and now stands at over 100'000 people,
making it one of Denver’s biggest employment hubs.2 Moreover,
DTC is close to affluent residential neighborhoods and benefits
from low vacancy rates of around 5% for Class A developments
that are easily accessible by public transport.3
Block E Belleview Station, which is part of a 2.2 million square
feet planned development, will consist of 408'000 square feet
of office space and was acquired at a 25% discount relative to
comparable market prices today. The value creation plan for
the project involves a lease-up strategy, which will bring the
development from 40% pre-leased to a stabilized occupancy
level of 96%.
This example illustrates our strategy of focusing on properties
in major Tier 1 and economically vibrant Tier 2 cities located
outside of CBD areas, offering relative discounts to rents in
CBD locations.
2 CBRE, May 2018.
3 Costar, May 2018.
In September 2018, we agreed to invest over AUD 200
million in equity to acquire and construct the first stage of
Murra Warra Wind Farm (Murra Warra I) in Australia. Murra
Warra I will comprise 61 Senvion 3.7MW turbines with a total
nameplate capacity of 226MW, located north of Horsham in
the state of Victoria. Construction of the wind farm started in
March 2018 and completion is expected in mid-2019.
This opportunity has allowed us to acquire a significantly de-
risked asset that is already under construction and which has a
substantial portion of generation capacity already contracted
through long-term power purchase agreements (PPAs). Once
completed, Murra Warra I will generate enough clean energy
to power 220'000 Australian households and offset over
900'000 tonnes of carbon emissions every year.
We will support the growth of the asset by leveraging the
expertise gained from our existing substantial portfolio of
renewable energy assets. Our value creation strategy will focus
on project execution to ensure that construction is successfully
completed on time and on budget. Furthermore, we will secure
PPAs for the remaining uncontracted capacity.
Australia remains an attractive market for onshore wind
and one where we can build on our experience from prior
investments. In fact, the Murra Warra I investment follows our
recent AUD 700 million commitment to develop Grassroots
Renewable Energy Platform ("Grassroots"), a large-scale
platform that aims to construct over 1.3GW of new wind power,
solar power and battery storage assets across Australia within
the next four years.
Once operational, Grassroots is expected to become a category
leader in the Australian power market as one of the country's
largest independent power producers in the renewables sector.
Also in the Australian renewable energy sector, in June 2015,
we invested in the development of the 240MW Ararat Wind
Farm, which started supplying clean energy to the Australian
national grid in mid-2017.
Murra Warra Wind Farm
12 | Partners Group
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ANNUAL REPORT 2018 2018 at a glance – Partners Group’s business model and
review of financial performance
Divestments in 2018
2018 was also a solid year for realizations. During the period,
we continued to make active use of the supportive exit
environment and were able to realize a number of mature
private markets assets on behalf of our clients, leading to a
total of USD 13.4 billion in underlying portfolio realizations.
Some distributions to evergreen programs were re-invested for
the benefit of the program’s investment exposure. Select exit
examples for each asset class are shown below.
Country
Hong Kong
Asset class
Private
equity
Sector
Consumer
Exit
Country
January
2018
France/
Netherlands
Asset class
Private
debt
Sector
Industrials
Exit
October
2018
Country
China
Asset class
Private real
estate
Sector
Mixed-use
Exit
September
2018
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Founded in Hong Kong in 1978, Trimco provides a full range of garment labels, tags and
trimming products to blue chip apparel brands and retailers worldwide. We acquired
Trimco on behalf of our clients in May 2012 and subsequently worked alongside the
management team to oversee a period of expansion in which the company quadrupled
its business and grew from an Asia-centric manufacturing specialist into a global leader
in its field. We sold the company to funds advised by Affinity Equity Partners for a total
consideration of USD 520 million, generating a 3.4x return on our original investment.
Alltub is a global leader in the production of aluminum and laminate specialty packaging,
typically used to produce "squeezable" packaging for semi-liquid products in end
markets such as cosmetics, pharmaceuticals and food. In June 2015, we provided EUR
74 million in unitranche financing to fund a broader refinancing of the company's capital
structure and support its expansion plans, including the purchase of a small manufacturer
based in Germany (Karl Hoell) in August 2016. The debt investment was fully repaid
in conjunction with the acquisition of Alltub by One Equity Partners in October 2018,
generating a 1.33x return. Based on the further development potential of the company,
we decided to continue our support of Alltub, providing EUR 87 million in unitranche
financing to support the new acquisition and expansion plan, which includes further buy-
and-build opportunities in a consolidating market.
Pacific Century Place in Beijing is a 185‘980 square meter, mixed-use complex comprising
two office towers and two serviced apartment blocks atop a six-story retail podium.
Acquired in 2014, the investment strategy for the property involved renovating and
repositioning the office and serviced apartment portions, and converting the largely
vacant retail space into office units to cater to the limited office supply in Beijing‘s CBD
area. The property was awarded Best Refurbished Building at the 2017 MIPIM Asia
Awards. In order to protect investor returns in a volatile Chinese yuan environment, our
asset management team initiated Chinese yuan hedging on the expected exit proceeds
when the sale was confirmed in March 2018. The sale was completed in September 2018
and generated a gross IRR of 17.0%.
Asset class
n Country
o
i
t
a
r
o
p
r
o
C
h
c
n
a
R
n
o
c
i
l
i
S
Sector
Exit
US
Private
infrastructure
Renewables
January
2018
In January 2018, we sold our stake in Silicon Ranch Corporation, a developer, owner
and operator of solar energy facilities in the US. Since our investment into Silicon Ranch
in April 2016, the company has quadrupled its operating portfolio of commercial- and
utility-scale solar projects. It now has approximately 880MW of contracted, under
construction, or operating solar PV systems across 14 US states, as well as close to 1GW
of additional development pipeline. With our support, the company has been able to
execute its growth plan faster than expected and we took the opportunity to divest our
equity stake to a strategic investor ahead of the original investment plan. The gross IRR
on the original investment stands at 27.4% as of 31 December 2018. The final return will
be dependent on the company achieving predetermined milestones.
Partners Group | 13
1_Annual_Report_Image_2018_en.indd 13
13.03.2019 16:54:44
ANNUAL REPORT 2018
2018 at a glance – Partners Group’s business model and
review of financial performance
Clients
EUR 13.3 billion gross client
demand in 2018; AuM stands
at EUR 73 billion.
Anticipated changes to 2019 asset allocations of
institutional investors representing USD 7 tn in AuM
Equities
-37%
High Yield
Hedge funds
Cash
reduce
increase
-8%
-2%
4%
Demand for
increasing exposure
to private markets
p
u
o
r
G
s
r
e
n
t
r
a
P
s
u
c
o
f
Real estate
Private equity
Real assets1)
Private credit
Reallocating risk in
search of uncorrelated
sources of return
30%
37%
50%
52%
-40%
-20%
0%
20%
40%
60%
1) Real assets include infrastructure, commodities, timber and farmland.
Source: BlackRock client survey among 230 institutional clients, December 2018.
Continued demand for bespoke solutions
2018 was a solid fundraising year as we were able to
demonstrate that our clients entrust us with their capital even in
the absence of larger flagship programs.
The demand derived from a wide spectrum of offerings across
all private markets asset classes, with many of our more sizable
clients requesting the creation of tailored programs, either
through single or multi-asset class mandates, confirming the
preference for non-standard solutions to meet the specific
client needs of larger institutional investors.
Around 40% of our AuM stems from relationships with clients
through such mandates. Our mandate business concentrates
on building up a client’s private markets exposure on an ongoing
basis. Capital is committed via long-term partnerships, which
often are not limited to a specific contractual life.
An additional 40% of our AuM is represented by traditional
private markets structures, typically limited partnerships, with a
pre-defined contractual life lasting up to twelve years.
Structural growth drivers remain intact
The four key structural growth drivers for the private markets
industry in general, and for Partners Group in particular,
continue to be the growth of institutional assets under
management, the rising allocations of institutional investors
to private markets, the outperformance of private markets
against public markets, and a concentration of private markets
allocations with those managers that have the capacity and
ability to onboard sizeable commitments and deploy larger
amounts of capital. Therefore, we expect the global demand
for private markets investments to grow further as these
asset classes represent a key component in the portfolios of
many leading institutional investors worldwide, contributing
substantially to the enhancement of their overall portfolio
returns across economic cycles.
This was underpinned by a recent BlackRock survey of
230 institutional clients, representing over USD 7 trillion in
investible assets, about potential changes in asset allocations in
2019. The challenging and more volatile market environment,
coupled with increasing concerns about the economic cycle,
are influencing the rebalancing and asset allocation plans
of institutional investors in search of alternative sources of
returns. The findings of the survey indicate that a significant
portion of institutions intend to increase their exposure to
private markets, in particular private credit and real assets, in
search of uncorrelated sources of return.
14 | Partners Group
1_Annual_Report_Image_2018_en.indd 14
13.03.2019 16:54:46
ANNUAL REPORT 2018
2018 at a glance – Partners Group’s business model and
review of financial performance
The remaining 20% of our AuM is held in perpetual or
structured programs. Essentially, these are open-ended vehicles
that have no contractual end but that are subject to potential
redemptions.
The breakdown of total AuM as of 31 December 2018 is as
follows: EUR 36 billion private equity, EUR 15 billion private
debt, EUR 12 billion private real estate, and EUR 9 billion
private infrastructure.
AuM by program structure
AuM by asset class
Perpetual/structured
programs
~20%
Private infrastructure
13%
EUR
73 billion
Mandate
solutions
~40%
Private debt
21%
EUR
73 billion
Private equity
49%
Closed-ended
programs
~40%
Note: as of 31 December 2018.
Private
real estate
17%
Note: as of 31 December 2018.
AuM grew to EUR 73 billion; up 18% year-on-year
In 2018, we received EUR 13.3 billion in new commitments
(guidance provided at the beginning of 2018: EUR 11-14 billion)
from our global client base across all private markets asset
classes. This demand for programs and mandates brings total
AuM to EUR 72.8 billion as of 31 December 2018
(31 December 2017: EUR 61.9 billion), and represents net
growth of 18%.
Total assets under management
(in EUR bn)
72.8
#1'203
employees
8 ): 1
1
0
2
-
8
0
0
A G R ( 2
C
6 . 7 % p . a .
37.6
#746
54.2
#930
Next to gross client demand of EUR 13.3 billion in 2018
(2017: EUR 13.3 billion), there were EUR -3.8 billion (2017:
-3.2 billion) in tail-down effects from mature private markets
investment programs and EUR -1.0 billion (2017: -0.9 billion)
in redemptions from liquid and semi-liquid vehicles, amounting
to a total of EUR -4.8 billion in 2018 (guidance provided at the
beginning of 2018: EUR -4.5 to -5.5 billion).
Given that 36% of Partners Group's AuM is USD-denominated,
the appreciation of the US Dollar against the Euro by 5%
during the year positively affected the firm's total AuM in
Euros. Foreign exchange effects amounted to EUR +1.1 billion.
Furthermore, a positive contribution of EUR +1.3 billion
stemmed mainly from performance- and investment-related
effects from certain investment vehicles. Overall, this resulted
in net AuM growth of EUR 10.9 billion during the period.
27.8
#625
20.7
#447
15.5
#334
8.6
#175
Total AuM
(in EUR bn)
2006
2008
2010
2012
2014
2016
2018
Note: assets under management exclude discontinued public alternative investment activities and
divested affiliated companies.
EUR 61.9
+13.3
-4.8
Tail-downs: -3.8
+2.4
Others +1.3
EUR 72.8
Redemptions: -1.0
FX +1.1
=USD 83.3
=CHF 82.1
Full-year
guidance
provided:
+11 to +14
Full-year
guidance
provided:
-4.5 to -5.5
No guidance
provided
2017
New money/
commitments
Tail-downs &
redemptions1)
FX & others2)
2018
1) Tail-downs & redemptions: tail-downs consist of maturing investment programs (typically
closed-ended structures); redemptions stem from liquid and semi-liquid programs (~20% of AuM).
2) Others: consist of performance and investment program changes from select programs.
1_Annual_Report_Image_2018_en.indd 15
13.03.2019 16:54:47
Partners Group | 15
ANNUAL REPORT 2018 2018 at a glance – Partners Group’s business model and
review of financial performance
Client demand across all asset classes
The absence of dedicated flagship programs in 2018 had a
more pronounced effect on our real estate and infrastructure
asset classes. In contrast, it hardly affected our corporate asset
classes (debt and equity), which contributed the lion's share of
new assets raised. Overall, all asset classes experienced double-
digit growth in 2018.
Private equity was the largest contributor to assets raised
in 2018, representing 39% of all new commitments (EUR 5.2
billion new commitments). Demand was split across a wide
range of different programs and mandates. For instance, one of
our long-standing diversified global value strategies attracted
substantial client demand in the second half of the year. The
global value strategy combines direct transactions – where
Partners Group sources and underwrites an opportunity and
is solely responsible for value creation – with portfolios of
highly diversified pools of assets via secondary and primary
investments. The growth rate of private equity AuM amounted
to 14% in 2018.
Private debt saw strong new commitments in 2018,
representing 37% of all new commitments (EUR 5.0 billion
new commitments). The debt business continues to benefit
from lower yields on traditional fixed income investments.
In particular, the floating-rate nature of private debt and the
shorter time it takes to ramp up exposure to private debt is seen
as highly attractive by most of our clients. Demand in 2018
was spread over several different programs and mandates
that focused on our corporate senior debt lending activities,
which contributed about two-thirds of assets raised, and our
collateralized loan obligation (CLO) business, which contributed
about one-third of new commitments. Today, our entire CLO
business represents only 3% of our AuM and is expected to
grow considerably in the years to come. Overall, the growth rate
of private debt AuM amounted to 37% in 2018. This makes it
the fastest-growing segment within the firm and highlights the
further scalability of the business.
In 2018, private real estate demand represented 13% of
all new commitments (EUR 1.7 billion new commitments).
In the first half of the year, we completed the fundraising for
our previous real estate secondary flagship program, which
had also contributed to fundraising in 2017. We expect our
current flagship program, which will target global real estate
opportunities, to contribute more meaningfully to fundraising in
2019. The year-on-year growth rate of private real estate AuM
amounted to 15% in 2018.
Private infrastructure represented 11% of overall new client
demand (EUR 1.4 billion new commitments). We anticipate the
private infrastructure business to be a stronger contributor in
the quarters to come as we approach the market with our next
global value offering. The growth rate of private infrastructure
AuM amounted to 10% in 2018.
AuM growth by asset class
(in EUR bn)
+ 1 0 %
+ 1 5 %
+ 3 7 %
+14%
61.9
8.3
10.8
11.2
31.7
2017
72.8
9.2
12.3
15.4
36.0
2018
Private infrastructure
Private real estate
Private debt
Private equity
Client demand spread across Europe, North America,
Asia-Pacific and emerging markets
We have an international client base of over 850 institutions
around the world. In 2018, client demand was again well-
diversified across regions. Almost 50% of AuM growth came
from the UK and US. Nevertheless, we are committed to further
expanding our activities in the US and capturing additional
market share, considering the size of the US pension market and
the significant potential ahead of us. Notably resilient countries
in continental Europe were Germany and Switzerland, which
together contributed about 25% of total inflows. The remainder
was contributed by all other regions, with Asia and Australia
making notably strong contributions.
Following these inflows in 2018, our total AuM by investor
region as of 31 December 2018 stands as follows.
AuM by region
Australia
5%
Asia & Middle East
9%
South America
2%
Switzerland
16%
North America
15%
EUR
73 billion
Germany & Austria
17%
France & Benelux
5%
UK
23%
Southern Europe
4%
Scandinavia
4%
16 | Partners Group
1_Annual_Report_Image_2018_en.indd 16
13.03.2019 16:54:47
ANNUAL REPORT 2018 2018 at a glance – Partners Group’s business model and
review of financial performance
Client demand from pension funds still major
contributor
Following these inflows in 2018, our total AuM by investor type
as of 31 December 2018 stands as follows.
AuM by type
Distribution partners/
private individuals
16%
Public pension
funds
22%
Asset managers,
family offices,
banks and others
16%
SWFs and other
endowments
5%
EUR
73 billion
Insurance
companies
11%
Corporate and
other pension funds
30%
We continued to grow all of our private markets asset classes
with different types of investors and entered into new
collaborations with some of the largest and most sophisticated
institutional investors globally.
In 2018, corporate, public and other pension funds continued
to be the key contributors to AuM growth, representing 50%
of total client demand. These investors typically seek to further
enhance the risk/return profile of their portfolios by increasing
their private markets exposure.
Banks and asset managers supported our fundraising in
2018 with a focus on our CLO offerings. These institutions
strengthened our position in the European and US broadly
syndicated debt markets. They made up about 17% of our total
fundraising in 2018. A further 7% stemmed from family offices
and other investors.
We saw continued demand from distribution partners/private
individuals, which represented about 14% of client demand
in 2018. These types of investors increasingly recognize the
benefits of private markets and aim to mirror the allocations
of institutional investors in their own investment portfolios.
Usually, they seek to access private markets through liquid
and semi-liquid structures, which are still unusual in an
industry dominated by illiquid, long-duration funds. Semi-
liquid structures, which offer limited monthly, quarterly and, in
some cases, (even) daily liquidity, were an important driver of
asset raising in 2018. We have been a notable pioneer in the
structuring of innovative liquid and semi-liquid programs for
investors and to-date manage around 20% of our total AuM in
such vehicles.
Insurance companies accounted for 8% of overall inflows
in 2018, displaying particular appetite for yield-generating
private debt offerings as well as renewed interest for equity
investments.
Sovereign wealth funds and endowments accounted for 4% of
total assets raised in 2018 and generally engage with us seeking
highly tailored private markets solutions to complement their
existing portfolios.
1_Annual_Report_Image_2018_en.indd 17
13.03.2019 16:54:47
Partners Group | 17
ANNUAL REPORT 2018 2018 at a glance – Partners Group’s business model and
review of financial performance
Client outlook
Solid gross client demand
expected for 2019; new guidance
of EUR 13-16 billion.
For 2019, we expect gross client demand of EUR 13-16 billion,
together with EUR -6.5 to -7.5 billion in tail-down effects from
the more mature Partners Group programs and potential
redemptions from liquid and semi-liquid programs. This
guidance assumes that the benign fundraising environment will
continue, which is our base case.
We continue to observe a strong structural trend of increasing
allocations to private markets by institutional investors.
Moreover, clients are concentrating their relationships with
those managers that can offer the necessary investment
capacity for them to build up more meaningful exposure to
private markets.
Based on our strong track record of investment performance,
as well as client service excellence, we believe that we are
ideally positioned to continue to be a strong partner to global
investors.
The increase in expected fundraising reflects our aim to capture
further client demand through a series of flagship programs
across all private markets asset classes. We expect private
equity to be a large contributor to increased demand. We will
continue to offer bespoke solutions to our mandate clients and
actively manage and steer their exposure to private markets in
line with longer-term investment horizons.
The higher projected tail-down effects in 2019 relate to a select
number of larger closed-ended programs that will reach the
end of their lifetime. However, looking ahead, we do not expect
tail-downs to increase as much in 2020 as we expect them to in
2019.
AuM, client demand and other effects
(in EUR bn, estimates)
Full-year 2019 expectations
13-16
Client demand
13.3
72.8
13.3
61.9
9.2
54.2
46.0
(-1.0)
-2.6
Tail-downs &
redemptions1)
+1.6
FX & others2)
(-5.5)
-4.1
Tail-downs &
redemptions1)
+1.5
FX & others2)
(-2.4)
-4.8
Tail-downs &
redemptions1)
+2.4
FX & others2)
(-6.5-7.5)
+/-
=
Tail-downs &
redemptions1)
FX & others2)
Total AuM
2016
2017
2018
2019
1) Tail-downs & redemptions: tail-downs consist of maturing investment programs (typically closed-
ended structures); redemptions stem from liquid and semi-liquid programs (~20% of AuM).
2) Others: consist of performance and investment program changes from select programs.
18 | Partners Group
1_Annual_Report_Image_2018_en.indd 18
13.03.2019 16:54:51
ANNUAL REPORT 2018 2018 at a glance – Partners Group’s business model and
review of financial performance
Financials
Profit reached CHF 769 million
in 2018; dividend of CHF 22.00
per share proposed.
Solid fundraising and realizations continued to drive
financial performance in 2018
Favorable, long-term underlying client trends, buoyed by the
expectation of continued private markets outperformance
over public markets, are the driving force behind the demand
for comprehensive private markets offerings now and in the
future. These structural industry dynamics combined with our
long-term track record enabled us to generate solid financial
performance across the board.
Key financials
Revenues increased by 7% year-on-year to CHF 1'326 million,
attributable to an increase in revenues from management fees
and continued solid performance fee development. EBITDA
increased by 7% year-on-year, in line with revenues, to
CHF 882 million. Profit increased by only 2% year-on-year
to CHF 769 million due to a slightly lower financial result and
higher taxes. These achievements, combined with our stable
margins and balance sheet-light approach to business, also
translated into an attractive dividend proposal for the year
2018.
AuM as of the end of the year (in EUR bn)
AuM as of the end of the year (in CHF bn)
Revenue margin1),2)
Attributable to management fee margin3)
Attributable to performance fee margin
Revenues (in CHF m)2)
Management fees (in CHF m)3)
Performance fees (in CHF m)
EBITDA margin
EBITDA (in CHF m)
Profit (in CHF m)
2017
61.9
72.5
1.89%
70%
30%
1'245
873
372
66%
825
752
2018
72.8
82.1
1.71%
76%
24%
1'326
1'002
324
66%
882
769
Growth
+18%
+13%
+7%
+15%
-13%
+7%
+2%
1) Based on average AuM of CHF 77.6 billion in 2018 (2017: CHF 65.8 billion), calculated on a daily basis. 2) Revenues from management services, net, including other operating income.
3) Management fees include recurring management fees and other revenues, net, and other operating income.
1_Annual_Report_Image_2018_en.indd 19
13.03.2019 16:54:53
Partners Group | 19
ANNUAL REPORT 2018 2018 at a glance – Partners Group’s business model and
review of financial performance
Management fee growth in line with AuM growth
In 2018, total revenues rose to CHF 1'326 million (2017:
CHF 1'245 million) and increased by 7%. Management fees4
increased by 15%, amounting to CHF 1'002 million (2017: CHF
873 million), broadly in line with the growth of average AuM5 in
CHF.
Due to the absence of significant closings of flagship programs
in 2018, late management fees and other income6 decreased
by 15% compared to the previous year, amounting to CHF 84
million (2017: CHF 99 million).
Performance fees decreased but continued to remain at a
solid level and amounted to CHF 324 million (2017: CHF 372
million). We continued to make active use of the supportive exit
environment, divesting businesses and assets that had reached
a mature stage and realized their targeted value creation
potential.
Revenues
(in CHF m)
Revenues1)
Performance fees
late management fees
& other income3)
Management fees2)
+ 7 %
+ 1 5 %
1'245
372
(30%)
99
873
(70%)
2017
1'326
324
(24%)
84
1‘002
(76%)
2018
We currently manage over 300 diverse investment programs
and mandates at different stages of their lifecycle. Our
established approach of launching investment programs and
mandates to enable clients to capitalize on specific private
markets investment opportunities at different points in
the market cycle means that there will typically be several
investment vehicles maturing at each stage of the cycle. Many
of these vehicles entitle the firm to a performance fee, typically
subject to pre-agreed return hurdles.
Due to this diversification, we anticipate that performance fees
will be earned regularly from a wide range of vehicles going
forward, making them a "quasi-recurring" source of income,
assuming market conditions remain broadly supportive.
In 2018, more than 50 investment programs and mandates
from a wide range of vintages commenced to pay out or
continued to pay out performance fees. Investment programs
with vintages between 2008 to 2012 were the main
contributors to our 2018 performance fees.
Management fees are contractually recurring
around
10%
Performance fees
24%
around
20-30%
around
70-80%
Performance fees
“quasi-recurring”
Management fees
“contractually
recurring”
around
90%
76%
1) Revenues include management fees and performance fees.
2) Management fees include recurring management fees and other revenues, net, and other
operating income.
3) Excluding recurring (full or partial) advisory services on assets amounting to CHF 17 million
in 2018 (2017: CHF 7 million).
2006-2015
2018
long-term
Note: assuming that the market remains favorable to exits, Partners Group expects to continue
to generate significant performance fees from its underlying client portfolios; management
fees include recurring management fees and other revenues, net, and other operating income;
typical duration is 10-12 years for equity offerings and 5-7 years for debt programs.
Management fees will continue to be the main source
of revenues
Management fees will continue to dominate our firm's revenues
in the years to come. Given the anticipated growth in the firm’s
AuM in combination with a structural delay in performance fee
realization, management fees are expected to make up around
70-80% of total revenues and will be recurring based on long-
term client contracts, often with an initial term of 10-12 years
for equity and 5-7 years for debt offerings.
4 Management fees include recurring management fees and other revenues, net, and other
operating income.
5 Based on average AuM of CHF 77.6 billion in 2018 (2017: CHF 65.8 billion), calculated on
a daily basis.
6 Late management fees occur in limited partnership structures, which typically have a con-
tractual life of 10-12 years. At the very beginning of this contractual life, these structures go
through a fundraising period of 12-24 months. All clients who commit to open investment pro-
grams during this period owe management fees for the entire lifetime of the fund, irrespective
of when the commitment was made. This is based on the fact that the firm has already com-
menced investment management services for these programs from the day of their initiation.
Clients who join an investment program at a later stage of the fundraising period are required
to pay retrospectively for these previously delivered management services. Any management
fee payments relating to prior accounting years are called late management fees. A period in
which older programs complete fundraising is more likely to lead to higher late management
fees in the same period.
20 | Partners Group
We expect to continue to generate significant performance fees
from underlying client portfolios. The expected bandwidth for
performance fees as a proportion of total revenues remains at
around 20-30%, assuming that the market remains favorable to
exits.
Performance fee development
n
e
d
r m a
( i n E U R b
n
s u
t
e
s
A s
72.8
t
n
e m e
g
)
a
n
61.9
372
54.2
294
46.0
s
e
c
e f e
F m )
n
H
324
r f o
e
P
r m a
(i n C
15.5
16.6
24.1
20.7
16
13
37.6
6-9 years
31.6
27.8
43
39
34
64
2008 2009 2010
2011 2012
2013
2014
2015
2016
2017 2018
2020
Note: assuming that the market remains favorable to exits, Partners Group expects to continue
to generate significant performance fees from its underlying client portfolios.
1_Annual_Report_Image_2018_en.indd 20
13.03.2019 16:54:54
ANNUAL REPORT 2018 2018 at a glance – Partners Group’s business model and
review of financial performance
Stable revenue margin on management fees
The dominant part of our revenue base is still recurring and
based on long-term contracts with our clients, which provides
highly visible cash flows. The management fee margin remained
largely stable despite lower late management fees and other
income, amounting to 1.29% (2017: 1.33%). Total revenue
margin, including performance fees, amounted to 1.71% (2017:
1.89%) in 2018.
client commitment (“catch-up” on 140-100 = 40, and 40 x
20% performance fees = 8).
Performance fee recognition model
Capital returns to clients
200
Total current value
(in USD)
140
100
hurdle rate
(8% IRR on invested capital)
initial client commitment
(in USD)
NAV
60
12
If NAV were sold over
time at 60 (20% of 60 = 12)
8
catch-up
(20% of 40)
Distributions
140
Performance fees
(20% above 100)
Stable management fee margin
1.25%
1.26%
1.36%
1.23%
1.39%
1.33% 1.39% 1.38%
1.89%
1.74%
1.71%
Performance fee recognition (realized)
6-9 years
8
Locked-in performance (based on exits)
%
4
2
%
6
7
0
6-9 years
20
If NAV were
sold at 60
Note: performance fees of performance fee generating investment programs and mandates
typically range between 10-20% over a hurdle of 4-8% IRR on invested capital, depending on
the program and instruments. For illustrative purposes only.
The investment manager will share any additional
distributions stemming from the sale of the remaining
portfolio over time, according to a pre-defined
performance-sharing mechanism with clients (typically
80% to clients; 20% to the investment manager). It
is assumed that the remaining NAV equals 60 and
this entitles the investment manager to an additional
performance fee of 12 (60 x 20%) should the portfolio be
sold at the indicated value of 60.
In summary, due to the investment manager's long-term
value creation, the initial client commitment of 100 has
grown in value to 200, which entitles the investment
manager to a performance fee of 20 (200 –100 = 100
value gain, then 100 value gain x 20% performance fees).
%
3
2
1
.
%
6
2
1
.
%
0
3
1
.
%
8
1
1
.
%
6
2
1
.
%
3
2
1
.
%
1
3
1
.
%
4
2
1
.
%
2
2
1
.
%
3
3
1
.
%
9
2
1
.
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Management fees
Performance fees
Note: management fees include recurring management fees and other revenues, net, and other
operating income; calculated as revenues divided by average assets under management (in CHF),
calculated on a daily basis.
Performance fee mechanism
In private markets, performance fees are designed to
remunerate investment managers for their long-term
value creation results. They are a profit-sharing incentive
for managers that outperform an agreed hurdle over the
lifetime of an investment program. Performance fees are
typically only charged once investments are realized and a
pre-defined return hurdle has been exceeded. Because the
value creation period lasts for several years, performance
fees often only start to be earned six to nine years after an
investment program commences its investment activities,
and only if these are successful.
The chart below shows the performance fee recognition
model of a typical limited partnership program. It shows
how distribution activities in client portfolios bring forward
the maturity profile of an investment program and increase
the likelihood that the required return hurdle is reached.
This illustrative example assumes an initial client
commitment of 100. After a couple of years the portfolio
generates distributions to the client based on ongoing exit
activities. After 6-9 years, the cumulated distributions
received by the client are assumed to exceed 140, i.e. the
hurdle rate. At this point in time, the investment manager
catches up on past performance in excess of the initial
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Partners Group | 21
ANNUAL REPORT 2018 2018 at a glance – Partners Group’s business model and
review of financial performance
EBITDA margin remains stable
Costs grew in line with revenues
In 2018, EBITDA increased by 7%, amounting to CHF 882
million (2017: CHF 825 million). The EBITDA margin remained
stable at 66% (2017: 66%). The firm targets an EBITDA margin
of ~60% for newly generated management fees (assuming
stable foreign exchange rates), as well as for performance fees
on existing and new AuM.
With the build out of our investment platform, we aim to
continuously hire highly skilled professionals in order to
systematically increase our investment capacity, to expand
our client relationships globally and to further strengthen our
corporate and services teams.
EBITDA margin development and outlook
62%
1.21
0.94
EUR/
CHF
USD/
CHF
61%
60%
59%
62%
66%
66%
1.23
1.21
0.93
0.92
1.07
0.96
1.09
0.99
1.11
0.98
1.15
0.98
~60%
for newly generated
management fees and
all performance fees
2012
2013
2014
2015
2016
2017
2018
Note: foreign exchange rates in daily averages in respective years/periods.
Personnel expenses grew broadly in line with
revenues
Total personnel expenses – the main driver of our costs –
increased in 2018 (+5%), broadly in line with revenue growth
(+7%). Our regular personnel expenses (+17%) increased in line
with the overall growth in management fees (+15%) and average
number of professionals (+14%) in the year under review.
At the same time, our performance-fee related personnel
expenses decreased in 2018 (-13%), in line with the decrease in
overall performance fees (-13%). We allocate 40% of revenues
stemming from performance fees to our teams and 60% to the
firm and its shareholders.
Operating expenses grew by 13% to CHF 68 million (2017:
CHF 60 million), in line with the growth of the platform.
Revenues
Total costs, of which
Personnel expenses
Personnel expenses (regular)
Personnel expenses
(performance-fee-related)
2017
1‘245
-420
-359
-210
-149
+7%
+6%
+5%
+17%
-13%
Operating expenses
EBITDA
-60
825
+13%
+7%
EBITDA margin
66% +0%-points
2018
1‘326
-444
-377
-247
-129
-68
882
66%
Note: revenues include management fees and performance fees. Management fees include
recurring management fees and other revenues, net, and other operating income. Regular
personnel expenses exclude performance fee-related costs.
Continued diversification of AuM, revenues and cost
base anticipated
86% of our revenues derive from EUR- and USD-denominated
investment programs and mandates, reflecting our international
clientele. However, nearly half of our cost base is still CHF-
denominated. In recent years, though, our team has grown
at a higher rate outside Switzerland as we have built up our
investment presence around the world. This international
expansion continues to diversify our cost base further and will
reduce our CHF-denominated cost base in relative terms over
time.
Fluctuations in the EUR or USD against the CHF can affect the
absolute amount of revenues and costs and cause our EBITDA
margin to deviate from its mid-term target. In 2018, currency
movements throughout the year lifted the EBITDA margin by
approximately 1%:
• Management fees (76% of revenues in 2018): currency
fluctuations directly affect management fees and related
costs. During the period, the EUR appreciated by 4%
against the CHF (average rate). This positively affected
management fees in CHF (49% of AuM are EUR-
denominated) but did not materially affect the firm’s cost
base (~5% of costs are EUR denominated and ~40% are
CHF-denominated).
•
Performance fees (24% of revenues in 2018): the impact
of currency fluctuations on performance fees and
performance fee-related costs, respectively, is largely
EBITDA margin-neutral.
22 | Partners Group
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ANNUAL REPORT 2018 2018 at a glance – Partners Group’s business model and
review of financial performance
Currency exposure in 2018
Other
6%
GBP
9%
Other
6%
GBP
9%
EUR
49%
AuM
≈
Management
fees
EUR
49%
Other
~15%
EUR
~5%
GBP
~15%
≠
Costs1)
USD
~25%
USD
36%
USD
36%
CHF
~40%
1) Includes regular personnel expenses (excluding performance fee-related expenses) and other
operating expenses.
Note: all figures are based on estimates and the currency denomination of underlying programs;
revenues include revenues from management services, net, and other operating income.
Financial result driven by value creation in client
portfolios; negative foreign exchange result and
higher taxes
The financial result amounted to CHF 23 million in 2018 (2017:
CHF 36 million). We invest into our own investment programs
alongside our clients (typically around 1% of the program's size).
The positive performance of these investments was again the
main contributor to the financial result and amounted to
CHF 35 million in 2018 (2017: CHF 50 million). Foreign
exchange, hedging & others amounted to CHF -12 million in
2018 (2017: CHF -14 million). Corporate taxes increased to
CHF -118 million in 2018 (2017: CHF -95 million), reflecting our
growing international setup.
Proposed dividend of CHF 22.00 per share (+16%)
Based on the solid development of the business in all asset
classes and regions, the operating result and confidence in the
sustainability of the firm’s growth, Partners Group’s Board
of Directors will propose a dividend of CHF 22.00 per share
(2018: CHF 19.00 per share) to its shareholders at the Annual
General Meeting on 15 May 2019. This represents a dividend
increase of 16%.
Dividend payments since IPO
F
H
C
n
i
e
r
a
h
s
/
d
n
e
d
i
v
i
D
24.00
20.00
16.00
12.00
8.00
4.00
0.00
22.001)
19.00
62% average payout ratio2)
(2006-2018)
76% payout ratio2)
(2018)
4.25
4.50
5.00
5.50
7.25
6.25
15.00
10.50
8.50
2008
2009
2010
2011
2012
2013 2014
2015
2016
2017 2018
80
60
40
20
0
T
o
t
a
l
i
A
u
M
n
E
U
R
b
n
1) The Board of Directors proposes that a dividend of CHF 22.00 per share be paid for the financial
year 2018 at the Annual General Meeting of shareholders to be held on 15 May 2019.
2) The dividend payout ratio is defined as the (proposed) dividend per share divided by earnings per
share.
Note: assets under management exclude discontinued public alternative investment activities and
divested affiliated companies.
Financial outlook
We are moving confidently into 2019 and see solid demand for
our new programs and mandates from clients across the globe.
In summary, the firm's profit increased by 2% year-on-year to
stand at CHF 769 million (2017: CHF 752 million).
• We expect management fees to continue to grow
alongside AuM.
Profit development
(in CHF m)
EBITDA
Total financial result, of which
Portfolio performance
Foreign exchange, hedging & others
Taxes
Profit
2017
825
+7%
36 -36%
50
-14
-95
752
+2%
2018
882
23
35
-12
-118
769
Net liquidity of CHF 1.2 billion
Partners Group’s balance sheet remains strong. After a
dividend payment of CHF 506 million in May 2018, we hold a
current net liquidity position of about CHF 1.2 billion as of
31 December 2018. The net liquidity position comprises cash &
cash equivalents and short-term loans facilities for investment
programs provided by the firm, net of long-term debt.
• We continue to expect performance fees to remain within
the expected bandwidth of around 20-30% as a proportion
of total revenues, assuming that the market remains
favorable to exits.
• We expect personnel expenses to increase broadly
in line with AuM and management fees as we continue
to sustainably invest in the build-out of our investment
platform and hiring of dedicated professionals.
Performance-related compensation will continue to
depend on performance fee development.
• Our balance sheet remains solid. With CHF 2.0 billion
in shareholders' equity and CHF 1.2 billion net liquidity,
we feel well-equipped to realize the potential of private
markets in different economic environments.
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Partners Group | 23
ANNUAL REPORT 2018
24 | Partners Group
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ANNUAL REPORT 2018 Market commentary
Private equity
A proactive sourcing approach
is key in a competitive market.
Despite the increased market volatility in Q4 2018, private
equity valuations remained at elevated levels throughout
2018. We attribute this to ever-increasing competition from
private equity managers, strategic buyers and new market
entrants, encouraged by the search for yield while interest rates
remain low and by strong debt markets for leveraged buyouts.
High-quality assets typically trade at up to mid-teen EBITDA
multiples. In contrast, assets still trading at low multiples tend to
be underperforming or operating in highly cyclical sub-sectors.
Average purchase price multiple of pro forma trailing
EBITDA for LBOs
12-15
13-15
12-14
11-13
9.7
9.1
8.9
7.7
9.2
8.5
9.7 9.7
10.3
9.2
10.0 10.0
10.6
9.9
10.710.5
16.0x
14.0x
12.0x
10.0x
8.0x
6.0x
4.0x
2.0x
0.0x
2008
2009
2010
2014
2015
2016
2017
Sep 18
Europe
US
Typical large-cap range
Source: Partners Group; S&P Global Leveraged Lending Review, Q3 2018.
As we do not operate in isolation, elevated valuations are a
reality in our underwriting as well, especially given our focus on
high-quality assets in high-growth segments. In order to mitigate
the risk associated with paying competitive prices, our strategy
is twofold.
On the one hand, we remain selective, investing in only around
1% of the private equity opportunities we screen. Increasingly,
when it comes to due diligence, we are using the early visibility
afforded by our platform and large team, aiming to identify
target companies and conduct thorough research on them
before they come up for sale. This enables us to source
opportunities in a systematic manner according to high-
conviction investment themes and develop substantiated value
creation and governance plans for our target assets early on.
Wrapping around target assets before the sales
process has started
s
h
t
n
o
m
n
I
18
16
14
12
10
8
6
4
2
0
Our proactive sourcing efforts
added ~10 incremental months
of due diligence per transaction
6.0
5.5
9.5
4.0
9.0
2.5
13.5
3.5
2015 investments
2016 investments
2017 investments
2018 investments
Formal process timeline
Pre-process timeline
Note: formal vs. pre-process due diligence timelines for Partners Group direct private equity
investments (2015-2018).
Source: Partners Group, October 2018.
On the other hand, we maintain our belief that to achieve
attractive returns in this environment, private markets
investment managers have no option but to excel in their
value creation capabilities. For this reason, the focus on
highly entrepreneurial ownership and active value creation
is a fundamental trait of our investment strategy. That same
focus offsets the multiple contraction assumption we use in
our underwriting, which has increased from around 0.5x for
investments made in 2016 to consistently 1-2x or more for
investments made today.
Our current investment themes
In light of the competitive market, we continue to place a strong
emphasis on Thematic Sourcing, searching for opportunities
according to well developed investment themes. We conduct
regular analyses in order to identify those sectors that we
believe offer higher value relative to others in today’s market.
Based on this initial assessment, we systematically map out the
Partners Group | 25
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ANNUAL REPORT 2018
Market commentary
sub-sectors within these sectors that particularly benefit from
structural growth or transformative trends and then develop
tangible investment themes for each sub-sector with long-term
growth prospects.
Examples of investment themes that have enabled us to
successfully source recent investments include the growing
demand for digital product engineering services, industrial
consumables, outsourced manufacturing and discount retail.
We find the most compelling value in assets that combine
attractive top-down market trends with bottom-up category
leadership, underpinned by the opportunity to create value
through entrepreneurial ownership. Within the sub-sectors
where we see attractive opportunities, we continue to apply our
proven investment focus on platform companies in fragmented
markets, niche businesses with potential to gain market share in
sub-segments of industries experiencing tailwinds and franchise
companies with strong defensive capabilities and high cash flow
generation. In many cases, we may identify or grow companies
into category leaders that have the potential to outperform over
a prolonged period of time.
How we realize relative value
potential in private equity
Platform companies
We acquire platform companies or assets with a strong
management team and infrastructure in a highly
fragmented market and then purchase add-on companies
to further grow the platform and benefit from synergies.
Niche winners
We acquire companies in sub-segments of specific
industries benefiting from particularly strong products
or services and demonstrating an ability to grow
disproportionately, often through internationalization.
We institutionalize the business and extend the product/
service offering.
Franchise companies
We acquire businesses or assets on a stand-alone basis –
typically, single assets with value creation potential as well
as strong defensive capabilities, high cash flow generation
and the ability to quickly de-leverage. We seek to broaden
their network and strengthen their positioning.
Corporate sub-sector matrix: relative value focus areas and investable universe
Consumer
Industrials
Healthcare
Bus. & fin. services
TMT
Personalization & customization
• Niche market leaders
• Co-manufacturing
Automation
• Vision sensors, micro-electro-
mechanical sensors & drives
• Industrial consumables
Ambulatory multi-site
• Employer onsite
• Physical therapy
Financial services
• Off-balance sheet FIs
• Payment & transaction banking
Lifestyle & sustainability
• Health & wellness
• Infant markets
• Pet products & services
Premiumization &
emerging middle class
• Aspirational brands
• High-growth categories
Modern logistics
• Integrators
• Material handling systems
• Machine vision
Advanced manufacturing
• 3D-printing
• Technical components
• Predictive maintenance
Digitalization
• Deep customer insights
• Channel/product disruption
• Customer engagement
New materials
• Ceramics
• Metallurgy
• Nanotechnology
Outsourced device manufacturing
• Orthopedics
• Multi-line outsourcers
Business process outsourcing
• Solutions for non-core functions
• Technology solutions
Life science supplies and reagents
• Genomics-based supplies
• Calibration standards
Testing, inspection & certification
• New technologies and regulation
• Rising end-user expectations
Physician practice management
• Single specialty
• Multi-specialty
Commercial services
• Industrial/onsite services
• Residential services
Enterprise software
• B2B enterprise software
• PaaS/SaaS models
• Cyber security software
IT services & infrastructure
• IT network & data center services
• Internet of things & edge
computing
IT & technology outsourcing
• XaaS (“anything” as a service)
• Digitalization
• Outsourced product development
Big data
• Big data intelligence
• Big data analytics
• Database platforms
Note: bullet points in black highlight sub-sectors with active investment opportunities. Bullet points in gray highlight future areas of focus for research or investment.
Source: Partners Group, November 2018. For illustrative purposes only.
26 | Partners Group
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ANNUAL REPORT 2018
Market commentary
In 2018, global real estate transaction activity further increased
in the US and Asia-Pacific compared to the previous year,
supported by high amounts of available capital. In Asia-Pacific,
China and Japan remain the two largest markets. In contrast,
European volumes are experiencing a marked slowdown and
have fallen across most sectors, driven by lower levels of
investment activity in the UK, Germany and Spain.
Since the Global Financial Crisis, low interest rates have
supported real estate prices by lowering both borrowing costs
and discount rates on future operating income. With the growth
of real estate asset values, yields have compressed and are now
at the lower end of their historical ranges across many markets.
In parallel, global capital values have risen by around 30% since
their low point in the cycle in 2009. Looking ahead, the potential
impact of rising interest rates on the asset class warrants close
attention.
The potential impact of rising rates on real estate
With rising rates in the US and further rate increases expected
to come, we are more cautious on the mid-term outlook for US
real estate as the spread between cap rates and 10-year US
Treasury yields continues to narrow and is now below the long-
term average of around 430bps.
Historically, cap rate spreads have acted as a buffer to absorb
rate increases without cap rates increasing in lock step. If yields
continue to rise – as we expect them to – there will be a reduced
capacity to absorb rate increases without upward movements
in cap rates. This especially holds true if net operating income
(NOI) growth is not able to offset the rate increases.
Our broad estimate suggests that 5% of NOI growth can offset
around 25bps in cap rate increase. NOI growth, however,
while still above the long-term average of 3.2%, is slowing, as
highlighted in the following chart.
Private real estate
Providing solutions to complex
situations.
Long-term NOI growth in US real estate
12%
8%
4%
0%
-4%
-8%
h
t
w
o
r
g
I
O
N
-12%
92
94
Source: Costar, November 2018.
96
98
Average 3.2%
00
02
04
06
08
10
12
14
16
18
Our prudent underwriting standards take into consideration
the impact of rising rates. We currently allow for a 50-100bps
cap rate increase over our hold period. In addition, in this
competitive environment and against the backdrop of rising
rates, our continued focus on investments that have a value-add
component provides us with the opportunity to actively drive
NOI growth.
In terms of property types, office, logistics/ industrial and
residential assets with tangible value creation potential or limited
development risk still offer attractive opportunities in many
parts of the globe, especially if sourced outside of competitive
auction processes. For our older vintage investments, we are
seeking exit options to lock in favorable market conditions and
strong returns.
Our current investment themes
In spite of the near-record pricing for all main property types
globally, we continue to focus on properties and cities benefiting
from the transformative trends that will have a lasting impact on
traditional real estate and enable superior growth. These include
increased urbanization and the resulting demographic shifts
generating demand for office and residential space as well as a
growing e-commerce sector creating demand for logistics space.
Partners Group | 27
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ANNUAL REPORT 2018
Market commentary
In the residential sector, we like affordable built-to-let
properties in expanding cities that attract diverse communities
and suffer from a supply shortfall.
In the office sector, we favor assets that require a capital
injection for upgrades in cities with competitive rents and high-
quality public transportation systems. For office developments,
which we pursue very selectively, we like established office hubs
outside of the main CBD areas and buildings that have a certain
degree of pre-leasing secured.
For industrial assets, we see relative value in XXL warehouses,
“last mile” distribution facilities and hybrid office-industrial
assets. Demand for these types of assets is increasing on
the back of a growing e-commerce sector requiring large
storage and distribution facilities. In addition, investments in
technological improvements in logistics and distribution centers
that allow tenants to enhance their supply chain, product chain
and distribution channels are generating further demand for
these segments.
Meanwhile, the retail segment is generally outside of our focus
given the pressure on the sector from e-commerce.
As markets remain liquid, we prefer to avoid competitive
processes as a means of sourcing opportunities in order to avoid
crowded segments with low upside potential. Instead, we are
further emphasizing our focus on special situations.
We typically seek the following characteristics for these
situations: a bespoke structure, i.e. opportunities that others
are discouraged from pursuing given their global and complex
nature (in a portfolio of assets context); a trigger event, i.e.
opportunities that are unlocked by a special situation such
as investor fatigue and/or discord; a sourcing angle, i.e.
opportunities that can be secured off-market in an exclusive
manner; and outperformance potential, i.e. opportunities with
clear value-added potential to generate outperformance.
How we realize relative value
potential in private real estate
We focus on providing solutions to operating or general
partners that do not have the mandate, tenure or means to
support asset-level business plans for their existing assets
or portfolios. We continue to prefer asset strategies that
fall into one or more of the following sub-strategies:
Buy below replacement cost
We target assets with low valuations located in rebounding
markets that can be repositioned and then leased-up by
under-cutting market rents.
Buy, fix and sell
We seek older buildings in great locations that are in need
of owner-oriented asset management initiatives.
Develop core
We target markets with strong long-term fundamentals
and trends that support additional absorption to selectively
develop properties through ground-up construction.
Real estate sub-sector matrix: relative value focus areas and investable universe
Residential
Office
Industrial
Retail
Other
Residential to let
• Expanding cities
• Areas with mass market appeal
E.g. Vienna
CBD development
• Cities with supply constraints
• Active pre-leasing markets
E.g. Seattle
XXL logistics
• Regional distribution centers
• High-bay/cross-docked
E.g. Australian East Coast
Regional shopping centers*
• Premium fashion
• Leisure/food & beverage
Hospitality*
• Diversified portfolios
• Properties with established
trading history
Residential to sell
• Micro living
• Amenitized urban locations
E.g. Stockholm
CBD repositioning
• Capex-starved assets
• Submarkets with competitive rents
E.g. Paris
Last mile logistics
• Urban infill locations
• Flexible assets
E.g. Chicago
District shopping centers*
• Food & non-food
• Discount retailer-anchored
Co-working*
• Flexible offer
• Freehold or leased estate
Affordable housing
• Key worker housing
• Discounted market rents
E.g. regional UK
Non-CBD development
• Established office hubs
• Public transport connectivity
E.g. Denver
Light manufacturing
• Hi-tech industries
• Established industrial hubs
E.g. Shanghai
Grocery units*
• Convenience offering
• Urban infill locations
Student housing
• Strong student communities
• Off-campus offering
E.g. Melbourne
Non-CBD repositioning
• Areas with good transport links
• Properties with adjacent amenities
E.g. Sydney
Hybrid office-industrial
• Space with up to 50% office content
• Light product assembly
E.g. Raleigh-Durham
Retail warehouses*
• Mixed product offering
• Click & collect potential
Senior housing
• Demographic-driven offering
• Independent living
E.g. Florida
Urban mixed-use
• “Work-live-play” offering
• Gentrifying suburbs
E.g. Brisbane
*Currently outside of our investment focus.
Note: bullet points in black highlight Partners Group focus areas.
Source: Partners Group, November 2018. For illustrative purposes only.
28 | Partners Group
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ANNUAL REPORT 2018
Market commentary
Private debt
Protecting capital in a
competitive market.
Stable demand for financings driven by high transaction activity
continues to serve as a tailwind for institutional investors in
private debt. Investors have generally increased allocations
to floating-rate private debt investments to protect against
interest rate increases and obtain stable yield. Overall, the
inflow of liquidity into the market, as well as the first steps
toward deregulation in the US market, have kept competition
for high-quality investments at a healthy level.
US market overview
In the US, demand for second lien remains robust and is even
finding its way into syndicated processes. In combination with
strong demand for new loans, new issue spreads continue to be
tight, although we have noted an uptick to 388bps in Q3 2018.
At the same time, the floating 3-month Libor base rate currently
stands at 2.5%, providing a positive impact on private debt
investment returns for USD investors.
Base rates plus weighted average new issue
institutional senior debt spreads
t
n
e
c
r
e
p
n
I
10
9
8
7
6
5
4
3
2
1
0
6.4
3.7
2007 2008
2009
2010 2011
2012
2013
2014 2015
2016 2017 2018
Europe (3M EURIBOR)
US (3M LIBOR)
Source: Bloomberg; S&P LCD, Q3 2018.
Leverage levels for buyouts in the US are still high at close to
6x, similar to pre-Global Financial Crisis levels. While equity
cushions continue to be very high at around 40%, compared to
just over 30% in 2007, prices in the private equity market have
increased since then as investors have been willing to pay higher
valuation multiples. In this environment, focusing on credit
quality is crucial.
Currently, we see relative value in second lien for (upper)
mid-cap companies. These businesses often tend to exhibit
superior stability and resilience – and the second lien debt
is contractually secured. Second lien spreads continue to be
attractive at around a 390bps return difference to first lien
spreads.
In select cases, investing in preferred equity in attractive
sectors with high-quality private equity partners or taking
equity kickers to increase returns can be good relative value
opportunities. We further expect attractive risk/return profiles
in unitranche financings, where we can position ourselves as the
sole debt investor in a business and therefore steer terms.
European market overview
Senior leveraged loan volumes in Europe are tracking at roughly
the same pace as last year. Leverage levels for buyouts in
Europe increased slightly in Q3 2018 to 5.6x. In contrast to the
US, this remains well below pre-crisis levels. Moreover, equity
cushions in Europe have increased to near-record levels of 47%,
although we expect this to normalize and come down slightly in
the coming months.
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Partners Group | 29
ANNUAL REPORT 2018
Market commentary
On the back of this supply and demand dynamic, spread levels
in Europe have seen upticks in the first three quarters of 2018
to a level of 402bps, although Euribor remains in negative
territory. We have further noted an increase in the rate of
repayments, with debt often being repaid in one to three years.
Early repayments require an even stronger focus on sourcing
transactions and re-investing capital going forward.
Unlike in the US, the regulatory environment remains stable,
and we observe no deregulation efforts. Relative value remains
to be found in mid-cap direct loans, in particular club-style
executions, which can offer a premium and solid downside
protection, with a small group of high-quality lenders in the club.
Directly placed second lien debt also continues to be an
attractive financing solution for issuers of mid-cap transactions
given the limited execution risk, the certainty on the terms
and conditions of the financing and the comparable cost to
syndicated solutions. For these transactions, the flexibility
to offer multiple European currencies can give private debt
providers an edge.
Liquid loans: diversification and active management
While we did see somewhat of a pullback in secondary loan
pricing levels in mid-2018, in general, our investments in the
liquid loan market have been focused on the primary market,
where we can leverage relationships from our direct loan
business. We have taken advantage of the weaker market during
this time to invest in primary loans at reasonably attractive
pricing levels.
We used the relative strength of the secondary loan market
throughout most of H1 2018 to reduce holdings in existing
names above par in order to make room for primary allocations,
with the aim of generating additional return and a more
diversified portfolio of liquid loans.
How we realize relative value
potential in direct and subordinated
loans
Our current investment themes
Offer tailor-made structures
We offer flexible and tailor-made capital structures that
support companies’ specific cash flow profiles and working
capital needs.
Target attractive sub-sectors
We target sub-sectors within industries where we see
above-average sector resilience and where we have the
depth of experience and high confidence in underlying
growth fundamentals.
Support buy-and-build strategies
We support successful sponsors and management teams
that are familiar to us in their buy-and-build strategies by
providing add-on acquisition financing in a timely manner,
particularly under strict time constraints.
In the US, mid-market and upper-mid-market direct loans have
continued to offer the most attractive return potential in private
debt. Having access to broad deal flow from high-quality private
equity partners remains key to investing selectively and building
well diversified credit portfolios with downside protection.
Moreover, we remain focused on identifying certain attractive
sub-sectors, particularly within IT, healthcare and business
services, which exhibit defensive characteristics.
In Europe, we continue to offer tailor-made structures to meet
company-specific needs and to back category winners in our
debt portfolio with add-on acquisition financing, searching for
attractive opportunities with appropriate downside protection.
Both strategies provide us with a competitive advantage among
other sources of financing.
In Asia-Pacific, demand for cross-border financing remains
strong as private equity firms in Asia continue to acquire US
and European assets. We also continue to see demand from
private equity firms in Australia and the broader Asia-Pacific
region for unitranche structures. Unitranche debt, which
combines elements of both senior and subordinated debt into a
single stretched senior tranche, has provided a competitive and
differentiated offering for sponsors as compared to traditional
bank offerings, which remain conservative in this space.
30 | Partners Group
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ANNUAL REPORT 2018 Market commentary
Private infrastructure
Focusing on the right trends.
The infrastructure asset class has experienced an impressive
growth trajectory, with both transacted volumes and available
capital growing at a high pace over the past few years. The
continued increase in demand from investors has led to more
competition in the sector and is putting upward pressure on
valuation multiples. In turn, this is leading to lower overall
expected returns, particularly for core operating assets.
Investors justify paying high prices by pointing to the quality of
the underlying assets and the long-term nature of infrastructure
investments – a compelling argument in the past few years’ low-
yield environment. However, as interest rates are set to rise in
the US and potentially elsewhere, and as the promise of further
growth in valuations appears to be slipping away, the risk of
overpaying is high.
Looking at how public utilities have performed during past
rate hike cycles, it becomes clear how sensitive infrastructure
valuations are to interest rates. The following chart illustrates
two findings: valuations are cyclical, and periods of rising rates
have usually coincided with declining valuation multiples.
For Partners Group as an investor, these observations have two
main implications. On the one hand, we ensure that we maintain
our portfolio’s exposure to rising interest rates at a minimum.
This means that we select investments with inflation-linked or
correlated revenues and low correlation to GDP and hedge the
cost of debt. Additionally, in order to limit the potential impact
of buyer discount rates at exit in light of rising rates, on average,
we have prudently assumed over 10% multiple contraction in
the underwriting of our investments over the last two years.
On the other hand, we focus on investments that have a
value-add component, providing us with the opportunity to
actively shape business strategy and manage operations to
increase profitability. We have long emphasized the need for
investors in this environment to build value rather than buy it,
and we continue to seek opportunities to create value through
our three key strategies: operational value creation, platform
expansion and building core. These strategies allow us to
actively achieve multiple expansion in our assets by de-risking
and scaling up their asset base and leveraging non-market-
based drivers such as earnings growth.
Infrastructure sensitivity to rising rates: public utilities
Our current investment themes
t
n
e
c
r
e
p
n
i
d
l
e
i
y
y
r
u
s
a
e
r
T
S
U
r
y
-
0
1
10
9
8
7
6
5
4
3
2
1
0
1990
1994
1998
2002
2006
2010
2014
2018
10-year US Treasury yield
Utilities EV/EBITDA
Note: shaded areas mark periods of Fed rate hikes.
Source: Partners Group; Bloomberg, August 2018.
13
12
11
10
9
8
7
6
5
U
t
i
l
i
t
i
e
s
E
V
/
E
B
I
T
D
A
(
x
)
In terms of originating and executing investments, we continue
to focus on the global trends that we believe will generate
attractive infrastructure investment opportunities for some
time to come. These include the global shift toward clean and
more efficient energy, the need for ancillary infrastructure
business services and the disruption in traditional energy
resource flows as a result of the shale gas revolution in the US.
The latter has significant implications not only for the energy
industry itself but also for the transportation industry.
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Partners Group | 31
ANNUAL REPORT 2018
Market commentary
Across all our key sectors, we continue to search for value in
non-core segments of the market. Currently, we see particular
value in services-focused infrastructure businesses, such as
transport logistics or energy management businesses and
infrastructure companies providing ancillary power services.
We also continue to overweight the renewable power sector
as well as assets and services in the midstream space, including
storage and export logistics for natural gas and gas products.
Regardless of the sector or sub-sector, all potential investment
opportunities must be underpinned by the opportunity to
create value during our ownership. Active value creation in
infrastructure requires extensive resources and operational
capabilities. We are able to leverage our global platform to
access a proprietary toolkit of best practices, benchmarks and
service providers not only in infrastructure but also across
private markets.
We have a large in-house Industry Value Creation and
Asset Management team that acts as an integral part of our
investment underwriting. During the hold period, these
operational specialists are active as board members, advisors
and coaches to management in our infrastructure projects and
companies. In addition, we thoroughly screen potential external
board members for our assets and are highly selective in terms
of their relevant experience and value-add to the asset.
How we realize relative value
potential in private infrastructure
Capitalize on platform expansion opportunities
We look for investments that offer us the opportunity to
build scale, for example through investing in fragmented
markets that have the potential for consolidation and
platform-building.
Proactively build core
We seek out opportunities where strong long-term
fundamentals in a particular market support the demand
for building a select type of infrastructure, for example
due to evolving infrastructure needs or changing market
fundamentals.
Focus on operational value creation
We focus on investment opportunities that offer us the
potential to enhance operational value through growth
and efficiency improvements. A key source of these
opportunities is the ongoing trend for corporate owners of
infrastructure to sell assets as part of a restructuring.
Infrastructure sub-sector matrix: relative value focus areas and investable universe
Transport/logistics
Power
Energy infrastructure
Social infra/PPPs
Communications
s
e
c
i
v
r
e
S
s
t
e
s
s
A
Transport logistics
• Integrated supply chain services
• Multi-modal transportation
• Air/rail/water transportation
equipment leasing
Ancillary power
• Distributed generation
• Installation of power supplies
• Utility scale battery storage
Energy management
• Metering/sub-metering
• Energy equipment leasing
• Utility location services
Public services
• Transport solutions:
mobility as a service
• Digitization of public services
• Smart cities
Specialty communications
• Emergency communications
• Network management &
monitoring
Ports
• Port operations
• Terminal logistics development
• Automation of towage &
freight handling
Renewable - wind/solar
• Building core offshore wind
• Platform expansion of onshore
wind & solar
• Integrated renewables platforms
Transmission
• Electric transmission
• Smart grids
• Stand-alone transmission
networks
Health
• Public/private health services
• Elderly care/child care
• Medical facilities
Fiber
• Wholesale connectivity
• Network builds for Telcos
• End-user/bridging rural divide
Surface transportation
• Public transportation
• Roads & short line rails
• Next generation mobility:
parking/eVehicle infrastructure
Renewable - other
• Hydro
• Waste-to-energy solutions
• Biomass
Distribution
• Gas & electric utilities
• District heating/cooling
• Piped energy distribution
systems
Housing & education
• Building & convenience utilities
• Higher education asset
concessions
• Student/military housing
Data centers
• Hyperscale data centers
• Asset carve-outs from strategics
• Regional/edge data centers
Airports
• Terminal concessions
• Regional airports
• Consolidation opportunities for
fixed-base operators
Conventional
• Thermal generation that is
complementary to renewables
• Gas
• Co-generation
Midstream
• Gathering & processing
• Pipelines for refined products/
natural gas/natural gas liquids
• Storage solutions
Civic and utilities
• Waste(water) treatment/disposal
• Community & sports facilities
• Local government facilities
Towers/masts
• Support 5G and higher data rates
• Telecom towers, small cells
• Net-co solutions: asset
carve-outs from Telcos
Note: bullet points in black highlight Partners Group focus areas.
Source: Partners Group, November 2018. For illustrative purposes only.
32 | Partners Group
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ANNUAL REPORT 2018 Key definitions and alternative performance metrics (APM)
Key definitions
Assets under management (AuM): Partners Group aims to
mirror the fee basis for its various programs and mandates
when calculating AuM. AuM covers programs, mandates
and assets to which Partners Group renders (full or partial)
investment management or advisory services, and does
not cover consultant, transaction or other ancillary services
it may render to clients or assets from time to time. AuM is
typically calculated as either i) the program size, ii) outstanding
commitments to investments, iii) the net asset value or the
outstanding principal of investments, or iv) the respective
investment exposure.
The AuM basis is increased by the amount of assets raised that
are based on i) subscriptions, or ii) new fee-paying assets and
amounts planned to be invested which would become fee-
paying assets in the following six months. Reductions in the
AuM basis for mature programs i) may follow a fixed schedule,
ii) can be based on the cost of realizing assets, or iii) may be the
result of such programs being liquidated. The AuM basis is also
reduced by redemptions on open-ended programs. Further
changes in the AuM basis may be explained by factors such as
performance or changes in FX rates.
Alternative performance metrics (APM)
Partners Group uses various financial and alternative
performance metrics (APM) to measure its financial
performance as part of its financial reporting. The APMs
used by Partners Group supplement the measures that are
documented and published in accordance with International
Financial Reporting Standards (IFRS). An APM is defined as a
financial measure of historical or future financial performance,
financial position or cash flows that is not already defined or
specified in the applicable financial reporting framework.
APMs are predominantly operational management metrics
and undergo regular performance reviews in both internal and
external reporting. The resulting findings are taken into account
as part of a strategy review process. We must point out that the
comparability of APMs within the industry can be limited due to
different calculation methods.
Partners Group uses the following APMs:
Earnings before interest and tax (EBIT) stands for the sum
of revenues from management services, net, including other
operating income and expenses before net finance result and
before taxes (taxes on income).
Earnings before interest, tax, depreciation and amortization
(EBITDA) stands for the sum of revenues from management
services, net, including other operating income and expenses
before net finance result, before taxes (taxes on income)
and before depreciation and amortization. This metric is
used by Partners Group as the financial target in its internal
presentations (business plans) and in its external presentations
(to analysts and investors). EBITDA is considered as a useful
unit of measurement for evaluating the operating performance
of the group.
EBITDA margin is calculated as earnings before interest, tax,
depreciation and amortization (EBITDA) divided by revenues
from management services, net, including other operating
income. It is one of the key operational management metrics as
it provides an indication of the profitability of the business.
In millions of Swiss francs
EBITDA
Revenues from management services,
net, including other operating income
2018
882
2017
825
1'326
1'245
EBITDA margin
66%
66%
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Partners Group | 33
ANNUAL REPORT 2018
Key definitions and alternative performance metrics (APM)
Equity ratio is calculated as equity attributable to owners of the
Company divided by total liabilities and equity.
Net liquidity position is calculated as cash and cash equivalents
including short-term loans to products, minus total short-term
and long-term debt.
In millions of Swiss francs
Cash and cash equivalents
Short-term loans
Long-term debt
Net liquidity position
2018
412
1'113
(299)
1'226
2017
852
713
(299)
1'267
Revenue margin is calculated as revenues from management
services, net, including other operating income, divided by
average assets under management (in CHF) calculated on a
daily basis.
In millions of Swiss francs
Revenues from management services,
net, including other operating income
Average assets under management (in
CHF) calculated on a daily basis.
2018
1'326
2017
1'245
77'615
65'817
Revenue margin
1.71%
1.89%
Return on average shareholders’ equity (RoE) is calculated as
profit for the period, divided by average equity attributable to
owners of the Company.
In millions of Swiss francs
Profit for the period
Average equity attributable to owners
of the Company
2018
769
1'962
2017
752
1'748
Return on equity
39%
43%
34 | Partners Group
Partners Group | 34
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ANNUAL REPORT 2018
Key definitions and alternative performance metrics (APM)
Index to the consolidated financial statements
and report of the auditors
1. Report of the auditors on the consolidated financial statements
2. Consolidated financial statements:
– Consolidated income statement for the years ended 31 December 2018 and 2017
– Consolidated statement of comprehensive income for the years ended 31 December 2018 and 2017
– Consolidated balance sheet as of 31 December 2018 and 2017
– Consolidated statement of changes in equity for the years ended 31 December 2018 and 2017
– Consolidated statement of cash flows for the years ended 31 December 2018 and 2017
– Notes to the consolidated financial statements for the years ended 31 December2018 and 2017
37
42
43
44
46
48
50
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Partners Group | 35
2017 at a glance – Partners Group’s business model and review of financial performance (continued)
36 | Partners Group
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ANNUAL REPORT 2018 Report of the auditors on the consolidated
financial statements
Statutory Auditor’s Report
To the General Meeting of Partners Group Holding AG, Baar
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Partners Group Holding AG and its
subsidiaries (the Group), which comprise the consolidated balance sheet as at 31 December 2018 and
the consolidated income statement, consolidated statement of comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for the year then ended, and
notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion the consolidated financial statements (pages 42 to 109) give a true and fair view of the
consolidated financial position of the Group as at 31 December 2018, and its consolidated financial
performance and its consolidated cash flows for the year then ended in accordance with International
Financial Reporting Standards (IFRS) and comply with Swiss law.
Basis for Opinion
We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and
Swiss Auditing Standards. Our responsibilities under those provisions and standards are further
described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section
of our report. We are independent of the Group in accordance with the provisions of Swiss law and the
requirements of the Swiss audit profession, as well as the IESBA Code of Ethics for Professional
Accountants, and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key Audit Matters
Recognition of revenues from management services (net)
Valuation of financial investments
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current period. These matters were addressed
in the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
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Partners Group | 37
ANNUAL REPORT 2018
Report of the auditors on the consolidated
financial statements
Recognition of revenues from management services (net)
Key Audit Matter
Our response
Revenues from management services, which
comprises management fees, commitment fees,
organisational fees and performance fees, are
the result of investment management services
within
the Group’s operating segments.
Payments to third parties for the introduction of
clients as well as rebates paid to clients are
recognised as revenue deductions.
Revenues from management services (net) is an
area of focus due to the size and importance to
the Group’s results.
The calculations of revenues and revenue
deductions are largely automated. There are a
number of inherent risks in calculating certain
types of revenue and revenue deductions
including the interpretation and manual input of
key contractual terms, which could lead to errors.
The bespoke and complex nature of underlying
investment management agreements and other
contractual
involving multiple Group
entities requires effective monitoring to ensure
all financial terms and conditions are captured
completely and accurately and are applied
appropriately.
terms
Performance fees are inherently more complex
in nature. The assessment of the likelihood of a
the
future clawback on such
determination whether criteria set in the carried
interest
require
management’s judgement. The determination of
performance fees is based on the underlying
valuation of the investment portfolio and requires
manual interventions.
arrangements
fees and
are met
Amongst other procedures, we obtained an
understanding of management’s processes and
controls around the calculation of revenues and
revenue deductions by performing walkthrough
procedures, testing relevant key controls and
evaluating the governance structure. We analysed
reports on
third party controls
independent
valuation
to
determine whether they were appropriate for our
purposes.
related processes and controls
On a sample basis, we obtained confirmations from
the external auditor of the underlying investment
programs on the revenues from management
services covered in their audit and reconciled these
revenues to the Group’s general ledger. We also
performed inquiries with the external auditor of the
underlying investment programs to confirm that the
audits on the sampled investment programs were
completed.
On a sample basis, we agreed revenue deductions
to underlying contracts and performed manual
recalculations.
We obtained an understanding of the Group’s
processes and controls around the calculation of
performance fees by evaluating the terms and
conditions set out in the underlying partnership
walkthrough
agreements
procedures. On a sample basis, we
tested
performance fees by:
⎯ Performing analytical procedures based on our
understanding of investment realisations and
the performance of the investment fund;
performing
and
⎯ Discussing and evaluating management’s
assessment of the likelihood of a future
clawback of performance fees by challenging
and back-testing the key assumptions. We
further corroborated whether such fees had
been recognised in the appropriate period;
⎯ Reconciling potential performance fee values
used in the assessment of a future clawback to
the accruals in the financial statement of the
underlying investment programs; and
⎯ Evaluating
completeness
assessing
whether a sample of eligible but unearned
performance
been
recognised during the 2018 financial year.
should
have
fees
by
For further information on the recognition of revenues from management services (net) refer to notes
2, 3 and 19.2 to the consolidated financial statements on pages 50 to 55 and 98.
38 | Partners Group
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ANNUAL REPORT 2018
Report of the auditors on the consolidated
financial statements
Valuation of financial investments
Key Audit Matter
Our response
As at 31 December 2018, financial investments
on the Group’s balance sheet amounted to CHF
554.0 million (2017: CHF 451.8 million). In
addition,
investment presented as
assets held for sale amounted to CHF 91.0
million (2017: CHF 260.8 million). These assets
represent a significant portion of the Group’s
total balance sheet.
financial
The financial investment and assets held for sale
portfolio comprises a large number of unquoted
securities for which no prices are available and
which have little or no observable inputs. The
Group applies valuation techniques such as the
market approach, the income approach or the
adjusted net asset value method that are based
on international standards.
The fair value assessment requires significant
judgement by management, in particular with
regard to key input factors such as earnings
multiples, liquidity discounts, discount rates or
the selection of valuation multiples.
included
obtaining
procedures
an
Our
understanding of the Group’s processes and key
controls around the valuation of and accounting
for unquoted
investments by performing
walkthrough procedures, testing relevant key
controls and evaluating the valuation governance
structure. We analysed independent third party
controls reports on valuation related processes
and controls to determine whether they were
appropriate for our purposes.
the external auditor of
On a sample basis, we obtained confirmations
from
the underlying
investment programs on their net asset values or
the valuation of their investments. We also
performed inquiries with the external auditor of the
underlying investment programs to confirm that
the audits on the sampled investment programs
were completed. The proportionate holdings of the
Group
investments were
financial
reconciled to the Group’s transaction records that
are kept for each investor.
in such
We further assessed if adjustments to the fair
values in the financial statements of the underlying
investment programs are required.
For further information on the valuation of financial
consolidated financial statements on pages 50 and 64 to 77.
investments refer to notes 2 and 5 to the
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Partners Group | 39
ANNUAL REPORT 2018
Report of the auditors on the consolidated
financial statements
Other Information in the Annual Report
The Board of Directors is responsible for the other information in the annual report. The other information
comprises all information included in the annual report, but does not include the consolidated financial
statements, the stand-alone financial statements of the company, the remuneration report and our
auditor’s reports thereon.
Our opinion on the consolidated financial statements does not cover the other information in the annual
report and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information in the annual report and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit,
or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact. We
have nothing to report in this regard.
Responsibility of the Board of Directors for the Consolidated Financial Statements
The Board of Directors is responsible for the preparation of the consolidated financial statements that
give a true and fair view in accordance with IFRS and the provisions of Swiss law, and for such internal
control as the Board of Directors determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of Directors is responsible for assessing
the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Board of Directors either intends
to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Swiss law, ISAs and Swiss Auditing Standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
—
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
— Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
— Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made.
— Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists related
to events or conditions that may cast significant doubt on the Group’s ability to continue as a going
40 | Partners Group
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ANNUAL REPORT 2018
Report of the auditors on the consolidated
financial statements
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the
Group to cease to continue as a going concern.
— Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
— Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the Group audit. We remain
solely responsible for our audit opinion.
We communicate with the Board of Directors or its relevant committee regarding, among other matters,
the planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have complied
with relevant ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
From the matters communicated with the Board of Directors or its relevant committee, we determine
those matters that were of most significance in the audit of the consolidated financial statements of the
current period and are therefore the key audit matters. We describe these matters in our auditor’s report,
unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Report on Other Legal and Regulatory Requirements
In accordance with article 728a para. 1 item 3 CO and the Swiss Auditing Standard 890, we confirm that
an internal control system exists, which has been designed for the preparation of consolidated financial
statements according to the instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
KPMG AG
Thomas Dorst
Licensed Audit Expert
Auditor in Charge
Zurich, 6 March 2019
Philipp Rickert
Licensed Audit Expert
KPMG AG, Badenerstrasse 172, PO Box, CH-8036 Zurich
KPMG AG is a subsidiary of KPMG Holding AG, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss legal entity. All rights reserved.
Partners Group | 41
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ANNUAL REPORT 2018
Consolidated income statement for the years ended
31 December 2018 and 2017
In millions of Swiss francs
Note
2018
2017
Management fees and other revenues, net
Performance fees, net
Revenues from management services, net
Other operating income 1)
Personnel expenses
Other operating expenses
EBITDA 2)
Depreciation and amortization
EBIT 2)
Finance income
Finance expense
Profit before tax
Income tax expense
Profit for the period
Profit for the period attributable to owners of the Company
Basic earnings per share (in Swiss francs)
Diluted earnings per share (in Swiss francs)
1) This includes the share of results of associates, previously disclosed separately.
2) For definitions please refer to p. 33.
956.5
323.7
841.9
372.1
1'280.2
1'214.0
45.7
30.9
(376.5)
(67.8)
881.6
(16.8)
864.8
40.1
(17.4)
887.5
(118.2)
769.3
(359.3)
(60.2)
825.4
(14.0)
811.4
50.4
(14.7)
847.1
(94.8)
752.3
769.3
752.3
28.91
28.65
28.37
28.09
3.
5.2.
4.1.
10.
11.&12.
5.1.
5.1.
9.1.
15.
15.
42 | Partners Group
2_Annual_Report_Finance_2018_en.indd 42
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ANNUAL REPORT 2018
Consolidated statement of comprehensive income
for the years ended 31 December 2018 and 2017
In millions of Swiss francs
Note
2018
2017
Profit for the period
769.3
752.3
Other comprehensive income:
Exchange differences on translating foreign operations
Total other comprehensive income that may be reclassified
to the income statement in subsequent periods
Net actuarial gains/(losses) from defined benefit plans
Tax impact on net actuarial gains/losses from defined benefit plans
Actuarial gains/(losses) from defined benefit plans, net of tax
Total other comprehensive income not being reclassified to the
income statement in subsequent periods, net of tax
4.5.2.
9.2.
(39.5)
(39.5)
(1.3)
0.2
(1.1)
(1.1)
38.2
38.2
2.8
(0.4)
2.4
2.4
Total other comprehensive income for the period, net of tax
(40.6)
40.6
Total comprehensive income for the period, net of tax
728.7
792.9
Total comprehensive income attributable to owners of the Company
728.7
792.9
2_Annual_Report_Finance_2018_en.indd 43
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Partners Group | 43
ANNUAL REPORT 2018 Consolidated balance sheet
as of 31 December 2018 and 2017
In millions of Swiss francs
Note
31 December 2018 31 December 2017
Assets
Cash and cash equivalents
Trade and other receivables 1)
Short-term loans
Assets held for sale
Total current assets
Property and equipment
Intangible assets
Investments in associates
Financial investments
Other financial assets
Employee benefit assets
Deferred tax assets
Total non-current assets
Total assets
1) This includes marketable securities, previously disclosed separately.
5.4.1
5.3.4.
5.3.3.
11.
12.
6.
5.3.2.
5.3.5.
4.5.
9.2.
412.2
403.8
1'113.4
91.0
2'020.4
67.6
61.8
55.0
554.0
166.7
-
23.6
928.7
2'949.1
852.3
384.9
713.4
260.8
2'211.4
28.0
61.5
90.1
451.8
64.0
1.2
24.7
721.3
2'932.7
44 | Partners Group
2_Annual_Report_Finance_2018_en.indd 44
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ANNUAL REPORT 2018 Consolidated balance sheet
as of 31 December 2018 and 2017
In millions of Swiss francs
Note
31 December 2018 31 December 2017
Liabilities and equity
Liabilities
Trade and other payables 1)
Income tax liabilities
Employee benefit liabilities 1)
Liabilities held for sale
Total current liabilities
Employee benefit liabilities 1)
Provisions 1)
Deferred tax liabilities
Long-term debt
Other long-term liabilities
Total non-current liabilities
Total liabilities
Equity
Share capital
Treasury shares
Legal reserves
Other components of equity
Equity attributable to owners of the Company
Total liabilities and equity
1) Comparative amounts have been re-presented. For further information, see note 4.5.
7.
4.5.
5.3.3.
4.5.
9.2.
13.
5.4.3.
14.
234.5
81.7
121.9
54.1
492.2
158.2
0.3
2.5
299.4
28.6
489.0
981.2
0.3
(143.6)
0.2
2'111.0
1'967.9
2'949.1
215.6
57.2
127.9
155.1
555.8
116.7
0.2
2.9
299.2
2.1
421.1
976.9
0.3
(57.1)
0.2
2'012.4
1'955.8
2'932.7
2_Annual_Report_Finance_2018_en.indd 45
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Partners Group | 45
ANNUAL REPORT 2018
Consolidated statement of changes in equity
for the years ended 31 December 2018 and 2017
In millions of Swiss francs
Equity attributable to owners of the Company
2018
Other components of equity
Share
capital
Treasury
shares
Legal
reserves
Translation
reserves
Retained
earnings
Total other
components
of equity
Total
Balance as of 1 January 2018
0.3
(57.1)
0.2
(53.8)
2'066.2
2'012.4
1'955.8
Transactions with owners of the Company,
recorded directly in equity
Contributions by and distributions to owners of
the Company:
Purchase of treasury shares
Disposal of treasury shares
Contractual obligation to purchase treasury shares
Option premium
Share-based payment expenses
Tax effect on share-based payment and treasury
share transactions
Dividends paid to owners of the Company
Total contributions by and distributions
to owners of the Company
Profit for the period
Total other comprehensive income for the period,
net of tax
Total comprehensive income for the period,
net of tax
(573.6)
487.1
(573.6)
(61.3)
(61.3)
425.8
(110.0)
(110.0)
(110.0)
1.3
47.2
1.3
47.2
1.3
47.2
(1.0)
(1.0)
(1.0)
(506.3)
(506.3)
(506.3)
-
(86.5)
-
-
-
-
-
-
-
-
(630.1)
(630.1)
(716.6)
769.3
769.3
769.3
(39.5)
(1.1)
(40.6)
(40.6)
(39.5)
768.2
728.7
728.7
Balance as of 31 December 2018
0.3
(143.6)
0.2
(93.3)
2'204.3
2'111.0
1'967.9
46 | Partners Group
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ANNUAL REPORT 2018
Consolidated statement of changes in equity
for the years ended 31 December 2018 and 2017
In millions of Swiss francs
Equity attributable to owners of the Company
2017
Other components of equity
Share
capital
Treasury
shares
Legal
reserves
Translation
reserves
Retained
earnings
Total other
components
of equity
Total
Balance as of 1 January 2017
0.3
(73.0)
0.2
(92.0)
1'705.3
1'613.3
1'540.8
Transactions with owners of the Company,
recorded directly in equity
Contributions by and distributions to owners of
the Company:
Purchase of treasury shares
Disposal of treasury shares
Share-based payment expenses
Tax effect on share-based payment and treasury
share transactions
Dividends paid to owners of the Company
Total contributions by and distributions
to owners of the Company
Profit for the period
Total other comprehensive income for the period,
net of tax
Total comprehensive income for the period,
net of tax
(152.0)
167.9
(152.0)
(42.2)
(42.2)
125.7
32.4
32.4
32.4
13.4
13.4
13.4
(397.4)
(397.4)
(397.4)
-
15.9
-
-
-
-
-
-
-
-
(393.8)
(393.8)
(377.9)
752.3
752.3
752.3
38.2
2.4
40.6
40.6
38.2
754.7
792.9
792.9
Balance as of 31 December 2017
0.3
(57.1)
0.2
(53.8)
2'066.2
2'012.4
1'955.8
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Partners Group | 47
ANNUAL REPORT 2018
Consolidated statement of cash flows
for the years ended 31 December 2018 and 2017
In millions of Swiss francs
Note
2018
2017
Operating activities
Profit for the period
Adjustments:
Net finance (income) and expense
Income tax expense
Depreciation and amortization
Share-based payment expenses
Change in provisions 1)
Change in employee benefit assets/liabilities 1)
Non-cash change in other financial assets
Non-cash change in other long-term liabilities
Operating cash flow before changes in working capital
5.1.
9.1.
11.&12.
4.2.
769.3
752.3
(22.7)
118.2
16.8
47.2
0.1
36.2
(79.2)
26.9
912.8
(35.7)
94.8
14.0
32.4
(1.0)
58.2
(56.3)
0.0
858.7
(Increase)/decrease in trade and other receivables and short-term loans
(440.0)
(157.3)
(89.5)
(2.8)
380.5
(96.8)
283.7
-
(43.9)
(13.2)
(115.6)
104.7
28.0
(26.4)
0.4
1.6
(64.4)
144.0
(2.6)
842.8
(61.7)
781.1
32.5
(10.4)
(20.7)
(168.2)
132.5
42.9
(0.6)
-
0.4
8.4
11.
12.
6.
5.1.
Increase/(decrease) in trade and other payables 1)
Financial expenses (other than interest) paid
Cash generated from/(used in) operating activities
Income tax paid
Net cash from/(used in) operating activities
Investing activities
Proceeds on disposal of fixed deposits
Purchase of property and equipment
Purchase of intangible assets
Purchase of financial investments 2)
Proceeds on disposal of financial investments 3)
Proceeds on disposal of investments in associates
Purchase of other financial assets
Proceeds on disposal of other financial assets
Interest received
Net cash from/(used in) investing activities
1) Comparative amounts have been re-presented. For further information, see note 4.5.
2) Purchases of assets and liabilities held for sale are included in this line item.
3) Proceeds on disposal of assets and liabilities held for sale are included in this line item.
48 | Partners Group
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ANNUAL REPORT 2018 Consolidated statement of cash flows
for the years ended 31 December 2018 and 2017
In millions of Swiss francs
Note
2018
2017
Financing activities
Repayments of credit facilities
Drawdowns from credit facilities
Issuance of long-term debts
Interest paid
Dividends paid to shareholders of the Company
Purchase of treasury shares
Disposal of treasury shares
Option premium received
Net cash from/(used in) financing activities
13.
14.
(175.0)
175.0
-
(4.1)
(506.3)
(573.6)
425.8
1.3
(656.9)
(160.0)
160.0
299.2
(1.5)
(397.4)
(152.0)
125.6
-
(126.1)
Net increase/(decrease) in cash and cash equivalents
(437.6)
663.4
Cash and cash equivalents as of 1 January
Exchange differences on cash and cash equivalents
852.3
(2.5)
186.0
2.9
Cash and cash equivalents as of 31 December
412.2
852.3
In millions of Swiss francs
31 December 2018 31 December 2017
Bank balances
Petty cash
Total cash and cash equivalents
412.2
0.0
412.2
852.3
0.0
852.3
2_Annual_Report_Finance_2018_en.indd 49
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Partners Group | 49
ANNUAL REPORT 2018
Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
1. Reporting entity
Partners Group Holding AG (“the Company”) is a company domiciled in Switzerland whose shares are publicly traded on the SIX Swiss
Exchange. The address of the Company’s registered office is Zugerstrasse 57, 6341 Baar-Zug, Switzerland. The consolidated financial
statements for the years ended 31 December 2018 and 2017 comprise the Company and its subsidiaries (together referred to as
“the Group”) and the Group’s interest in associates. The consolidated financial statements were authorized for issue by the Board of
Directors (“BoD”) on 6 March 2019 and are subject to approval at the Annual General Meeting of shareholders on 15 May 2019.
The principal activities of the Group are described in note 3.
The consolidated financial statements present a true and fair view of the Group’s financial position, results of operations and cash
flows in accordance with International Financial Reporting Standards (“IFRS”) and comply with Swiss law.
2. Critical accounting estimates and judgments
Estimates and judgments are based on historical experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future and exercises judgment in applying its accounting policies. The
resulting accounting estimates will, by definition, rarely equal the related actual results. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, as well as
significant judgments in applying accounting policies, are discussed below.
(a) Accounting for investment programs
The Group assessed its involvement with the investment programs that it manages to determine whether it has control over them (see
note 19.3.). In accordance with IFRS 10, the Group assessed its power over the investment programs, its exposure or rights to variable
returns and its ability to use its power to affect its returns. The assessment determined whether the Group acts as an agent on behalf
of the investors in the investment programs and within delegated decision-making rights or as a principal.
In its assessment, the Group focused on its exposure to the total economic interest in the investment programs which is a combination
of the stake the Group holds in an investment program and the Group’s remuneration for its activities with regard to an investment
program. IFRS 10 does not provide clear-cut thresholds for determining whether or not an investment program is controlled. The
Group took all facts and circumstances into consideration and concluded that it acts as an agent for all investment programs that it
manages, except for seed capital financed investment programs (see note 19.15.). For further details on the investment programs and
their carrying amounts please refer to note 5.3.2.
(b) Fair value
A significant portion of the Group’s assets and liabilities are carried at fair value. The fair value of some of these assets is based on
quoted prices in active markets or observable inputs.
In addition, the Group holds financial instruments for which no quoted prices are available and which have little or no observable
inputs. For these financial instruments, the determination of fair value requires subjective assessment with varying degrees of
judgment depending on liquidity, concentration, pricing assumptions, the current economic and competitive environment and the risks
affecting the specific financial instrument. In such circumstances, valuation is determined based on management’s judgment about
the assumptions that market participants would use in pricing assets or liabilities (including assumptions about risk). These financial
instruments mainly include derivatives, private equity, private debt, private real estate and private infrastructure investments.
For more information regarding fair value measurement refer to note 5.5.
50 | Partners Group
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
(c) Revenue recognition
Instances may arise where the Group has to decide whether revenues should be recognized or not. This mainly relates to performance
fees, which are foreseeable, but have not yet been collected by the Group or are subject to claw-back. A “claw-back” ensures that
investors in an investment program are returned any performance fees paid in excess of the originally agreed percentage during the
life of the investment program. It protects investors from paying performance fees on one investment, and then having a subsequent
investment incur losses resulting in overall performance fees paid in excess of the originally agreed upon terms. Performance fees are
only recognized once the likelihood of a potential future claw-back is no longer considered meaningful in the assessment of the Group.
3. Segment information
The BoD has been identified as the chief operating decision-maker. The BoD reviews the Group’s internal reporting in order to assess
performance and allocate resources. Management has determined the following operating segments based on these reports:
• Private equity
• Private debt
• Private real estate
• Private infrastructure
In these operating segments, the Group services its clientele with investment management services in the private markets spectrum.
These services are comprised of structuring and investment advising as relates to direct investments in operating companies or assets
and investments in third party managed investment programs. In its management services, the Group offers diversified as well as
more focused investment programs as relates to investment styles, industry and geography of the investments in private markets.
Private equity
Private equity refers to investments made in private – i.e. not publicly traded – companies. On behalf of its clients, the Group focuses
on investing directly into companies with the objective of driving forward strategic initiatives and operational improvements. In
addition, the Group also invests into the private equity secondary market by acquiring portfolios of privately held companies and in the
primary market by maintaining a comprehensive set of investment relationships. The Group invests across sectors and regions based
on a relative value investment approach.
Private debt
Private debt refers to debt financing for private – i.e. not publicly traded – companies. On behalf of its clients, the Group focuses on
providing tailored financing solutions for businesses seeking non-bank funding due to their limitations in entering capital markets. The
Group provides debt capital across the entire debt structure, ranging from senior loans to mezzanine financing solutions, as well as
across sectors and regions based on a relative value investment approach.
Private real estate
Private real estate refers to investments made in private – i.e. not publicly traded – real estate assets. On behalf of its clients, the
Group focuses on investing in real estate with value creation opportunities. The Group invests across the capital structure in either
equity or debt instruments, as well as across sectors and regions based on a relative value investment approach.
Private infrastructure
Private infrastructure refers to investments made in private – i.e. not publicly traded – infrastructure assets. On behalf of its clients,
the Group focuses on investing in essential infrastructure with development potential through active ownership. The Group invests
across the capital structure in either equity or debt instruments, as well as across sectors and regions based on a relative value
investment approach.
2_Annual_Report_Finance_2018_en.indd 51
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Partners Group | 51
ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
The activities in all operating segments consist of:
• Strategic asset allocation and portfolio management
• Investment management and monitoring
• Risk management
• Reporting and portfolio administration
• Relationship management
The BoD assesses the performance of the operating segments based on gross segment results, determined by the allocation of
directly attributable revenues and expenses for the respective operating segment. Therefore, the gross results per operating segment
do not include the allocation of expenses that are not directly attributable, such as overhead and general operating expenses, etc. All
non-directly attributable elements of profit or loss are summarized in the unallocated column.
Management believes that this reporting is most relevant in evaluating the results of its operating segments.
There were no inter-segment transactions and, as such, no eliminations are necessary.
As the Group pursues a fully integrated investment approach, many professionals are engaged in assignments across several operating
segments within the private markets asset classes. Thus, only the personnel expenses of those professionals entirely dedicated to a
single operating segment have been allocated to the respective operating segments. This has led to the majority of personnel expenses
being unallocated to any of the operating segments. The same applies to other operating expenses. Depreciation and amortization
have not been allocated to the operating segments.
52 | Partners Group
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
In millions of Swiss francs
Operating segments
2018
Private
equity
Private
debt
Private
real estate
Private
infra-
structure
Total
reportable
segments Unallocated
Total
Management fees and other revenues
Performance fees
Revenue deductions
Revenues from management services, net
674.0
335.1
(110.9)
898.2
116.7
169.9
125.5
1'086.1
7.0
1'093.1
3.8
(14.6)
105.9
(30.9)
148.0
9.0
10.3
358.2
(14.7)
(171.1)
-
-
358.2
(171.1)
121.1
1'273.2
7.0
1'280.2
Other operating income
16.2
5.0
15.4
7.0
43.6
Revenues and other operating income
914.4
110.9
163.4
128.1
1'316.8
2.1
9.1
45.7
1'325.9
Personnel expenses
Other operating expenses
(81.0)
(26.3)
(26.6)
(29.1)
(163.0)
(213.5)
(376.5)
(3.8)
(1.8)
(1.3)
(1.3)
(8.2)
(59.6)
(67.8)
Gross segment result before depreciation and
amortization
829.6
82.8
135.5
97.7
1'145.6
(264.0)
881.6
Depreciation and amortization
-
-
-
-
-
(16.8)
Gross segment result
829.6
82.8
135.5
97.7
1'145.6
(280.8)
Reconciliation to profit for the period:
Net finance income and expense
Income tax expense
Profit for the period
(16.8)
864.8
22.7
(118.2)
769.3
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Partners Group | 53
ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
In millions of Swiss francs
Operating segments
2017
Private
equity
Private
debt
Private
real estate
Private
infra-
structure
Total
reportable
segments
Unallocated
Total
Management fees and other revenues
Performance fees
Revenue deductions
Revenues from management services, net
605.4
296.1
(89.8)
811.7
101.1
137.9
133.5
9.0
71.5
977.9
383.8
7.2
(10.8)
97.5
(27.8)
119.1
(20.3)
(148.7)
184.7
1'213.0
1.0
1'214.0
1.0
-
-
978.9
383.8
(148.7)
Other operating income 1)
7.2
6.6
7.4
6.5
27.7
Revenues and other operating income
818.9
104.1
126.5
191.2
1'240.7
3.2
4.2
30.9
1'244.9
Personnel expenses
Other operating expenses
(78.4)
(20.3)
(25.2)
(24.8)
(148.7)
(210.6)
(359.3)
(3.0)
(1.2)
(1.4)
(0.9)
(6.5)
(53.7)
(60.2)
Gross segment result before depreciation and
amortization
737.5
82.6
99.9
165.5
1'085.5
(260.1)
825.4
Depreciation and amortization
-
-
-
-
-
(14.0)
Gross segment result
737.5
82.6
99.9
165.5
1'085.5
(274.1)
Reconciliation to profit for the period:
Net finance income and expense
Income tax expense
Profit for the period
1) This includes the share of results of associates, previously disclosed separately.
(14.0)
811.4
35.7
(94.8)
752.3
54 | Partners Group
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ANNUAL REPORT 2018
Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
Geographical information
The operating segments are managed on a worldwide basis with Switzerland as the headquarters. Local offices ensure access to
worldwide markets and investment opportunities. Investment advisory services are primarily provided out of Switzerland, whereas
Guernsey, North America and UK/Luxembourg serve as the Group’s main fund hubs. In presenting information on the basis of
geographical operating segments, operating segment revenue is based on the geographical location where the respective revenues
are accounted for; i.e. in the location in which the revenues are shown in the Group entities’ financial statements.
In millions of Swiss francs
Switzerland
Guernsey
North America
Other European countries
Rest of world
Revenues from management services,
net
2018
2017
408.2
394.9
222.8
120.3
134.0
514.2
319.0
166.1
98.7
116.0
Total revenues from management services, net
1'280.2
1'214.0
In 2018 and 2017, no direct counterparty of the Group contributed more than 10% to the Group’s revenues from management
services, net.
4. Remuneration
4.1. Personnel expenses
In millions of Swiss francs
Note
2018
2017
Salaries and cash bonus
Share-based payment expenses
Other long-term benefits (management carry program)
Retirement schemes - defined contribution plans
Retirement schemes - defined benefit plans
Other social security expenses
Sundry personnel expenses
Total personnel expenses
4.2.
4.5.2.
(197.9)
(214.4)
(46.6)
(87.5)
(12.4)
(2.9)
(14.3)
(14.9)
(31.6)
(74.3)
(10.7)
(1.7)
(14.2)
(12.4)
(376.5)
(359.3)
2_Annual_Report_Finance_2018_en.indd 55
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Partners Group | 55
ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
4.2. Share-based payment expenses
The Group recognized the following expenses for grants in 2018, as well as in previous periods:
In millions of Swiss francs
Note
2018
2017
Grants 2012 (options and non-vested shares)
Grants 2013 (options and non-vested shares)
Grants 2014 (options and non-vested shares)
Grants 2015 (options and non-vested shares)
Grants 2016 (options and non-vested shares)
Grants 2017 (options and non-vested shares)
Grants 2018 (options and non-vested shares)
Share grants at start of employment
Total options and non-vested shares
Grants 2017 (MPP)
Grants 2018 (MPP)
Total share-based payment expenses1)
-
(0.2)
(0.8)
(2.1)
(4.6)
(10.2)
(14.8)
(2.0)
(34.7)
(4.8)
(7.1)
(46.6)
(0.1)
(0.7)
(1.8)
(3.7)
(8.5)
(10.7)
-
(1.3)
(26.8)
(4.8)
-
(31.6)
4.3.1.
4.4.
4.3.2.
1) Share-based payment expenses for non-executive members of the BoD of CHF 0.6 million (2017: CHF 0.8 million) are disclosed as a part of consulting expenses (see note 10.).
The average number of employees in 2018 was 1’120 (2017: 979), which is equivalent to an average of 1’110 full-time employees
(2017: 970).
4.3. Options, non-vested shares and Management Performance Plan
The Group has a long history of granting equity incentives to its employees. These are awarded at year-end through options, shares
and the Management Performance Plan (“MPP”).
4.3.1. Non-vested shares and options
The Employee Participation Plan (“EPP”) aims to align employee interests with those of external shareholders. The 2018 plan was a
shares-only plan for the Group’s employees and its allocation to departments, teams and individuals depends on their performance
and contribution to the overall achievement of the firm’s goals during the period.
Since 2012, EPPs have followed a linear vesting model, with proportionate annual vesting over a three- or five-year period following
the awards, depending on the rank of the employee and contingent upon the employee remaining with the Group during the respective
service period.
In 2015, the Group implemented a management incentive plan (“MIP”). The vesting of this long-term option-only plan for senior
management follows a five-year (50% of grant) and six-year (50% of grant) cliff-vesting model.
56 | Partners Group
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
Number and weighted average exercise price
The number and weighted average exercise price of share options and non-vested shares developed as follows:
Outstanding as of 1 January
Forfeited during the period
Exercised during the period
Granted during the period - options
Granted during the period - shares
Outstanding as of 31 December
Weighted average
exercise price
(in CHF)
Number of
instruments
Weighted average
exercise price
(in CHF)
Number of
instruments
2018
2018
2017
2017
512.45
27.73
126.83
960.09
-
1'360'808
(10'671)
(142'488)
216'989
59'504
371.27
90.30
136.16
805.50
-
1'194'619
(20'302)
(214'670)
353'678
47'483
597.86
1'484'142
512.45
1'360'808
Exercisable as of 31 December
202'067
254'567
Of the outstanding 1’484’142 options and non-vested shares (31 December 2017: 1’360’808), 202’067 options are exercisable
immediately (31 December 2017: 254’567). All other options and non-vested shares are restricted until at least 21 November 2019.
The outstanding instruments are split by strike price and grant year as follows:
Numbers of instruments outstanding
Grant year
Options granted in 2008
Options granted in 2009
Options granted in 2010 and 1.1.2011
Options granted in 2011
Options granted in 2012
Options granted in 2013 and 8.1.2014
Options granted in 2014
Options granted in 2015
Options granted in 2015
Options granted in 2015
Options granted in 2016
Options granted in 2016
Options granted in 2017
Options granted in 2017
Options granted in 2018
Options granted in 2018
Non-vested shares granted from 2013 to 2018
Total instruments outstanding
Strike price in CHF
31 December 2018
31 December 2017
100.00
150.00
209.00
195.00
236.00
270.00
324.00
340.00
450.00
446.00
682.00
593.00
805.00
810.00
975.00
800.00
-
-
13'105
24'358
19'813
55'411
89'380
8'344
1'418
8'700
18'037
33'857
27'218
86'997
111'139
8'344
1'418
174'000
174'000
6'127
375'000
10'110
318'600
35'078
198'500
18'489
136'409
6'127
375'000
10'110
318'600
35'078
-
-
146'183
1'484'142
1'360'808
Partners Group | 57
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
The estimated fair value of options granted, and the underlying fair value of services, is based on the Black-Scholes model, whereas the
fair value of the non-vested shares granted is based on the share price at the date of grant.
Fair value of share options and shares granted in 2018, and related assumptions:
Date of grant
21.3.18
26.9.18
26.9.18
26.9.18
29.11.18
29.11.18
29.11.18
Vested
shares
Non-vested
options1)
Non-vested
options
Non-vested
options2)
Vested
options
Non-vested
shares
Non-vested
shares
Fair value per option/non-vested share at measure-
ment date (in CHF)
676.00
20.29
20.29
33.81
668.50
668.50
Share price (in CHF)
Exercise price (in CHF)
Vesting conditions
Expected volatility
Expected term of execution
Expected dividend ratio
Risk-free interest rate (based on Swap rates)
676.00
779.50
779.50
668.50
668.50
668.50
975.00
975.00
800.00
5 years
5 years
6 years
none
3 years 3)
5 years 3)
17.59%
17.59%
21.15%
5 years
5 years
6 years
5 years
4.00%
4.00%
(0.35%)
(0.35%)
4.00%
(0.53%)
Total options/shares granted
4'359
127'500
71'000
18'489
21'414
33'731
Total value granted in 2018 (in millions of CHF)
2.9
2.6
1.4
1.6
0.6
14.3
22.5
Gross amount recognized in profit or loss
(in millions of CHF)
Forfeitures during 2018 (in millions of CHF)
Net amount recognized in profit or loss
(in millions of CHF)
2.9
0.4
0.2
0.2
0.6
5.2
(0.1)
6.5
(0.1)
2.9
0.4
0.2
0.2
0.6
5.1
6.4
Total amount recognized in profit or loss (in millions of CHF)
- recognized in personnel expenses related to the grant 2018 (in millions of CHF)
- recognized in consulting expenses related to the grant 2018 (in millions of CHF)
- recognized in personnel expenses related to the grant 2017 1) (in millions of CHF)
15.8
14.8
0.6
0.4
1) Under the 27 September 2017 option plan, the Group granted equity incentives with a fair value of CHF 5.1 million. The amount is allocated to the participants in two tranches, the first half in Septem-
ber 2017 and the second half in September 2018. As both parties have a common understanding of the terms and conditions and participants have begun rendering services in respect of both tranches,
the Group recognizes expenses for both tranches beginning in 2017.
2) Under the 26 September 2018 option plan, the Group granted equity incentives with a fair value of CHF 3.0 million. The amount is allocated to the participants in two tranches, the first half in Septem-
ber 2018 and the second half in September 2019. As both parties have a common understanding of the terms and conditions and participants have begun rendering services in respect of both tranches,
the Group recognizes expenses for both tranches beginning in 2018.
3) Linear vesting model, with proportionate annual vesting.
The applied expected volatility is determined using an average volatility that is calculated based on the average of the historic five-year
volatility of the Company’s stock and the longest available future implied volatility for the Company’s shares/options in the market.
58 | Partners Group
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
4.3.2. Management Performance Plan
In 2017, Partners Group revised its dedicated performance fee-related compensation program and introduced the MPP for Executive
Committee members and non-independent Board members. The MPP ensures an alignment of interests with shareholders and clients.
It is dependent on the share price development over a five-year horizon. It measures the absolute performance of the share price of
the Company but also puts equal weight on the outperformance against an industry benchmark (S&P Listed Private Equity Index). Five
years after the grant date, MPP rights will be measured based on absolute performance of the share price and its outperformance over
the benchmark index. Once the value of the MPP rights is determined, its payout is dependent on the achievement of a performance
fee target, which ultimately derives from active value generation, and the realization of investment opportunities in underlying client
portfolios. Depending on the investment outcomes and timing of the investment realizations, it often takes up to 14 years until the full
payout of performance fees is received. Any payout will be in the form of restricted shares equal to the value of the respective payout.
Vesting parameters
The MPP grants vest linearly over a period of five years. The linear vesting is subject to a minimum five-year tenure in the respective
committee. Before that, it has a five-year cliff vesting attached. Any holder of unvested MPP rights leaving the Group has the
obligation to render his or her unvested interest back to the Company.
Valuation
In accordance with the option-like characteristics of the MPP, the grant date fair value is calculated in a similar way to the valuation
of a combination of call options (based on the Black-Scholes model) and exchange options (total return on PGHN and the S&P Listed
Private Equity Index based on Margrabe’s formula).
Fair value of MPP granted in 2018, and related assumptions:
Date of grant
Share price (in CHF)
Exercise price/normalized index price (in CHF)
Correlation
Vesting conditions
Expected volatility
Expected volatility index
Expected term of execution
Expected dividend ratio
Expected dividend ratio index
Risk-free interest rate (based on Swap rates)
Total fair value granted in 2018 (in millions of CHF)
Amount recognized in profit or loss (in millions of CHF)
Total amount recognized in profit or loss (in millions of CHF)
1) Linear vesting model, with proportionate annual vesting every year.
Absolute basis
Relative basis
29.11.18
29.11.18
668.50
668.50
n/a
5 years1)
21.15%
n/a
5 years
4.00%
n/a
(0.53%)
12.3
3.6
668.50
668.50
0.66
5 years1)
21.15%
18.59%
5 years
0.00%
0.00%
n/a
12.3
3.6
7.1
Partners Group | 59
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
4.4. Entry shares
In 2018, the Group further granted 3’016 (2017: 2’290) shares to employees of the Group that commenced employment with the
Group during the year. These shares are subject to a vesting period of one year. In addition, the shares are subject to a maximum five-
year selling restriction, which is shortened if the employee resigns from the Group before the end of the restriction period.
4.5. Employee benefits
In millions of Swiss francs
Defined benefit plan
Accrued variable compensation (cash bonus)
Management Carry Plan
Other employee benefit liabilities
Total net employee benefit liabilities
Non-current assets
Current liabilities
Non-current liabilities
Balance as of 31 December
31 December 2018 31 December 2017
(0.4)
(145.2)
(125.2)
(9.3)
(280.1)
-
(121.9)
(158.2)
(280.1)
1.2
(148.4)
(88.8)
(7.4)
(243.4)
1.2
(127.9)
(116.7)
(243.4)
The Group has reviewed the presentation of its employee benefit liabilities. To improve the disclosures of the financial statements,
various line items have been re-presented to make the information and disclosures more understandable:
• Accrued remuneration costs, previously disclosed as a part of trade and other payables, is now disclosed as accrued variable
compensation (2017: CHF 69.4 million) and other employee benefit liabilities (2017: CHF 2.6 million).
• Management Carry Plan (“MCP”) liabilities (2017: CHF 88.8 million) and other provisions (2017: CHF 4.8 million), previously
presented as a part of provisions, are now disclosed as Management Carry Plan and other employee benefit liabilities, respectively.
• In the employee benefits section, the line item previously disclosed as performance-related compensation is now disclosed as
accrued variable compensation.
Prior year numbers in the consolidated balance sheet and in the consolidated statement of cash flows are re-presented accordingly.
4.5.1. Performance fee related compensation
Each year, the Nomination & Compensation Committee (“NCC”) allocates up to 40% of recognized performance fees to the
Performance Fee Compensation Pool which is then distributed to an eligible group of employees.
The promise represents a constructive obligation towards the eligible group of employees. The pool is allocated to the individual
employees via the MCP with the remainder, i.e. the difference between the Performance Fee Compensation Pool and the MCP
allocation, being allocated via the Performance Fee Bonus Pool.
In 2018, performance fees recognized in the consolidated income statement amounted to CHF 323.7 million (2017: CHF 372.1
million), of which CHF 93.0 million (2017: CHF 79.0 million) were allocated via the MCP allocation (including social securities) and CHF
36.5 million (2017: CHF 69.9 million) via the Performance Fee Bonus Pool allocation. The Group expects for 2019 a total payout of
CHF 82.1 million (2018: CHF 90.9 million) for both schemes.
60 | Partners Group
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
(a) Management Carry Plan allocation
In 2010, the Group introduced the MCP as allocation key on the basis of discretionary annual grants. A portion of the performance
fees recognized from investments made during a relevant investment period is allocated to the broader management teams. The
grants are only paid out to the eligible employees once the performance fees are collected by the Group. If employees leave before
a minimum five-year employment period after the MCP grant, bonus allocations will be reduced proportionally to this employment
period.
Performance fees depend on the performance attributable to investments made. The Group recognizes expenses related to the MCP
in personnel expenses when the payment of the related performance fees becomes sufficiently visible. This is in the period in which
performance fees are recognized in the consolidated income statement, which is generally before the effective collection of such
performance fees. Until the cash amount is paid to eligible employees, the corresponding liabilities are recognized as employee benefit
liabilities. The part of the liabilities that is not expected to be settled wholly before twelve months after the end of the reporting period
is presented as non-current liabilities.
(b) Performance Fee Bonus Pool allocation
The Performance Fee Bonus Pool, i.e. the difference between the Performance Fee Compensation Pool and the MCP allocation, is
distributed among the broader management teams based on their contribution to performance. The part of the Performance Fee
Bonus Pool that is not expected to be settled wholly before twelve months after the end of the annual reporting period in which the
employees render the related services is presented as non-current.
4.5.2. Defined benefit plan
The pension plan for Swiss employees (“the Pension Fund”) is a defined benefit plan. The Pension Fund provides benefits for
retirement, disability and surviving dependents that meet or exceed the minimum benefits required under the Federal Law on
Occupational Retirement, Survivors’ and Disability Insurance (“BVG”), including the legal coordination charge, which is also insured.
The monthly premium to fund the Pension Fund’s benefits is split equally between employer and employees. Contributions, which vary
by the age of the employees from 6-13% of the covered salary, are credited to the employees’ individual retirement savings accounts.
The Pension Fund is responsible for capital investments and pursues an investment strategy with a prescribed investment policy.
The Group assumes an average retirement age of 62 (female) and 63 (male), respectively. Upon retiring (including early and partial
retirement), insured persons are entitled to a lifelong retirement pension if employees do not choose to withdraw the entire balance, or
portion thereof, of their individual retirement savings accounts in the form of a capital payment.
The Pension Fund is administered by Gemini Sammelstiftung, Zurich/Switzerland, which is legally separate from the Group and
is governed by a foundation board. In addition, there is a pension fund commission comprised of two employee and two employer
representatives. The duties of the foundation board, as well as the pension fund commission, are laid out in the BVG and the specific
pension fund rules. They are required by law to act in the best interest of the participants and are responsible for setting certain
policies (e.g. investment, contribution and indexation policies) for the Pension Fund. At least four times a year, the foundation board, as
well as the pension fund commission, meet to analyze consequences and decide on adjustments in the investment strategy.
Pursuant to the BVG, additional employer and employee contributions may be imposed whenever a significant funding deficit in
accordance with the BVG arises. In addition to investment risk, the Pension Fund is exposed to actuarial risk as well as longevity risk,
currency risk and interest rate risk.
In addition to the pension plan for Swiss employees, a defined benefit plan for Swiss management also provides retirement benefits
and risk insurance for death and disability for components of remuneration in excess of the maximum insurable amount of salary under
the plan described above.
2_Annual_Report_Finance_2018_en.indd 61
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Partners Group | 61
ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
Development of defined benefit asset/(obligation)
In millions of Swiss francs
2018
2017
Present value of benefit obligation as of 1 January
(61.6)
(56.6)
Included in profit or loss:
Current service cost (employer)
Interest expense on benefit obligation
Included in other comprehensive income:
Actuarial gains/(losses) on benefit obligation arising from:
- change in financial assumptions
- experience gains/(losses)
Other:
Employee contributions
Benefit payments
Plan amendment
Present value of benefit obligation as of 31 December
Fair value of plan assets as of 1 January
Included in profit or loss:
Interest income on plan assets
Administration cost
Included in other comprehensive income:
Return on plan assets (excl. interest income)
Other:
Employer contributions
Employee contributions
Benefit payments
Fair value of plan assets as of 31 December
Net defined benefit asset/(obligation) as of 31 December
(2.9)
(0.4)
-
(0.7)
(2.6)
(0.6)
-
(68.8)
62.8
0.5
(0.1)
(0.6)
2.6
2.6
0.6
68.4
(0.4)
(2.8)
(0.3)
1.0
(1.7)
(2.3)
(0.1)
1.2
(61.6)
54.4
0.3
(0.1)
3.5
2.3
2.3
0.1
62.8
1.2
The weighted average duration of the net defined benefit obligation is 15.6 years as of 31 December 2018 (2017: 15.5 years).
62 | Partners Group
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
Asset allocation as of 31 December
Cash
Public debt
Public equity
Private markets
Alternatives/other
Total
2018
2017
9.2%
10.6%
27.6%
37.7%
14.9%
9.3%
13.8%
24.6%
29.3%
23.0%
100.0%
100.0%
Principal actuarial assumptions
The calculation of the net defined benefit asset/(obligation) included the following principal actuarial assumptions:
Principal actuarial assumptions as of 31 December
2018
2017
Discount rate
Expected net return on plan assets
Interest rate on retirement credits
Average future salary increases
Future pension increases
Mortality tables used
Sensitivity analysis
0.70%
0.70%
1.00%
1.50%
0.00%
0.70%
0.70%
1.00%
1.50%
0.00%
BVG 2015 (GT)
BVG 2015 (GT)
Reasonably possible changes as of the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant,
would have affected the net defined benefit asset/(obligation) by the amounts presented below:
In millions of Swiss francs
Decrease of discount rate (-0.5%)
Increase of discount rate (+0.5%)
Decrease of salary increase (-0.5%)
Increase of salary increase (+0.5%)
Impact on defined
benefit obligation
Impact on current
service cost (em-
ployer)
(5.9)
5.1
0.8
(0.9)
(0.5)
0.4
0.1
(0.1)
Although the analysis above does not take into account the full distribution of expected cash flows under the defined benefit plan, it
does provide an approximation of the sensitivity of the assumptions presented.
The expected employer contributions in 2019 are estimated to be CHF 2.6 million.
2_Annual_Report_Finance_2018_en.indd 63
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Partners Group | 63
ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
5. Investments held by the Group, finance income and expense and
financial risk management
5.1. Finance income and expense
In millions of Swiss francs
Note
2018
2017
Interest income calculated using the effective interest rate method
Net gains on fair value through profit or loss instruments
Share of results of associates (Pearl)
Total finance income
Interest expense calculated using the effective interest rate method
Net losses on marketable securities
Share of results of associates (Pearl)
Other finance expense
Net exchange differences
Total finance expense
5.5.
6.
6.
1.6
38.5
-
40.1
(4.3)
-
(3.8)
(2.8)
(6.5)
0.4
42.7
7.3
50.4
(1.8)
(0.1)
-
(3.2)
(9.6)
(17.4)
(14.7)
Total net finance income and (expense)
22.7
35.7
5.2. Other operating income
In millions of Swiss francs
Compensation from short-term loans
Share of results of associates (LGT)
Other income
Total other operating income
Note
5.3.4.
6.
2018
2017
41.9
0.0
3.8
45.7
27.5
0.0
3.4
30.9
64 | Partners Group
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
5.3. Financial instruments
5.3.1. Financial instruments by category
The Group’s financial assets can be classified into the respective categories as follows:
In millions of Swiss francs
Note
31 December 2018 31 December 2017
Financial assets
Financial assets at amortized cost
Cash and cash equivalents
Trade receivables 1)
Short-term loans
Other receivables 1)
Cash collateral 1)
Accrued revenues 1) 2)
Other financial assets
Financial assets at fair value through profit or loss
Mandatorily measured at FVTPL
Marketable securities
Financial investments
Assets held for sale
Derivative assets held for risk management 1)
Total financial assets
1) Presented in the line item trade and other receivables in the consolidated balance sheet.
2) Comparative amounts have been re-presented. For further information, see note 19.1.
5.4.1.
5.3.4.
5.4.1.
5.4.1.
5.4.1.
5.3.5.
5.4.1.
5.3.2.
5.3.3.
5.4.1.
412.2
158.8
1'113.4
35.3
-
201.5
166.7
852.3
216.4
713.4
10.1
79.8
75.3
64.0
2'087.9
2'011.3
0.0
554.0
91.0
8.2
653.2
2'741.1
0.0
451.8
260.8
3.3
715.9
2'727.2
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Partners Group | 65
ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
The Group’s financial liabilities can be classified into the respective categories as follows:
In millions of Swiss francs
Note
31 December 2018 31 December 2017
Financial liabilities
Financial liabilities at amortized cost
Trade payables 1)
Cash collateral 1)
Long-term debt
Other long-term liabilities
Financial liabilities at fair value through profit or loss
Mandatorily measured at FVTPL
Liabilities held for sale
Derivative liabilities held for risk management 1)
Other long-term liabilities
Total financial liabilities
1) Presented in the line item trade and other payables in the consolidated balance sheet.
5.3.2. Financial investments
7.
7.
13.
5.4.3.
5.3.3.
7.
5.4.3.
71.6
0.3
299.4
27.8
399.1
54.1
0.1
0.8
55.0
454.1
108.2
66.5
299.2
1.1
475.0
155.1
5.9
1.0
162.0
637.0
The Group holds investments in various investment programs that it manages. These investments typically account for a stake of one
percent in an investment program. Within the investment programs, the Group typically performs investment management activities
for the benefit of external investors under a predetermined investment policy and receives a predetermined management fee and,
where applicable, a performance fee for its services presented as revenues from management services in the consolidated income
statement.
In millions of Swiss francs
31 December 2018 31 December 2017
Balance as of 1 January
Additions
Distributions/disposals
Transfers from assets and liabilities held for sale
Change in fair value of investments held at period end
Change in fair value of investments disposed/liquidated during the period
Exchange differences
Balance as of end of period
451.8
108.9
(72.9)
45.1
35.2
0.1
(14.2)
554.0
359.2
125.1
(93.4)
6.9
37.6
-
16.4
451.8
66 | Partners Group
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ANNUAL REPORT 2018
Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
As of the relevant balance sheet date, the Group held the following investments in investment programs, split into the following
operating segments:
In millions of Swiss francs
Note
31 December 2018 31 December 2017
Private equity
Private debt
Private real estate
Private infrastructure
Total financial investments
5.4.2.
5.4.2.
5.4.2.
5.4.2.
272.8
184.2
51.7
45.3
554.0
214.1
146.5
51.2
40.0
451.8
5.3.3. Assets and liabilities held for sale
The Group provides seed financing to certain early stage investment programs managed by the Group. The decision to provide seed
financing to an investment program is made by responsible bodies defined in the Group’s Rules of the Organization and of Operations
(“ROO”). These investment programs typically call the seed financing to invest in assets that are comparable to the Group’s
investments in investment programs that it manages (see note 5.3.2.). Therefore, the underlying assets of these investment programs
are typically financial assets valued at the adjusted net asset values.
Assets and liabilities of four (2017: five) such investment programs are classified and presented as assets and liabilities held for sale.
The assets and liabilities held for sale as of 31 December 2018 are comprised of private equity, private real estate and private debt
related assets and liabilities:
In millions of Swiss francs
31 December 2018 31 December 2017
Assets held for sale
Liabilities held for sale
Assets and liabilities held for sale, net
5.3.4. Short-term loans
91.0
(54.1)
36.9
260.8
(155.1)
105.7
Short-term loans of CHF 1’113.4 million (2017: CHF 713.4 million) relate to loans granted to various investment programs managed
by the Group and typically have an expected repayment date within the next twelve months. The Group considers granting short-term
loans as part of its maintenance of investment programs and, hence, as part of its operating activities. The Group received in 2018 an
at arm’s length compensation of CHF 41.9 million (2017: CHF 27.5 million) for these activities.
As of 31 December 2018, no short-term loans are past due or impaired (31 December 2017: none). There have been no losses in the
past and the loans are fully collateralized by the underlying investments and any unfunded capital commitments.
5.3.5. Other financial assets
The increase in other financial assets to CHF 166.7 million (2017: CHF 64.0 million) mainly resulted from recognized performance
fees which are not expected to be settled within twelve months.
In millions of Swiss francs
31 December 2018 31 December 2017
Long-term accrued revenues
Long-term loans
Other
Total other financial assets
134.2
31.5
1.0
166.7
56.3
4.4
3.3
64.0
Partners Group | 67
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
5.3.6. Capital commitments
As of 31 December 2018, the Group had capital commitment contracts of CHF 638.3 million (2017: CHF 595.2 million), of which
CHF 212.8 million (2017: CHF 215.0 million) were not yet called by the relevant investment manager. Capital commitments are called
over time, typically between one to five years following the subscription of the commitment. Capital commitments are not considered
to be a financial liability as the commitments do not constitute any obligation to pay cash until the capital is called.
5.4. Financial risk management
The Group has exposure to the following risks arising from its holding of financial instruments:
• credit risk;
• market risk (including currency risk, interest rate risk and price risk); and
• liquidity risk.
This note presents information about the Group’s exposure to each of the above listed risks, the Group’s objectives, policies and
processes for measuring and managing these risks, and the Group’s management of capital. Further quantitative disclosures are
included throughout the consolidated financial statements.
The BoD has overall responsibility for the establishment and oversight of the Group’s risk management framework. The BoD has
established the Risk & Audit Committee (“RAC”), which is responsible for developing and monitoring the Group’s risk management
policies. The RAC reports regularly to the BoD on its activities.
The Group’s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to
reflect changes in the market conditions and in the Group’s activities. The Group, through its training and management standards and
procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and
obligations.
The RAC oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the
adequacy of the risk management framework in relation to the risks faced by the Group. The RAC is assisted in its oversight role by the
Chief Risk Officer as well as by Internal Audit. Internal Audit undertakes both regular and ad-hoc reviews of risk management controls
and procedures, the results of which are reported to the RAC.
5.4.1. Credit risk
The following sections present the Group’s exposure to credit risk and how it is managed by the Group. Credit risk is the risk of
financial loss to the Group if a customer or counterparty to financial instruments fails to meet its contractual obligations and typically
arises from the Group’s receivables from customers and investment securities. The carrying amount of financial assets represents the
maximum credit exposure.
(a) Trade and other receivables
In millions of Swiss francs
Marketable securities
Trade receivables
Other receivables
Cash collateral
Accrued revenues
Derivative assets held for risk management
Total trade and other receivables
31 December 2018 31 December 2017
0.0
158.8
35.3
-
201.5
8.2
403.8
0.0
216.4
10.1
79.8
75.3
3.3
384.9
The increase in trade and other receivables mainly resulted from recognized but not yet invoiced performance fees.
68 | Partners Group
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
The Group’s exposure to credit risk is primarily influenced by the individual characteristics of each customer. The demographics of the
Group’s customer base, including the default risk of the industry and country in which customers operate, has less of an influence on
the Group’s exposure to credit risk. The majority of customers are investment programs that are managed by the Group. The credit
risk related to trade and other receivables with such customers can be considered minimal as they are collateralized against unfunded
client commitments. These commitments can be drawn upon to repay receivables and are backed by high-quality clients (e.g. pension
funds). In addition, underlying assets in the investment programs serve as additional security. Other counterparties of the Group are
typically regulated financial institutions or institutional investors with a high credit quality and, to a lesser extent, portfolio companies.
The Group periodically reviews the client exposure and concentration. There is no substantial concentration of credit risk.
The Group has never suffered any material losses from its trade and other receivables and does not expect any material default risk
based on the current structure of the relevant counterparties as well as the Group’s assessment of the economic environment in the
near future. The Group considers the probability of default to be very remote. As of the effective date of IFRS 9, the Group did not
identify material expected credit losses. There has been no significant change in the assessment of the Group’s credit risk related to
trade and other receivables since the transition and the Group does not expect any material credit losses. No material expected credit
losses have been identified as of 31 December 2018 (31 December 2017: none). As of the reporting date, no material receivables were
overdue (31 December 2017: none). The Group will reassess the credit risk for trade and other receivables on a regular basis.
(b) Accrued revenues
Accrued revenues mainly include revenues from management services that have not yet been invoiced. The Group has never suffered
any material losses and does not expect any material default risk related to accrued revenues. As of the effective date of IFRS 9, the
Group did not identify any material expected credit losses. There has been no significant change in the assessment of the Group’s
credit risk related to accrued revenues since the effective date of IFRS 9 and the Group does not expect any material credit losses. No
material expected credit losses have been identified as of 31 December 2018 (31 December 2017: none). The Group will reassess the
credit risk for accrued revenues on a regular basis.
(c) Loans
The Group’s loans are granted to various investment programs managed by the Group on behalf of its clients. These loans typically
have a short-term nature with an expected repayment date within twelve months. The credit risk related to these loans can be
considered minimal as they are collateralized against unfunded client commitments (or the clear visibility thereof), which can be drawn
upon to repay related loans and which are backed by high-quality clients (e.g. pension funds). In addition, underlying assets in the
investment programs serve as additional security. Granting of loans is subject to loan-to-value ratios. Nevertheless, and in order to
control the credit risk resulting from loans to investment programs, the Group has established a system-based loan approval process.
This process is supported by a risk policy framework and pre-defined approval authorities. During the loan approval process, rigorous
qualitative and quantitative checks are applied to ensure the high quality of the Group’s loan portfolio. The Group does not expect any
significant default risk in this regard. Finally, the Group has individually assessed the probability of default per loan class, the loss given
default and the exposure at default. Following the assessment, the Group has come to the conclusion that the probability of default
can be considered very remote. No material expected credit losses were identified as of the effective date of IFRS 9. The Group
reassesses the credit risk for short-term loans on a regular basis.
Long-term loans, if considered material, are individually assessed for impairment. For the years ended 31 December 2018 and 2017,
no loans were past due or impaired. There has been no significant change in the assessment of the Group’s credit risk related to loans
since the effective date of IFRS 9 and the Group does not expect any material credit losses. No material expected credit losses have
been identified as of 31 December 2018 (31 December 2017: none).
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Partners Group | 69
ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
(d) Other
The Group’s other credit risks arise from cash and cash equivalents. The surplus cash is typically transferred to the Company for cash
pooling (see note 5.4.3.). For bank deposits, typically, only independently rated parties with a minimum rating of “A-3” or equivalent
are accepted (as per Standard and Poor’s short-term issue credit ratings definitions). The Group has never suffered any impairment
losses on cash and cash equivalents. Based on historic data and the Group’s assessment of the potential exposure to credit risk in the
near future, the Group did not expect any material credit losses on cash and cash equivalents in line with IFRS 9 as of the effective
date of the new standard. There has been no significant change in the assessment of the Group’s credit risk related to cash and cash
equivalents since the effective date of IFRS 9 and the Group does not expect any material credit losses. No material expected credit
losses have been identified as of 31 December 2018 (31 December 2017: none). The Group will reassess the credit risk for cash and
cash equivalents on a regular basis.
5.4.2. Market risk
Market risk is the risk that changes in market prices - such as foreign currency exchange rates, interest rates and equity prices - will
affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters, while optimizing returns. The Group may buy and sell derivatives
in order to manage certain market risks. All such transactions are carried out within the guidelines defined in the Rules of the
Organization and of Operations as issued by the BoD.
(a) Currency risk
The Group is mainly exposed to transactional currency risk on receivables, payables, cash and cash equivalents as well as loans that
are denominated in a currency other than the functional currency of the respective subsidiaries. The currency risk mainly results from
exposures in Euros (EUR), US dollars (USD), British pounds (GBP) and Singapore dollars (SGD). In general, the Group economically
hedges foreign exchange exposures related to third party assets and liabilities. As a consequence, the Group’s net balance sheet
currency risk is limited mainly to its intercompany receivables and payables.
(b) Interest rate risk
The Group’s income and operating cash flows are substantially independent from changes in market interest rates. The Group is
mainly exposed to cash flow interest rate risk with respect to its cash and cash equivalents held at banks, short-term loans (see note
5.3.4.) as well as other financial assets. Such cash flows are dependent on changes in short-term market interest rates. Due to this
short-term nature and limited sensitivity, the Group does currently not actively manage its cash flow interest rate risk. At the reporting
date, the interest rate profile of the Group’s interest-bearing financial instruments was:
In millions of Swiss francs
Variable rate instruments
Financial assets
Financial liabilities
Fixed rate instruments
Financial assets
Financial liabilities
70 | Partners Group
2018
2017
412.2
(0.3)
411.9
1'145.7
(299.4)
846.3
932.1
(66.5)
865.6
720.6
(299.2)
421.4
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
Cash flow sensitivity analysis for variable rate instruments
A change of 50 basis points in interest rates at the reporting date would have increased/(decreased) profit or loss by the amounts
shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is
performed on the same basis as for the previous period.
In millions of Swiss francs
Profit or loss
50 bp increase
50 bp decrease
Variable rate instruments
2018
2017
2.1
(2.1)
4.3
(4.3)
Fair value sensitivity analysis for fixed rate instruments
The Group does not designate any fixed rate financial assets or liabilities as at fair value through profit or loss. Therefore, changes in
interest rates would not affect profit or loss.
(c) Price risk
The Group is exposed to equity securities price risk because of investments held by the Group and classified on the consolidated
balance sheet at fair value through profit or loss. The majority of the Group’s investments are entered into under investment
management contracts whereby the Group invests alongside investors in private equity, private debt, private real estate or private
infrastructure investment programs managed by the Group.
In assessing the price risk associated with the Group’s investments, a volatility ratio was applied to each of its investments classified as
marketable securities or financial investments. The Group used long-term data to determine the volatilities for each asset class.
In millions of Swiss francs
2018
Volatility
2017
Volatility
Carrying amount/volatility
Marketable securities (equity securities held for trading)
Financial investments:
Private equity
Private debt
Private real estate
Private infrastructure
Assets and liabilities held for sale
Total
0.0
272.8
184.2
51.7
45.3
36.9
590.9
7%
18%
5%
8%
7%
6%
0.0
7%
214.1
146.5
51.2
40.0
105.7
557.5
18%
5%
8%
7%
13%
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Partners Group | 71
ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
Based on the applied long-term volatility for the individual asset classes, the Group is exposed to the following equity price risk:
In millions of Swiss francs
Profit or loss
2018
2017
Marketable securities (equity securities held for trading)
0.0
0.0
Financial investments:
Private equity
Private debt
Private real estate
Private infrastructure
Assets and liabilities held for sale
Total
5.4.3. Liquidity risk
49.1
9.2
4.1
2.9
2.1
67.4
38.5
7.3
4.1
2.8
14.1
66.8
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due. The Group’s approach to
managing liquidity is to ensure that it has sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the Group’s reputation. The Group’s long-term contracts with clients
mitigate its exposure to liquidity risk.
In order to assess the development of its liquidity, the Group uses a cash flow forecasting tool which is integrated in the budgeting and
reporting process, and assists in monitoring cash flow requirements and optimizing its cash return on investments.
Cash flow forecasting is performed at group level. Typically, the Group ensures that it has sufficient cash on demand to meet expected
operational expenses as well as the servicing of financial obligations, excluding the potential impact of extreme circumstances that
cannot reasonably be predicted. Surplus cash held by the Group’s subsidiaries, over and above the balance required for working capital
management, is transferred to the Company to the extent permitted by regulatory and legal provisions. In addition, the BoD and
the Executive Committee (“ExCo”) monitor the liquidity available to the Group’s balance sheet on a semi-annual basis. The available
liquidity targeted should allow the Group to sustain its operations with minimal disruptions in a financial crisis scenario and/or a
depressed economic environment. The Group holds its cash in current accounts or invests it in time deposits, money market deposits
and marketable securities deemed to have appropriate maturities or sufficient liquidity to provide head-room as determined by the
above mentioned forecasts. In addition, the Group maintains the following lines of credit:
• The Group has an unsecured credit facility of CHF 400 million with a syndicate of Swiss banks. This credit facility can be used for
general corporate purposes with a primary focus on working capital financing. The facility is subject to covenants which were met
throughout the current and prior year.
• An additional unsecured credit facility of CHF 30 million can be used for current account overdrafts or for fixed advances with a
maturity of up to six months. The facility is subject to covenants which were met throughout the current and prior year.
72 | Partners Group
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ANNUAL REPORT 2018
Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
The following table discloses the financial liabilities with their contractual maturities:
In millions of Swiss francs
31 December 2018
Carrying
amount
6 months
or less
6 - 12
months
1 - 2
years
2 - 5
years
More than
5 years
Trade payables 1)
Derivative liabilities held for risk management 1)
Accrued revenue deductions 1)
Cash collateral1)
Other payables 1)
Long-term debt
Other long-term liabilities 2)
Unfunded commitments
32.0
71.6
0.1
32.0
0.3
71.6
0.1
0.3
126.9
126.9
299.4
28.6
212.8
212.8
299.4
8.2
20.4
1) Presented in the line item trade and other payables in the consolidated balance sheet.
2) This line item includes long-term accrued liabilities related to the investment programs and other third parties.
771.7
411.7
32.0
8.2
20.4
299.4
In millions of Swiss francs
31 December 2017
Carrying
amount
6 months
or less
6 - 12
months
1 - 2
years
2 - 5
years
More than
5 years
Trade payables 1)
108.2
108.2
Derivative liabilities held for risk management 1)
Accrued revenue deductions 1)
Cash collateral 1)
Other payables 1)
Long-term debt
Other long-term liabilities 2)
Unfunded commitments
5.9
66.5
26.7
5.7
5.9
5.7
66.5
26.7
299.2
2.1
299.2
2.1
215.0
215.0
729.3
422.3
5.7
-
2.1
299.2
1) Presented in the line item trade and other payables in the consolidated balance sheet.
2) This line item includes long-term accrued liabilities related to the investment programs and other third parties.
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Partners Group | 73
ANNUAL REPORT 2018
Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
5.5. Fair value measurement
Introduction
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
knowledgeable market participants at the measurement date in the principal, or in its absence, the most advantageous market to which
the Group has access to at that date. The fair value of a liability reflects its non-performance risk. The Group measures fair values
using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
• Inputs - other than quoted prices included within level 1 - that are observable for assets or liabilities, either directly (that is, as prices)
or indirectly (that is, derived from prices) (level 2).
• Inputs for assets or liabilities that are not based on observable market data (that is, unobservable inputs) (level 3).
The following table shows the fair value hierarchy of the Group’s financial assets and liabilities that are measured at fair value:
In millions of Swiss francs
Level 1
Level 2
Level 3
Total
31 December 2018
Marketable securities
Derivative assets held for risk management 1)
Assets held for sale
Financial investments
Financial assets
Derivative liabilities held for risk management 2)
Liabilities held for sale
Other long-term liabilities
Financial liabilities
1) Presented in the line item trade and other receivables in the consolidated balance sheet.
2) Presented in the line item trade and other payables in the consolidated balance sheet.
In millions of Swiss francs
Marketable securities
Derivative assets held for risk management 1)
Assets held for sale
Financial investments
Financial assets
Derivative liabilities held for risk management 2)
Liabilities held for sale
Other long-term liabilities
Financial liabilities
1) Presented in the line item trade and other receivables in the consolidated balance sheet.
2) Presented in the line item trade and other payables in the consolidated balance sheet.
74 | Partners Group
0.0
0.0
8.2
8.2
0.1
-
0.1
0.0
8.2
91.0
554.0
653.2
0.1
54.1
0.8
55.0
91.0
554.0
645.0
54.1
0.8
54.9
Level 1
Level 2
Level 3
Total
31 December 2017
0.0
0.0
3.3
3.3
5.9
-
5.9
0.0
3.3
260.8
451.8
715.9
5.9
155.1
1.0
162.0
260.8
451.8
712.6
155.1
1.0
156.1
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
The carrying amount for cash and cash equivalents, trade and other receivables, short-term loans, and trade and other payables are
expected to approximate the fair values given the short-term nature of these financial instruments. The carrying amounts for other
financial assets are expected to approximate fair values since time values do not materially differ.
The following tables show the reconciliation of all level 3 financial instruments in 2018 and 2017:
In millions of Swiss francs
Balance as of 1 January 2018
Purchases
Sales
Change in fair value 1)
Exchange differences
Balance as of 31 December 2018
In millions of Swiss francs
Balance as of 1 January 2017
Purchases
Sales
Change in fair value 1)
Exchange differences
Balance as of 31 December 2017
31 December 2018
Financial assets
Financial liabilities
712.6
160.3
(247.2)
38.5
(19.2)
645.0
156.1
44.7
(142.5)
(0.1)
(3.3)
54.9
31 December 2017
Financial assets
Financial liabilities
546.8
306.8
(210.8)
42.7
27.1
712.6
87.9
138.7
(78.3)
0.2
7.6
156.1
1) Presented in the line item finance income and expense in the consolidated income statement.
There were no transfers between levels in 2018 and 2017.
Financial investments and assets and liabilities held for sale
Financial investments and assets and liabilities held for sale, disclosed as level 3 financial instruments, consist of investments in
investment programs that the Group manages. The Group’s investments typically account for a stake of one percent in an investment
program. For these investments, the determination of fair value requires subjective assessment with varying degrees of judgment
depending on liquidity, concentration, pricing assumptions, the current economic and competitive environment and the risks affecting
the specific financial instrument. In such circumstances, valuation is determined based on management’s judgment about the
assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).
The Group applies control processes to ensure that the fair value of the financial instruments reported in the consolidated financial
statements, including those derived from pricing models, are in accordance with IFRS 13 and determined on a reasonable basis.
Control processes include the review and approval of new investments made on behalf of investors. The Group has several investment
committees. The investment selections and recommendations are made by the Specialized Investment Committees and the Global
Investment Committee, supported by the Global Portfolio Committee. These committees decide whether or not new investments
will be advised to the manager of the investment program. The controls also include reviews of profit and loss at regular intervals, risk
monitoring and reviews of price verification procedures and models, which are used to estimate the fair value of financial instruments
by senior management and personnel with relevant expertise who are independent of the trading and investment functions.
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Partners Group | 75
ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
Valuation techniques
Financial investments held by the Group consist of underlying assets and liabilities within investment programs. These investment
programs are in turn invested in direct and indirect equity and debt investments. The following valuation techniques are applied by
the Group to determine fair values of equity and debt investments in line with IFRS 13:
• market approach;
• income approach; and
• adjusted net asset value method.
Market approach
The market approach comprises valuation techniques such as market comparable companies and multiple techniques. A market
comparable approach uses quoted market prices or dealer quotes for similar instruments to determine the fair value of a financial
asset. A multiple approach can be used in the valuation of less liquid securities. Comparable companies and multiple techniques
assume that the valuation of unquoted direct investments can be assessed by comparing performance measure multiples of similar
quoted assets for which observable market prices are readily available. Comparable public companies based on industry, size,
development stage, strategy, etc. have to be determined. Subsequently, the most appropriate performance measure for determining
the valuation of the relevant direct investment is selected (these include but are not limited to EBITDA, price/earnings ratios for
earnings or price/book ratios for book values). Trading multiples for each comparable company identified are calculated by dividing
the value of the comparable company by the defined performance measure. The relevant trading multiples might be subject to
adjustment for general qualitative differences such as liquidity, growth rate or quality of customer base between the valued direct
investment and the comparable company set. The indicated fair value of the direct investment is determined by applying the relevant
adjusted trading multiple to the identified performance measure of the valued company.
Income approach
Within the income approach, the Group primarily uses the discounted cash flow method and the capitalization model. Expected cash
flow amounts are discounted to a present value at a rate of expected return that represents the time value of money and reflects the
relative risks of the direct investment. Direct investments can be valued by using the “cash flow to equity” method, or indirectly, by
deriving the enterprise value using the “cash flow to entity” method and subsequently subtracting the direct investment’s net debt in
order to determine the equity value of the relevant direct investment. Expected future cash flows based on agreed investment terms
or expected growth rates have to be determined. In addition, and based on the current market environment, an expected return of
the respective direct investment is projected. The future cash flows are discounted to the present date in order to determine the
current fair value.
Adjusted net asset value method
As a combination of the market and the income approach, the adjusted net asset value method is used. Indirect investments of
investment programs managed by the Group are typically valued at the indirect investments’ net asset values last reported by the
indirect investments’ general partners. When the reporting date of such net asset values does not coincide with the investment
programs’ reporting date, the net asset values are adjusted as a result of cash flows to/from an indirect investment between the
date of the most recently available net asset valuation and the end of the reporting period of the investment program, and further
information gathered by the investment advisor during its on-going investment monitoring process. This monitoring process includes,
but is not limited to, binding bid offers, non-public information on developments of portfolio companies held by indirect investments,
syndicated transactions, which involve such companies, and the application of reporting standards by indirect investments which do
not apply the principle of fair valuation.
Unobservable input factors
Where available, valuation techniques use market-observable assumptions and inputs. If such information is not available, inputs
may be derived by reference to similar assets and active markets, from recent prices for comparable transactions or from other
observable market data. When measuring fair value, the Group selects the non-market-observable inputs to be used in its valuation
techniques based on a combination of historical experience, derivation of input levels based upon similar investment programs with
observable price levels and knowledge of current market conditions and valuation approaches.
76 | Partners Group
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
Within its valuation techniques the Group typically uses different unobservable input factors. Significant unobservable inputs
include: EBITDA multiples (based on budgeted/forward-looking EBITDA or historical EBITDA of the issuer and EBITDA multiples of
comparable listed companies for an equivalent period), discount rates, capitalization rates, price/book as well as price/earnings ratios
and enterprise value/sales multiples. The investment program also considers the original transaction prices, recent transactions in
the same or similar instruments and completed third party transactions in comparable instruments, and adjusts the model as deemed
necessary. Further inputs consist of external valuation appraisals and broker quotes. A significant portion of the investment programs’
direct equity investments are measured using EBITDA multiples. EBITDA multiples used show wide ranges.
The value of level 3 direct equity investments valued by using unobservable input factors are directly affected by a change in that
factor. The change in valuation of level 3 direct equity investments may vary between different direct investments of the same
category as a result of individual levels of debt financing within such an investment. Level 3 direct debt investments are typically valued
using either a comparable debt approach or a waterfall approach. The comparable debt approach arrives at the valuation of a direct
debt investment by discounting its expected future cash flows to a present value with a benchmark rate derived from observable
market data. The waterfall approach takes into account the different seniority levels of debt in arriving at the valuation. Thus, the
effect of a change in the unobservable input factor on the valuation of such investments is limited to the debt portion not covered by
the enterprise value resulting from the valuation.
Sensitivity of fair values
From a Group perspective, financial investments and assets and liabilities held for sale are typically valued at the adjusted net asset
values of the investment programs. A reasonably possible change in the adjusted net asset value would have the following effects on
the fair value of these investments held by the Group with changes to be recognized in profit or loss:
In millions of Swiss francs
31 December 2018 31 December 2017
Adjusted net asset value (1% increase)
5.9
5.6
Although the Group believes that its estimates of fair values are appropriate, the use of different methodologies and different
unobservable inputs, especially in the underlying investments of investment programs, could lead to different measurements of fair
value. Due to the broad range and number of unobservable input factors used in the valuation of the investment programs’ direct
investments, particularly concerning the EBITDA multiple, a sensitivity analysis on these underlying unobservable input factors does
not result in meaningful outcomes.
2_Annual_Report_Finance_2018_en.indd 77
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Partners Group | 77
ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
6. Investments in associates
The Group accounted for investments in associates as of 31 December 2018 as summarized below:
In millions of Swiss francs
Principal
activity
Fair
value
Carrying
value
Ownership
Pearl Holding Limited, Guernsey ("Pearl")
LGT Private Equity Advisers, Liechtenstein ("LGT")
Total investments in associates
Private equity
investments
Asset
management
54.5
0.5
54.5
0.5
55.0
28%
40%
In millions of Swiss francs
31 December 2018 31 December 2017
Balance as of 1 January
Redemption of shares (Pearl)
Share of results (Pearl)
Share of results (LGT)
Exchange differences
Balance as of end of period
90.1
(28.0)
(3.8)
0.0
(3.3)
55.0
116.0
(42.9)
7.3
0.0
9.7
90.1
Summary of financial information of the investments in associates - 100%:
In millions of Swiss francs
31 December 2018 31 December 2017 31 December 2018 31 December 2017
Pearl
LGT
Total assets
Total liabilities
Equity
Revenues
Profit/(loss) for the period
196.9
3.4
193.5
7.7
(13.4)
319.4
1.2
318.2
45.5
26.1
1.9
0.7
1.2
2.9
0.0
7.1
5.9
1.2
9.6
0.0
The financial information is based on unaudited financial information as of the balance sheet date as received from LGT and Pearl.
Pearl Holding Limited
Pearl’s investments are managed on a discretionary basis by Pearl Management Limited, Guernsey, which is advised by Partners Group
AG, Switzerland (“PGAG”), in accordance with an investment advisory agreement. PGAG’s duties are to provide asset allocation,
commercial due diligence reviews, investment and disinvestment proposals and performance monitoring. For the described services,
the Group is entitled to receive administration, management and performance fees.
Share of results of associates
The share of results of associates resulting from Pearl is disclosed in profit or loss as net finance income and expense (see note 5.1.),
while the share of results of associates resulting from LGT (see note 5.2.) is disclosed as other operating income. The Group assesses
LGT’s results as comparable to management services and as a consequence discloses the results as operating income. Pearl’s results
are mainly driven by distributions and changes in fair value of the underlying investments, comparable to changes in fair value of
financial investments (see note 5.3.2.), which are presented as net finance income and expense in the consolidated income statement
(see note 5.1.).
78 | Partners Group
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ANNUAL REPORT 2018
Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
7. Trade and other payables
In millions of Swiss francs
Note
31 December 2018 31 December 2017
Trade payables
Goods and services received not yet invoiced
Derivative liabilities held for risk management
Accrued revenue deductions
Cash collateral
Contractual obligation to purchase treasury shares
16.
Other payables
Total trade and other payables
71.6
3.6
0.1
32.0
0.3
110.0
16.9
234.5
108.2
2.6
5.9
5.7
66.5
-
26.7
215.6
8. Contingencies
The Group has contingent liabilities in respect of the ordinary course of business. It is not anticipated that any material liabilities will arise
from such contingent liabilities.
9. Income tax
9.1. Income tax expense
9.1.1. Recognized in profit or loss
In millions of Swiss francs
Note
2018
2017
Current tax expense:
Current year
Under/(over) provided in prior years
Total current tax expense
Deferred tax expense/(income):
Deferred tax expense/(income), net
relating to the origination and reversal of temporary differences
9.2.
Total deferred tax expense/(income)
Total income tax expense
122.8
(0.0)
122.8
(4.6)
(4.6)
118.2
100.2
(3.2)
97.0
(2.2)
(2.2)
94.8
Partners Group | 79
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ANNUAL REPORT 2018 ANNUAL REPORT 2018
Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
9.1.2. Weighted average expected tax rate reconciliation
In millions of Swiss francs
Profit before tax
2018
2017
887.5
847.1
Weighted average expected Group tax rate
13.26%
10.77%
Expected tax expense
Non-tax-deductible expense and non-taxable income
Applicable tax rates differing from expected rate
Non-refundable withholding taxes
Changes in statutory applicable tax rate
Under/(over) provided in prior years
Other impacts
Total income tax expense
117.7
0.7
(0.6)
-
-
(0.0)
0.4
118.2
91.2
(1.9)
(0.2)
5.5
3.8
(3.2)
(0.4)
94.8
The Group calculated a weighted average tax rate, taking into account statutory tax rates of the Company and its subsidiaries in their
specific jurisdictions, and their contribution to total profit before tax.
9.2. Deferred tax assets and liabilities
Development of deferred tax assets and liabilities
Deferred tax assets and liabilities are recognized in respect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. The following table shows the development of
deferred tax assets and deferred tax liabilities.
In millions of Swiss francs
31 December 2018 31 December 2017
Deferred tax assets
Deferred tax liabilities
Deferred tax assets / (liabilities), net
23.6
(2.5)
21.1
24.7
(2.9)
21.8
In millions of Swiss francs
2018
2017
Balance as of 1 January, net
Changes recognized in profit or loss
Changes recognized in equity
Changes recognized in other comprehensive income
Exchange differences
Balance of deferred tax assets / (liabilities) as of 31 December, net
21.8
4.6
(5.6)
0.2
0.1
21.1
22.1
2.2
(1.6)
(0.4)
(0.5)
21.8
80 | Partners Group
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Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
Analysis of deferred tax assets and liabilities
The following table shows the gross amounts of deferred tax assets and liabilities by category. Movements in the significant assets and
liabilities classes giving rise to temporary differences are analyzed below:
In millions of Swiss francs
2018
Financial
investments
Other non-
current
assets
Defined
benefit plan
Share-based
payment
expenses
Accrued
variable
compensa-
tion & MCP
Others
Total
Balance as of 1 January 2018, net
Changes recognized in profit or loss
Changes recognized in equity
Changes recognized in other comprehensive income
Exchange differences
Balance as of 31 December 2018, net
(0.5)
0.2
-
-
0.0
(0.3)
(2.2)
(0.3)
-
-
0.0
(2.5)
(0.2)
0.1
-
0.2
-
0.1
13.6
4.0
(5.6)
-
0.1
12.1
9.0
2.3
-
-
0.0
11.3
2.1
(1.7)
-
-
0.0
0.4
In millions of Swiss francs
Financial
investments
Other non-
current
assets
Defined
benefit plan
Share-based
payment
expenses
Accrued
variable
compensa-
tion & MCP
Balance as of 1 January 2017, net
Changes recognized in profit or loss
Changes recognized in equity
Changes recognized in other comprehensive income
Exchange differences
Balance as of 31 December 2017, net
0.6
(1.1)
-
-
0.0
(0.5)
(3.1)
0.8
-
-
0.1
(2.2)
0.3
(0.1)
-
(0.4)
-
(0.2)
13.8
1.7
(1.6)
-
(0.3)
13.6
9.2
0.1
-
-
(0.3)
9.0
Others
Total
1.3
0.8
-
-
0.0
2.1
22.1
2.2
(1.6)
(0.4)
(0.5)
21.8
21.8
4.6
(5.6)
0.2
0.1
21.1
2017
Financial investments
Taxable temporary differences arise between the tax bases of financial investments and their carrying amounts (fair values with
regard to the application of IFRS 9) in the consolidated financial statements.
Other non-current assets
Taxable temporary differences arise between the tax bases of property and equipment as well as intangible assets and their carrying
amounts in the consolidated financial statements.
Defined benefit plan
The Group recognizes deferred tax assets or liabilities by applying IAS 19 (for further information see note 4.5.2.).
Share-based payment expenses
Taxable temporary differences arise (in accordance with IAS 12.68A) from the recognition of share-based payment expenses (see
notes 4.2. and 4.3.) in the applicable accounting period in accordance with IFRS 2, but the tax deduction based on these expenses
materializes in a different period; e.g. only when the options and shares are exercised or vested. Typically, the measurement of the tax
deduction is based on the share price at the date of exercise or vesting.
2_Annual_Report_Finance_2018_en.indd 81
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Partners Group | 81
ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
Accrued variable compensation & MCP
Taxable temporary differences arise between the tax bases of remuneration-related accruals and provisions and their carrying
amounts in the consolidated financial statements.
10. Other operating expenses
In millions of Swiss francs
2018
2017
Consulting expenses
Rental expenses and maintenance costs
Administrative expenses
Travel and representation expenses
Total other operating expenses
11. Property and equipment
In millions of Swiss francs
(14.3)
(14.2)
(22.1)
(17.2)
(67.8)
Land
Buildings
Construction
in progress
Office
furniture
Interior
fittings
Equipment
and
IT fittings
Cost
Balance as of 1 January 2018
7.0
5.9
Additions
Removals
Exchange differences
Balance as of 31 December 2018
Accumulated depreciation
Balance as of 1 January 2018
Depreciation
Accumulated depreciation on removals
Exchange differences
Balance as of 31 December 2018
Carrying amount
As of 1 January 2018
As of 31 December 2018
Impairment losses incurred in 2018
-
-
0.1
7.1
-
-
-
-
-
7.0
7.1
-
-
-
5.9
1.2
0.2
-
-
1.4
4.7
4.5
4.8
39.6
-
0.3
44.7
-
-
-
-
-
4.8
44.7
6.6
0.9
(1.3)
(0.1)
6.1
4.5
0.7
(1.3)
(0.1)
3.8
2.1
2.3
21.4
2.2
(1.2)
(0.2)
22.2
14.7
2.3
(1.2)
(0.1)
15.7
6.7
6.5
11.2
1.2
(2.8)
(0.1)
9.5
8.5
1.4
(2.8)
(0.1)
7.0
2.7
2.5
Construction in progress reflects the costs for the Group’s North American headquarters.
82 | Partners Group
(11.4)
(13.4)
(20.2)
(15.2)
(60.2)
2018
Total
56.9
43.9
(5.3)
0.0
95.5
28.9
4.6
(5.3)
(0.3)
27.9
28.0
67.6
nil
2_Annual_Report_Finance_2018_en.indd 82
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
In millions of Swiss francs
Land
Buildings
Construction
in progress
Office
furniture
Interior
fittings
Equipment
and
IT fittings
Cost
Balance as of 1 January 2017
7.3
5.9
Additions
Removals
Exchange differences
Balance as of 31 December 2017
Accumulated depreciation
Balance as of 1 January 2017
Depreciation
Accumulated depreciation on removals
Exchange differences
Balance as of 31 December 2017
Carrying amount
As of 1 January 2017
As of 31 December 2017
Impairment losses incurred in 2017
-
-
(0.3)
7.0
-
-
-
-
-
7.3
7.0
-
-
-
5.9
1.0
0.2
-
-
1.2
4.9
4.7
0.2
4.7
-
(0.1)
4.8
-
-
-
-
-
0.2
4.8
7.9
1.4
(2.7)
0.0
6.6
6.5
0.7
(2.8)
0.1
4.5
1.4
2.1
19.0
2.7
(0.4)
0.1
21.4
13.1
1.9
(0.4)
0.1
14.7
5.9
6.7
14.7
1.6
(5.3)
0.2
11.2
12.2
1.4
(5.2)
0.1
8.5
2.5
2.7
2017
Total
55.0
10.4
(8.4)
(0.1)
56.9
32.8
4.2
(8.4)
0.3
28.9
22.2
28.0
nil
Operating leases (leases as a lessee)
Non-cancellable operating leases are payable as follows:
In millions of Swiss francs
31 December 2018 31 December 2017
Less than one year
Between one and five years
More than five years
Total non-cancellable operating leases
10.8
27.7
0.3
38.8
8.0
31.8
1.2
41.0
The Group classifies its office rental payments under operating leases. None of the leases include contingent rentals. During the
current year, CHF 10.7 million was recognized as expenses in profit or loss in respect of operating leases (2017: CHF 10.6 million). The
Group received payments of CHF 0.6 million (2017: CHF 0.7 million) from sublease agreements. The total expected future sub-lease
payments from non-cancellable sub-leases as of 31 December 2018 are nil (2017: CHF 1.3 million).
2_Annual_Report_Finance_2018_en.indd 83
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Partners Group | 83
ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
12. Intangible assets
In millions of Swiss francs
Acquired
client
contracts
Goodwill
Software
Contract
costs
Other
intangible
assets
Cost
Balance as of 1 January 2018
4.9
33.2
Additions
Removals
Exchange differences
Balance as of 31 December 2018
Accumulated amortization and impairment losses
Balance as of 1 January 2018
Amortization
Accumulated amortization on removals
Exchange differences
Balance as of 31 December 2018
Carrying amount
As of 1 January 2018
As of 31 December 2018
Impairment losses incurred in 2018
-
-
(0.2)
4.7
4.5
0.4
-
(0.2)
4.7
-
-
(0.6)
32.6
-
-
-
-
-
14.6
3.7
(0.1)
-
18.2
9.6
3.3
(0.1)
-
12.8
36.5
9.5
-
(0.2)
45.8
15.2
8.0
-
(0.1)
23.1
0.4
-
33.2
32.6
5.0
5.4
21.3
22.7
2018
Total
96.4
13.2
(0.1)
(1.0)
7.2
-
-
-
7.2
108.5
5.6
0.5
-
-
6.1
1.6
1.1
34.9
12.2
(0.1)
(0.3)
46.7
61.5
61.8
nil
84 | Partners Group
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
In millions of Swiss francs
Cost
Balance as of 1 January 2017
Additions
Exchange differences
Balance as of 31 December 2017
Accumulated amortization and impairment losses
Balance as of 1 January 2017
Amortization
Exchange differences
Balance as of 31 December 2017
Carrying amount
As of 1 January 2017
As of 31 December 2017
Impairment losses incurred in 2017
Impairment testing for CGU’s containing goodwill
Acquired
client
contracts
Goodwill
Software
Contract
costs
Other
intangible
assets
4.7
-
0.2
4.9
3.6
0.8
0.1
4.5
1.1
0.4
33.2
10.2
-
0.0
4.4
0.0
33.2
14.6
-
-
-
-
33.2
33.2
7.1
2.5
0.0
9.6
3.1
5.0
21.4
15.2
(0.1)
36.5
9.3
5.9
0.0
15.2
12.1
21.3
6.1
1.1
-
7.2
5.0
0.6
-
5.6
1.1
1.6
2017
Total
75.6
20.7
0.1
96.4
25.0
9.8
0.1
34.9
50.6
61.5
nil
The carrying amount of goodwill as of 31 December 2018 (CHF 32.6 million; 2017: CHF 33.2 million) has been allocated to the
following cash generating units (“CGU”), which represent the lowest level within the Group at which the goodwill is monitored for
internal management purposes.
• Goodwill of CHF 17.5 million (2017: CHF 17.3 million) relating to the acquisition of Partners Group Real Estate LLC (“PG RE”)
in 2007, which was merged into Partners Group (USA) Inc. as of 1 January 2012, has been allocated to the private real estate
segment.
• Goodwill of CHF 15.1 million (2017: CHF 15.9 million) relating to the acquisition of Partners Group (Italy) SGR S.p.A. in 2013 (“PG
Italy”), which was merged into Partners Group (UK) Limited, as of 1 January 2017, has been allocated to the private equity segment.
3_Annual_Report_Finance_2018_en.indd 85
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Partners Group | 85
ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
The recoverable amounts of the private real estate and the private equity segments were based on their value in use. The value in
use was determined by discounting the future cash flows from the continuing use of the CGUs and was based on the following key
assumptions:
• Cash flows were projected based on the actual operating results and a five-year estimate (2019–2023). Cash flows for the time
thereafter were taken into account by calculating a terminal value based on the discount factor applied by the Group. No growth
rate was applied for the terminal value.
• Revenues were projected based on the development of the existing business, taking into account the generation of additional
business in the years 2019 to 2023.
• Other operating expenses growth was considered at a constant rate of 10% p.a. (2017: 10% p.a.).
• Personnel expenses growth was considered at a constant rate of 5% p.a. (2017: 5% p.a.) plus additional personnel expenses for
additional business revenues (i.e. 35% of additional revenues are expensed as additional personnel and general expenses (2017:
35%)).
• Pre-tax discount rates of 8.0% (PG RE; 2017: 8.9%) and 7.4% (PG Italy; 2017: 7.9%), respectively, were applied in determining the
recoverable amounts of the CGU’s. The Group applied market interest rates of 2.9% (PG RE; 2017: 2.4%) and 3.0% (PG Italy; 2017:
1.73%), adjusted by market risk premiums and industry weighted average beta factors.
• The impairment test resulted in a value in use higher than the carrying amount.
Management believes that any reasonably possible change in any of the key assumptions would not cause the carrying value of
goodwill of the CGUs to exceed the recoverable amounts.
13. Long-term debt
In millions of Swiss francs
31 December 2018 31 December 2017
Balance as of 1 January
Issuance of long-term debts
Accreted interest
Balance as of end of period
299.2
-
0.2
299.4
-
299.2
0.0
299.2
The Group issued the following corporate bonds denominated in Swiss francs and listed on the SIX Swiss Exchange
(ISIN: CH0361532895):
Date of
issue
Face value in
millions of CHF
Coupon
in %
Year of
maturity
Issue price
in %
Redemption price
in %
7 June 2017
300.0
0.150%
2024
100.052%
100.000%
The fair value of the corporate bonds as of 31 December 2018 was CHF 300.0 million (2017: CHF 298.9 million) and was determined
by the quoted market price.
86 | Partners Group
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
14. Share capital, capital management and reserves
In effective number of shares
31 December 2018 31 December 2017
Issued as of 1 January
Issued during the period
Issued as of 31 December - fully paid in
26'700'000
26'700'000
-
-
26'700'000
26'700'000
The issued share capital of the Company comprises 26’700’000 registered shares (2017: 26’700’000) at CHF 0.01 nominal value
each. The shareholders are entitled to receive dividends, as declared from time to time, and are entitled to one vote per share at
shareholder meetings of the Company.
Legal reserves
Legal reserves comprise the reserves which are to be maintained due to the legal requirements as indicated in the Swiss Code of
Obligations. The Group’s legal reserves amount to CHF 218’100 as of 31 December 2018 (31 December 2017: CHF 218’100),
consisting of CHF 217’100 (31 December 2017: CHF 217’100) for legal reserves from capital contributions and of CHF 1’000
(31 December 2017: CHF 1’000) for other legal reserves.
Treasury shares
Treasury shares are recognized at cost and presented separately within equity. At the balance sheet date, the Group held 207’805
(2017: 105’165) of the Company’s issued shares. The Group holds treasury shares to provide for existing share and option programs.
Contractual obligation to purchase treasury shares
In 2018, the Company entered into an agreement to purchase some of its registered shares (see note 16.). As of 31 December 2018,
the total notional amount of CHF 110.0 million is directly recognized in equity (31 December 2017: nil).
Translation reserves
Translation reserves comprise all foreign exchange differences arising from the translation of the financial statements of foreign
operations included in the consolidation.
Dividends
The Company pays a dividend once per financial year following the approval of the appropriation of available earnings by the owners of
the Company at the annual general meeting, typically held in May. The Company paid a dividend of CHF 19 per share on 16 May 2018
(17 May 2017: CHF 15). As the Company’s treasury shares are not eligible for a dividend payment, the dividend distribution of CHF
507.3 million approved in May 2018 (May 2017: CHF 400.5 million) was not fully distributed, i.e. a total of CHF 506.3 million was paid
out (May 2017: 397.4 million). After the balance sheet date, the BoD proposes a dividend distribution of CHF 587.4 million (CHF 22
per share) for 2018.
Capital management
The BoD’s objective is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain the
future development of the business. The BoD also monitors the level of dividend distributions to shareholders.
The Group may purchase its own shares on the market within the limits defined by the BoD. The timing of these purchases depends on
the market price and restrictions imposed by applicable laws. Primarily, these purchases are used in conjunction with the Group’s share
and option programs. Furthermore, the Company has authorized conditional capital of CHF 40’050. The BoD is authorized to increase
the share capital by up to 15% at its discretion as a result of exercised options and granting of shares.
There were no changes in the Group’s approach to capital management during the year. The Company and some of its subsidiaries are
subject to minimum capital requirements prescribed by external parties (e.g. banks) and are regulated by relevant authorities in the
corresponding countries. The capital requirements may depend on fixed costs, expenditures, key financial ratios, net assets and assets
under management. All these capital requirements have been met during 2018 and 2017.
3_Annual_Report_Finance_2018_en.indd 87
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Partners Group | 87
ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
Outstanding shares
The computation of the weighted average number of ordinary shares outstanding during the period is based on the following figures:
In effective number of shares
Balance as of 1 January 2018
Purchase of treasury shares
Disposal of treasury shares
31 December 2018
Shares
issued
Treasury
shares
Shares
outstanding
26'700'000
105'165
26'594'835
872'304
(872'304)
(769'664)
769'664
Balance as of 31 December 2018
26'700'000
207'805
26'492'195
Weighted average number of shares outstanding
during the period (360 days)
Shareholders above 5% (in % of shares issued)
Dr. Marcel Erni
Alfred Gantner
Urs Wietlisbach
BlackRock Inc.
In effective number of shares
Balance as of 1 January 2017
Purchase of treasury shares
Disposal of treasury shares
26'606'695
in %
10.01%
10.01%
10.01%
6.14%
Shares held
2'673'659
2'673'659
2'673'659
1'639'500
31 December 2017
Shares
issued
Treasury
shares
Shares
outstanding
26'700'000
180'607
26'519'393
271'421
(271'421)
(346'863)
346'863
Balance as of 31 December 2017
26'700'000
105'165
26'594'835
Weighted average number of shares outstanding
during the period (360 days)
Shareholders above 5% (in % of shares issued)
Dr. Marcel Erni
Alfred Gantner
Urs Wietlisbach
BlackRock Inc.
26'517'721
in %
10.01%
10.01%
10.01%
6.14%
Shares held
2'673'659
2'673'659
2'673'659
1'639'500
In 2015, the Group’s founding partners, Dr. Marcel Erni, Alfred Gantner and Urs Wietlisbach, each entered into a derivative
transaction with a third party concerning up to 4.1% of the Group’s total share capital over the next five years. In 2017, each of the
founding partners increased the percentage up to 5%. The transaction involves collars that expire on 17 June 2021, subject to early
termination, including optional early termination by the three founding partners. This transaction was not entered into with any intent
to change the size of the three founding partners’ stakes in the Company during the period until maturity of the collars.
88 | Partners Group
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ANNUAL REPORT 2018
Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
15. Earnings per share
In Swiss francs
Average fair value of one ordinary share during the period
Weighted average exercise price for shares under option during the period
2018
2017
708.92
595.51
596.23
489.19
Note
Earnings
per share
Profit for
the period
2018
Number of
shares
Profit for the period (in millions of Swiss francs)
769.3
Weighted average number of ordinary shares outstanding
14.
26'606'695
Basic earnings per share (in Swiss francs)
Weighted average number of shares under option during the period
Number of shares that would have been issued at fair value 1)
Diluted earnings per share (in Swiss francs)
1) Calculated on the basis of each individual share option grant.
28.91
28.65
Note
Earnings
per share
Profit for
the period
1'181'094
(937'813)
26'849'976
2017
Number of
shares
Profit for the period (in millions of Swiss francs)
752.3
Weighted average number of ordinary shares outstanding
14.
26'517'721
Basic earnings per share (in Swiss francs)
Weighted average number of shares under option during the period
Number of shares that would have been issued at fair value 1)
Diluted earnings per share (in Swiss francs)
1) Calculated on the basis of each individual share option grant.
28.37
28.09
1'006'222
(742'730)
26'781'213
As of 31 December 2018, the Group had 1’484’142 options and non-vested shares outstanding (2017: 1’360’808) (see note 4.3.). The
treasury shares necessary to cover the granted non-vested shares have already been placed in separate escrow accounts in the name of
the employees. Thus, the number of treasury shares (see note 14.) is already net of non-vested shares outstanding.
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Partners Group | 89
ANNUAL REPORT 2018
Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
16. Related party transactions
The Group has related party relationships with its subsidiaries (see note 17.), investments in associates (see note 6.), pension funds (see
note 4.5.2.), as well as with its management and significant shareholders and their related parties.
In 2018, associates purchased services from the Group in the amount of CHF 7.1 million (2017: CHF 9.8 million).
As of 31 December 2018, loans to related parties of the Group amounted to CHF 7.2 million (2017: CHF 3.5 million) and were
included in other financial assets. The loans to related parties of the Group bear interest at market-related interest rates.
The Group purchased treasury shares at arm’s length from its shareholders employed by the Group as follows:
In effective number of shares
2018
2017
Purchase of treasury shares from shareholders employed by the Group
5'499
11'578
Average purchase price per share (in Swiss francs)
714.63
561.57
In 2018, the Company entered into an agreement with an executive committee member to purchase some of its registered shares
at arm’s length. The maximum transaction value amounts to CHF 110 million, the maximum total number of securities amounts to
134’500 shares determined as follows:
• The share price is determined as the arithmetic average of the daily VWAPs (volume weighted average prices) of PGHN shares traded
over the SIX Swiss Exchange during the period starting on 21 January 2019 and ending on 15 February 2019.
• If the resulting determined share price is below CHF 700 per share, the transaction will not take place.
• If the resulting determined share price is above CHF 818 per share, the number of shares purchased will decrease such that the total
transaction value does not exceed CHF 110 million.
As the determined share price was below CHF 700 per share during the period starting on 21 January 2019 and ending on 15
February 2019, the transaction did not take place.
90 | Partners Group
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
The Group is managed by the BoD and the ExCo of the Company. The total personnel expenses for the BoD as well as the ExCo of the
Company are included in personnel expenses (see note 4.1.) and for non-executive board members in consulting expenses (see note
10.) and amount to:
In millions of Swiss francs
2018
2017
BoD:
Short-term employment benefits
Other compensation
Share-based payment expenses
Other long-term benefits (MCP)
Post-employment benefits
Total BoD
ExCo:
Short-term employment benefits
Other compensation
Share-based payment expenses
Other long-term benefits (MCP)
Post-employment benefits
Total ExCo incl. former members
Total BoD and ExCo
2.4
0.2
3.1
6.2
0.1
2.8
0.1
2.0
6.3
0.2
12.0
11.4
8.2
0.2
10.7
10.2
0.4
29.7
41.7
14.2
0.4
5.4
18.1
1.0
39.1
50.5
At the relevant balance sheet date, the BoD and the ExCo were holding the following number of options, non-vested shares and
shares:
Options and non-vested shares:
In effective number of options and non-vested shares
31 December 2018 31 December 2017
Board members (vested options)
Board members (non-vested options and shares)
Members of the ExCo (options and non-vested shares)
Total
Share ownership (unrestricted):
In effective number of shares
Board members
Members of the ExCo
Total
82'675
2'025
166'323
251'023
68'201
3'079
169'260
240'540
31 December 2018 31 December 2017
8'385'206
8'385'674
647'379
654'922
9'032'585
9'040'596
For further information in accordance with Art. 663c of the Swiss Code of Obligations, refer to note 14. of the entity accounts of
Partners Group Holding AG.
Partners Group | 91
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ANNUAL REPORT 2018
Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
17. Subsidiaries
17.1. Changes in scope of consolidation
Incorporation of new Group entities
Name
Incorporation date
Principal activity
Partners Group (Canada) Inc., Canada
15 November 2018
Support the Group’s investment activities in the region
Partners Group Advisors (DIFC) Limited,
United Arab Emirates
Partners Group Cayman Management IV Limited,
Cayman Islands
Partners Group Private Markets (Australia)
Pty. Ltd., Australia
8 July 2018
Support the Group’s investment activities in the region
29 March 2018
Serve as an investment manager
14 March 2018
Support the Group’s investment activities in the region
Partners Group Japan Kabushiki Kaisha, Japan
14 December 2017
Support the Group’s investment activities in the region
Partners Group US Management CLO LLC,
Delaware (USA)
17.2. Involvement with structured entities
24 August 2017
Investment Manager for the Group’s CLOs
Structured entities are entities that have been designed so that voting or similar rights are not the dominant factor in deciding who
controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means
of contractual arrangements. Such entities often have restricted activities and narrow and well-defined objectives.
Consolidated structured entities
The Group provides seed financing to certain early stage investment programs that the Group manages. The decision to provide seed
financing to an investment program is made by responsible bodies as defined in the Group’s ROOs. For further details see note 5.3.3.
Unconsolidated structured entities
The fair value of financial investments, as presented in note 5.3.2., represents the Group’s participation in unconsolidated investment
programs.
92 | Partners Group
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
17.3. Subsidiaries
Details of the Group’s operating subsidiaries as of the reporting date are set out below:
Name of the subsidiary
31 December 2018 31 December 2017
Principal
activity
Place of incor-
poration and
operation
Proportion of ownership interest
and voting rights held by the
Group
Partners Group AG
Investment manager
Switzerland
Partners Group Corporate Finance AG
Corporate Finance
Switzerland
Partners Group Advisors (DIFC) Limited
Partners Group Japan Kabushiki Kaisha
Investment manager
Investment manager
UAE
Japan
Partners Group Private Markets (Australia) Pty Ltd
Investment manager
Australia
Partners Group Prime Services Solutions (Philippines),
Inc.
Partners Group (Brazil) Investimentos Ltda.
Partners Group (Canada) Inc.
Investment
management services
Investment manager
Investment manager
Philippines
Brazil
Canada
Partners Group (Deutschland) GmbH
Investment manager
Germany
Partners Group (France) SAS
Investment manager
France
Partners Group (Guernsey) Limited
Investment manager
Guernsey
Partners Group (India) Private Limited
Investment manager
India
Partners Group (Luxembourg) S.A.
Investment manager
Luxembourg
Partners Group (Shanghai) Co., Ltd.
Investment manager
China
Partners Group (Singapore) Pte. Limited
Investment manager
Singapore
Partners Group (UK) Limited
Partners Group (USA) Inc.
Investment manager
Investment manager
UK
USA
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
100%
-
100%
100%
-
100%
100%
100%
100%
100%
100%
100%
100%
100%
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Partners Group | 93
ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
At the end of the reporting period, the Group had other subsidiaries that typically perform management services and/or typically hold
financial investments (see note 5.3.2.). The principal activities and their place of operation are summarized as follows:
Principal activity
31 December 2018
31 December 2017
Place of incorpora-
tion and operation
Number of subsidiaries
General partner to investment programs
General partner to investment programs
General partner to investment programs
General partner to investment programs
Manager to investment vehicles
Holding of land and property
Investment services
Manager to investment vehicles
Manager to investment programs
Client access management
Financing/treasury
Management services to investment programs
18. Subsequent events
Guernsey
Scotland
Germany
Cayman Islands
USA
USA
USA
UK
Luxembourg
Guernsey
Guernsey
Guernsey
18
18
3
1
4
3
1
1
1
3
1
6
3
3
1
3
3
1
1
1
3
1
6
3
No events took place between 31 December 2018 and 6 March 2019 that would require material adjustments to the amounts
recognized in these consolidated financial statements.
19. Summary of significant accounting policies
19.1. Basis of preparation
The consolidated financial statements are presented in Swiss francs, rounded to the nearest one hundred thousand. The figures
referred to in text passages are actual figures either rounded to the nearest Swiss franc or presented in millions of Swiss francs unless
otherwise stated. The statements are prepared on a historical cost basis, except for certain assets and liabilities which are stated at fair
value, such as derivative financial instruments, assets and liabilities held for sale and financial instruments at fair value through profit or
loss.
The preparation of financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions
that affect the application of policies and reported amounts of assets and liabilities, as well as income and expenses. The estimates
and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making judgments concerning carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized in the
period in which the estimate is revised if the revision affects only that period, or, in the period of the revisions and future periods if the
revision affects both current and future periods.
Judgments made by management in the application of IFRS that have a significant effect on the consolidated financial statements and
estimates with a significant risk of material adjustment in the next year are described in note 2.
94 | Partners Group
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
The RAC performed an assessment of the risks to which the Group is exposed to at its meeting on 7 March 2018. The risk assessment
covers, in particular, strategic and business risks, operational risks, financial risks (see note 5.4.) as well as reputational risks. For its
assessment, the RAC has taken into consideration the internal control system designed to monitor and reduce the risks of the Group.
Some line items in the consolidated income statement and the consolidated balance sheet have been aggregated and/or re-presented
and some note disclosures have been improved to make the information and disclosure more understandable. Comparative amounts
have been re-presented accordingly.
19.2. Changes in accounting policies
The accounting policies adopted for the year ended 31 December 2018 are consistent with those of the previous financial year, except
where new or revised standards were adopted, as indicated below.
19.2.1. Standards, amendments and interpretations effective for the first time
The following standards have been applied for the first time:
IFRS 9, “Financial Instruments”
As of 1 January 2018, the Group applied IFRS 9 Financial Instruments. IFRS 9 replaced IAS 39 and has the objective to establish
general principles for the financial reporting of financial assets and financial liabilities. The standard sets forth the requirements for
recognition, classification, measurement, derecognition and hedge accounting, and introduces a new impairment model for financial
assets. As the comparative figures in this Annual Report have not been restated, refer to the Annual Report 2017 for the accounting
policies under the previous standard (IAS 39).
Classification and measurement
Beginning on 1 January 2018, the Group has classified its financial assets in the following measurement categories:
• those to be measured subsequently at fair value through profit or loss (“FVTPL”); and
• those to be measured at amortized cost.
The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash
flows.
IFRS 9 largely retains the existing requirements of IAS 39 for the classification of financial liabilities.
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Partners Group | 95
ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
The Group’s management has assessed which business models apply to the financial assets held by the Group at the date of initial
application of IFRS 9 and has classified its financial instruments into the appropriate IFRS 9 categories. The following table explains
the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Group’s
financial assets and liabilities as of 1 January 2018:
In millions of Swiss francs
Financial assets
Original classification
under IAS 39
New classification
under IFRS 9
Original carrying
amount under
IAS 39
New carrying
amount under
IFRS 9
Cash and cash equivalents
Loans and receivables
Amortized cost
Marketable securities
Trade receivables 1)
Other receivables 1)
Cash collateral 1)
Accrued revenues
Held-for-trading
Mandatorily FVTPL
Loans and receivables
Amortized cost
Loans and receivables
Amortized cost
Loans and receivables
Amortized cost
Loans and receivables
Amortized cost
Derivative assets held for risk management 1)
Held-for-trading
Mandatorily FVTPL
Short-term loans
Assets held for sale
Financial investments
Other financial assets
Total financial assets
Financial liabilities
Trade payables 2)
Cash collateral 2)
Derivative liabilities held for risk management 2)
Liabilities held for sale
Long-term debt
Other long-term liabilities
Other long-term liabilities
Total financial liabilities
Loans and receivables
Amortized cost
Held-for-trading
Mandatorily FVTPL
Designated FVTPL
Mandatorily FVTPL
Loans and receivables
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
FVTPL
FVTPL
Mandatorily FVTPL
Mandatorily FVTPL
Amortized cost
Amortized cost
Amortized cost
Amortized cost
FVTPL
Mandatorily FVTPL
1) Presented in the line item trade and other receivables in the consolidated balance sheet.
2) Presented in the line item trade and other payables in the consolidated balance sheet.
852.3
0.0
216.4
10.1
79.8
75.3
3.3
713.4
260.8
451.8
64.0
852.3
0.0
216.4
10.1
79.8
75.3
3.3
713.4
260.8
451.8
64.0
2'727.2
2'727.2
108.2
66.5
5.9
155.1
299.2
1.1
1.0
108.2
66.5
5.9
155.1
299.2
1.1
1.0
637.0
637.0
96 | Partners Group
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
Impairment of financial assets
The new standard replaces the ‘incurred loss’ with an ‘expected loss’ impairment approach for relevant financial instruments. The
Group has identified the following financial assets as subject to the expected credit loss model. These are held within a business
model that has the objective to hold and collect the contractual cash flows and where the contractual cash flows only include principal
payments and interest:
• Cash and cash equivalents where the Group applies the ‘general impairment approach’. The general impairment approach involves
a three-stage approach. The measurement basis of the loss allowance are 12 month expected credit losses unless a significant
increase in credit risk occurs. In this case, the measurement basis changes to lifetime expected losses, unless the increase reverses.
• Short-term loans where the Group applies the ‘general impairment approach’.
• Trade and other receivables as well as other financial assets where the Group applies the ‘simplified impairment approach’ using the
lifetime expected loss provision. Within the simplified impairment approach, the loss allowance is always measured at an amount
equal to lifetime expected credit losses.
For further details see note 5.4.1.
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Partners Group | 97
ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
IFRS 15, “Revenue from Contracts with Customers”
The International Accounting Standards Board has issued a new standard, IFRS 15, for the recognition of revenues that replaces
existing revenue recognition guidance, including IAS 18 “Revenue”, IAS 11 “Construction Contracts” and IFRIC 13 “Customer Loyalty
Programmes.” IFRS 15 establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15,
revenue is recognized when it satisfies its performance obligations in a contract at an amount that reflects the consideration to which
an entity expects to be entitled in exchange for transferring goods or services to a customer.
The Group has adopted IFRS 15 as issued in May 2014, which resulted in changes in accounting policies, but did not result in any
adjustments to the amounts recognized in the financial statements.
Management has assessed the impact of IFRS 15 on the various revenue streams and contractual agreements of the Group, analyzing
the five-step approach as set out in the standard. Management has concluded that there is no change to the method of revenue
recognition or financial statement presentation applied in previous financial years as a result of the adoption of IFRS 15.
Management fees and other revenues, performance fees
The accounting policies relating to management fees and other revenues as well as performance fees are outlined in note 19.7.
Based on the Group’s assessment, the application of IFRS 15 did not result in differences in the timing of revenue recognition for these
services.
Revenue deductions
Rebates are typically paid either as fee discounts to select large clients or to facilitate mandate implementation through the Group’s
managed comingled investment programs while avoiding double fee layers.
Based on the Group’s assessment, the application of IFRS 15 did not result in differences in the timing of revenue recognition for these
services.
Contract costs
The accounting policy relating to contract costs is outlined in note 19.17.
Based on the Group’s assessment, the application of IFRS 15 did not result in differences in accounting for contract costs compared to
IAS 18.
Transition
The adoption of the new standard had no material impact on the Group’s retained earnings and therefore no impact was recognized in
retained earnings as of 1 January 2018.
Amendments and interpretations
The following amendments and interpretations have been applied for the first time but have no significant impact on the Group’s
financial statements:
• Annual Improvements to IFRSs 2014-2016 Cycle various standards (Amendments to IFRS 1 and IAS 28)
• Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2)
• IFRIC 22 Foreign Currency Transactions and Advance Consideration
98 | Partners Group
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
19.2.2. Standards, amendments and interpretations to existing standards that are not yet effective and might be relevant to
the Group, but have not been early adopted
The following new and revised standards, amendments and interpretations have been issued by the date the consolidated financial
statements were authorized for issue, but are not yet effective and are not adopted early in these consolidated financial statements.
Their impacts on the consolidated financial statements of the Group have not yet been systematically analyzed. The expected impacts
as disclosed in the table below reflect a first assessment by the Group’s management.
Standard / Interpretation
New standards or interpretations
IFRS 16, “Leases”
IFRS 17, “Insurance Contracts”
Revisions and amendments of standards and interpretations
IFRIC 23 Uncertainty over Income Tax Treatments
Plan Amendment, Curtailment or Settlement
(Amendments to IAS 19)
Prepayment Features with Negative Compensation
(Amendments to IFRS 9)
Long-term Interests in Associates and Joint Ventures
(Amendments to IAS 28)
Plan Amendment, Curtailment or Settlement
(Amendments to IAS 19)
Annual Improvements to IFRS Standards 2015–2017
Cycle – various standards
Amendments to References to Conceptual
Framework in IFRS Standards
Definition of a Business
(Amendments to IFRS 3)
Definition of Material
(Amendments to IAS 1 and IAS 8)
* No significant impact is expected on the consolidated financial statements of the Group.
** The impact on the consolidated financial statements is explained in the following page.
Effective date
Planned adoption
by the Group
**
1 January 2019
Reporting year 2019
*
*
*
*
*
*
*
*
*
*
1 January 2021
Reporting year 2021
1 January 2019
Reporting year 2019
1 January 2019
Reporting year 2019
1 January 2019
Reporting year 2019
1 January 2019
Reporting year 2019
1 January 2019
Reporting year 2019
1 January 2019
Reporting year 2019
1 January 2020
Reporting year 2020
1 January 2020
Reporting year 2020
1 January 2020
Reporting year 2020
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Partners Group | 99
ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
IFRS 16, “Leases”
The International Accounting Standards Board has issued a new standard for leases that replaces existing leases guidance, including
IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement contains a Lease”, SIC-15 “Operating Leases - Incentives“ and SIC-27
“Evaluating the Substance of Transactions Involving the Legal Form of the Lease”. Under the new standard, an asset (the right to use
the leased item) and a financial liability representing the present value of the outstanding lease payments are recognized. The only
exemptions are short-term leases and low-value leases. In addition, the nature of expenses related to these leases will change as IFRS
16 replaces the straight-line operating lease expense with a depreciation charge on the right-of-use assets and interest expense of
lease liabilities.
The most significant impact identified is that the Group will recognize additional assets and liabilities for the use of its office facilities,
which are currently classified as operating leases (see note 11.). The Group uses the optional exemptions as described above. Based
on the information currently available, the Group estimates that it will recognize right-of-use assets in the range of CHF 50.0 million
to CHF 55.0 million as of 1 January 2019. The actual impact may change because the Group’s new accounting policies are subject to
change until the Group presents its first financial statements that include the initial application.
The Group will apply IFRS 16 initially on 1 January 2019, using the modified retrospective approach. Therefore, the cumulative
effect of adopting IFRS 16 will be recognized as an adjustment to the opening balance as of 1 January 2019, with no restatement of
comparative information.
19.3. Basis of consolidation
(a) Subsidiaries
The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities)
controlled by the Company (its “subsidiaries”). The Company controls an investee (entity) if and only if the Company has all of the
following:
• power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
• exposure, or rights, to variable returns from its involvement with the investee; and
• ability to use its power over the investee to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above.
When the Company holds less than a majority of the voting rights of an investee, it has power over the investee when the voting rights
are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all
relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power,
including:
• the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
• potential voting rights held by the Company, other vote holders or other parties;
• rights arising from other contractual arrangements; and
• any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the
relevant activities at the time when decisions need to be made, including voting patterns at previous shareholders meetings.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses
control over the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in
the consolidated statement of comprehensive income from the date the Company gains control until the date when the Company
ceases to control the subsidiary.
Whenever necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with
the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full upon consolidation.
100 | Partners Group
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
When the Group loses control over a subsidiary, a gain or loss is recognized in profit or loss and is calculated as the difference
between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous
carrying amount of the assets (including goodwill), and liabilities of the subsidiary. When assets of the subsidiary are carried at
revalued amounts or fair values and the related cumulative gains or losses have been recognized in other comprehensive income and
accumulated in equity, the amounts previously recognized in other comprehensive income and accumulated in equity are accounted
for as if the Group had directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained
earnings as specified by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date when control
is lost is regarded as the fair value on initial recognition for subsequent accounting under IFRS 9 “Financial Instruments” or, when
applicable, the cost on initial recognition of an investment in an associate or a joint venture.
(b) Associates
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial
and operating policy decisions of the investee but is not control or joint control over those policies.
The Group accounts for its interest in associates using the equity method.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured
receivables, the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the
associate.
Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the
associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Based on the Group’s assessment of each individual associate, the share of results of associates is disclosed as operating income if
comparable to revenues from management services. If the share of results is mainly driven by distributions and changes in fair value of
the underlying investments, comparable to changes in fair value of financial investments, the share of results is presented as finance
income and expense in the consolidated income statement.
19.4. Segment reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating
segments’ gross segment results are reviewed regularly by the Group’s BoD to assess their performance and to make decisions about
resources to be allocated to the segments for which discrete financial information is available.
19.5. Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Swiss
francs.
(b) Foreign currency transactions
Transactions in foreign currencies are translated at the foreign currency exchange rates at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are translated at each balance sheet date to the functional currency at
the foreign currency exchange rate of that date. Foreign exchange differences arising on translation of such foreign denominated
monetary asset and liabilities are recognized in profit or loss. Non-monetary assets and liabilities that are measured in terms of
historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and
liabilities denominated in foreign currencies that are stated at fair value are translated to the functional currency at the applicable
foreign currency exchange rate of the date the fair value is determined.
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
(c) Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising from consolidation, are translated
to Swiss francs at foreign currency exchange rates applicable at the balance sheet date. The revenues and expenses as well as cash
flows of foreign operations are translated to Swiss francs at the average rate of the period.
Resulting foreign currency translation differences are recognized in other comprehensive income, and presented in translation
reserves in equity. When the disposal or partial disposal of a foreign operation results in losing control or significant influence over an
entity (i.e. the foreign operation) the cumulative amount in translation reserves (related to the specific foreign operation) is reclassified
to profit or loss as part of the gain or loss on disposal.
(d) Applied foreign currency exchange rates
The Group applied the following currency exchange rates against the Swiss franc:
Year
2018
Year
2017
Currency
Balance sheet rate
Average rate
EUR
USD
GBP
SGD
1.1267
0.9853
1.2559
0.7230
1.1548
0.9785
1.3056
0.7253
Currency
Balance sheet rate
Average rate
EUR
USD
GBP
SGD
1.1704
0.9748
1.3190
0.7294
1.1118
0.9844
1.2683
0.7132
19.6. Financial instruments
Recognition
Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial
liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instrument.
Financial assets
Classification
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing
financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the
change in the business model.
The Group classifies its financial assets in the following measurement categories:
• those to be measured subsequently at fair value through profit or loss; and
• those to be measured at amortized cost.
The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will be recorded in profit or loss. Investments in debt instruments will be measured
at amortized cost if the objective of the business model is to hold and to collect contractual cash flows and contractual cash flows
represent solely payments of principal and interest. See note 19.2. for details about each type of financial asset.
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through
profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial
assets carried at fair value through profit or loss are expensed in profit or loss.
Subsequent measurements of debt instruments depend on the Group’s business model for managing the asset and the cash flow
characteristics of the asset. There are two measurement categories into which the Group classifies its debt instruments:
• Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments
of principal and interest are measured at amortized cost. A gain or loss on a debt investment that is subsequently measured at
amortized cost and is not part of a hedging relationship is recognized in profit or loss when the asset is derecognized or impaired.
Interest income from these financial assets is included in finance income using the effective interest rate method.
• Fair value through profit or loss: Assets that do not meet the criteria for amortized cost are measured at fair value through profit
or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a
hedging relationship is recognized on a net basis in profit or loss in the period in which it arises.
Financial liabilities
Financial liabilities are classified as measured at amortized cost or FVTPL.
• A financial liability is classified as at FVTPL if it is a derivative or it is designated as such on initial recognition. Financial liabilities at
FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss.
• Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and
foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.
19.7. Revenue recognition
Revenue comprises the fair value for the rendering of services, net of value-added tax and rebates and after eliminating sales within
the Group. No revenue is recognized if there are significant uncertainties regarding the recovery of the consideration due.
The Group is active in different businesses (see note 3.). Within the different businesses, the Group earns income for its various
activities, which are further explained and outlined below:
Management fees and other revenues
The Group earns investment management fees for discretionary mandates, typically based on long-term contracts. The fees are often
based on the investment exposure of investors in the investment structures and are often payable on a quarterly basis in advance. The
performance obligation of the Group in respect of these fees is to manage the investment structures on an ongoing basis. Ongoing
investment management fees including all non-performance related fees are recognized over time, based on the specific contracts.
In the process of structuring new products, the Group typically receives a fee for its services in connection with establishing
investment programs and related legal and structuring work. These organizational fees are always one-off fees, which are typically
received when a new investor commits into the structure. The structuring of the relevant investment programs represents a
separate performance obligation of the Group, and therefore revenue is recognized at the point in time when the investor commits.
Occasionally, the Group also receives transaction fee income relating to private market transactions. These transaction fees are
typically one-time occurring. The performance obligation of the Group is satisfied by the execution of the private market transaction,
and therefore revenue is recognized at the point in time when the execution of the transaction is completed.
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
Performance fees
Typically, performance fees are recognized so that they do not exceed the portion of performance fees from realized investments and
so that there is a sufficiently large cushion for any potential negative development on the remaining portfolio, therefore resulting in a
very low probability that these fees are subject to a reversal in a potential claw-back situation.
Accordingly, the recognition of performance fees of investment programs with a claw-back is assessed based on a three-step
approach once a pre-defined return hurdle has been exceeded: (1) the total proceeds from realized investments are determined
and the corresponding costs of such realized as well as of fully written-off investments are deducted (“Net Proceeds”), (2) the NAV
of unrealized investments is determined. The respective NAV will be written down (in a so-called “Write-Down Test”) to the extent
that the probability of a future claw-back risk becomes minimal. Then, the corresponding costs of such unrealized investments
are deducted, resulting in a “Write-Down NAV”. This Write-Down NAV is added to the Net Proceeds. In the final third step (3),
performance fees to be recognized are calculated by multiplying the lower of (1) and (2) by the applicable performance fee rate, if the
value is positive.
On a quarterly basis, the Write-Down Test is applied to all private markets investment programs with a claw-back. The discount
applied in the Write-Down Test may vary from investment program to investment program and considers specific risk characteristics,
including macroeconomic, (geo-) political and investment program-specific risk factors. The discount applied in the Write-Down Test
is regularly assessed by the Group and reviewed by the Board of Directors. As of 31 December 2018, the applied discounts was 50%
(31 December 2017: between 50% and 80%).
Revenue deductions
Revenue deductions include the Group’s payments to third parties, such as rebates. Third party payments may be one-off or also
recurring, depending on individual agreements. Rebates to clients are typically for fees charged which were earned when investing
through a pooling vehicle, in order to avoid the double charging of fees.
19.8. Other operating income
Other operating income comprises income resulting from the ordinary course of business but that is not revenue from management
services, net. Other operating income includes operating income on short-term loans, true-up compensation on management and
organizational fees.
19.9. Leases
Leases where the lessor substantially retains all the risks and rewards of ownership are classified as operating leases. Payments made
under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the
period of the lease. Lease incentives are recognized in profit or loss as an integral part of total lease expense. The majority of the
Group’s lease expenses result from rental agreements, especially office space rental agreements, and are classified as operating leases.
19.10. Consulting expenses
Consulting expenses comprise BoD compensation (non-executive) as well as legal, consulting and other fee expenses to third parties.
19.11. Finance income and expense
Net finance income and expense comprises bank interest income and expense, dividend income, gains and losses on revaluations of
financial instruments and foreign exchange gains/losses.
Dividend income is recognized in profit or loss on the date the entity’s right to receive payments is established, which in the case of
quoted securities is typically the ex-dividend date.
19.12. Income tax expense
Income tax expense for the period comprises current and deferred tax expense. Income tax expense is recognized in profit or loss
except to the extent that it relates to items recognized directly in equity.
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
Current income tax relates to the expected taxes payable on the taxable income for the period, using tax rates enacted or substantially
enacted at the balance sheet date, and any adjustments to taxes payable in respect of previous periods.
Deferred income tax is recognized, using the balance sheet liability method, on temporary differences between the tax basis of assets
and liabilities and their carrying amounts included in the consolidated financial statements. The following temporary differences are
not considered in accounting for deferred taxes: the initial recognition of goodwill, the initial recognition of assets or liabilities that
affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that their reversal
is not probable in the foreseeable future. Deferred income tax is determined using tax rates (and laws) that have been enacted or
substantially enacted as of the balance sheet date and are expected to apply when the related deferred income tax asset is realized or
the deferred income tax liability is settled.
Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the
temporary differences can be utilized.
19.13. Cash and cash equivalents
Cash and cash equivalents include cash on hand and call deposits held with banks and are measured at amortized cost. Bank
overdrafts are shown in current liabilities of the consolidated balance sheet.
19.14. Trade and other receivables
Trade and other receivables are measured at amortized cost, less impairment losses.
19.15. Assets and liabilities held for sale
The Group may seed capital into investment programs that the Group typically manages with the objective to provide initial scale
and facilitate marketing of the investment programs to third party investors. For these assets and liabilities held for sale, the Group is
actively seeking to reduce its share in seed financed investment programs by recycling capital back into cash or by diluting.
Those investment programs deemed to be controlled under IFRS 10 are classified as held for sale and are presented in the separate
balance sheet line items assets held for sale and liabilities held for sale. Such assets and liabilities held for sale are measured at the
lower of their carrying amount and fair value less costs to sell.
Investments that are subsequently disposed of or diluted, such as the Group is no longer deemed to have control under IFRS 10,
will subsequently be re-classified to investments at fair value through profit or loss and presented as financial investments in the
consolidated balance sheet.
19.16. Property and equipment
Property and equipment is stated at cost less accumulated depreciation and impairment losses. Costs include expenses that are
directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the costs of the item can be measured
reliably. All other repairs and maintenance costs are charged to profit or loss in the financial period in which they are incurred.
Depreciation of property and equipment is calculated using the straight-line method to allocate the cost of each asset, minus its
residual value, over its estimated useful life, as follows:
• Buildings
• Interior fittings
30–50 years
5–10 years
• Office furniture
5 years
• Equipment and IT fittings
3–5 years
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ANNUAL REPORT 2018
Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
Major renovations are depreciated over the remaining estimated useful life of the related asset or to the date of the next major
renovation, whichever is sooner. Land is not depreciated.
The carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount (see note 19.19.).
Gains and losses on disposals of property and equipment are determined by comparing proceeds with the carrying amount and are
included in profit or loss.
19.17. Intangible assets
(a) Client contracts
Client contracts, which the Group acquired and which are recognized as intangible assets, have definite useful lives. Such intangible
assets are carried at cost less accumulated amortization and impairment losses.
(b) Goodwill
Goodwill arises upon the acquisition of subsidiaries and is included in intangible assets.
The Group measures goodwill at the acquisition date as the total of:
• the fair value of the total consideration transferred; plus
• the recognized amount of any non-controlling interest in the acquiree; plus - if the business combination is achieved in stages - the
fair value of the existing equity interest in the acquiree; less
• the net recognized amount (typically fair value) of the identifiable assets acquired and liabilities (including contingent liabilities)
assumed.
When the excess is negative, a gain on a bargain purchase is recognized immediately in net finance income and expense in the
consolidated income statement.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units and is not amortized
but tested annually for impairment.
(c) Software
Acquired software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. Software
recognized as an asset is carried at cost less accumulated amortization and impairment losses.
(d) Contract costs
The Group may make payments to secure investment management revenue contracts. These amounts paid are considered a cost
to obtain a contract and are amortized using the straight-line method which is consistent with the transfer to the customer of the
services to which the asset relates. This is typically between three to five years.
(e) Subsequent expenditure
Subsequent expenditure on capitalized intangible assets is capitalized only when it increases future economic benefits embodied in
the intangible asset to which it relates. All other subsequent expenditure is expensed in profit or loss as incurred.
(f) Amortization
Amortization is recognized in profit or loss on a straight-line basis over the estimated useful life of intangible assets unless such life
is indefinite. Goodwill and other intangible assets with an indefinite useful life are tested at least annually for impairment as of the
balance sheet date. Intangible assets with a determinable useful life are amortized from the date that they are available for use.
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
The estimated useful life of intangible assets is as follows:
• Goodwill
• Software
• Placing expenses
• Client contracts
indefinite
3–5 years
3–5 years
3–5 years
• Other intangible assets
3–10 years
19.18. Investments
(a) Financial investments
Financial investments (see note 5.3.1.) are measured at fair value through profit or loss. The fair values of quoted investments are
based on current bid prices. If the market for a financial asset (including unlisted securities) is not active, the Group establishes fair
values by using various valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments
that are substantially the same and discounted cash flow analysis refined to reflect the issuer’s specific circumstances. For further
explanations in connection with the determination of fair value please refer to note 5.5.
(b) Loans
Loans are non-derivative financial assets with fixed or determinable payments, which are not quoted in an active market and in respect
of which there is no intention of trading. They are included in current assets (short-term loan, see note 5.3.4.), except for amounts with
maturities greater than 12 months after the balance sheet date, which are classified as non-current assets (other financial assets).
19.19. Impairment of assets
(a) Financial assets
The Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortized
cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 5.4.1. details
the Group’s credit risk assessment of the financial assets.
For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be
recognized from initial recognition of the receivables.
(b) Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than deferred tax assets, are reviewed at each reporting date
to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is
estimated. For goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable
amount is estimated each year at the same time.
The recoverable amount of an asset or cash-generating unit (“CGU”) is the greater of its value in use and its fair value less costs to
sell. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment
testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows
from continuing use that are largely independent of the cash inflows of other assets or groups of assets (CGU). For the purpose of
goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested
reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is
allocated to groups of CGUs that are expected to benefit from the synergies of the combination.
An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment
losses are recognized in profit or loss. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying
amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units)
on a pro rata basis. An impairment loss in respect of goodwill is not reversed.
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ANNUAL REPORT 2018
Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications
that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed
the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
19.20. Trade and other payables
Trade and other payables are obligations to pay for goods and services that have been rendered in the ordinary course of business
from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as
non-current liabilities.
Trade and other payables are recognized initially at fair value and subsequently measured at amortized cost.
19.21. Provisions
Provisions are recognized when: (i) the Group has a present legal or constructive obligation as a result of past events; (ii) it is more
likely than not that an outflow of resources will be required to settle the obligation; and (iii) the amount can be reliably estimated.
If the effect is material, provisions are determined by discounting the expected future cash flows at the pre-tax rate that reflects
current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
19.22. Employee benefits
(a) Defined benefit plan
Group companies operate various pension schemes. The schemes are funded through payments to insurance companies or trustee-
administered funds, determined by periodic actuarial calculations. The Group has both defined benefit and defined contribution plans.
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no
legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all benefits to employees
relating to employee services in the current and prior periods. For defined contribution plans, the Group pays contributions to publicly
or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment
obligations once the contributions have been paid. The contributions are recognized as personnel expenses in the consolidated income
statement when due.
A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined benefit plans specify an amount of
pension benefit that an employee will receive on retirement, typically dependent on one or more factors such as age, years of service
and compensation. The benefits paid to employees in Switzerland qualify as a defined benefit plan.
The Group’s net obligation/asset in respect of defined benefit plans is calculated by estimating the amount of future benefits that
employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets. The
defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. When the actuarial
calculation results in a benefit to the Group, the recognized asset is limited to the present value of economic benefits available in the
form of any future refunds from the plan or reductions in future contributions to the plan. An economic benefit is available to the
Group if it is realizable during the life of the plan, or on settlement of the plan liabilities.
Remeasurements of the net defined benefit obligation/asset, which comprise actuarial gains and losses the return on plan assets
(excluding interest) and the effect on the asset ceiling (if any excluding interest) are recognized immediately in the consolidated
statement of comprehensive income.
The Group determines the net interest expense/income on the net defined benefit obligation/asset for the period by applying
the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then net defined
benefit obligation/asset, taking into account any changes in the net defined benefit obligation/asset during the period as a result of
contributions and benefit payments. Net interest expense/income and other expenses related to defined benefit plans are recognized
in profit or loss.
The Group opted for the Risk-Sharing approach.
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ANNUAL REPORT 2018 Notes to the consolidated financial statements
for the years ended 31 December 2018 and 2017
(b) Share-based payment transactions
The fair value at grant date of share-based payment awards granted to employees is recognized as personnel expenses in the
consolidated income statement with a corresponding increase in equity, over the period until the employees unconditionally become
entitled to the awards. The amount recognized as personnel expense is adjusted to reflect the number of awards for which the related
service and non-market vesting conditions are expected to be met, such that the amount ultimately recognized as personnel expense
is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For
share-based payment awards without vesting conditions, the fair value at grant date of the share-based payment is measured and
immediately expensed in profit or loss to reflect such conditions and there is no true-up for differences between expected and actual
outcomes.
(c) Performance-related compensation
The NCC and the BoD allocate each year up to 40% of recognized performance fees via the Performance Fee Compensation Pool to a
group of eligible employees.
A portion of the Performance Fee Compensation Pool is allocated via the MCP Allocation to the broader management team on the
basis of discretionarily awarded grants. The recognition of the performance fee related compensation expenses usually occurs when
the performance fees are sufficiently visible and recognized. The corresponding liability is recognized as employee benefit liabilities in
the consolidated balance sheet (see note 4.5.). The part of the liability that is not expected to be settled wholly before twelve months
after the end of the annual reporting period is considered in non-current liabilities.
The difference between the Performance Fee Compensation Pool and the MCP Allocation is allocated to a “Performance Fee
Bonus Pool” which is distributed among the broader management teams based on their contribution to performance. The part of the
Performance Fee Bonus Pool that is not expected to be settled wholly before twelve months after the end of the annual reporting
period is recorded in non-current liabilities.
19.23. Long-term debt
Long-term debt is initially measured at fair value less any directly attributable transaction costs. Subsequent to initial recognition these
liabilities are measured at amortized cost using the effective interest method, with interest expense recognized in the consolidated
income statement on the effective yield basis.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense
over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the
expected life of the financial liability to the net carrying amount on initial recognition.
19.24. Share capital
(a) Ordinary shares
Ordinary shares are classified as equity since the shares are non-redeemable and any dividends are discretionary.
(b) Issuance of new shares
Incremental costs directly attributable to the issuance of new shares or options are shown in equity as a deduction from the proceeds,
net of tax.
(c) Repurchase of share capital and options
Where any Group company purchases the Company’s issued shares, the consideration paid, including any directly attributable
incremental costs, is deducted from equity attributable to the Company’s equity holders until the shares are cancelled, re-issued
or disposed of. Where such shares are subsequently sold or re-issued, any consideration received, net of any directly attributable
incremental transaction costs, is included in equity attributable to the Company’s equity holders.
(d) Distribution of dividends
The distribution of dividends to the Company’s shareholders is recognized as a liability in the consolidated financial statements when
the dividends are approved by the Company’s shareholders.
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ANNUAL REPORT 2018 Notes to the consolidated financial statements for the years ended 31 December 2014 and 2013
Index to the financial statements of Partners Group
Holding AG and report of the auditors
1. Report of the auditors on the financial statements of Partners Group Holding AG
2. Financial statements of Partners Group Holding AG:
– Income statement for the years ended 31 December 2018 and 2017
– Balance sheet as of 31 December 2018 and 2017
– Notes to the financial statements for the years ended 31 December 2018 and 2017
111
114
115
116
3. Proposal by the Board of Directors of Partners Group Holding AG for the appropriation of available earnings as of
31 December 2018
124
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110 | Partners Group
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ANNUAL REPORT 2018
Report of the auditors on the financial statements of
Partners Group Holding AG
Statutory Auditor’s Report
To the General Meeting of Partners Group Holding AG, Baar
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of Partners Group Holding AG, which comprise the
balance sheet as at 31 December 2018, and the income statement for the year then ended, and
notes to the financial statements, including a summary of significant accounting policies.
In our opinion
31 December 2018 comply with Swiss law and the company’s articles of incorporation.
financial statements (pages 114 to 124)
the
for
the year ended
Basis for Opinion
We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our
responsibilities under those provisions and standards are further described in the Auditor’s
Responsibilities for the Audit of the Financial Statements section of our report. We are
independent of the entity in accordance with the provisions of Swiss law and the requirements of
the Swiss audit profession and we have fulfilled our other ethical responsibilities in accordance
with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Report on Key Audit Matters based on the circular 1/2015 of the Federal Audit Oversight
Authority
Key audit matters are those matters that, in our professional judgment, were of most significance
in our audit of the financial statements of the current period. We have determined that there are
no key audit matters to communicate in our report.
Responsibility of the Board of Directors for the Financial Statements
The Board of Directors is responsible for the preparation of the financial statements in accordance
with the provisions of Swiss law and the company’s articles of incorporation, and for such internal
control as the Board of Directors determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors is responsible for assessing the
entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the Board of Directors either
intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so.
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Partners Group | 111
ANNUAL REPORT 2018 Report of the auditors on the financial statements of
Partners Group Holding AG
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Swiss law and Swiss Auditing Standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with Swiss law and Swiss Auditing Standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made.
Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the entity’s ability to continue
as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the entity to cease to continue as a going concern.
We communicate with the Board of Directors or its relevant committee regarding, among other
matters, the planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have
complied with relevant ethical requirements regarding independence, and to communicate with
them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors or its relevant committee, we
determine those matters that were of most significance in the audit of the financial statements of
the current period and are therefore the key audit matters. We describe these matters in our
auditor’s report, unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be expected to outweigh
the public interest benefits of such communication.
112 | Partners Group
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ANNUAL REPORT 2018 Report of the auditors on the financial statements of
Partners Group Holding AG
Report on Other Legal and Regulatory Requirements
In accordance with article 728a para. 1 item 3 CO and the Swiss Auditing Standard 890, we
confirm that an internal control system exists, which has been designed for the preparation of
financial statements according to the instructions of the Board of Directors.
We further confirm that the proposed appropriation of available earnings complies with Swiss law
and the company’s articles of incorporation. We recommend that the financial statements
submitted to you be approved.
KPMG AG
Thomas Dorst
Licensed Audit Expert
Auditor in Charge
Zurich, 6 March 2019
Philipp Rickert
Licensed Audit Expert
KPMG AG, Badenerstrasse 172, PO Box, CH-8036 Zurich
KPMG AG is a subsidiary of KPMG Holding AG, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss legal entity. All rights reserved.
Partners Group | 113
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ANNUAL REPORT 2018 Income statement of Partners Group Holding AG
for the years ended 31 December 2018 and 2017
In millions of Swiss francs
Note
2018
2017
Dividend income
Other finance income
Other service income
Total income
Third party services
General and administrative expenses
Travel and representation expenses
Finance expense
Profit before tax
Direct taxes
Profit for the period
2.
3.
449.2
53.6
4.6
507.4
(2.1)
(1.4)
(0.2)
(77.5)
426.2
(0.0)
426.2
846.4
58.9
-
905.3
(2.1)
(1.4)
(0.1)
(72.5)
829.2
(3.8)
825.4
114 | Partners Group
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ANNUAL REPORT 2018 Balance sheet of Partners Group Holding AG
as of 31 December 2018 and 2017
In millions of Swiss francs
Note
31 December 2018 31 December 2017
Assets
Cash and cash equivalents
Other current receivables
Total current assets
Financial assets
Participations
Total non-current assets
Total assets
Liabilities and equity
Liabilities
Current interest-bearing liabilities to subsidiaries
Other current liabilities
Total current liabilities
Non-current interest-bearing liabilities
Other non-current liabilities
Provisions
Total non-current liabilities
Total liabilities
Equity
Share capital
Legal capital reserves
Legal reserves from capital contributions
Legal retained earnings
Legal reserves
Voluntary retained earnings
Results carried forward
Profit for the period
Treasury shares
Total equity
Total liabilities and equity
4.
5.
6.
7.
8.
9.
10.
94.9
587.6
682.5
26.9
1'833.4
1'860.3
2'542.8
957.2
5.5
962.7
300.0
0.1
3.0
303.1
1'265.8
0.3
0.2
0.0
993.9
426.2
(143.6)
1'277.0
2'542.8
525.3
420.4
945.7
4.7
1'357.7
1'362.4
2'308.1
561.0
1.4
562.4
300.0
0.1
1.9
302.0
864.4
0.3
0.2
0.0
674.9
825.4
(57.1)
1'443.7
2'308.1
Partners Group | 115
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ANNUAL REPORT 2018 Notes to the financial statements of Partners Group
Holding AG for the years ended 31 December 2018 and 2017
1. Accounting principles
The financial statements have been established in accordance with the accounting, presentation and valuation principles of the Swiss
Code of Obligations.
Partners Group Holding AG (“the Company”) is domiciled in Switzerland. The address of the Company’s registered office is Zugerstrasse
57, 6341 Baar-Zug, Switzerland.
Receivables and liabilities
Receivables from and liabilities to subsidiaries are denominated in the local currency of the respective subsidiary and are recognized on
a net basis for each counterparty.
Financial assets
Financial assets include long-term loans. Loans granted in foreign currencies are translated to Swiss francs at foreign currency exchange
rates applicable at the balance sheet date.
Participations
The Company applies the group valuation principle for the valuation of all its participations (see note 6.).
Treasury shares
Treasury shares are recognized at acquisition cost, deducted from equity at the time of acquisition and presented separately within
equity. In case of a disposal of treasury shares, the gain or loss is recognized in the income statement as other finance income or finance
expense. The treasury shares are valued at historic price.
2. Other finance income
In millions of Swiss francs
2018
2017
Interest income
Foreign exchange gains
Gain on treasury shares transactions
Total other finance income
3. Finance expense
2.7
29.6
21.3
53.6
3.0
29.2
26.7
58.9
In millions of Swiss francs
2018
2017
Interest expense
Foreign exchange losses
Loss on treasury shares transactions
Other finance expense
Total finance expense
116 | Partners Group
(9.7)
(21.4)
(45.4)
(1.0)
(77.5)
(8.8)
(26.1)
(36.2)
(1.4)
(72.5)
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ANNUAL REPORT 2018 Notes to the financial statements of Partners Group
Holding AG for the years ended 31 December 2018 and 2017
4. Other current receivables
In millions of Swiss francs
31 December 2018
31 December 2017
Third parties
Subsidiaries
Total other current receivables
5. Financial assets
5.8
581.8
587.6
0.0
420.4
420.4
In millions of Swiss francs
31 December 2018
31 December 2017
Loans to subsidiaries
Total financial assets
6. Participations
Partners Group AG
Partners Group Corporate Finance AG
Partners Group (Deutschland) GmbH
Partners Group Management (Deutschland) GmbH
Partners Group (Luxembourg) S.A.
Partners Group Management I S.à r.l.
Partners Group Management II S.à r.l.
Partners Group Management III S.à r.l.
Partners Group (France) SAS
Partners Group (Brazil) Investimentos Ltda.
Partners Group (USA) Inc.
Partners Group Colorado Propco, LLC
Partners Group (Canada) Inc.
Partners Group (Singapore) Pte. Limited
Partners Group (Shanghai) Co., Limited
Partners Group (India) Private Limited
Partners Group Prime Services Solutions (Philippines), Inc.
Partners Group Japan Kabushiki Kaisha
Partners Group (UK) Limited
Partners Group (UK) Management Limited
26.9
26.9
4.7
4.7
Ownership and voting interest
Domicile
31 December 2018 31 December 2017
Switzerland
Switzerland
Germany
Germany
Luxembourg
Luxembourg
Luxembourg
Luxembourg
France
Brazil
USA
USA
Canada
Singapore
China
India
Philippines
Japan
UK
UK
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
100%
100%
100%
100%
100%
100%
100%
Partners Group | 117
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ANNUAL REPORT 2018 Notes to the financial statements of Partners Group
Holding AG for the years ended 31 December 2018 and 2017
Ownership and voting interest
Domicile
31 December 2018 31 December 2017
Partners Group Advisors (DIFC) Limited
PG Private Markets (Australia) Pty. Ltd.
Partners Group Cayman Management I Limited
Partners Group Cayman Management II Limited
Partners Group Cayman Management III Limited
Partners Group Cayman Management IV Limited
Partners Group (Guernsey) Limited
Pearl Management Limited
Penta Management Limited
Princess Management Limited
Partners Group Management Limited
Partners Group Management II Limited
Partners Group Management III Limited
Partners Group Management IV Limited
Partners Group Management V Limited
Partners Group Management VI Limited
Partners Group Management VII Limited
Partners Group Management VIII Limited
Partners Group Management IX Limited
Partners Group Management X Limited
Partners Group Management XI Limited
Partners Group Management XII Limited
Partners Group Management XIII Limited
Partners Group Management XIV Limited
Partners Group Management XV Limited
Partners Group Client Access Management I Limited
Partners Group Access Finance Limited
Partners Group Client Access 10 MP Management Limited
Partners Group Finance ICC Limited
Partners Group Finance CHF IC Limited
Partners Group Finance USD IC Limited
Partners Group Finance EUR IC Limited
Partners Group Finance GBP IC Limited
Partners Group Finance SGD IC Limited
Partners Group Private Equity Performance Holding Limited
UAE
Australia
Cayman Islands
Cayman Islands
Cayman Islands
Cayman Islands
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
LGT Private Equity Advisers AG
Liechtenstein
118 | Partners Group
100%
100%
100%
100%
100%
100%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
40%
0%
0%
100%
100%
100%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
40%
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ANNUAL REPORT 2018 Notes to the financial statements of Partners Group
Holding AG for the years ended 31 December 2018 and 2017
7. Other current liabilities
In millions of Swiss francs
31 December 2018
31 December 2017
Accrued audit expenses
Other accrued expenses
Tax liabilities
Sundry liabilities
Total other current liabilities
0.2
4.9
0.0
0.4
5.5
0.2
0.7
0.1
0.4
1.4
8. Non-current interest-bearing liabilities
The Company issued the following corporate bonds denominated in Swiss francs and listed on the SIX Swiss Exchange
(ISIN: CH0361532895):
Date of
issue
Face value in
millions of CHF
Coupon
in %
Year of
maturity
Issue price
in %
Redemption price
in %
7 June 2017
300
0.150%
2024
100.052%
100.000%
9. Provisions
In millions of Swiss francs
Provisions for compensation to board members
Option grants
Management carry program
Total provisions
31 December 2018
31 December 2017
2.4
0.6
3.0
1.8
0.1
1.9
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Partners Group | 119
ANNUAL REPORT 2018 Notes to the financial statements of Partners Group
Holding AG for the years ended 31 December 2018 and 2017
10. Treasury shares
Balance as of 1 January 2017
Purchase of treasury shares
Disposal of treasury shares
Balance as of 31 December 2017
Purchase of treasury shares
Disposal of treasury shares
Balance as of 31 December 2018
Number of
shares
Weighted
average price
Total
value
In Swiss francs
In millions of
Swiss francs
180'607
271'421
(346'863)
105'165
872'304
(769'664)
207'805
404.10
559.84
483.83
543.10
657.59
632.93
690.98
73.0
152.0
(167.8)
57.1
573.6
(487.1)
143.6
The Company has 1’484’142 (31 December 2017: 1’360’808) outstanding employee options and non-vested shares. The treasury
shares necessary to cover the granted non-vested shares have already been put aside in separate escrow accounts in the name of the
employees. Thus, the number of treasury shares is already net of non-vested shares outstanding (see also note 4.3. of the consolidated
financial statements).
11. Share and option grants to members of the Board of Directors and the
Executive Committee
In Swiss francs
2018
2017
Number of
instruments
Weighted aver-
age price
In Swiss francs
Total value
In millions of
Swiss francs
Number of
instruments
Weighted aver-
age price
In Swiss francs
Total value
In millions of
Swiss francs
337
18'489
668.50
33.81
0.2
0.6
592
35'078
676.00
23.52
0.4
0.8
-
-
-
1'332
676.00
0.9
Board of Directors
Shares
Options
Executive Committee
Shares
120 | Partners Group
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ANNUAL REPORT 2018 Notes to the financial statements of Partners Group
Holding AG for the years ended 31 December 2018 and 2017
12. Commitments and contingent liabilities
In millions of Swiss francs
31 December 2018
31 December 2017
Guarantees for third parties
Guarantees for subsidiaries
56.5
430.0
-
430.0
The Company and certain subsidiaries maintain the following lines of credit as of 31 December 2018 (see note 5.4.3. of the consolidated
financial statements):
• CHF 30 million
• CHF 400 million
The amounts drawn by subsidiaries are guaranteed by the Company.
As of 31 December 2018 there are no outstanding drawings by a subsidiary (2017: CHF 0).
13. Shareholders above 5%
Dr. Marcel Erni
Alfred Gantner
Urs Wietlisbach
BlackRock, Inc.
31 December 2018
31 December 2017
10.01%
10.01%
10.01%
6.14%
10.01%
10.01%
10.01%
6.14%
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Partners Group | 121
ANNUAL REPORT 2018 Notes to the financial statements of Partners Group
Holding AG for the years ended 31 December 2018 and 2017
14. Share and option holdings by members of the Board of Directors and
the Executive Committee
Number of shares and options
31 December 2018
Share
ownership
Non-vested
shares
Options
Board of Directors
Steffen Meister, Executive Chairman
Dr. Peter Wuffli, Vice Chairman
Dr. Charles Dallara
Dr. Marcel Erni
Michelle Felman
Alfred Gantner
Grace del Rosario-Castaño
Dr. Eric Strutz
Patrick Ward
Urs Wietlisbach
Executive Committee
André Frei, Co-Chief Executive Officer
Christoph Rubeli, Co-Chief Executive Officer
Marlis Morin
Andreas Knecht, Chief Operating Officer and General Counsel
David Layton 1)
Juri Jenkner
Dr. Michael Studer
Total
350'675
10'000
3'248
2'673'659
102
2'673'659
102
102
-
2'673'659
50'271
538'993
16'969
4'109
2'664
7'638
26'735
-
-
2'025
-
-
-
-
-
-
-
112
112
464
592
592
555
472
-
30'597
6'000
-
7'430
-
8'962
11'661
18'025
-
32'820
2'500
1'700
37'100
24'500
32'404
32'400
9'032'585
4'924
246'099
1) Effective from 1 January 2019, David Layton, Partner and Head Private Equity, succeeded Christoph Rubeli as Co-Chief Executive Officer
122 | Partners Group
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ANNUAL REPORT 2018 Notes to the financial statements of Partners Group
Holding AG for the years ended 31 December 2018 and 2017
14. Share and option holdings by members of the Board of Directors and
the Executive Committee
Number of shares and options
31 December 2017
Share
ownership
Non-vested
shares
Options
Board of Directors
Dr. Peter Wuffli, Chairman
Dr. Charles Dallara, Vice Chairman
Dr. Marcel Erni
Michelle Felman
Alfred Gantner
Steffen Meister
Grace del Rosario-Castaño
Dr. Eric Strutz
Patrick Ward
Urs Wietlisbach
Executive Committee
André Frei, Co-Chief Executive Officer
Christoph Rubeli, Co-Chief Executive Officer
Marlis Morin
Andreas Knecht, Chief Operating Officer and General Counsel
David Layton
Juri Jenkner
Dr. Michael Studer
Total
10'000
3'716
2'673'659
102
2'673'659
350'675
102
102
-
2'673'659
57'800
538'722
16'656
3'618
2'300
7'368
28'458
-
2'679
-
-
-
-
-
-
-
-
383
383
777
1'083
923
825
882
28'612
6'000
-
5'211
-
1'350
6'743
10'055
10'630
-
32'820
2'500
1'700
37'100
24'500
32'404
32'980
9'040'596
7'935
232'605
15. Full-time employees
The Company did not have any employees in the reporting year or in the previous year.
4_Annual_Report_Finance_2018_en.indd 123
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Partners Group | 123
ANNUAL REPORT 2018 Proposal by the Board of Directors of Partners Group
Holding AG for the appropriation of available earnings as of
31 December 2018
In millions of Swiss francs
Profit for the period
Results carried forward
Total voluntary retained earnings available for appropriation
Proposal by the Board of Directors to the Annual General Meeting of shareholders:
To be distributed to shareholders
To be carried forward
31 December 2018
426.2
993.9
1'420.1
(587.4)
832.7
124 | Partners Group
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ANNUAL REPORT 2018 4_Annual_Report_Finance_2018_en.indd 125
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Partners Group | 125
ANNUAL REPORT 2018 Compensation Report
Dear clients, business partners
and fellow shareholders,
As Chairwoman of the Nomination & Compensation Committee
of the Board, I am pleased to present you with Partners Group’s
2018 Compensation Report. In this report, the Nomination
& Compensation Committee outlines the philosophy and
principles behind our compensation structure and discloses the
compensation paid to the members of the Executive Committee
and the Board for the fiscal year 2018.
2018 performance
In 2018, we continued to realize potential in private markets
and invested over USD 19 billion on behalf of our clients,
maintaining our highly disciplined approach and high standards
of selectivity across all private markets asset classes. Our
successful investment and exit activities and additional client
demand resulted in solid financial performance, as explained in
detail in the financial section of our 2018 Annual Report.
Review of compensation structure and disclosure in 2018
Although the general philosophy behind our compensation
policy has remained unchanged since our inception, we
undertake periodic reviews of our compensation structure and
make adjustments as necessary to ensure that the interests of
employees, clients, shareholders and other stakeholders remain
well aligned.
In 2018, we proactively reached out to major shareholders
and several proxy advisors to reflect on industry trends and
gather outside perspectives. During our meetings, we focused,
in particular, on our compensation methodology, cognizant
of the fact that our 2017 Compensation Report had gained
an approval rate of only 68.6% among our shareholders.
Shareholders and proxy advisors alike revealed that they had
not fully understood how we had determined and allocated
compensation budgets and that they felt the compensation of
individual members of the Executive Committee and Board
lacked detail.
Based on the feedback gathered throughout the year, in
this report we have focused on providing more thorough
explanations of our allocation method and more explicitly
126 | Partners Group
Grace del Rosario-Castaño member of the Board of Directors and Chairwoman
of the Nomination and Compensation Committee
highlighting our approach to linking pay to company
performance and granting long-term incentives to members of
the Executive Committee and executive members of the Board.
While our short-term incentives (STIs) are based on function
and represent a stable and predictable compensation
component, our long-term incentives (LTIs) are closely linked to
both quantitative and qualitative achievements. In the absence
of non-ordinary circumstances, the year-on-year development
of these achievements is the main component that affects the
allocation of LTIs.
• We take quantitative measures such as (1) the financial
performance, and (2) the investment development into
consideration when evaluating the performance of the firm,
in general, and our most senior executives, in particular.
• We also believe that qualitative measures such as (1) the
implementation of strategic initiatives and (2) leadership
achievements in the year under review are crucial to
creating additional potential for future success.
2018 compensation overview
2018 was a solid year for Partners Group in terms of the
development of its financial performance and a highly successful
year in terms of the firm’s ability to invest a significant amount
in private markets assets. In 2018, members of the Executive
Committee and executive members of the Board also achieved
their qualitative goals relating to the implementation of the
firm’s strategy and leadership objectives. These achievements
translated into an increase in the LTI compensation in 2018
compared to that of the previous year. In this report, we will
outline how we reached this conclusion.
5_Annual_Report_Finance_2018_en.indd 126
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ANNUAL REPORT 2018 Compensation Report
2019 compensation outlook
In 2019, we would like to further improve our compensation
framework in order to create value for our shareholders in
the long term. The Nomination & Compensation Committee’s
current focus areas for 2019 are mentioned below:
• Cash compensation for the Executive Committee:
the Nomination & Compensation Committee plans to
further amend the cash compensation of the Executive
Committee. It does not intend to change the overall
amount of compensation but proposes shifts in the cash-
like compensation components to give equal weight to base
salaries and deferred cash payments. Both components are
expected to remain stable (see section 6.1).
• Compensation of independent Board members: the
Board plans to amend the compensation framework for
independent Board members and propose a more detailed
module-based approach to compensation. This will largely
be determined by the time each member allocates to
Board committee responsibilities and their additional
contribution to the firm’s business beyond their committee
responsibilities (see section 6.2).
• Optimize MPP further to continue to provide
superior and sustainable total shareholder return: the
Nomination & Compensation Committee plans to consider
smaller amendments to the MPP to further align it with the
interests of clients and shareholders (see section 6.3).
• Preview of compensation budgets/AGM voting
procedure: in 2018, we prospectively asked shareholders
for the approval of a single compensation budget for
the Executive Committee and the Board. Shareholders
voted on a combined budget that encompasses base
salaries, deferred cash payments and MPP. In 2019/20,
we would like to separate the compensation budgets.
We will therefore ask shareholders at the AGM to vote
prospectively on the cash compensation (STIs) and vote
retrospectively on the MPP allocation proposals (LTIs) (see
section 6.4).
On behalf of Partners Group and the Nomination &
Compensation Committee, I would like to thank you for your
continued trust and support.
Yours sincerely,
Grace del Rosario-Castaño
Chairwoman of the Nomination & Compensation Committee
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1. Philosophy & principles
2.1 Philosophy
Our investment approach favors trusted, long-term
relationships that extend beyond our EUR 73 billion AuM
and our more than 1’200 global professionals who operate
a significant number of businesses and/or assets in various
industries and sectors across the globe. Our professionals are
responsible for over 220’000 employees who work for our
largest portfolio companies and are responsible for creating
long-term value for the over 200 million beneficiaries who are
served by our clients. They focus on business and ownership
excellence to realize the full development potential of the
companies, real estate and infrastructure assets in which we
invest.
Our compensation framework honors this responsibility and
supports the firm’s business strategy. It promotes a corporate
culture that contributes to the company’s sustained success,
while adhering to its values. The philosophy behind the
compensation framework is based on our aim of providing
clients and their beneficiaries with superior and sustainable
investment performance on a mid- to long-term basis.
In order to best combine the interests of clients and
shareholders with those of the firm’s employees, our
compensation framework includes a significant long-term
incentive component that allows the firm and its employees to
participate in investment success alongside clients.
2.2 Principles
When making compensation decisions, the Nomination &
Compensation Committee follows three guiding principles,
which apply to all employees:
• Compensation follows contribution: we have a unique
business model and operate as one global firm, albeit
with differentiated business lines and functions. The main
drivers for the variable compensation elements in the
firm’s compensation framework are relative to individual
and team objectives, as well as to the firm’s overall
achievements.
•
Equal opportunity and non-discrimination: we are
an equal opportunity employer and do not discriminate
against employees on the basis of age, gender, nationality,
or any other basis that is inconsistent with our guiding
values. The firm is committed to a “pay for performance”
and “fair pay” policy and systematically conducts equal pay
analyses across departments and regions.
128 | Partners Group
• Compensation is no substitute for talent development:
compensation is an important pillar of governance and
leadership. It is, however, no substitute for a caring
culture, for non-material ways of recognizing individual
achievements and for helping the development of the firm’s
human capital.
Our compensation philosophy stems
from our firm’s values
Our purpose is to deliver our clients superior investment
performance, realizing the potential of private markets
through our integrated platform. We strive for attractive
financial returns and a premium valuation to honor the
long-term confidence of our shareholders. At the same
time, our charter defines our overriding compensation
philosophy for the most important asset of our firm, our
employees.
Clients
We actively listen to our clients to understand their needs
and build trusted, long-term relationships. Our aim is to
provide tailored private markets portfolio solutions that
enable them to achieve superior investment performance
and benefit from market-leading client servicing. Our
clients honor their trust through continued commitments
to Partners Group’s investment vehicles.
Shareholders
We strive for attractive financial returns and for a premium
valuation to honor our shareholders’ long-term confidence
in our firm. Partners and employees hold a significant
ownership in Partners Group and are thus aligned with
external shareholders’ interests.
Employees
We attract talented individuals who are committed to our
purpose and values and help them to develop so that they
perform at their best. Together, we create a demanding and
rewarding environment throughout our firm.
Senior professionals are incentivized to participate in
delivering superior investment performance to clients
through their eligibility for compensation derived from
the future performance fees earned by Partners Group’s
investments.
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2. Components
We have further reduced the total number of compensation
components available to our Executive Committee and
executive members of the Board. Today, we have two short-term
incentives and one long-term incentive. While the base salary &
pension benefits and the deferred cash payment are based on
function and represent a stable and predictable compensation
component for the Executive Committee, the long-term share-
based compensation plan is linked to quantitative and qualitative
achievements.
Exhibit 1: Compensation components for the Executive
Committee
Type of compensation
Instrument
Timing
Fix
Base salary & benefits
Deferred cash payment1)
Cash
STI
Variable
Management
Performance Plan
(MPP)
Equity
(share-based)
LTI
1) Deferred cash compensation is awarded at year end. It is intended to be stable and
predictable and only adjusted downwards in the case of significant underperformance of the
firm or on individual level.
We believe that with increasing seniority, a larger part of
an employee’s total compensation consideration should be
variable and tied to long vesting periods and even longer payout
mechanisms. This is intended to ensure that the interests of
employees and senior leaders are strongly aligned with those of
clients and shareholders, and involves a focus on both sustainable
financial performance and long-term investment success.
The Management Performance Plan (MPP) reinforces a strong
alignment of interests with shareholders as it is dependent on
the share price development over a five-year period. At the same
time, the MPP ensures a strong alignment of interests with clients
as it is dependent on the achievement of a performance fee
target, which ultimately derives from active value generation and
the realization of investment opportunities in underlying client
portfolios.
The MPP requires recipients to have a long-term perspective,
as it often takes up to 14 years until the full performance fee
payouts from a particular investment year are received. Given
the length of this period, we believe the MPP promotes a focus
on sustainable value creation and avoids inappropriate risk-taking
or short-term profit maximization at the expense of long-term
return generation for our clients and ultimately shareholders.
The MPP’s long vesting schedules and even longer payout
periods are highlighted below.
• Vesting: the MPP grants vest linearly over a period of
five years. For members of the Executive Committee and
executive members of the Board, the linear vesting is subject
to a minimum five-year tenure in the respective committee.
• Payout in restricted shares: any MPP payout will be in
Partners Group shares with a 2-year selling restriction. It
starts in year 5 and ends in year 14. The MPP payout can
deviate from the intermediate intrinsic value calculated in
year 5 as it ultimately depends on the actual investment
performance achieved for clients. Superior value creation,
above underlying ex ante defined model return targets, can
increase the payout, whereas value creation below targets
decreases the MPP payout. In the worst-case scenario of
insufficient value creation, it can be zero.
Exhibit 2: Vesting and expected payout of the Management Performance Plan (MPP), the firm’s LTI for the
Executive Committee
Intrinsic
value of MPP
right
Vesting parameters
Expected payout of intrinsic value
Evaluation of the intrinsic
value of a MPP right1)
20%
20%
20%
20%
Better than
expected
100%
Worse than
expected
Payment based on underlying performance
fees generated of investments in year 02)
Grant year
t=0
20%
1
2
3
4
6
7
8
9
10
11
12
13
14 years
5
1) The intrinsic value of MPP rights after the initial grant after five years relates to absolute shareholder return as well as to a total return outperformance against the benchmark, the S&P Listed
Private Equity Index. See detailed description in Appendix A.2.
2) The time period following the determination of the intrinsic value of MPP rights focuses entirely on how the intrinsic value of MPP rights after five years will be paid out in the following years
(in the form of restricted Partners Group shares). Both magnitude and timing are dependent on the actual performance fees generated for the firm. See detailed description in Appendix A.2.
Partners Group | 129
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3. Pay for performance
3.1. Top-down LTI allocation
Methodology
The allocation of MPP is linked to both quantitative and
qualitative achievements in the year under review. Quantitative
achievements are assessed via a top-down performance review
based on the firm’s financial performance and investment
development. The qualitative assessment is equally important
and emphasizes strategy implementation and the leadership
achievements of the Executive Committee and Board. Based
on the assessment of both quantitative and qualitative
achievements, the MPP allocation of the previous year typically
serves as a basis to calculate the MPP allocation for the year
under review.
In order to compensate members of the Executive Committee
and executive members of the Board for their long-term
perspective and continued value creation, the Nomination
& Compensation Committee limits the upside as well as the
downside volatility in single years (vis-à-vis their previous year’s
MPP allocation). We believe that this approach to compensation
encourages true entrepreneurialism while ensuring a degree of
consistency in our compensation allocations. The Nomination &
Compensation Committee caps the upside at a compensation
factor of 2.0x the previous year’s MPP allocation, on the
one hand, and protects Executive Committee members and
executive members of the Board by limiting the downside
at a compensation factor of 0.5x, on the other hand. In case
of an extraordinary event, the Nomination & Compensation
Committee can, if necessary, deviate from these limits. For
example, if the firm or an individual committee member severely
underperforms in a given year and a material adjustment
is made to compensation in that year, this would be made
transparent to shareholders.
Quantitative measures
1. Financial performance: we assess financial
performance based on the year-on-year change in
management fee EBITDA (defined as EBITDA adjusted
for non-management fee-related and non-ordinary
items).1
2.
Investment development: we assess investment
development based on the year-on-year change in the
performance fee-weighted investment volume (based
on standardized model return targets defined at the
investment date, adjusted for non-ordinary effects).
1 As of the Nomination & Compensation Committee meeting in November of the year
under review.
Financial performance
As a measure, financial performance expresses the
operational strength of the firm and is a result of the firm’s
past achievements. Its year-on-year development is an input
factor when determining whether MPP allocations should be
increased or decreased compared to the previous year’s MPP
allocations.
Investment development
Successful investments made in the year under review provide
the basis for potential future performance fees. Their year-
on-year development also serves as an input factor when
determining whether MPP allocations should be increased or
decreased compared to the previous year’s MPP allocations.
The weighting of, and resulting year-on-year adjustments, to the
MPP allocation is illustrated in Exhibit 3.
Exhibit 3: Year-on-year adjustment of MPP
Financial performance
2.0x
1.0x
)
r
a
e
y
t
s
a
l
.
s
v
(
under-
performance
expected
performance
out-
performance
strong
outperformance
Investment development
under-
performance
expected
performance
out-
performance
strong
outperformance
r
o
t
c
a
f
n
o
i
t
a
s
n
e
p
m
o
C
r
o
t
c
a
f
n
o
i
t
a
s
n
e
p
m
o
C
0.5x
significant
underperformance
2.0x
1.0x
)
r
a
e
y
t
s
a
l
.
s
v
(
0.5x
significant
underperformance
130 | Partners Group
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Qualitative measures
1. Strategy implementation: we assess the successful
implementation of key strategic initiatives as well as
continued business & operational excellence across
our platform and businesses.
Once the overall MPP allocation for the Executive Committee
and the Board has been set, the individual MPP allocation for its
members depends on the individual assessment, relative to all
other committee members. For the performance assessment of
the Co-CEOs as well as the Chief Operating Officer (COO), the
firm places a stronger weighting on group-level objectives than
on Executive Committee-level objectives.
2. Leadership achievements: we assess the progress
3.3. Bonus-malus system
Long-term compensation awarded to members of the
Executive Committee as well as to executive members of the
Board is subject to “malus” and “clawback” rules. This means
that the Nomination & Compensation Committee and the
Board, respectively, may decide not to pay any vested but
unpaid incentive compensation (malus) or may seek to recover
incentive compensation that has been paid in the past where
the payout and/or personal conduct has been proven to conflict
with applicable laws and regulations.
3.4. Equal pay analysis
Our Human Resource department regularly performs equal
pay analyses and shares the results with the Nomination
& Compensation Committee. In the course of the audit of
the 2018 compensation report, KPMG acknowledged the
existence of this analysis and took note of the results and the
considerations presented to the Nomination & Compensation
Committee.
The latest rank-based (comparison based on rank, tenure in
rank, location and team covering all employees) and grade-
based (comparison of corporate and services employees with
compensation ranges based on grade and location) equal pay
analysis was presented to the Nomination & Compensation
Committee in November 2018. Based on the above-mentioned
criteria, the analysis identified no pay gap between male and
female professionals, among others.
made on ensuring the organizational effectiveness of
the firm, an entrepreneurial leadership culture as well
as the development of talented individuals who are
committed to our purpose.
Qualitative assessment
While the quantitative compensation framework serves as
a basis for the top-down MPP allocation, the Nomination
& Compensation Committee also applies a qualitative
assessment. This assessment is equally important and considers
performance metrics such as strategy implementation and
leadership achievements. In its assessment, the Nomination
& Compensation Committee can adjust the results of the
quantitative approach. These adjustments are limited to
a minimum of 0.5x and a maximum of 2.0x the previous
year’s MPP allocation in the absence of extraordinary
circumstances. Any material adjustments of the MPP allocation
by the Nomination & Compensation Committee based on its
qualitative assessment will be made transparent to shareholders
and explained in detail.
3.2. Bottom-up LTI allocation to individuals
Once the top-down allocation for the Executive Committee
and the Board has been completed, the individual assessment
of each member commences. Individual goals differ depending
on a member’s function and level of responsibility. At Executive
Committee-level, each member has additional objectives with
a greater focus on either investment-, client-, operations-
and/or service-related activities. At Board committee-level,
each executive member has additional responsibilities in the
respective sub-committees. The focus areas for individual
responsibilities are outlined in Exhibit 4 and serve as the basis
for individual performance assessment.
Members of the Executive Committee will be measured against
quantitative (productivity/output) and qualitative (strategy and
leadership) dimensions. A similar evaluation process also applies
to the group of the executive members of the Board who have
responsibilities in the three Board sub-committees.
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Exhibit 4: Group- and Executive Committee-level objectives & Board committee responsibilities
Group level
Objectives
Investment platform
• Achieve sustainable growth and scalability of investment capacity
• Create long-term value in portfolio assets
Financials
• Focus on sustainable growth
• Balance cost growth vs. revenue growth
Strategy implementation
• Successfully implement key strategic initiatives
• Ensure business & ownership excellence across our platform and businesses
Leadership achievements
• Develop organizational effectiveness and an entrepreneurial leadership culture
• Develop talented individuals who are committed to our purpose
ExCo1)-level
Objectives
Investments
Clients
Services
Corporate
• Achieve asset class-specific investment goals
• Meet asset class-specific return targets
• Establish entrepreneurial governance among portfolio assets
• Extend client coverage (region and type of investor)
• Best-in-class client coverage (incl. compliance)
• Achieve fundraising goals (mandates, flagship programs and strategic partnerships)
• Maintain excellent investment service levels
• Provide best-in-class client servicing
• Contribute to our PRIMERA2) platform to the benefit of investments, clients & employees
• Provide necessary technology solutions to enable operational excellence
• Maintain excellent compliance track record
• Ensure hiring, onboarding, developing and retaining of top talents
Board-level
Objectives
Strategy
Committee
• Drive the firm via the Board on major business, corporate and organizational initiatives
• Guide human capital development, financial planning and use of financial resources
Investment Oversight
Committee
• Ensure quality/consistency of decision making processes and investment performance
•
Implement investment-related quality standards and measurement methods
Client Oversight
Committee
• Drive strategic fundraising initiatives and identify new key product & fundraising themes
• Direct the coverage of the firm’s key client prospects and global consultant network
1) Executive Committee.
2) PRIMERA is our proprietary private markets database.
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4. Executive Committee
compensation 2018
4.1. Short-term incentives
The total cash compensation of the Executive Committee
remained largely flat and amounted to CHF 8.9 million in 2018
(2017: CHF 8.7 million). It is a combination of base salary,
pensions and other benefits and a deferred cash payment.
A detailed overview of the compensation of the Executive
Committee is shown in Exhibit 8.
After the re-organization of the Executive Committee in 2017,
the Nomination & Compensation Committee reviewed the
total cash compensation and increased the base compensation
of all existing Executive Committee members in 2018. At the
same time, it reduced deferred cash payments to a similar
degree, which resulted in largely stable year-on-year total cash
compensation development.
Exhibit 5: 2018 short-term incentives
Total short-term incentives
(in CHF million)
2017
2018 Deviation
Base salary
Deferred cash payments
Total
3.6
5.1
8.7
4.4
4.5
8.9
+22%
-12%
+2%
4.2. Long-term incentives
On aggregate, the Executive Committee was granted
MPP rights valued at CHF 20.0 million (2017: CHF 13.7
million), representing an increase of 46%. The quantitative
achievements in 2018 resulted in the following adjustments
being made to the MPP allocation compared to the previous
year (see Exhibit 6):
•
•
Financial performance: in 2018, the financial
performance met expectations and therefore resulted in a
compensation factor of 1.0x. The management fee EBITDA
considered at the time by the Nomination & Compensation
Committee grew by 9%, which was in line with 2018
expectations of ~10%.
Investment development: in 2018, investment
development strongly exceeded expectations and
therefore resulted in a compensation factor of 2.0x.
The increase was mainly due to the firm’s strong
investment activities in the year under review. In fact, the
performance-fee weighted investment volume in 2018
increased by over 100%.
For the 2018 MPP allocation, the quantitative assessment
resulted in an indicative average allocation of approximately
1.50x previous year’s MPP allocation. This means the 2018
MPP allocation should be ~50% higher than the 2017 MPP
allocation.
Exhibit 6: 2018 quantitative assessment
Financial performance
2.0x
1.0x
)
r
a
e
y
t
s
a
l
.
s
v
(
under-
performance
expected
performance
out-
performance
strong
outperformance
Investment development
under-
performance
expected
performance
out-
performance
strong
outperformance
r
o
t
c
a
f
n
o
i
t
a
s
n
e
p
m
o
C
r
o
t
c
a
f
n
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i
t
a
s
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e
p
m
o
C
0.5x
significant
underperformance
2.0x
1.0x
)
r
a
e
y
t
s
a
l
.
s
v
(
0.5x
significant
underperformance
In 2018, the Executive Committee also achieved its qualitative
goals relating to the implementation of the firm’s strategy and
leadership goals (see Exhibit 4). In particular, the following
sub-goals were assessed by the Nomination & Compensation
Committee in detail:
•
•
Strategy implementation: (1) building out our longer-
term, business-oriented entrepreneurial governance
approach, (2) initiating our Long-Term Entrepreneurial
Ownership program on assets that represent longer-term
investment opportunities and (3) further developing our
next generation mandate solutions allowing clients to
strategically build up private markets exposure over the
long term.
Leadership achievements: (1) further strengthening our
approach to ownership excellence in light of our platform
growth to over 1’200 employees worldwide and (2)
bringing our leadership development program to the next
level with a particular focus on people leadership and talent
development.
The qualitative assessment performed by the Nomination &
Compensation Committee revealed that both factors, strategy
implementation and leadership achievements, did not warrant
an adjustment to the proposed average of approximately 1.50x
the previous year’s MPP allocation.
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4.3. Co-CEO compensation
4.5. Compensation caps
The performance awards for the Co-CEOs are based on similar
performance targets at group- and Executive Committee-level
as shown in Exhibit 4. In 2018, there was no change to the
Co-CEOs’ total cash compensation. Both Co-CEOs met group-
and Executive Committee-level targets. While the base salary
of both Co-CEOs increased by CHF 0.15 million to CHF 0.65
million each, their deferred cash payment was reduced by the
same amount. The total cash compensation therefore remained
flat and amounted to CHF 1.50 million each in 2018 (2017: CHF
1.50 million).
The 2018 MPP grant for each Co-CEO amounted to CHF 3.50
million (2017: CHF 2.32 million) and increased by 51%. This
increase is in line with the overall increase of the MPP allocation
of the Executive Committee (+46%) and a reflection that the
Nomination & Compensation Committee did not apply any
qualitative adjustments for the MPP grants of the Co-CEOs in
2018.
4.4. Highest paid Executive Committee member in
2018
The highest paid Executive Committee member in 2018 was
David Layton, who became Co-CEO as of 1 January 2019. For
2018, David Layton was awarded total short-term incentives of
CHF 1.28 million (2017: CHF 1.26 million) and total MPP rights
in the value of CHF 4.50 million (2017: CHF 3.38 million).
In determining these awards, the Nomination & Compensation
Committee took into account the significant contribution of
David Layton to the firm in his role as Head Private Equity. His
department experienced a record investment year in 2018 and
is currently Partners Group’s largest asset class by AuM.
The 2018 compensation for the Executive Committee did
not exceed our defined compensation caps. For consistency
reasons, we continue to calculate compensation caps in relation
to the base salaries of an individual member of the Executive
Committee. The ratio between the Executive Committee
members’ short-term deferred cash payment compared to
their base salary ranged from 1.0x to 1.5x in 2018 (cap = 3x).
The ratio between the committee members’ MPP compared to
their base salary ranged from 2.5x to 9.2x in 2018 (cap = 10x).
These ratios exclude any other benefits (social security and
pension contributions) and show the varying compensation
levels among individuals based on their function, achievements
and responsibility. For instance, the Co-CEOs earned 1.3x their
base salary as a deferred cash payment (cap = 3x) and 5.4x their
base salary in MPP rights (cap = 10x).
4.6. Executive Committee loans (audited)
Executive Committee members may apply for loans and fixed
advances, subject to an internal review and approval process.
As of 31 December 2018, no loans were outstanding to either
current or former Executive Committee members or to a
related party of a current or former Executive Committee
member.
4.7. Employee contracts (audited)
Employee contracts have no special provisions such as
severance payments, “golden parachutes”, reduced stock and/
or options and MPP vesting periods etc. in place in case of
the departure of an Executive Committee member. Individual
settlements will always be subject to the review and approval
of the Nomination & Compensation Committee. Partners
Group did not make any such payments to current Executive
Committee members in 2017 and 2018.
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Exhibit 7: Composition of the Executive Committee 2018 and functions of its members
Name
André Frei
David Layton
Christoph Rubeli1)
Juri Jenkner
Andreas Knecht
Marlis Morin
Dr. Michael Studer
2000
2005
1998
2004
2009
Joined Partners
Group in
Nationality
Age
Swiss
American
43
37
Position
Co-Chief Executive Officer
Co-Chief Executive Officer and Head Private Equity2)
Swiss
57 Co-Head Entrepreneurial Governance / Operating Directors2)
German
Swiss
2003
Swiss/Italian
2001
Swiss
43
49
48
46
Head Private Infrastructure
Chief Operating Officer and General Counsel
Head Client Services
Chief Risk Officer and Head Portfolio Solutions
1) Member until 31 December 2018.
2) Effective from 1 January 2019, David Layton, Partner and Head Private Equity, succeeded Christoph Rubeli as Co-Chief Executive Officer.
Exhibit 8: Executive Committee compensation for the full-year 2018 (audited)
In thousands of Swiss francs
2018
André Frei, Co-Chief Executive Officer
Christoph Rubeli, Co-Chief Executive Officer3)
David Layton, Head Private Equity4)
Base
salary
(cash)
650
650
489
Other1)
Deferred
cash
Subtotal
short term
Options/
shares
MPP2)
MCP
Total
134
61
55
850
850
734
1’634
1’561
1’278
-
-
-
-
3’500
3’500
4’500
20’000
-
-
-
-
5’134
5’061
5’778
28’870
Total Executive Committee
3’689
647
4’534
8’870
1) Other compensation includes payments by Partners Group for pension and other benefits such as social security payments.
2) Fair value of Management Performance Plan (MPP) as outlined in Appendix A.2.1
3) Member until 31 December 2018.
4) Effective from 1 January 2019, David Layton, Partner and Head Private Equity, succeeded Christoph Rubeli as Co-Chief Executive Officer.
Exhibit 9: Executive Committee compensation for the full-year 2017 (audited) DRAFT
In thousands of Swiss francs
2017
Base
compensa-
tion (cash)
Other
compensa-
tion1)
Subtotal
fixed
compensa-
tion
Variable
compensa-
tion (cash
bonus)
André Frei, Co-Chief Executive Officer
Christoph Rubeli, Co-Chief Executive Officer
David Layton, Head Private Equity
Total Executive Committee
Former members of the Executive Committee5)
Total Executive Committee incl. former members
500
500
394
2’894
2’956
5’849
133
132
30
712
656
1’368
633
632
424
3’606
3’612
7’217
1) Other compensation includes payments by Partners Group for pension and other benefits such as social security payments.
2) Fair value of Management Performance Plan (MPP) as outlined in section A.2.1.
1’000
1’000
837
5’137
3’215
EPP/
MIP
-
-
200
900
450
MPP2)
MCP3)
Total4)
2’323
2’323
3’380
13’729
-
-
-
-
3’956
3’955
4’840
23’372
-
13’782
21’059
8’352
1’351
13’729
13’782
44’431
3) Figures above are presented for illustrative purposes only to increase transparency. Actual values depend on the future performance of the investments attributable to the financial year 2017.
For the table above, for each 1% of carry pool allocation the Group assumed an expected payout range from CHF 0 to CHF 6’822 thousand and used CHF 4’548 thousand as a base scenario for
illustrative purposes. Amounts disclosed use average daily foreign exchange rates (i.e. CHF/USD).
4) Figures above exclude discounted fees for investments made alongside investors in Partners Group’s open-ended investment programs under the firm’s Employee Investment Program (EIP).
Including these accrued but not yet paid items the total compensation for the entire Executive Committee amounts to CHF 44’445 thousand, including CHF 13 thousand for EIP. There is no change
to the total compensation of André Frei, Christoph Rubeli, and David Layton.
5) Members of the Executive Committee until 30 June 2017.
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5. Board compensation 2018
The Board consists of ten members, of whom six are classified
as independent and four as executive members. Each Board
member plays a very important role within the firm. Beyond
their statutory duties, and supervisory and risk management
tasks, these Board members contribute to Partners Group’s
growth and development by supporting the analysis of
investment opportunities, networking with senior business
leaders on behalf of the firm, working alongside client teams
on business development and major client relationships, and
actively contributing to the firm’s corporate and cultural
development.
The Board makes every effort to build a sustainable,
entrepreneurial business over the long term for the benefit
of its clients, employees and shareholders. It applies the same
approach to the firm’s governance as it does to the management
of its portfolio companies, valuing a long-term approach when it
comes to individual board- and management-led value creation
projects.
5.1. Compensation framework 2018
The Board sets the compensation for its members at a level that
reflects individual responsibility and contribution, as well as
time allocated to the Board mandate.
Exhibit 10: Board compensation structure
Board membership functions
Cash & options
(in CHF thousand)
Executive members of the Board
300 (excl. LTIs)
Independent member
Chairing of the Board
Chairing of a Board committee
Additional contribution to the firm
100
+150
+50
+>200
5.2. Executive Chairman of the Board
The Chairman’s role at Partners Group requires a substantial
commitment concerning time and involvement. Under the
leadership of the Executive Chairman, Steffen Meister, the
Board determines, among other things, the strategy of the
firm and exercises ultimate supervision over management.
The Chairman has a strategic project focus and drives forward
business and corporate development (through his engagement
as chair of the Strategy Committee) and is actively involved in
the development of client-related initiatives (through his seat
136 | Partners Group
on the Client Oversight Committee). He is, together with the
Executive Committee, responsible for the development of
the next generation of leaders and serves as a coach for the
Executive Committee. The Chairman also takes an active role
in representing the firm vis-à-vis regulators, key shareholders,
investors, and other important external stakeholders.
The Chairman is paid an annual base Board fee of CHF 0.30
million (2017: CHF 0.30 million). In line with the group-level
performance achievements determining the compensation
of the Executive Committee and his contribution on Strategy
Committee-level (Board sub-committee), the Chairman was
granted MPP rights amounting to CHF 1.50 million (2017: CHF
0.95 million). This increase is in line with the overall increase of
the MPP allocation to the Executive Committee and follows the
same allocation methodology.
5.3. Executive members of the Board
There are an additional three executive members of the
Board, Dr. Marcel Erni and Messrs. Alfred Gantner and Urs
Wietlisbach, who are significant shareholders of the firm.
Combined, they hold 30% of the firm’s share capital. Each is a
founding partner of the firm and dedicates a substantial amount
of his time to the firm. Each executive member of the Board also
plays an instrumental role in determining the firm’s business
and corporate strategy (through their seat on the Strategy
Committee), in building out Partners Group’s investment
capacity (through their seat on the Investment Oversight
Committee) and/or in driving forward major client relationships
(through their seat on the Client Oversight Committee).
The Nomination & Compensation Committee assesses their
contribution to each committee throughout the year. Dr. Marcel
Erni and Messrs. Alfred Gantner and Urs Wietlisbach were
each awarded an annual base Board fee of CHF 0.30 million
(2017: CHF 0.30 million) and an MPP award of CHF 1.00
million in 2018 (2017: CHF 0.63 million). This increase is in line
with the overall increase of the MPP allocation of the Executive
Committee and follows the same allocation methodology.
5.4. Independent members of the Board
Independent Board members receive their annual fixed
compensation for their regular board work based on the
framework outlined above. Select independent Board members
may receive higher annual compensation should they take on
additional tasks and significant responsibilities or take a more
active role in the firm’s ongoing business activities beyond
the scope of the responsibilities expected from every Board
member.
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ANNUAL REPORT 2018 Compensation Report
The independent Board members who focus on their Board-
and committee-related mandates at Partners Group are Grace
del Rosario-Castaño, Michelle Felman and Dr. Eric Strutz,
They are each paid CHF 0.15 million per annum for their Board
contribution (CHF 0.10 million for their committee membership
and CHF 0.05 million for chairing a committee), which was paid
in cash and options delivered in one installment in the current
board period. They did not receive any MPP and pension
benefits.
Dr. Peter Wuffli acted as Vice Chairman and Lead Independent
Director and was paid an annual base Board fee of CHF 0.10
million. He also received CHF 0.20 million for his additional
contribution to the firm in his capacity as Vice Chairman, of
which CHF 0.05 million was for his role as Chairman of the
Board throughout the first four months of 2018 until the AGM
in May. This brings his total compensation to CHF 0.31 million
(including other compensation), which was paid in cash and
options delivered in one installment in the current board period.
Dr. Peter Wuffli did not receive any MPP.
Dr. Charles Dallara devoted a significant amount of his time
to Partners Group, providing guidance on global client-related
development initiatives through his seat on the Client Oversight
Committee and supporting the firm’s client relationship teams
globally as well as the firm’s investment activities in the US in
his capacity as Chairman of the Americas. In 2018, Dr. Charles
Dallara allocated less time to Partners Group compared to
previous years. His compensation amounted to a total cash &
option/share compensation of CHF 0.78 million (including other
compensation). Dr. Charles Dallara did not receive any MPP.
Patrick Ward continued to dedicate a significant amount of
his time to guide the firm on global client-related initiatives
through his seat on the Client Oversight Committee. He further
supported the firm’s corporate development in the UK and
the client relationship teams in the UK and Middle East in his
capacity as Chairman UK and Middle East. The committee
proposed to remunerate Patrick Ward for his efforts with
total cash & option/share compensation of CHF 0.58 million
(including other compensation). Patrick Ward did not receive
any MPP.
Long-term option plans for independent Board members
with a 5-year selling restriction
Independent Board members receive a part of their
compensation in long-term options (see Exhibit 11). These
long-term options feature a strike price set substantially above
the share price when granted. They vest at grant date but have a
five-year selling restriction.
The Nomination & Compensation Committee favors the
asymmetric risk profile of this plan over a traditional (restricted)
stock allocation. The committee is convinced that this plan
discourages short-term and excessive risk taking and instead
incentivizes independent Board members to focus on the long-
term financial success of the firm on behalf of all shareholders.
If the company, and ultimately the stock price, underperforms,
this will directly affect the Board member’s compensation (50%
of their compensation could be lost completely). In contrast, a
sustainable long-term performance of the company provides
stronger upside to the respective Board member.
5.6. Loans to the Board (audited)
Members of the Board may apply for loans and fixed advances,
subject to an internal review and approval process. Loans are
made on substantially the same terms as those granted to
other employees. As of 31 December 2018, no loans were
outstanding to either current or former Board members or to a
related party of a current or former Board member.
5.7. Board contracts (audited)
Contracts with members of the Board have no special
provisions such as severance payments, “golden parachutes”,
reduced stock and/or options and MPP vesting periods etc.
in place in case of the departure of a Board member. Partners
Group did not make any such payments to current members of
the Board in 2017 and 2018.
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Partners Group | 137
ANNUAL REPORT 2018 Compensation Report
Exhibit 11: Board compensation for the full-year 2018 (audited)
In thousands of Swiss francs
Steffen Meister, Executive Chairman
Dr. Peter Wuffli, Vice Chairman
Dr. Charles Dallara
Dr. Marcel Erni
Michelle Felman
Alfred Gantner
Grace del Rosario-Castaño
Dr. Eric Strutz
Patrick Ward
Urs Wietlisbach
Base
salary (cash)
Other1)
Deferred
cash
Subtotal
short term
Options/
shares
300
150
294
300
75
300
75
75
300
300
56
10
36
57
6
69
6
6
23
64
-
-
220
-
-
-
-
-
-
-
356
160
550
357
81
369
81
81
323
364
2018
Total5)
1’856
311
775
MPP4)
1’500
-
-
1’000
1’357
-
156
1’000
1’369
-
-
-
1’000
4’500
156
156
573
1’364
8’073
-
1503)
2252)
-
753)
-
753)
753)
2503)
-
850
Total Board of Directors
2’169
334
220
2’723
1) Other compensation: other compensation includes payments by Partners Group for pension and other benefits. In particular, the following Board members received pension benefits: Dr. Marcel
Erni, Alfred Gantner, Steffen Meister und Urs Wietlisbach. Dr. Charles Dallara received US health insurance payments amounting to CHF 29 thousand and Patrick Ward received UK national
insurance payments amounting to CHF 7 thousand. The remaining payments to the following members of the Board exclusively represent social security costs in relation to their compensation: Dr.
Charles Dallara, Michelle Felman, Grace del Rosario-Castano, Eric Strutz, Patrick Ward and Dr. Peter Wuffli.
2) Shares: Dr. Charles Dallara was allocated 337 PGH shares in the value of CHF 668.50 per share.
3) Options: each option has a strike price of CHF 800 and vests immediately. The selling restricting is 5 years. The number of options allocated to each Board member is as follows: Michelle Felman
(2’219 options), Grace del Rosario-Castano (2’219 options), Eric Strutz (2’219 options), Patrick Ward (7’395 options) and Dr. Peter Wuffli (4’437 options). For further information on the fair value
of options and shares granted in 2018, please see consolidated financial statement under 4.3.
4) Fair value of Management Performance Plan (MPP) as outlined in section A.2.1.
5) Total compensation of the Board, excluding social security costs represents CHF 7.9 million and lies within the approved compensation budget at the 2018 AGM of shareholders in May.
Exhibit 12: Board compensation for the full-year 2017 (audited)
In thousands of Swiss francs
Dr. Peter Wuffli, Chairman
Dr. Charles Dallara, Vice Chairman
Dr. Marcel Erni
Michelle Felman
Alfred Gantner
Steffen Meister
Grace del Rosario-Castaño
Dr. Eric Strutz
Patrick Ward
Urs Wietlisbach
Base
compensa-
tion (cash)
Other
compensa-
tion1)
Subtotal
fixed
compensa-
tion
Variable
compensa-
tion (cash
bonus)
150
492
300
75
300
300
75
75
300
300
10
29
49
6
67
48
6
6
25
54
160
521
349
81
367
348
81
81
325
354
-
394
-
-
-
-
-
-
-
-
EPP/
MIP
350
400
-
75
-
-
75
75
250
-
2017
MPP2)
Total3)
-
-
634
-
634
951
-
-
-
634
510
1'315
982
156
1'000
1'299
156
156
575
988
Total Board of Directors
2’367
300
2’667
394
1’225
2’852
7’137
1) Other compensation includes payments by Partners Group for pension and other benefits.
2) Fair value of Management Performance Plan (MPP) as outlined in section A.2.1.
3) Figures above exclude discounted fees for investments made alongside investors in Partners Group’s open-ended investment programs under the firm’s Employee Investment Program (EIP).
Including these accrued but not yet paid items the total compensation for the entire Board of Directors amounts to CHF 7’319 thousand , including CHF 181 thousand for EIP. Total compensation of
individual Board members: Dr. Marcel Erni, CHF 1’033 thousand (EIP: CHF 51 thousand); Alfred Gantner, CHF 1’009 thousand (EIP: CHF 8 thousand); Steffen Meister, CHF 1’303 thousand (EIP:
CHF 4 thousand); Urs Wietlisbach, CHF 1’106 thousand (EIP: CHF 118 thousand).
138 | Partners Group
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ANNUAL REPORT 2018 Compensation Report
6. Considered compensation
adjustments 2019
We strive to continuously improve our compensation
framework in order to create value for our shareholders in
the long run and we will therefore consider further potential
amendments to the compensation for the Executive Committee
and the Board. Current focus areas of the Nomination &
Compensation Committee are outlined below.
6.1. Cash compensation for the Executive Committee
The Nomination & Compensation Committee plans further
amendments to the cash compensation of the Executive
Committee. It does not intend to change the overall amount of
compensation but proposes shifts in the cash compensation,
i.e. to give an equal weight to base salaries and deferred cash
payments.
The deferred cash compensation is awarded at year-end
to individual members of the Executive Committee. The
individual deferred cash compensation set by our compensation
framework is intended to be stable and predictable
and only adjusted downwards in the case of significant
underperformance of the firm or on individual level.
In combination with this adjustment, the Nomination &
Compensation Committee will amend the caps on STIs
(deferred cash compensation) from currently 3.0x to 2.0x the
base salary. Caps on LTIs will remain at 10x the base salary.
Exhibit 13: Cash compensation for Executive
Committee members in 2019 (in thousand)
Function
Base salary
Targeted
deferred cash
compensation
Total cash
compensation
2018
Co-CEO
CHF 650
CHF 850
CHF 1’500
2019
Co-CEOCH
Co-CEOUSA
Executive
Committee
CHF 750
USD 750
CHF 500
USD 500
CHF 750
USD 750
CHF 500
USD 500
CHF 1’500
USD 1’500
CHF 1’000
USD 1’000
6.2. Compensation of independent Board members
For 2019, the Board plans to amend the compensation
framework for independent Board members and propose
a more detailed module-based approach to compensation.
This approach will transparently outline the compensation
considerations for independent Board members concerning
their time allocation to their committee work. The new module-
based compensation approach will also consider their additional
contribution to the firm’s business and thereby focus on their
respective responsibilities and the time they allocate to these.
In general, it is planned that independent Board members will
continue to receive a part of their compensation in cash and a
part in a long-term option plan.
6.3. Further optimize MPP to continue to provide
superior and sustainable total shareholder return
The Nomination & Compensation Committee plans to consider
smaller amendments to the MPP to further align it with the
interests of clients and shareholders. With this in mind, the
committee plans to optimize the parameters of performance
rights (see Appendix A.2.), which are required to determine
the intrinsic value of MPP rights. Secondly, the committee will
review the weighting of these rights.
6.4. Preview of compensation budgets/AGM voting
procedure
In 2018, we prospectively asked shareholders for the approval
of one single compensation budget for the Executive Committee
and the Board. Shareholders voted on a combined budget that
encompasses base salaries, deferred cash payments and MPP.
In 2019/2020, we would like to separate the compensation
budgets. We will therefore ask shareholders at the 2019 AGM
to vote prospectively on the cash compensation (STIs) and from
the 2020 AGM onwards to vote retrospectively on the potential
MPP allocations (LTIs). We believe this will allow shareholders to
better evaluate the link between pay and performance.
Exhibit 14: AGM 2019/2020 budget considerations
AGM 2019
STIs
(Base, deferred
cash payments,
pensions &
others)
LTIs
(Management
Performance
Plan)
Budget
(prospective)
2019
2020
AGM 2020
Budget
(retrospective)
2019
2020
Note: budget amounts exclude social security payments.
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ANNUAL REPORT 2018
Compensation Report
7. Appendix
A1 Short-term incentives (STIs)
A.1.1. Base salary & benefits
Base salaries for all employees are based on an individual’s
role and level of responsibility for the upcoming year and are
typically only adjusted meaningfully with a change of role. They
are paid on a monthly basis and reviewed annually.
The primary purpose of benefits such as pension and insurance
plans is to establish a level of security for employees and their
dependents with regard to the major economic risks of sickness,
accident, disability, death and retirement. The level and scope of
pension and insurance benefits provided is country-specific and
influenced by local market practice and regulations.
A.1.2. Deferred cash compensation
The deferred cash compensation is awarded at year-end
to the Executive Committee. The individual deferred cash
compensation set by our compensation framework is intended
to be stable and predictable. However, the Nomination &
Compensation Committee applies an appropriate degree of
discretion and will have the ability to make further adjustments
to the overall deferred cash compensation in crisis years and/or
during non-ordinary circumstances (e.g. one-timer events may
skew financial performance disproportionally in a given year).
Any adjustments to the deferred cash pool made by the
Nomination & Compensation Committee will be made
transparent to shareholders.
Executive Committee members are typically notified of their
deferred cash compensation at year-end and receive their
payments the following February.
A.2. Long-term incentives (LTIs)
A.2.1. Management Performance Plan (MPP)
The MPP consists of a performance right (component 1), which
focuses on the firm’s share performance, and a performance
fee component (component 2), which focuses on active
value creation in the firm’s underlying investment programs.
Achieving only one component while not the other results in no
payout. Any payout will be in a number of restricted Partners
Group shares in the value of the respective payout.
Component 1: share price development (year 1 to 5)
As a public firm, we aim to provide superior and sustainable total
shareholder return and ensure that senior executives place an
emphasis on positive share price development over the mid- to
long-term. We therefore link component 1 of the MPP to the
development of the share price of Partners Group Holding AG
(ticker: PGHN):
•
•
on an absolute basis (increase of share price over a period
of five years); and
on a relative basis (outperformance over a benchmark
index over a period of five years).
The intrinsic value of these MPP rights will be measured
five years after the grant date. On this date, we measure the
absolute performance of the share price (“A” in Exhibit 15) and
its outperformance over the benchmark index (“B” in Exhibit
15). We believe that measuring performance over an extended
five-year period is consistent with the long-term orientation of
the firm’s business.
Exhibit 15: Determining intrinsic value of MPP rights
Intrinsic value
of MPP right
Intrinsic
value
B
A
t
n
p m e
e l o
v
P e er gr o u p o utp erfo r m a n c e
e d
e
r i c
e p
r
a
h
P G H N s
Grant year
t=0
+5 years
50% of the grant value of these MPP rights relates to absolute
shareholder return, while the remaining 50% relates to a total
return outperformance against the benchmark, the S&P Listed
Private Equity Index. We believe that the S&P Listed Private
Equity Index is the closest industry benchmark and that it
therefore represents the best proxy to measure Partners
Group’s relative performance within the private markets
industry.
140 | Partners Group
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ANNUAL REPORT 2018 Compensation Report
(A) Share price performance (50% of grant value)
• Company: Partners Group Holding AG
•
Ticker (BB): PGHN Performance: price return
• Valuation date: 5 years after grant
•
Intrinsic value: difference between share price in
2023 vs. share price in 2018
(B) Outperformance against benchmark (50% of
grant value)
•
•
•
Index: S&P Listed Private Equity Index
Ticker (BB): SPLPEQTY
Performance: total return outperformance
• Valuation date: 5 years after grant
•
Intrinsic value: difference between the total return
of PGHN shares between 2018 and 2023 vs. total
return of index during the same period multiplied by
the share price at grant
Exhibit 16 illustrates how the intrinsic value of the share
component of the MPP rights is determined. It depends on both
the absolute share price performance and outperformance over
a benchmark index. Plan participants will not receive any payout
in the event of negative stock price performance combined with
underperformance against the benchmark.
In contrast, their MPP rights will increase most in value if both
performance criteria are met, i.e. the share price performs in
absolute terms (“A” in Exhibit 16) and outperforms against the
benchmark index (“B” in Exhibit 16). Should only one of the two
performance criteria be met, the intrinsic value of the MPP
rights will be lower.
Exhibit 16: Illustration of the different scenarios that
determine the intrinsic value of MPP rights
+
Benchmark index
outperformance
High potential
(combined performance)
Limited potential
(only relative performance)
A
-
0%
Example
B
+
PGHN share price
performance
No payout
(no performance)
Limited potential
(only absolute performance)
-
Component 2: performance fee achievement (year 5 to 14)
While component 1 focuses on the absolute and relative share
price development in order to determine an intrinsic value,
component 2 focuses entirely on how the intrinsic value of MPP
rights after five years will be paid out in the following years (in
the form of restricted Partners Group shares). In other words,
component 2 sets the framework for the magnitude and timing
of the payout. Both magnitude and timing are dependent on
the actual performance fees that the firm generated from the
particular year in which MPP rights were granted.
• Magnitude: the magnitude ultimately depends on the
actual performance fees that the firm is able to generate
from its 2018 investment vintage throughout the next 15
years. For that purpose, the firm defines a target that is
based on ex ante model returns. This target is set at 100%
and needs to be achieved over a time period of 15 years
(“1” in Exhibit 17). For example, if the intrinsic value of MPP
rights is 100 and 100% of the expected performance fees
are actually paid to the firm, the plan participant receives
Partners Group shares in the value of 100. The total
payout can be higher than the originally expected nominal
amount in the case of consistent investment performance
above underlying assumptions (“2” in Exhibit 17), or lower
than the originally anticipated nominal amount in the case
of lower investment performance (“3” in Exhibit 17). In the
worst case scenario, the amount can be zero, irrespective
of the intrinsic value determined through component 1.
Partners Group | 141
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ANNUAL REPORT 2018 Compensation Report
Exhibit 17: Illustration of actual MPP payout based on
underlying investment performance
Underlying
investment
performance
Bottom-up
assessment
100%
2
1
3
Intrinsic value
of MPP rights
(example)
Actual MPP
payout
•
Timing: the MPP payout occurs as the performance fees of
the underlying investment vintage materialize, as illustrated
in Exhibit 18. After each year, we compare the actual
proportion of performance fees generated against the
defined target. We then pay out the same proportion of the
intrinsic value of the MPP grant in the form of restricted
shares. For example, should the 2018 investment year pay
out 15% of its anticipated total payout (100%) in 2023,
we would pay out 15% of the intrinsic value of MPP rights
determined in component 1 to plan participants in the form
of Partners Group shares in 2023.
Exhibit 18: Illustration of actual MPP payout based on
underlying investment performance
2
3
Better than
expected
100%
Worse than
expected
Expected payout of intrinsic value = 100%
1
e
c
n
r m a
r f o
e
g p
d
e
r l y i n
t
a
r
e
e
n
d
e
n
n u
s g
e
e
s
a
d o
f e
t b
n
y m e
a
P
5
6
7
8
9
10
11
12
13
14 years
142 | Partners Group
Illustrative example: performance fee payout structure
of the 2018 investment year
Future potential performance fees will depend on
investments made between Q4 2017 and Q3 2018 (“2018
investment year”). Once profitable investments have been
realized, cash is first distributed to the investors in our
investment programs.
Only once the hurdle rate that was agreed with the firm’s
clients has been cleared (i.e. the client has already achieved
a certain predefined minimum return, typically 8% p.a.)
will a part of the investment profits be distributed to the
firm (in the form of performance fees). Depending on
the investment outcomes and timing of the investment
realizations, it often takes up to 14 years until the full
payout of performance fees is received, as illustrated in
Exhibit 19.
Exhibit 19: Possible payout pattern of performance
fees under MPP
100%
Cumulative performance
fee payout
Performance fee
payout p.a.
0%
t=0
Investment year
5
6
7
8
9
10 11 12 13 14
Vesting parameters
The MPP grants vest linearly over a period of five years. For
members of the Executive Committee and executive members
of the Board, the linear vesting is subject to a minimum five-
year tenure in the respective committee. Before that, it has a
five-year cliff vesting attached. Any holder of unvested MPP
rights leaving the Group has the obligation to render his or
her unvested interest back to the company. The plan thereby
encourages employees to remain with the firm in the long term.
In summary, Exhibit 20 illustrates the two components and
stringent performance conditions that have to be fulfilled over
the medium to long term so that plan participants can receive
their MPP payout in the form of shares. Any share settlement is
followed by a two-year selling restriction.
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ANNUAL REPORT 2018 Compensation Report
Further information on Partners Group’s share-based payment
plan can be found in section 4 of the notes to the consolidated
financial statements included in the 2018 Annual Report.
Vesting rules in case of retirement
The vesting parameters of the firm’s LTIs are rather stringent
and long-term focused, even compared to industry peers.
While any holder of unvested LTIs who leaves the firm has the
obligation to render his or her unvested interests back to the
firm, there are special vesting rules in the case an employee is
coming up to retirement.
Given that the firm aims to foster a performance-oriented work
environment, senior employees of the firm receive the majority
of their compensation in LTIs with long vesting periods. This
is also the case for employees nearing their retirement. This
can result in senior employees entering their retirement with a
meaningful portion of unvested LTIs.
In order to ensure that senior employees continue to contribute
to the firm’s success until their retirement, the Nomination &
Compensation Committee has established special vesting rules
for senior employees heading towards their retirement.
At the time of retirement, all LTIs for Executive Committee
members and executive members of the Board shall be deemed
to have fully vested and become unrestricted, provided that the
employee has reached the age of 55 and has served the firm for
ten years or more as a Managing Director/Partner.
The vesting relief is subject to the following conditions: the
employee is considered a good leaver, agrees to sign a two-
year non-compete agreement and will have no new principal
employment in the private markets industry.
The Nomination & Compensation Committee may use its
discretion to make further adjustments to the rules outlined
above on a case-by-case basis in order to achieve the best
result for both the business and the employee coming up to
retirement.
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ANNUAL REPORT 2018 Compensation Report
Exhibit 20: Overview of MPP components and different scenarios that determine MPP payout
Component 1:
share price development
Component 2:
performance fee development
Intrinsic value
of MPP right
Intrinsic
value
Expected payout of intrinsic value = 100%
1
B
A
t
n
p m e
e l o
v
e
c
n
r m a
r f o
e
g p
d
e
r l y i n
a t
r
e
e
n
d
e
n
n u
s g
e
e
s
a
d o
f e
t b
n
y m e
a
P
P e er gr o u p o utp erfo r m a n c e
e d
e
r i c
e p
r
a
h
P G H N s
2
3
Better than
expected
100%
Worse than
expected
Grant year
t=0
+5 years
5
6
7
8
9
10
11
12
13
14 years
Determining
intrinsic value
+
Benchmark index
outperformance
High potential
(combined performance)
Limited potential
(only relative performance)
A
-
0%
Example
B
+
PGHN share price
performance
No payout
(no performance)
Limited potential
(only absolute performance)
Underlying
investment
performance
Bottom-up
assessment
100%
Determining
actual payout
2
1
3
-
Intrinsic value
of MPP rights
(example)
Actual MPP
payout
144 | Partners Group
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ANNUAL REPORT 2018 Compensation Report
A.3. Compensation governance
A.3.1. Legal framework
The Swiss Code of Obligations as well as the Corporate
Governance Guidelines of the SIX Swiss Exchange require listed
companies to disclose information about the compensation
of members of the Board and Executive Committee, their
equity participation in the firm and any loans made to them.
This Annual Report fulfills that requirement. In addition, this
Annual Report is in line with the principles of the Swiss Code of
Best Practice for Corporate Governance of the Swiss Business
Federation (economiesuisse).
A.3.2. Compensation decision-making authorities
Compensation allocation is an important and challenging
governance and leadership task. As such, Partners Group’s
Board assigns the Nomination & Compensation Committee with
the task of carrying out a systematic process on an annual basis.
The Committee has combined responsibilities for “nomination”
and “compensation” proposals, as both are an integral and
closely linked part of a typical compensation consideration.
The nomination process ensures the assessment and
nomination of individuals is based on their contribution to the
firm’s success and on their potential for development, while
the compensation process ensures the respective adjustments
to compensation based on functions, responsibilities and
performance. Giving one committee responsibility for both
the nomination and compensation processes should ensure a
seamless transition between a professional’s development and
compensation.
The Nomination & Compensation Committee fulfills the duties
set out for it in the firm’s articles of association. In particular,
the committee oversees the firm’s compensation structure to
ensure adherence to Partners Group’s strategy and culture and
to recognized best practices:
•
•
•
It reviews compensation proposals by the Executive
Committee to ensure they comply with determined
principles and performance criteria and evaluates the
proposals’ consistency with the firm’s values, such as “fair
pay” and “pay for performance.”
It advises and supports the Board and the Executive
Committee with regard to firm-wide promotions,
leadership development measures and succession planning.
It submits nomination and compensation motions and
recommendations to the Board and is also responsible
for the preparation of this Compensation Report
(see Exhibit 21).
A.3.3. Committee members
As of 31 December 2018, the members of the Nomination &
Compensation Committee were Grace del Rosario-Castaño
(Chair) and Dr. Peter Wuffli. According to the independence
criteria outlined in our Corporate Governance Report (section
3), Grace del Rosario-Castaño and Dr. Peter Wuffli are
independent Board members. The members were elected
by shareholders for a one-year term with the possibility of
re-election.
A.3.4. Committee meetings & decisions taken
Throughout the year, members of the Nomination &
Compensation Committee interact with the Chairman, the
Co-CEOs and other members of the Executive Committee on a
regular basis. Throughout 2018, formal and informal meetings
were held with a wide group of the firm’s senior leaders to
discuss compensation budgets, department bonus allocation
plans, promotion criteria and other compensation-related
topics.
Typically, the Nomination & Compensation Committee interacts
via informal meetings throughout the year and holds two formal
decision meetings in the second half of the year:
•
•
In its first formal meeting (Q3), the Nomination &
Compensation Committee confirms the budget allocations
for STIs (deferred cash payments) and LTIs (MPP). During
the meeting, the committee defines guidelines for the
allocation of the various compensation pools.
In its second formal meeting (Q4), the Nomination &
Compensation Committee approves the compensation
proposal for the Executive Committee and Global
Executive Board members and proposes the compensation
for the Co-CEOs and Board members. Compensation
authorities are outlined in Exhibit 21. Partner- and
Managing Director-level promotions and compensation are
ratified individually.
A.3.5. Nomination & Compensation Committee
composition 2019
In 2019, the Board will propose two additional independent
members of the Board to also become members of the
Nomination & Compensation Committee. Dr. Peter Wuffli,
currently member of the Nomination & Compensation
Committee, will retire from the Board as of 15 May 2019.
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Partners Group | 145
ANNUAL REPORT 2018 Compensation Report
Exhibit 21: Approval authorities
Compensation pools
Budget/proposal
Approval
Board of Directors,
Executive Committee
Group-level
budget
Department-level
budget
NCC
NCC
Chairman & Co-CEOs
Individual compensation
Budget/proposal
Chairman of the Board of
Directors
Members of the Board of
Directors
Co-CEOs
Executive Committee,
Global Executive Board
Other
professionals
Chair of the NCC
NCC
Chairman & Co-CEOs
Executive Committee
Q4
Q3
Q3
Q4
Q4
Q4
Q4
Shareholders’ AGM
May
Board of Directors ratifies
NCC approves
Q4
Q4
Approval
Board of Directors approve
Q4
NCC approves,
Board of Directors ratifies
Q4
Note: in the case of approving the Chairman’s compensation and the additional fees for the Nomination and Compensation committee members, the Board member concerned does not
participate in the recommendation involving his or her own compensation.
A.4 Review: binding budgets 2014-2017 vs. actual
payouts
With the introduction of the Ordinance against Excessive
Compensation in listed joint stock companies (“OaEC”) of the
Swiss Federal council, shareholders can express a binding vote
on the compensation of the Board of Directors and Executive
Committee as of the financial year 2014 onwards.
As of 31 December 2018, the actual payout to current and
former executive Committee member or to executive members
of the Board has been less than the approved budgets between
2014 and 2017.
146 | Partners Group
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ANNUAL REPORT 2018
Compensation Report
Statutory Auditor’s Report
To the General Meeting of Partners Group Holding AG, Baar
Report on the Audit of the Compensation Report
We have audited the accompanying compensation report of Partners Group Holding AG for the year
ended 31 December 2018. The audit was limited to the information according to articles 14-16 of the
Ordinance against Excessive compensation in Stock Exchange Listed Companies contained in sections
4.6 to 4.7 and exhibits 8 to 9 on pages 134 and 135 as well as sections 5.6 to 5.7 and exhibits 11 and
12 on pages 137 to 138 of the compensation report.
Responsibility of the Board of Directors
The Board of Directors is responsible for the preparation and overall fair presentation of the
compensation report in accordance with Swiss law and the Ordinance against Excessive compensation
in Stock Exchange Listed Companies (Ordinance). The Board of Directors is also responsible for
designing the compensation system and defining individual compensation packages.
Auditor's Responsibility
Our responsibility is to express an opinion on the accompanying compensation report. We conducted
our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the
compensation report complies with Swiss law and articles 14 – 16 of the Ordinance.
An audit involves performing procedures to obtain audit evidence on the disclosures made in the
compensation report with regard to compensation, loans and credits in accordance with articles 14 – 16
of the Ordinance. The procedures selected depend on the auditor’s judgment, including the assessment
of the risks of material misstatements in the compensation report, whether due to fraud or error. This
audit also includes evaluating the reasonableness of the methods applied to value components of
compensation, as well as assessing the overall presentation of the compensation report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Opinion
In our opinion, the compensation report for the year ended 31 December 2018 of Partners Group
Holding AG complies with Swiss law and articles 14 – 16 of the Ordinance.
KPMG AG
Thomas Dorst
Licensed Audit Expert
Auditor in Charge
Zurich, 6 March 2019
Philipp Rickert
Licensed Audit Expert
KPMG AG, Badenerstrasse 172, PO Box, CH-8036 Zurich
KPMG AG is a subsidiary of KPMG Holding AG, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss legal entity. All rights reserved.
Partners Group | 147
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ANNUAL REPORT 2018
ANNUAL REPORT 2018
Corporate Governance Report
Partners Group is committed to meeting high standards of
corporate governance, with the aim of guiding the firm to
further success. Partners Group prepares its Corporate
Governance Report according to the “Directive on Information
relating to Corporate Governance” issued by the SIX Exchange
Regulation and also takes into account the “Swiss Code of Best
Practice for Corporate Governance” issued by economiesuisse.
With entities regulated in various jurisdictions, including the
Swiss Financial Market Supervisory Authority (FINMA), the
U.S. Securities and Exchange Commission (SEC), the Financial
Conduct Authority (FCA) and the Monetary Authority of
Singapore (MAS), we further uphold the requirements that
these regulations imply. The corporate governance section
contains information on the following:
1. Group structure and shareholders
2. Capital structure
3. Board of Directors
4. Executive Committee
5. Global Executive Board
6. Compensation, shareholdings and loans
7.
Shareholders’ participation rights
8. Changes of control and defense measures
9. Auditors
10. Information policy
11. Non-applicability/negative disclosure
In this Corporate Governance Report, references to “Partners
Group”, the “firm”, the “company”, the “entity”, “we”, “us”
and “our” are to Partners Group Holding AG together with
its consolidated subsidiaries, unless the context requires
otherwise.
1) Partners Group Colorado Propco, LLC was formed for the sole purpose of purchasing and owning land and property for Partners Group‘s permanent office in Colorado, USA.
As of 22 January 2019 (Partners Group). The purpose of the chart above is to provide an overview of the group structure of Partners Group Holding AG and its subsidiaries/affiliates. The ownership
percentages reflected in the chart are meant for illustrative purposes and are rounded.
148 | Partners Group
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ANNUAL REPORT 2018
1. Group structure and
shareholders
1.1. Group structure
1.1.1. Description
Partners Group operates through majority or wholly owned
direct or indirect subsidiaries in Switzerland, the United
States, the United Kingdom, Guernsey, Singapore and other
jurisdictions. The chart on the previous page provides an
overview of the group structure as of 22 January 2019.
1.1.2. Listed companies belonging to the Group
Partners Group Holding AG is a stock corporation incorporated
under Swiss law with its registered office and headquarters at
Zugerstrasse 57, 6341 Baar-Zug. The shares of Partners Group
are listed pursuant to the International Reporting Standard on
the SIX Swiss Exchange AG under the Valor number 2460882
and ISIN CH0024608827. The market capitalization of the
company as of 31 December 2018 was CHF 15.9 billion. All
other group companies are privately held.
1.1.3. Non-listed companies belonging to the Group
For more detailed information on the non-listed subsidiaries
of the group, including names, domiciles, share capital and
ownership interests, please see section 6 of the notes to the
financial statements of Partners Group Holding AG in the
Annual Report 2018. For more detailed information on the non-
listed operating subsidiaries of the group, including principal
activity, place of incorporation and ownership interests,
please see section 17 of the notes to the consolidated financial
statements in the Annual Report 2018.
1.2. Significant shareholders
Partners Group has the following significant shareholders
holding over 3% of the shares and voting rights of the company
as of 13 February 2019.
The founding partners and largest shareholders of Partners
Group, Dr. Marcel Erni and Messrs. Alfred Gantner and Urs
Wietlisbach (“the founding partners”), each hold 2’673’659
shares, corresponding to 10.01% each of the total share capital.
On 3 December 2015, Dr. Marcel Erni and Messrs. Alfred
Gantner and Urs Wietlisbach entered into a five-year derivative
transaction. This derivative transaction concerns up to 4.1% of
Partners Group’s total share capital for each founding partner
and involves so-called collars that expire on 17 June 2021.
In order to coordinate the associated share transaction, the
founding partners entered into an organized group, comprising
12.37% (4.12% each) of the total share capital. Within this
group, each member entered into a separate collar transaction,
with Morgan Stanley & Co. International plc as counterparty,
involving the purchasing of put options and the writing of call
options. In parallel, and in relation to the collar transactions with
Morgan Stanley & Co. International plc, the founding partners
entered into a separate lock-up group which concerned the
remaining shares of each founding partner not subject to the
collar transaction. On 20 February 2017, the founding partners
extended their existing derivative agreement concerning
up to 4.1% of Partners Group’s total share capital for each
founding partner by another 0.9%. This transaction involves
another collar that also expires on 17 June 2021, subject to
early termination, including optional early termination by the
three founding partners. This transaction does not intend any
change in the size of the three founding partners’ stakes in the
Company during the period until the maturity of the collars.
On 13 February 2019, a group controlled by Morgan Stanley,
c/o The Corporation Trust Company (DE), Corporation Trust
Center, 1209 Orange Street, Wilmington, Delaware, DE
19801, USA, disclosed shareholdings of 4’222’150 shares,
corresponding to 15.81% of the total share capital.
In addition, on 2 September 2017, a group controlled by
BlackRock, Inc., 55 East 52nd Street, New York, NY 10055,
USA, disclosed an acquisition of shares resulting in a
shareholding of 1’639’500 shares, corresponding to 6.14% of
the total share capital.
On 27 November 2018, a group controlled by Allianz SE, 80802
Munich, Germany, disclosed shareholdings of 809’775 shares,
corresponding to 3.03% of the total share capital.
As of 31 December 2018, Partners Group held 207’805
treasury shares, corresponding to 0.78% of the total share
capital.
All disclosures according to art. 120 of the Financial Market
Infrastructure Act (FMIA), including further details on the
lock-up group and organized group referred to above as well as
on option plans, can be found on the SIX Exchange Regulation
homepage: www.six-exchange-regulation.com/en/home/
publications/significant-shareholders.html.
1.3. Cross-shareholdings
Partners Group has no cross-shareholdings of 5% or more with
another company or group of companies.
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2. Capital structure
2.3. Changes in capital
No changes in capital have occurred during the last three years.
2.1. Capital
The issued nominal share capital of Partners Group amounts to
CHF 267’000, comprising 26’700’000 fully paid-in registered
shares with a nominal value of CHF 0.01 each. Please see
section 2.2 below for information on authorized and conditional
capital.
2.2. Authorized and conditional share capital
Partners Group has no authorized share capital as of
31 December 2018 and no changes in capital have occurred
during the last three years.
The Annual General Meeting (AGM) of shareholders held on
27 April 2007 approved the increase of the conditional share
capital to a maximum of CHF 40’050, divided into 4’005’000
fully paid-in registered shares of a nominal value of CHF 0.01
each.
The share capital may be increased through the exercise of
options granted to the members of the Board of Directors
and employees of Partners Group in the aggregate amount
of the conditional share capital. Preemptive rights and the
shareholders’ advance subscription rights are excluded in favor
of the option holders. The Board of Directors will determine
all details of the terms of any issue of conditional share capital,
such as the amount of each issue, date of dividend entitlement,
and kind of contribution, and will establish the related equity
investment plan. The acquisition of the registered shares by
exercising the option rights and the further transfer of the
shares are subject to the transfer restrictions set forth in
section 2.6.
2.4. Shares and participation certificates
Partners Group has issued 26’700’000 fully paid-in
registered shares with a nominal value of CHF 0.01 each
and transferability in accordance with our articles of
association (available at http://www.partnersgroup.com/
articlesofassociation), as described in section 2.6. The
shares have been issued in the form of book-entry securities.
Shareholders do not have the right to ask for printing and
delivery of share certificates. A shareholder may, however, at
any time demand that Partners Group issue a confirmation of
such shareholder’s holding.
Each share carries one vote at shareholders’ meetings. All
shares have equal rights. Voting rights and certain other non-
economic rights attached to the shares, including the right to
call and to attend shareholders’ meetings, may be exercised only
after a shareholder has been registered in the share register
of Partners Group as a shareholder with voting rights. Such
registration requires the approval of the Board of Directors
and is restricted, see section 2.6. All shares are entitled to full
dividend rights.
Partners Group has not issued (non-voting) participation
certificates (Partizipationsscheine).
2.5. Dividend-right certificates
Partners Group has not issued any dividend-right certificates
(Genussscheine).
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ANNUAL REPORT 2018
2.7. Convertible bonds and options
Partners Group currently has no convertible bonds
outstanding.
On 7 June 2017, Partners Group issued its first corporate bond,
raising CHF 300 million through a fixed-rate senior unsecured
CHF-denominated issue. The bond was issued with a seven-
year term and a coupon of 0.15% and matures on 7 June 2024.
Please see section 13 of the notes to the consolidated financial
statements in the Annual Report 2018 for comprehensive
information on the bond issued by the firm.
Since 30 June 2000, Partners Group has established regular
share and option programs that entitle management personnel
and a large number of employees to purchase and/or hold
shares in the entity. The options can be settled either by the
issuance of shares out of conditional share capital or by the
delivery of existing shares (treasury shares). Please see section
4 of the notes to the consolidated financial statements in the
Annual Report 2018 for comprehensive information on the
share and option program of the firm.
Partners Group has not issued any further options or warrants.
Corporate Governance Report
2.6. Limitations on transferability and nominee
registration
Any transfer of shares will not be recognized for the purpose
of having voting rights with respect to such shares unless a
transfer is approved by the Board of Directors. This limitation
also applies to the establishing of a usufruct. If the application
of a transferee for recognition is not declined by the Board of
Directors within 20 days, this transferee is deemed to have
been recognized as a shareholder. According to art. 6 of the
articles of association, the Board of Directors may refuse to
register a transferee as a shareholder with voting rights to the
extent that said transferee’s total shareholding would exceed
10% of the total share capital as registered in the commercial
register. The Board of Directors may also refuse to register a
transferee as a shareholder with voting rights if the transferee
does not expressly declare that it has acquired the shares in
its own name and for its own account. If the shares pass by
inheritance or matrimonial property law, the transferee may
not be refused as a shareholder with voting rights. Entries in
the share register may be cancelled if they are based on false
information on the part of the transferee.
Partners Group has issued special provisions for the
registration of nominees. Nominees may be entered in the
share register with voting rights for a maximum of 5% of the
total share capital as set forth in the commercial register. The
Board of Directors may allow a nominee to exceed this limit if
such nominee discloses the name, address and shareholding of
any person for whose account it is holding 0.5% or more of the
share capital as set forth in the commercial register. The Board
of Directors shall conclude agreements with such nominees
concerning disclosure requirements, representation of shares
and exercise of voting rights.
Any reversal or amendment of the statutory rules governing
the transfer limitation require a quorum of at least two-thirds
of the represented votes at the shareholders’ meeting and the
absolute majority of the represented nominal value of shares.
No exceptions to the limitations on transferability and nominee
registration were granted during the financial year 2018.
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ANNUAL REPORT 2018
Corporate Governance Report
3. Board of Directors
The Board of Directors of Partners Group is entrusted with the overall strategy and direction of the company and with the supervision
of its management. As of 31 December 2018, the Board of Directors consists of ten members. All members were elected by
shareholders for a one-year tenure with the possibility of re-election.
The table below shows the current composition of the Board of Directors:
Name
Independent
Director
Strategy
Committee
Investment
Oversight
Committee
Client Oversight
Committee
Risk & Audit
Committee
Nomination &
Compensation
Committee
Steffen Meister, Chairman
Dr. Peter Wuffli, Vice Chairman1)
Dr. Charles Dallara1)
Dr. Marcel Erni
Michelle Felman2)
Alfred Gantner
Grace del Rosario-Castaño
Dr. Eric Strutz
Patrick Ward
Urs Wietlisbach
2)
2)
Member
Chair
Lead Independent Director
1) Dr. Peter Wuffli and Dr. Charles Dallara will retire from the Board of Directors. Therefore, they will not be eligible for re-election at the AGM to be held on 15 May 2019.
2) Michelle Felman will be proposed as a candidate for the Nomination & Compensation Committee at the AGM to be held on 15 May 2019. Subject to her election, the Board of Directors will propose
Michelle Felman as a candidate for the Risk & Audit Committee.
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Corporate Governance Report
ANNUAL REPORT 2018
All Board members exhibit:
•
Strong alignment with shareholders
• High integrity
• Deeply active engagement with focus on value
creation
•
Strong Board leadership skills in shaping and directing
strategy
• Bias towards trusted, long-term relationships
• Knowledge of corporate governance requirements
• A commitment to the long-term success of Partners
and practices
Group
• A proven record of success
• A commitment to sustainability and corporate
responsibility extending beyond our direct
stakeholders
Our Board members exhibit an effective and broad mix of skills, experience and diversity
30%
>10 years
Average
Board tenure
10.9
years
20%
≤5 years
50%
6-10 years
Gender
diversity
20%
women
9
Private markets industry know-how1)
5
Risk management experience3)
10
Broad international exposure5)
1) Have had at least 5 years of experience in the private markets industry
2) Have had at least 5 years of C-level experience
3) Have had at least 5 years of involvement in risk management activities
30%
>60 years
10%
German
10%
British
20%
≤50 years
50%
51-60 years
Average
age
56.9
years
10%
Filipina
5
different
nationalities
50%
Swiss
20%
US American
8
C-level experience2)
7
Operational experience4)
9
Investment experience6)
4) Have had at least 5 years of operational experience (through line or general management roles that included profit and loss responsibility)
5) Have had at least 10 years of international business exposure
6) Have had at least 10 years of investment management experience
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Corporate Governance Report
3.1. Members of the Board of Directors
All members of the Board of Directors of Partners Group
Holding AG are also members of the Board of Directors of
Partners Group AG. Individual members of the Board of
Directors of Partners Group Holding AG are also members of
the Board of Directors of other operating entities of the firm
such as the Group entities in the UK, US and the Philippines.
The texts below provide information on the independence
criteria for members of the Board of Directors and on the
professional history and education of each member of the
Board of Directors, including other significant activities in
governing and supervisory bodies of important financial
organizations, institutions and foundations under private and
public law, permanent management and consultancy functions
for important Swiss and foreign interest groups, official
functions and political posts.
Independence statement for members of the Board
Best practice in corporate governance calls for the
independence of selected Board members as an important
element of its quality and integrity. However, codes of best
practice, regulators and proxy advisors tend to use different
criteria and no globally accepted standard has yet emerged.
In addition, many of the suggested criteria follow formal
legal or financial concepts that do not necessarily reflect the
substantive independence in background, perspective and
judgment of Board members that are conducive to high levels
of quality and integrity in corporate governance. Finally, each
company has its specific characteristics in terms of its business
model and its governance and ownership structure as a result of
which certain criteria take precedence over others.
Having reviewed a series of possible criteria from different
sources, ranging from financial market authorities, other
stock exchanges and codes of best practice to foundations
and independent asset managers with a focus on sustainable
corporate development, Partners Group recognizes differences
in the definition of Board member independence. Some apply
more formal criteria while others tend to focus more on
substance. For example, more formal criteria for the definition
of independence assess direct compensation received from
the firm within a certain period of time or focus on the current
employment status with the firm, whereas criteria that focus
more on substance to determine independence also take into
account specific circumstances, such as other functions a Board
member performs for the firm. Partners Group follows the
general corporate governance principle of “comply or explain”
and therefore applies the following criteria to evaluate the
independence of its Board members.
154 | Partners Group
First and foremost, when searching for an additional external
member of the Board, Partners Group looks for accomplished,
distinctive and competent personalities who are respected
based on their achievements, contribute relevant professional
skills, commit substantial capacity and add to the diversity of
the Board in terms of background and unbiased perspectives. In
our view, these selection criteria represent the essence of true
independence.
In addition, Partners Group applies several formal criteria for
Board member independence:
•
•
•
no line management function (i.e. positions with substantial
decision-making authority) for Partners Group, or any of its
affiliates, currently or in the prior three years;
no employment or affiliation with our external auditor
currently or in the prior three years;
less than ten years as an existing Partners Group Board
member.
The materiality of the following additional criteria is evaluated
on a case-by-case basis:
•
•
limited financial dependence on Partners Group in terms
of employment, income and shareholding relative to an
individual’s overall situation; and
no material direct or indirect business relationship with
Partners Group or any of its affiliates (except as an investor
in Partners Group products).
Whether or not a Board member has an employment contract
with Partners Group, or any of its affiliates, the extent to which
a Board member is active on behalf of Partners Group, and the
level of compensation received from Partners Group are, in our
assessment, not valid criteria to challenge independence. On the
contrary, Partners Group appreciates active Board members
and views high levels of involvement as valuable contributions
to the quality and integrity of corporate governance.
As a result of this evaluation process (which is reviewed
annually) we consider the following current Board members
as independent: Dr. Charles Dallara, Michelle Felman, Grace
del Rosario-Castaño, Dr. Eric Strutz, Patrick Ward and Dr.
Peter Wuffli. Neither of the independent Board members, nor
any of their close family members, have ever been members
of the senior (executive) management of Partners Group,
nor any of its subsidiaries, nor do they have any significant
business connections with either Partners Group or one of its
subsidiaries. None of the independent Board member exercise
any official functions or hold a political post, nor do they
have any permanent management/consultancy functions for
significant domestic and foreign interest groups.
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History and education of each member of the Board of Directors, including other activities and functions
Steffen Meister
Steffen Meister is a Partner of the firm and Executive Chairman of
the Board of Directors of Partners Group Holding AG, based in Zug.
Steffen Meister has been with Partners Group since 2000 and served as
Delegate of the Board from 2013 to 2018 and as Chief Executive Officer
from 2005 to 2013. Prior to joining Partners Group, he worked at Credit
Suisse Financial Products and had assignments at Swiss Reinsurance Co.
and the Department of Mathematics of the Swiss Federal Institute of
Technology (ETH) in Zurich. He has 23 years of industry experience and
holds a master’s degree in mathematics from the Swiss Federal Institute
of Technology (ETH), Switzerland.
Director since: 2013
Age: 48
Nationality: Swiss
Board Committees:
Strategy Committee
(Chairman), Client Oversight
Committee
Other board mandates:
Crossiety AG (Co-Founder
and Chairman), FAIRTIQ AG
Key qualifications and skills
Private markets industry know-how
C-level experience
Risk management experience
Operational experience
Broad international exposure
Investment experience
Dr. Peter Wuffli
Dr. Peter Wuffli is the Vice Chairman and Lead Independent Director
of the Board of Directors of Partners Group Holding AG. Previously,
he served as the Chairman of the Board from 2014 to 2018. From
1984 to 1993, he worked for McKinsey & Company as a management
consultant where he became a Partner and member of the Swiss office
leadership team in 1990. In 1994, he joined the Swiss Bank Corporation
(today UBS) as Chief Financial Officer. Following the merger of the
Swiss Bank Corporation and the Union Bank of Switzerland in 1998, he
continued to serve as Chief Financial Officer until 1999, when he became
Chairman and CEO of UBS Global Asset Management. From 2001, he
was President, and from 2003 onwards, Group CEO of UBS until his
resignation in 2007. Dr. Peter Wuffli studied economics at the University
of St. Gallen (HSG), Switzerland, where he gained his PhD in 1984.
Director since: 2009
Age: 61
Nationality: Swiss
Board Committees:
Strategy Committee, Risk &
Audit Committee, Nomination
& Compensation Committee
Other board mandates:
elea Foundation for Ethics
in Globalization (Co-
Founder and Chairman),
Foundation and Supervisory
Boards of IMD business
school (Chairman), MAS
International Advisory Panel,
PG Impact Investment
foundation (Board of
Trustees), Zurich Opera
House (Vice-Chairman)
Key qualifications and skills
Private markets industry know-how
C-level experience
Risk management experience
Operational experience
Broad international exposure
Investment experience
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Dr. Charles Dallara
Dr. Charles Dallara is a Partner of the firm and an independent member
of the Board of Directors of Partners Group Holding AG. He is also
the Chairman of the Americas. Prior to joining Partners Group, he was
the Managing Director and Chief Executive Officer of the Institute of
International Finance. Previously, he was a Managing Director at J.P.
Morgan & Co. In addition, he held the following positions in the George
H.W. Bush and Ronald Reagan administrations: Assistant Secretary of the
Treasury for International Affairs, Assistant Secretary of the Treasury for
Policy Development and Senior Advisor for Policy to the Secretary of the
Treasury, United States Executive Director of the IMF, and, concurrently,
Senior Deputy Assistant Secretary of the Treasury for International
Economic Policy and US Alternate Executive Director at the IMF. He has
43 years of industry experience and holds a Master of Arts, a Master of
Arts in Law & Diplomacy and a PhD from the Fletcher School of Law and
Diplomacy at Tufts University, Massachusetts, USA, and a bachelor’s
degree in economics from the University of South Carolina, USA.
Director since: 2013
Age: 70
Nationality: US American
Board Committees:
Client Oversight Committee
Other board mandates:
Middle East Investment
Initiative (MEII), National
Bureau of Economic Research
(NBER) (Director at large),
Scotiabank, Canada and
Scotia Holdings (US) Inc.
Key qualifications and skills
Private markets industry know-how
C-level experience
Broad international exposure
Investment experience
Dr. Marcel Erni
Dr. Marcel Erni co-founded Partners Group in 1996. He is a Partner of
the firm and an executive member of Partners Group Holding AG’s Board
of Directors, based in Zug. Previously, he served as the Chief Investment
Officer of Partners Group until June 2017. Prior to founding Partners
Group, he worked at Goldman Sachs & Co. and McKinsey & Co. He has
27 years of industry experience and holds an MBA from the University
of Chicago Booth School of Business, Illinois and a PhD in finance and
banking from the University of St. Gallen (HSG), Switzerland.
Director since: 1997
Age: 53
Nationality: Swiss
Board Committees:
Strategy Committee,
Investment Oversight
Committee
Other board mandates:
PG3 AG
Portfolio company board
mandates:1)
AMMEGA, Global Blue,
GlobalLogic
Key qualifications and skills
Private markets industry know-how
C-level experience
Broad international exposure
Investment experience
1) Partners Group representatives are a member of the board of a portfolio company or a special purpose vehicle (SPV) established in connection with the respective investment.
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Michelle Felman
Michelle Felman is an independent member of the Board of Directors
of Partners Group Holding AG. She is a senior advisor to Turner Impact
Capital, a US investment platform focused on social impact investing in
education. Furthermore, she teaches at Columbia University in New York.
From 1997 to 2010, Michelle Felman was Executive Vice President (EVP),
Acquisitions and Capital Markets, at Vornado Realty Trust. Before joining
Vornado, she was Managing Director, Global Business Development, at
GE Capital, with responsibility for structuring and evaluating new markets
and products globally (1994-1997). Prior to this, she spent three years
in investment banking at Morgan Stanley. She has more than 28 years of
experience in the real estate and investment business. She earned her
undergraduate degree in economics from the University of California in
Berkeley and her MBA from Wharton Business School at the University
of Pennsylvania, USA.
Director since: 2016
Age: 56
Nationality: US American
Board Committees:
Investment Oversight
Committee (Chairwoman)
Other board mandates:
Cumming, USA, JAM
Holdings LLC (founder),
Reonomy, Turner Impact
Fund
Key qualifications and skills
Private markets industry know-how
Risk management experience
Operational experience
Broad international exposure
Investment experience
Alfred Gantner
Alfred Gantner co-founded Partners Group in 1996. He is a Partner
of the firm and an executive member of Partners Group Holding AG’s
Board of Directors, based in Zug. Previously, Alfred Gantner served
as Chief Executive Officer of Partners Group from 1996 to 2005 and
subsequently as Executive Chairman from 2005 to 2014. He was also
Chairman of Partners Group’s Global Investment Committee from 2011
until June 2017. Prior to founding Partners Group, he worked at Goldman
Sachs & Co. He has 27 years of industry experience and holds an MBA
from the Brigham Young University Marriott School of Management in
Utah, USA.
Director since: 1997
Age: 50
Nationality: Swiss
Board Committees:
Strategy Committee,
Investment Oversight
Committee
Other board mandates:
PG3 AG, PG Impact
Investments Foundation
(Board of Trustees)
Portfolio company board
mandates:1)
Fermaca, PCI Pharma
Services, United States
Infrastructure Corporation
Key qualifications and skills
Private markets industry know-how
C-level experience
Risk management experience
Operational experience
Broad international exposure
Investment experience
1) Partners Group representatives are a member of the board of a portfolio company or a special purpose vehicle (SPV) established in connection with the respective investment.
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Grace del Rosario-Castaño
Grace del Rosario-Castaño is an independent member of the Board of
Directors of Partners Group Holding AG. She spent 22 years at Johnson
& Johnson, joining in 1990 as Brand Manager and ending her tenure as
Company Group Chairwoman, Asia-Pacific, in July 2014. In that role,
Grace del Rosario-Castaño was responsible for all markets in the Asia-
Pacific region. In her early years at Johnson & Johnson, she worked for
the Consumer Products Worldwide division in the United States. Prior
to joining Johnson and Johnson, Grace del Rosario-Castaño spent the
formative years of her career with Unilever. She holds a Bachelor of
Science, magna cum laude, in Business Administration from the University
of the Philippines. She has also completed the Senior Management
Programs at the Asian Institute of Management, Smith-Tuck Global
Leadership For Women, at the Tuck School of Business in Hanover, New
Hampshire and the Advanced Management Program at the University of
California in Berkeley, USA.
Director since: 2015
Age: 55
Nationality: Filipina
Board Committees:
Investment Oversight
Committee, Nomination &
Compensation Committee
(Chairwoman)
Key qualifications and skills
C-level experience
Operational experience
Broad international exposure
Dr. Eric Strutz
Dr. Eric Strutz is an independent member of the Board of Directors of
Partners Group Holding AG. Dr. Eric Strutz was Chief Financial Officer
and a member of the Board of Managing Directors of Commerzbank
AG until March 2012. Prior to joining Commerzbank AG, Dr. Eric Strutz
was employed by the Boston Consulting Group from 1993, where he
was Vice President, Director and Partner as from 2000. He studied at
the Universities of Erlangen-Nürnberg, Germany, and St. Gallen (HSG),
Switzerland, and holds an MBA from the University of Chicago, Illinois,
USA, as well as a Doctorate, summa cum laude, in Business Administration
from the University of St. Gallen (HSG), Switzerland.
Director since: 2011
Age: 54
Nationality: German
Board Committees:
Risk & Audit Committee
(Chairman)
Other board mandates:
HSBC Bank plc., HSBC
Trinkaus & Burkhardt AG
Portfolio company board
mandates:1)
Global Blue, Techem
Key qualifications and skills
Private markets industry know-how
C-level experience
Risk management experience
Operational experience
Broad international exposure
Investment experience
1) Partners Group representatives are a member of the board of a portfolio company or a special purpose vehicle (SPV) established in connection with the respective investment.
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Patrick Ward
Patrick Ward is an independent member of Partners Group Holding
AG’s Board of Directors and Chairman UK and Middle East. Prior to
joining Partners Group, he was Advisory Director and Chairman of
Goldman Sachs Asset Management International. Previously, he was
Deputy Chairman and Co-Chief Executive Officer of Goldman Sachs
International and a member of the firm’s management committee, having
previously Co-Headed the equities division globally. He has 39 years of
industry experience and holds a master’s degree in management from
Northwestern University, Illinois, USA, and an MBA from the University
of the Witwatersrand in Johannesburg, South Africa.
Director since: 2013
Age: 65
Nationality: British
Board Committees:
Client Oversight Committee
Key qualifications and skills
Private markets industry know-how
C-level experience
Operational experience
Broad international exposure
Investment experience
Urs Wietlisbach
Urs Wietlisbach co-founded Partners Group in 1996. He is a Partner of
the firm and an executive member of Partners Group Holding AG’s Board
of Directors, based in Zug. Prior to founding Partners Group, he worked
at Goldman Sachs & Co. and Credit Suisse. He has 30 years of industry
experience and holds a master’s degree in business administration from
the University of St. Gallen (HSG), Switzerland.
Director since: 2011
Age: 57
Nationality: Swiss
Board Committees:
Strategy Committee, Client
Oversight Committee
(Chairman)
Other board mandates:
Entrepreneur Partners AG,
HSG Foundation (Board
of Trustees), PG Impact
Investments AG, PG Impact
Investments Foundation
(Board of Trustees), PG3
AG, Schweizer Sporthilfe
(President of Board of
Trustees), Stiftung Passion
Schneesport (President of
Board of Trustees), Swiss
Startup Factory AG (Advisory
Board member)
Portfolio company board
mandates:1)
KR Group (Board observer)
Key qualifications and skills
Private markets industry know-how
Broad international exposure
Investment experience
1) Partners Group representatives are a member of the board of a portfolio company or a special purpose vehicle (SPV) established in connection with the respective investment.
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Organizational changes to the Board of Directors
At the Annual General Meeting of shareholders on 9 May 2018,
Steffen Meister was elected Executive Chairman, succeeding
Dr. Peter Wuffli, who was reelected and appointed as Vice
Chairman of the Board.
On 7 March 2019, the Board of Directors announced its
intention to nominate Dr. Martin Strobel for election as an
independent member of the Board and member of the Risk &
Audit Committee and Nomination & Compensation Committee
at the Annual General Meeting of shareholders to be held on 15
May 2019.
Dr. Strobel’s background is in technology and he gained a PhD
in business computer science while beginning his career as a
consultant at The Boston Consulting Group. He subsequently
joined the Swiss insurer Baloise Group to oversee technology,
before ultimately spending seven years of his 17-year tenure
there as Group CEO. After leaving Baloise Group in April 2016,
Dr. Strobel spent almost three years as an operating partner at
private equity firm Advent International. He is a board member
at RSA Insurance Group plc., a British-headquartered insurer,
where he chairs the Risk Committee. At Partners Group, he will
contribute to general strategic Board-level initiatives, with a
particular focus on technology and operations.
Dr. Peter Wuffli, current Vice Chairman of Partners Group, will
retire from the Board of Directors as of 15 May 2019 after ten
years as an independent member of the Board.
Dr. Charles Dallara, current member of the Board of Directors
and Chairman of the Americas, will retire from the Board of
Directors as of 15 May 2019 after six years as an independent
member of the Board. Both have provided invaluable guidance
in support of Partners Group’s growth. Dr. Peter Wuffli
was instrumental in further institutionalizing the firm, while
safeguarding its entrepreneurial governance approach. Dr.
Charles Dallara has significantly contributed in further building
out the firm’s business and client relationships in the US and
internationally.
3.2. Other activities and vested interests
Please see note 3.1.
3.3. Ordinance against excessive compensation in
listed joint stock companies – Number of mandates
pursuant to the OaEC
The ordinance against excessive compensation in listed joint
stock companies (“OaEC”) inter alia obliges listed joint stock
companies to annually submit the Board of Directors’ and
executive management’s compensation to shareholders for a
160 | Partners Group
binding vote. At the Annual General Meeting on 13 May 2015,
shareholders approved a revised version of the firm’s articles
of association comprising the changes as required by the OaEC
and as proposed by the Board of Directors.
In accordance with art. 12 para. 1 of the OaEC and art. 25 of the
articles of association, each member of the Board of Directors
may assume a maximum of four additional mandates in listed
corporations and a maximum of five additional mandates in
other legal entities. The following mandates are exempt from
this limitation: mandates in legal entities controlled by the
Company or controlling the Company; mandates that are
carried out on behalf of or as directed by the Company or any
of its controlled companies in legal entities that are not part of
the group, whereby each member of the Board of Directors
may assume a maximum of ten of such mandates; mandates
in associations, non-profit organizations, foundations, trusts,
and employee pension foundations, whereby each member
of the Board of Directors may assume a maximum of ten of
such mandates; and mandates in legal entities serving the sole
purpose of managing private assets, whereby each member of
the Board of Directors may assume a maximum of ten of such
mandates.
The term “mandate” as used in the articles of association
includes activities within other superior governing or
administrative bodies of legal entities that are obliged to register
themselves in the Swiss commercial registry or a corresponding
foreign registry. Mandates in several legal entities that are
under joint control or joint beneficial ownership, are considered
one mandate.
3.4. Elections and terms of office
The Board of Directors consists of at least three members. All
members as well as the Chairman of the Board of Directors are
elected individually at the shareholders’ meeting, for a term
of one year in accordance with the OaEC. The year that each
member of the Board of Directors was first appointed is listed in
the table at the beginning of this section. Re-election is possible.
There are no rules in the articles of association that differ from
the statutory legal provisions with regard to the appointment of
the chairman, the members of the compensation committee and
the independent proxy.
3.5. Internal organizational structure
The Board of Directors has adopted written internal regulations
for the management of the company and of its subsidiaries
pursuant to art. 716b of the Swiss Code of Obligations, the
rules of the SIX Exchange Regulation, the company’s articles of
association and the Swiss Federal Act on Collective Investment
Schemes.
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The Board of Directors has ultimate responsibility for the
management of Partners Group. Please see the table at the
beginning of this section for information on the allocation of
tasks within the Board of Directors.
Once a year, during the first Board meeting following the Annual
General Meeting of shareholders, the Board of Directors
appoints its secretary, who does not need to be a member
of the Board of Directors. The Board of Directors meets as
often as business requires, but no less than four times a year
as set forth in the company’s Rules of the Organization and of
Operations (the “Rules”; Organisationsreglement); in 2018,
five formal meetings were held, which lasted between three
and eight hours each. The majority of all Board members were
present at all meetings. The meetings of the Board of Directors
were also attended by relevant non-members of the Board
of Directors who hold key functions or responsibilities within
the firm. The formal meetings were complemented by regular
and considerable informal interactions with management and
employees across the firm.
The Board of Directors can deliberate if the majority of its
members are present. Resolutions are adopted with the
majority of the votes of the members present. In the event
of a tie, the Chairman casts the deciding vote. Resolutions by
circular letter require the absolute majority of all members of
the Board of Directors unless higher quorums are provided by
applicable provisions.
The Board of Directors has established further committees
to promulgate and monitor related directives and policies: the
Risk & Audit Committee, the Nomination & Compensation
Committee, the Strategy Committee, the Client Oversight
Committee and the Investment Oversight Committee. Each
committee advises the Board of Directors on the matters
specified below, often with the assistance of the Executive
Committee and others involved in the management of Partners
Group. The members and Chairs of these committees are
determined by the Board of Directors, apart from the members
of the Nomination & Compensation Committee who are
elected individually at the Annual General Meeting for a term
of one year in accordance with the OaEC. Please see the table
at the beginning of this section for the composition of these
committees.
Any of the committee members may call committee meetings. In
order for resolutions to be valid, the majority of a committee’s
members must be present (physically or by phone/video
conference) at the meeting or the resolution must be adopted
by way of a circular resolution.
Risk & Audit Committee (RAC)
The RAC is in charge of ensuring the diligent performance of
internal and external auditing as well as financial controlling in
addition to performing other tasks related to risk management.
In particular, the RAC (i) approves internal audit’s organization
and tasks, (ii) orders the performance of specific audits, (iii)
supervises internal audit’s activities, (iv) ensures the execution
of the external audit, (v) monitors the financial review processes
and (vi) ensures the review of the management and internal
control processes. The role of the RAC is primarily supervisory
and its decision making authority is limited to those areas which
are ancillary to its supervisory role (see also section 3.7.1.5).
Subject to limitations provided under the law and the Articles
of Association, the RAC shall be presided over by independent
members and only consist of independent Board members. As
of 31 December 2018, the members of the RAC were Dr. Eric
Strutz (Chair) and Dr. Peter Wuffli. The RAC held four formal
meetings in 2018, which each lasted approximately two to four
hours. In addition, the external auditors attended all meetings
of the RAC in 2018. All committee members were present at all
meetings. The meetings of the RAC were also attended by other
non-voting members of the Board of Directors and relevant
non-members of the Board of Directors who hold key functions
or responsibilities within the firm. The formal meetings
were complemented by regular and considerable informal
interactions with management and employees across the firm
on legal, compliance and audit-related matters or projects.
Nomination & Compensation Committee (NCC)
The NCC advises and supports the Board of Directors in
particular with regard to the determination of the compensation
system and principles, as well as with regard to the nomination
of members of the Board of Directors and the promotion of
executive officers of the company or its controlled companies,
as applicable. It assesses the compensation proposals for
the company or its controlled companies with regard to
compliance with the determined principles. It also prepares
the Compensation Report and the motions on the Board
of Directors’ and executive management’s compensation
to be submitted to the shareholders’ meeting. The Board
of Directors may assign further tasks, responsibilities and
powers in compensation and nomination matters to the NCC.
Subject to limitations provided under the law and the Articles
of Association, the NCC shall be presided over by independent
members and only consist of independent Board members. As
of 31 December 2018, the members of the NCC were Grace
del Rosario-Castaño (Chair) and Dr. Peter Wuffli. The NCC held
two formal meetings in 2018, which each lasted approximately
two to three hours, to discuss the annual compensation for
the Board of Directors and the Executive Committee as well
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as to confirm the overall compensation policy. All committee
members were present at all meetings. The meetings of the
NCC were also attended by other non-voting members of the
Board of Directors and relevant non-members of the Board
of Directors who hold key functions or responsibilities within
the firm. The formal meetings were complemented by regular
and considerable informal interactions with management and
employees across the firm on promotion considerations and
leadership development projects.
Strategy Committee (SC)
The SC directs the firm’s major strategic initiatives and
advises the Board of Directors on, in particular, major
business, corporate and organizational initiatives. It further
oversees fundamental initiatives in terms of the firm’s human
capital development, financial planning and use of financial
resources. As of 31 December 2018, the members of the SC
were Steffen Meister (Chair), Dr. Marcel Erni, Alfred Gantner,
Urs Wietlisbach and Dr. Peter Wuffli. The SC held six formal
meetings in 2018, which each lasted approximately three to
four hours. The majority of the meetings were attended by all
members. The meetings of the SC were also attended by other
non-voting members of the Board of Directors and relevant
non-members of the Board of Directors who hold key functions
or responsibilities within the firm. The formal meetings
were complemented by regular and considerable informal
interactions with management and employees across the firm to
implement key strategic growth projects.
Client Oversight Committee (COC)
The COC coordinates global marketing and (key) client
activities, drives strategic fundraising initiatives and identifies
new key product and fundraising themes. In addition, it oversees
the coverage of the firm’s key client prospects, the global
consultant network, the firm’s global public relations strategy
as well as its advisory network. As of 31 December 2018, the
members of the COC were Urs Wietlisbach (Chair), Dr. Charles
Dallara, Steffen Meister and Patrick Ward. The COC held
seven formal meetings in 2018 which lasted approximately
two hours each. The majority of the meetings were attended
by all members. The meetings of the COC were also attended
by other non-voting members of the Board of Directors and
relevant non-members of the Board of Directors who hold
key functions or responsibilities within the firm. The formal
meetings were complemented by regular and considerable
informal interactions with management and employees across
the firm on key client-related matters or projects.
162 | Partners Group
Investment Oversight Committee (IOC)
The IOC provides advice and support to the Board of Directors,
the management and the Investment Committees on the
assessment of quality and consistency of decision processes,
the investment performance achieved, the realization of the
projected appreciation on individual investments, and the
investment risks incurred. It defines quality standards and
measurement methods and proposes any measures that may be
required. The Board retains the right to discuss any investment
proposal in the IOC and therefore it designated Dr. Marcel Erni
and Alfred Gantner as voting members in the Global Investment
Committee as of 1 January 2018. The two IOC voting members
have the right to cast a total of one vote on a particular
transaction. In case of absences of standing members, each
IOC voting member may cast one vote in the Global Investment
Committee. As of 31 December 2018, the members of the IOC
are Michelle Felman (Chair), Dr. Marcel Erni, Alfred Gantner
and Grace del Rosario-Castaño. The IOC held two meetings in
2018, which lasted approximately two hours each. The meetings
of the IOC were also attended by other non-voting members of
the Board of Directors and relevant non-members of the Board
of Directors who hold key functions or responsibilities within
the firm. The formal meetings were complemented by regular
and considerable informal interactions with management and
employees across the firm on key investment-related matters or
projects.
Meeting attendance
The members of the Board are encouraged to attend all
meetings of the Board and the committees on which they serve.
Meeting attendance
Meetings held in
2018
Number of members
who missed no
meetings
Number of members
who missed one
meeting
Number of members
who missed two or
more meetings
Meeting attendance
in %
BoD SC
IOC
COC
RAC
NCC
5
7
3
0
6
4
1
0
2
3
1
0
7
2
0
2
4
31)
0
0
2
2
0
0
94% 97% 88% 75% 100% 100%
BoD: Board of Directors, RAC: Risk & Audit Committee, NCC: Nomination & Compensation Com-
mittee, SC: Strategy Committee, COC: Client Oversight Committee, IOC: Investment Oversight
Committee
1) After the AGM held on 9 May 2018, the RAC and NCC consist of two members only (previ-
ously: three). For the two RAC meetings held in March and May 2018 prior to this change, the
table above shows the attendance of three members
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3.6. Definition of areas of responsibility
7. Organization, management and implementation of
The Board of Directors has delegated the day-to-day
management of Partners Group to the Executive Committee
unless provided otherwise by law, the articles of association
or as described below. The Board of Directors has the right to
issue specific rules for this purpose and to form the respective
committees to determine the principles of the business
policy, the risk policy of the various business sectors and the
authority and responsibilities of each of the company’s bodies.
The positions of Chairman of the Board of Directors and of
the Co-Chief Executive Officers are held by separate people,
thus ensuring a system of internal checks and balances and an
independence of the Board of Directors from the day-to-day
management of the company.
Apart from the non-transferable functions mentioned in the
law and in the articles of association, the Board of Directors
has a number of additional duties and powers, including
(among others) resolutions regarding essential features of the
group’s organization, all transactions in connection with real
estate (outside of investment activities), the establishment
of employment conditions, all activities pertaining to the
shareholder register, acceptance and handling of audit
reports and budgets, and the periodic review of the internal
organization. Responsibilities delegated to the Executive
Committee of Partners Group are set forth in the company’s
Rules. The delegated responsibilities are the following:
1. Direct management as well as continual monitoring of
business activities within the scope of, and in line with,
the regulations, guidelines, competencies, individual
resolutions and restrictions imposed by the Board;
2. Conclusion of transactions provided these lie within the
limits as determined by the Rules and particularly by the
determined authorities and responsibilities set forth in
the Rules or by the regulations, guidelines, competencies,
individual resolutions and restrictions imposed by the
Board of Directors;
3. Establishing subsidiaries and founding new group
companies (branches);
4. Developing and issuing directives, policies and job
descriptions for employees to the extent that such tasks
are not reserved for the Board of Directors;
5. Employment and termination of employees within the
authorities and responsibilities set forth in the Rules;
6.
Initiating legal actions and concluding settlements
according to the authorities and responsibilities set forth in
the Rules;
accounting, financial planning and reporting, including
preparation of the company’s management report and
annual financial statements for the attention of the Board
of Directors;
8. Preparation of the budget for the attention of the Board;
9. Execution of the Board of Directors’ resolutions;
10. Organizing, assisting and coordinating the employment
benefit plans;
11. Organizing insurance management;
12. Organizing risk management as well as implementing and
monitoring the internal control system and compliance;
13. Informing the senior management of relevant resolutions
made by the Board of Directors and the Executive
Committee;
14. Proposals for all transactions that have to be submitted
to the Board of Directors according to the Rules and the
authorities and responsibilities set forth in the Rules;
15. Exercising the company’s shareholder rights as a
shareholder within group companies, including the
entitlement to vote on the composition of the members of
management, accepting the annual financial statements
and matters related to this.
3.7. Information and control instruments vis-à-vis the
senior management
The Board of Directors is kept informed of the activities of
the Executive Committee through a number of information
and control instruments. The Co-Chief Executive Officers,
Co-Heads of Group Finance & Corporate Development
(“Co-Heads GF&CD”), Chief Operating Officer and respective
operating officers with line management functions are in a
regular dialogue with the Chairman of the Board of Directors
regarding the general course of business, the financial situation
of the company and any developments or events of importance
to the company and its business. In the event of extraordinary
incidents or developments, the Executive Committee notifies
the Chairman of the Board without delay.
The Executive Committee submits decisions beyond the
scope of ordinary management or decisions that carry major
implications to the relevant Board Committee or Board of
Directors, including (but not limited to) decisions specifically
reserved for the relevant Board Committee or Board of
Directors.
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Partners Group’s risk governance framework
Board of Directors
Risk management
Risk control and audit
Strategy risk control
Executive Committee
Risk & Audit Committee
Strategy Committee
Group
operational risk
management
Group legal &
regulatory risk
management
(compliance)
Group
financial risk
management
Financial
review
Internal
audit
External
audit
Strategy
risk
control
Annual risk assessment
Annual risk report
by Chief Risk Officer
Annual strategy risk assessment
3.7.1. Group risk governance
3.7.1.1. Scope and elements
Partners Group identifies, assesses and monitors risks
and controls risk management processes on an aggregate
consolidated basis for all business activities across the
organization.
Partners Group’s risk governance framework comprises the
following elements:
• Risk management;
• Risk control and audit; and
•
Strategy risk control.
Responsibilities for each element are separated as illustrated on
the following page.
3.7.1.2. Executive Committee
The ongoing risk management of Partners Group’s activities
is delegated to the Executive Committee. In establishing
appropriate processes regarding risk management, the
Executive Committee shall distinguish between:
•
•
the group operational risk management;
the group legal and regulatory risk management
(compliance); and
•
the group financial risk management.
Within these categories, the Executive Committee sets
qualitative and quantitative standards consistent with the
risk appetite in Partners Group’s business activities by issuing
appropriate policies or otherwise. Risk identification and
categorization is explained in more detail in section 3.7.2.3.
Partners Group’s management has established an operational
Internal Control System (“ICS”) and maintains an internal
control structure that monitors compliance with established
policies and procedures. The ICS is established and refreshed
based on assessment of the risks facing Partners Group.
Partners Group selects and develops control activities that
contribute to the mitigation of risks.
The ICS consists of the following three pillars: (i) a risk
management culture is embedded in the operational activities
of the business teams, with the core responsibility for the
implementation, effectiveness and documentation of controls
lying with the respective owners of Group Processes; (ii)
oversight and monitoring of Group Processes is performed
annually by the Department Heads as ensured and facilitated by
the Head Operational Risk Management – a risk assessment is
performed annually by the Chief Risk Officer, Chief Operating
Officer and the Head Operational Risk Management; and (iii)
Group Internal Audit, as a business and operations independent
function, periodically verifies and assesses the ICS, thus
contributing to its improvement.
Overall responsibility for the ICS lies with the senior
management of Partners Group. In addition, the Board of
Directors carries out its oversight responsibilities by defining,
maintaining, and periodically evaluating the skills and expertise
needed among its members to enable them to ask probing
questions of senior management and take commensurate
actions. The Board of Directors retains oversight responsibility
for management’s design, implementation, and the conduct of
internal control with regards to the individual components of
internal control: control environment, risk assessment, control
activities, information and communication and monitoring
activities.
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Partners Group has engaged PricewaterhouseCoopers AG
(“PwC”) to report on the suitability of the design of the ICS and
the operating effectiveness of the control activities related to
its investment management services, in accordance with the
International Standard on Assurance Engagements 3402 (“ISAE
3402”) issued by the International Auditing and Assurance
Standards Board. In 2018, Partners Group issued an ISAE
3402 Type II controls report with no qualification relating to its
investment management services as of year-end 2017, thereby
confirming the operational effectiveness of the controls.
3.7.1.3. Risk & Audit Committee (RAC)
Within the Board of Directors, the RAC is responsible for the
review of the risk profile of Partners Group and for ensuring
appropriate processes regarding the ongoing group risk control
and audit are in place, relating specifically to:
•
•
•
the financial reviewing;
the internal auditing; and
the external auditing.
The RAC’s responsibilities are further defined in the Rules of
the Organization and of Operations (ROO) for Partners Group
Holding AG.
Group Internal Audit supports the Board of Directors, the
RAC and the Executive Committee of the company in their
supervisory and risk management tasks. In doing so, Group
Internal Audit provides an independent view based on objective
analysis regarding material risks and quality issues at Partners
Group and develops and suggests recommendations for
improvement. Group Internal Audit reports to the Chairman
of the Board of Directors and works closely with the Chairman
of the RAC and the Executive Committee. The scope,
responsibilities, tasks and priorities of Group Internal Audit
are regularly discussed with and approved by the RAC and are
reflected in the Group Internal Audit Directive.
The International Standards for the Professional Practice of
Internal Auditing as well as the Definition of Internal Auditing
and Code of Ethics guide the Group Internal Audit practice.
3.7.1.4. Strategy Committee (SC)
Within the Board of Directors, the SC is responsible for
identifying and assessing strategic and business risks and
establishing appropriate processes for the group’s strategy
risk control. The SC’s responsibilities are further defined in the
Rules of the Organization and of Operations (ROO) for Partners
Group Holding AG.
3.7.1.5. Risk Control Function
To support the risk governance bodies set out above (under
sections Executive Committee, RAC and SC), Partners Group
has established a Risk Control Function currently carried out
by the CRO. From time to time, the Executive Committee shall
propose amendments to the Risk Control Function to the
Board, thereby ensuring that the function is allocated adequate
resources and authority, in line with the size and complexity
of the business and organization, as well as the risk profile of
Partners Group.
As an independent controlling function, the Risk Control
Function includes the following responsibilities:
•
Supporting the RAC and the Board in reviewing the risk
profile (risk policy, risk appetite and risk limits) of the
organization;
• Collecting, consolidating and assessing risk information
from within the organization to enable the RAC and the
Board to supervise Partners Group’s risk profile;
• Monitoring Partners Group’s risk profile by defining and
procuring the implementation of adequate systems and
methods for risk supervision, and adjusting such systems
and methods to new business lines and products;
•
Supervising the adequacy and effectiveness of the
organization’s systems for risk management in light of
Partners Group’s risk profile.
The Head of the Risk Control Function has unrestricted access
to the Executive Committee and a direct reporting line to the
Co-CEOs. Unrestricted access to information, locations and
documents is also granted within the scope of the Risk Control
Function.
The Head of the Risk Control Function typically reports to the
Executive Committee every six months or on an ad-hoc basis,
as needed. The Head informs the RAC about their activities
and findings at the Committee’s regular meetings. In between
meetings, the Chairman of the RAC and the Head of the Risk
Control Function liaise to prepare meetings and address specific
issues on an ad-hoc basis.
On an annual basis, the Head of the Risk Control Function shall
provide a risk report to the Board of Directors comprising the
risk assessments of the Executive Committee, the RAC and the
SC.
3.7.1.6. Conflict resolution
Partners Group strives to avoid situations that result in conflicts
of interest. However, in certain situations conflicts cannot be
avoided and for such instances the Conflict Resolution Board
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has been appointed by the group companies as the governing
committee for handling all relevant conflicts of interest within
the group. The members of the Conflict Resolution Board are
Board member and Chairman of the RAC Dr. Eric Strutz (Chair),
Steffen Meister (Executive Chairman of the Board of Directors)
and Andreas Knecht (Chief Operating Officer and General
Counsel).
3.7.2. Risk management process
3.7.2.1. Objectives
Partners Group’s risk management is an ongoing process under
the leadership and supervision of the Executive Committee that
wants to ensure that:
• Risk is consistently and comprehensively identified,
measured, monitored and reported across all of its
businesses, locations and risk types;
• Risk is monitored in a coordinated way within clear roles
and responsibilities;
• Risk is within Partners Group’s risk appetite; and
• Risk is governed by the appropriate Partners Group bodies
and functions in order to provide reasonable assurance
regarding the achievement of Partners Group’s objectives.
Risk identification, measurement, monitoring and reporting
is addressed by dedicated and tailored risk management
processes.
3.7.2.2. Responsibilities
The coordination and implementation of Partners Group’s
operational risk management is the responsibility of each
Department Head for his/her business or staff department.
Adherence to the internal core processes is based on
compliance with the applicable directives, policies and
instructions issued by the Executive Committee.
The coordination and implementation of Partners Group’s legal
and regulatory risk management is the responsibility of the
General Counsel. Adherence to the firm’s core instructions is
based on compliance with applicable directives, policies and
instructions issued by the Executive Committee.
The coordination of the financial risk management is the
responsibility of the Co-Heads GF&CD. Financial controls are
based on the internal control system for finance and a dedicated
Management Information System (MIS).
3.7.2.3. Risk identification and categorization
Within the responsibility of the Executive Committee, the Board
of Directors has identified the following main risk categories for
Partners Group’s business activities:
166 | Partners Group
•
•
Strategic and business risks refer to those risks that
could cause Partners Group’s business vision and strategic
direction to become unfeasible, cause Partners Group
to lose its competitiveness and erode the firm’s business
profitability due to changes in the environment, failures in
the firm’s choice or execution of strategy, or other reasons.
These risks are inherent to Partners Group’s business
model and dependent on how well this is adapted to the
business environment in which the firm competes.
Investment risks refer to the risk that assets might
underperform and also consider a potential loss of an
investment made on behalf of Partners Group’s clients.
They further include the risk of significant concentration of
specific investments in client portfolios. These risks could
cause the erosion of Partners Group’s track record and
impact the firm’s competitiveness for future client demand
and its potential to generate future performance fees.
• Operational risks are those risks that could cause
Partners Group to suffer a loss directly or indirectly from
inadequate or failed internal processes, people, systems
or external events. They are inherent to all of Partners
Group’s business and support activities and comprise a
large number of disparate risks, including losses resulting
from events such as human error, IT failures and fraud.
• Compliance risks refer to the risk of non-compliance with
legal and regulatory requirements, rules of professional
conduct as well as common standards and Partners
Group’s own standards. They are inherent to all of Partners
Group’s business and support activities and dependent on
the awareness of applicable laws, rules and regulations and
their application and enforcement.
Risk management and control of obligations directly
related to external parties/regulators is based on the
firm’s Product Obligations and Procedures (POPs) and
Regulatory Obligations and Procedures (ROPs) task control
system, which consists of an electronic task list with which
adherence to all major corporate regulatory/legal and
contractual requirements is automatically monitored and
documented.
Compliance risks are monitored by Partners Group’s
Compliance team and regularly reported to the Risk and
Audit Committee by the General Counsel and Head of
Global Compliance. Risk management and risk control
related to key operational internal processes is covered
by Partners Group’s Operational Internal Control System
which is described in the Operational Internal Control
System Directive.
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•
Financial risks are risks of loss of financial resources that
could affect Partners Group’s profit and loss statement
or balance sheet. They comprise credit risks, liquidity risks
and market risks.
(a) Credit risks refer to the possibility that Partners Group
may suffer a loss from the failure of counterparties and
customers to meet their financial obligations, including
failing to meet them in a timely manner. Credit risks arise as
a result of activities that support the firm’s business model.
Credit risks are monitored and controlled by the Co-Heads
GF&CD and are periodically reported to the RAC.
(b) Liquidity risks refer to the risk that Partners Group may
not have sufficient financial resources to meet its financial
obligations when these fall due.
The coordination and monitoring of the liquidity risk is the
responsibility of the Co-Heads GF&CD, based on a risk
framework established by the CRO and Co-Heads GF&CD.
The cash flow forecasting (including adapting the dividend
policy) is discussed on a regular basis in the RAC.
(c) Market risks refer to the possibility that Partners Group
may suffer a loss resulting from the fluctuations in the
values of, or income from, proprietary assets and liabilities.
As an asset manager, Partners Group does not deliberately
seek exposure to market risks to generate profit as this is
not the central business of Partners Group.
The market risk management process aims to ensure
that all market risks undertaken by Partners Group’s
own account are identified, measured, monitored and
controlled at all times. This is achieved by applying suitable,
comprehensively documented risk measures. The trading
book is monitored on a daily basis and periodically reported
on to the RAC by the CRO.
• Reputational risks can result from events in any of the
above mentioned risk categories. Hence, this type of
risk is measured through the business risk framework
and monitored on an ongoing basis by the Executive
Committee.
3.7.2.4. Additional activities in relation to investment risk
management for clients
Scope and elements
Partners Group identifies, assesses and monitors risks
and controls risk management processes on an aggregate
consolidated basis for all activities in relation to investment
activities for clients.
Partners Group’s investment risk governance framework
comprises the following elements:
(a) Risk management in relation to single investments
Responsibilities are highlighted below:
•
•
Investment selection and allocation: Investment
Committees,
Investment monitoring: as applicable, Fund Review
Committee, Operational Value Creation Committee and
Investment Committees,
• Direct asset valuation: Valuation Committees.
Further details on the purpose and powers of the respective
committees are highlighted in the relevant policies and
directives.
(b) Risk management in relation to portfolio risk
management
Responsibilities are highlighted below:
• Assessment of macro and strategy risks: Relative Value
Committees,
• Asset allocation and portfolio implementation and risk:
Global Portfolio Committee.
Further details on the purpose and powers of the respective
committees are highlighted in the relevant policies and
directives.
(c) Investment process oversight
Within the Board of Directors the responsibility to oversee
processes in relation to investment activities for clients rests
with the Investment Oversight Committee (IOC). The IOC
provides i) advice and support to the Board in relation to
investment risks incurred and ii) oversight of investment, value
creation and governance processes. The IOC monitors and
improves the quality of the investment and decision-making
process. It supports efforts to prevent severe setbacks to
Partners Group’s track record, develops a consensus on
investment-related issues and risks and provides guidance
to investment committees. In addition, the IOC monitors
track record sensitivities and oversees the monitoring, value
creation and board work performed on direct investments.
The IOC’s responsibilities are further defined in the Rules of
the Organization and of Operations (ROO) for Partners Group
Holding AG.
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4. Executive Committee
The table below shows the current composition of the Executive Committee:
Name
André Frei
David Layton
Christoph Rubeli1)
Juri Jenkner
Andreas Knecht
Marlis Morin
Dr. Michael Studer
Joined Partners
Group in
Nationality
Age
2000
Swiss
2005 US American
43
37
Position
Co-Chief Executive Officer
Co-Chief Executive Officer and Head Private Equity2)
Swiss
57 Co-Head Entrepreneurial Governance/Operating Directors2)
1998
2004
2009
German
Swiss
2003
Swiss/Italian
2001
Swiss
43
49
48
46
Head Private Infrastructure
Chief Operating Officer and General Counsel
Head Client Services
Chief Risk Officer and Head Portfolio Solutions
1) Member and Co-Chief Executive Officer until 31 December 2018.
2) Effective from 1 January 2019, David Layton, Partner and Head Private Equity, succeeded Christoph Rubeli as Co-Chief Executive Officer.
4.1. Members of the Executive Committee
David Layton
is the Co-Chief Executive Officer of
Partners Group, based in the firm’s
Americas headquarters in Colorado.
Together with André Frei, he leads
the Executive Committee and the
Global Executive Board. He is also the
Head of the Private Equity business
department. Previously, he was the Head of Partners Group’s
Private Equity business in the Americas and he has been active
on the firm’s Global Investment Committee. He is a member
of the Board of Directors of the firm’s portfolio companies
KinderCare Learning Centers and Pacific Bells. He has been
with Partners Group since 2005 and has 16 years of industry
experience. He holds a bachelor’s degree in finance from
Brigham Young University’s Marriott School of Management.
As mentioned in section 3.6 above, the Board of Directors has
delegated the operational management of the company to the
Executive Committee, unless otherwise required by law, the
articles of association or otherwise defined in section 3.6. Next
to day-to-day investment and client activities, the Executive
Committee considers firm-wide and cross-departmental
aspects, such as human resources, compliance with legal and
regulatory requirements, and salary steering.
History and education of each member of the Executive
Committee, including other activities and functions
André Frei
is the Co-Chief Executive Officer of
Partners Group, based in Zug. Together
with David Layton, he leads the
Executive Committee and the Global
Executive Board. He has been with
Partners Group since 2000 and has 19
years of industry experience. Previously,
he served as the Chief Risk Officer of Partners Group
between 2008 and 2013 and he was the Head of the Client
Services business department. He holds a master’s degree in
mathematics from the Swiss Federal Institute of Technology
(ETH) in Zurich, Switzerland. He is also a CFA charterholder.
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Juri Jenkner
Christoph Rubeli
is Head of the Private Infrastructure
business department, based in Zug.
He is a member of the Executive
Committee and the Global Executive
Board. He is a member of the Global
Investment Committee and the Private
Infrastructure Investment Committee.
Previously, he served as Co-Head of the Private Debt business
department and Head of the European Private Debt business
unit. He has been with Partners Group since 2004 and has 19
years of industry experience. Prior to joining Partners Group,
he worked at Privatbankiers Merck Finck & Co. He holds
a master’s degree in finance from the Lorange Institute of
Business Zurich, Switzerland. He is also a Certified European
Financial Analyst.
Andreas Knecht
is the Chief Operating Officer and
General Counsel of Partners Group,
based in Zug. He is Head of the
Corporate Operations business
department and Head of the Corporate
Legal business unit. He is a member
of the Executive Committee and the
Global Executive Board. He has been with Partners Group
since 2009 and has 23 years of industry experience. Prior to
joining Partners Group, he worked at a number of different law
firms, including Niederer Kraft & Frey, and at Man Group. He
holds a master’s degree in law from the University of Zurich,
Switzerland and an LLM from New York University. He is also
admitted to the Swiss bar.
Marlis Morin
is Head of the Client Services business
department, based in Zug. She is a
member of the Executive Committee
and the Global Executive Board. She has
been with Partners Group since 2003
and has 25 years of industry experience.
Prior to joining Partners Group, she
worked at Credit Suisse Asset Management Funds, Raiffeisen
Landesbank Südtirol and Raiffeisenkasse Eisacktal. She holds a
master’s degree in international economics and business studies
from the University of Innsbruck, Austria and Marquette
University, Wisconsin.
is Co-Head of the Entrepreneurial
Governance/Operating Directors
business unit, based in Zug and
Singapore. Until 31 December 2018,
he was Co-Chief Executive Officer
of Partners Group and co-led the
Executive Committee and Global
Executive Board and was a member of the Global Investment
Committee. He is a member of the Board of Directors of the
firm’s portfolio companies Cerba HealthCare and Foncia. He
has been with Partners Group since 1998 and has 33 years of
industry experience. Prior to joining Partners Group, he worked
at UBS. He holds an MBA from INSEAD Paris, France.
Dr. Michael Studer
is the Chief Risk Officer of Partners
Group and Head of the Portfolio
Solutions business department, based
in Zug. He is a member of the Executive
Committee, the Global Executive Board
and the Global Investment Committee.
He has been with Partners Group since
2001 and has 22 years of industry experience. He holds a PhD
in mathematics from the Swiss Federal Institute of Technology
(ETH) in Zurich, Switzerland.
Organizational changes to senior management
Partners Group reviews its organizational structure on an
ongoing basis and implements adjustments to its organizational
structure that will support and enable the continued successful
growth of its investment platform to the benefit of the firm’s
clients and shareholders, while ensuring continuity and stability
in its core leadership team.
Effective from 1 January 2019, Partners Group implemented a
change in the firm’s Co-CEO office. David Layton, Partner and
Head of Private Equity, succeeded Christoph Rubeli as Co-
CEO. He joined André Frei, who has been Co-CEO since 2013,
in the Co-CEO office. Christoph Rubeli additionally stepped
down from Partners Group’s Executive Committee and Global
Executive Board by 31 December 2018, but he will remain a
Partner of the firm. Christoph Rubeli will support the further
build-out of the investment platform globally, with a particular
emphasis on the entrepreneurial governance of our portfolio
companies.
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4.2. Other activities and vested interests
None of the members of the Executive Committee is a member
of a governing or supervisory body of important Swiss or
foreign organizations outside of Partners Group. None of
the members of the Executive Committee hold permanent
management or consultancy functions for important Swiss or
foreign interest groups, and none of the members have official
functions or hold political posts. None of the members of the
Executive Committee have carried out tasks for Partners Group
prior to joining the firm.
4.3. Number of mandates pursuant to the OaEC
In accordance with art. 12 para. 1 of the OaEC and art. 29
of the articles of association, each member of the executive
management may assume a maximum of one additional mandate
in listed corporations and a maximum of four additional
mandates in other legal entities. The other provisions under art.
25 of the articles of association, as referred to in section 3.3,
above apply mutatis mutandis.
4.4. Management contracts
Partners Group has not entered into any management
contracts with companies or individuals not belonging to the
group.
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5. Global Executive Board
In addition to the Executive Committee members, the Global Executive Board includes the following members:
Name
Bill Berry
René Biner
Mike Bryant
Fredrik Henzler1)
Adam Howarth
Sergio Jovele
Dr. Kevin Lu
Stefan Näf
Amelia Räss-Fernandez
Dr. Stephan Schäli
Dr. Yves Schneller
Dr. Raymond Schnidrig
Martin Scott
Anthony Shontz
Marc Weiss
1) Member as of 1 January 2019.
Joined Partners
Group in
Nationality
Age
2016 US American
1999
2016
2012
Swiss
British
Swedish
2007 US American
2005
2014
2000
2016
1999
2008
2010
Italian
Chinese
Swiss
Swiss
Swiss
Swiss
Swiss
2008
Australian
52
48
51
47
40
49
45
45
52
50
41
50
45
Position
Head Private Debt
Chairman Global Investment Committee
Co-Head Private Real Estate
Head Industry Value Creation and Head Industrials
Head Portfolio Management Americas
Client Solutions Europe
Chairman Asia and Head Client Solutions Asia
Head Client Solutions
Head Human Resources
Chief Investment Officer
Head Investment Services
Chief Technology Officer
Head Client Solutions Australia
2007 US American
41 Co-Head Private Equity Integrated Investments Americas
2007 US American
53
Co-Head Private Real Estate
The Global Executive Board is a diverse global leadership team
at group level, charged with driving forward the global business
and corporate development of the firm. Members include
Partners and Managing Directors from different business
lines across the firm’s offices in Denver, New York, London,
Singapore and Sydney, as well as its headquarters in Zug,
Switzerland. The team works closely with the firm’s Executive
Committee. Executive Committee members are also members
of the extended Global Executive Board (see also section 4.1).
In line with the changes in the Executive Committee (see also
section 4.1), Christoph Rubeli stepped down from Partners
Group’s Global Executive Board by 31 December 2018. Fredrik
Henzler will join the Global Executive Board as of 01 January
2019.
Members of the Global Executive Board
Bill Berry
is Head of the Private Debt business
department, based in London. He has
23 years of industry experience. Prior
to joining Partners Group, he was
Co-President of Capula Investment
Management and worked at Bank of
America/Merrill Lynch in a variety
of senior roles including Global Co-Head of Counterparty
Portfolio Management (CPM) and Head of EMEA Structured
Credit and Securitization and Solutions. He holds a bachelor’s
degree in economics from Princeton University, New Jersey
and an MBA from the Wharton School of the University of
Pennsylvania, USA.
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René Biner
Adam Howarth
is Chairman of the Global Investment
Committee at Partners Group, based
in Zug. He is a member of the Global
Executive Board. He has been with
Partners Group since 1999 and has
25 years of industry experience. Prior
to joining Partners Group, he worked
at PricewaterhouseCoopers. He holds a master’s degree in
economics and business administration from the University
of Fribourg, Switzerland. He is also a Swiss certified public
accountant.
Mike Bryant
is Co-Head of the Private Real Estate
business department, based in London.
He is a member of the Private Real
Estate Directs Investment Committee,
the Private Real Estate Secondaries
Investment Committee and the Private
Real Estate Primaries Investment
Committee. He has over 30 years of industry experience. Prior
to joining Partners Group he worked at GE Capital Real Estate,
HVB Real Estate Capital, Erste Bank, Coopers and Lybrand,
and Cushman and Wakefield. He holds a Master of Arts in Land
Economy from the University of Cambridge, UK. He is also a
qualified chartered surveyor.
Fredrik Henzler
is Head of the Industry Value Creation
business department and Head of the
Industrials Industry Value Creation
business unit, based in Zug. He is a
member of the Global Executive Board,
the Global Investment Committee,
the Private Equity Directs Investment
Committee and the Global Direct Debt Investment Committee.
He is a member of the Board of Directors of the firm’s portfolio
companies AMMEGA, CSS Corp., Form Technologies,
Hofmann Menue Manufaktur and United States Infrastructure
Corporation. He has been with Partners Group since 2012 and
has 24 years of industry experience. Prior to joining Partners
Group, he worked at BrainNet Supply Management Group AG
where he led more than 50 operational efficiency projects for
portfolio companies of private equity sponsors including APAX,
Bridgepoint, Cinven, KKR and Permira. He holds a master’s
degree in finance and accounting from the University of St.
Gallen (HSG), Switzerland.
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is Head of Partners Group’s New
York office and Head of Portfolio
Management for the Americas. He
is a member of the Private Equity
Integrated Investment Committee
and was previously the Co-Head
Private Equity Integrated Investments
Americas. He has been with Partners Group since 2007 and
has 19 years of industry experience. Prior to joining Partners
Group, he worked at HarbourVest Partners, LLC and Credit
Suisse. He holds an MBA from the New York University Stern
School of Business, USA.
Sergio Jovele
is Head of Partners Group’s London
office and part of the European Client
Solutions business unit. He is a member
of the Global Executive Board. He has
been with Partners Group since 2005
and has 19 years of industry experience.
Prior to joining Partners Group,
he worked at Initiative Europe on private equity research
assignments. He has published academic papers on American
literature and holds a degree in literature from the Istituto
Universitario Orientale di Napoli, Italy.
Dr. Kevin Lu
is Chairman of Asia and Head of
Partners Group’s Singapore office
as well as Head of the Asian Client
Solutions business unit. He is a member
of the Global Executive Board. He has
been with Partners Group since 2014
and has 21 years of industry experience.
Prior to joining Partners Group, he was a member of the senior
management team at the World Bank Group’s Multilateral
Investment Guarantee Agency, as its CFO and Asia-Pacific
Regional Director. He holds a PhD in international finance and
public policy from New York University, USA.
Stefan Näf
is Head of the Client Solutions business
department and Head of the European
Client Solutions business unit, based
in Zug. He is a member of the Global
Executive Board. Previously, he was
part of the Private Equity Directs
and Primaries business unit and
subsequently founded the firm’s London office. He has been
with Partners Group since 2000 and has 23 years of industry
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experience. Prior to joining Partners Group, he worked at the
European Institute for Risk Management (EIRM). He holds a
master’s degree in banking and finance from the University of
St. Gallen (HSG), Switzerland.
of industry experience. Prior to joining Partners Group, he
worked at Goldman Sachs and Finance Online GmbH. He holds
a PhD in computer science from the Swiss Federal Institute of
Technology (ETH) in Zurich, Switzerland.
Amelia Räss-Fernandez
Martin Scott
is Head of the Human Resources
business department, based in Zug. She
is a member of the Global Executive
Board. She has 25 years of industry
experience. Prior to joining Partners
Group, she worked at Salt Mobile/
Orange Communications Switzerland,
Zurich Financial Services and PricewaterhouseCoopers.
She holds an executive MBA from the University of Zurich,
Switzerland and a graduate degree in human resources
management from the University of Manchester, UK.
Dr. Stephan Schäli
is the Chief Investment Officer of
Partners Group, based in Zug. He is
a member of the Global Executive
Board. He is the Deputy Chairman of
the Global Investment Committee and
the Chairman of the Global Portfolio
Committee. He has been with Partners
Group since 1999 and has 22 years of industry experience.
Prior to joining Partners Group, he worked at UBS and
Goldman Sachs & Co. He holds an MBA from the University
of Chicago, Booth School of Business, Illinois and a PhD in
business administration from the University of St. Gallen (HSG),
Switzerland.
Dr. Yves Schneller
is Head of the Investment Services
business department and Co-Head of
the Transaction Services business unit,
based in Zug. He has been with Partners
Group since 2008 and has twelve years
of industry experience. Prior to joining
Partners Group, he worked at Baer &
Karrer. He holds a PhD in business law from the University of St.
Gallen (HSG), Switzerland. He is also admitted to the Swiss bar.
Dr. Raymond Schnidrig
is the Chief Technology Officer of
Partners Group and Head of the
Technology business unit, based in Zug.
He is a member of the Global Executive
Board. He has been with Partners
Group since 2010 and has 26 years
is Head of Partners Group’s Sydney
office and Head of the Australian Client
Solutions business unit. He is a member
of the Global Executive Board. He
has been with Partners Group since
2008 and has 26 years of industry
experience. Prior to joining Partners
Group, he worked at Zurich Investments, Tyndall Investment
Management and Citigroup. He holds a marketing diploma from
the Macquarie Graduate School of Management, Australia
and studied business at the University of Technology Sydney,
Australia.
Anthony Shontz
is Head of Partners Group’s Denver
office and Co-Head of Private Equity
Integrated Investments Americas.
He is a member of the Private Equity
Integrated Investment Committee. He
has been with Partners Group since
2007 and has 17 years of industry
experience. Prior to joining Partners Group, he worked at
Pacific Private Capital and Prudential Capital Group. He holds
an MBA from the Northwestern University Kellogg School of
Management in Illinois, USA.
Marc Weiss
is Co-Head of the Private Real
Estate business department, based
in New York. He is a member of the
Global Executive Board, the Global
Investment Committee and Chairman
of the Private Real Estate Investment
Committee. He has been with Partners
Group since 2007 and has 32 years of industry experience.
Prior to joining Partners Group, he worked at Commonfund,
Kenneth Leventhal & Company, Ernst & Young, LLP, UBS Asset
Management and Pension Consulting Alliance, Inc., whose
discretionary asset management business was integrated into
Partners Group. He holds an MBA from the Cornell University
Samuel Curtis Johnson Graduate School of Management in
New York, USA. He was also a certified public accountant.
Partners Group | 173
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6. Compensation, shareholdings
and loans
7. Shareholders’ participation
6.1. Principles, content and method of determining
the compensation
Pursuant to art. 14 and 15 of the OaEC, all compensation
paid in 2018 to the members of the Board of Directors and
the Executive Committee, and the outstanding loans, if
any, granted to the members of the Board of Directors and
the Executive Committee, are disclosed in sections 4 and
5 in the Compensation Report 2018. In the Compensation
Report 2018, the firm outlines its compensation principles,
components and method. The Compensation Report can be
found in the Annual Report 2018 or on the firm’s website.
6.2. Loans
Members of the Board of Directors and Executive Committee
may apply for loans and fixed advances, subject to an
internal review and approval process. Such loans are made
on substantially the same terms as those granted to other
employees, including interest rates and collateral. A detailed
overview of loans outstanding as of 31 December 2018 for the
Board of Directors and the Executive Committee can be found
in the Compensation Report in sections 5 and 6.
Pursuant to art. 12 para. 2 section 1 of the OaEC, the maximum
amount of loans and credits for members of the Board of
Directors and the executive management must be fixed in the
articles of association in order to allow the company to grant
such loans and credits to members of the Board of Directors
and the Executive Committee. Art. 27 and Art. 31 of Partners
Group’s articles of association state that the members of the
Board of Directors and Executive Committee may be granted
loans, credits and provided collateral up to certain limits at arm’s
length conditions. All loans listed in the Compensation Report
2018 were granted before the entering into force of the OaEC.
7.1. Voting rights & representation measures
Each share entitles to one vote. The shareholders who are
entitled to attend shareholders’ meetings and to exercise voting
rights are those recorded with voting rights in the shareholder
register as of a qualifying date prior to the shareholders’
meeting set by the Board of Directors.
Registration in the shareholder register with the attached
voting rights is restricted by the limits on transferability and
nominee registration as set forth in section 2.6. All registered
shareholders are invited to attend shareholders’ meetings. If
they do not wish to attend, any shareholder may be represented
at the shareholders’ meeting by a legal representative who
needs not be a shareholder, or the independent proxy. The
Board of Directors issues further rules in relation to attendance
and representation at shareholders’ meetings, including
the electronic issuance of proxies and instructions to the
independent proxy.
7.2. Quorums required by the articles of association
The articles of association for Partners Group provide that,
unless provided otherwise by mandatory provisions of law,
the following resolutions of the shareholders’ meeting require
at least two-thirds of the represented votes and the absolute
majority of the represented nominal value of shares:
The cases provided for by law in art. 704 para. 1 of the Swiss
Code of Obligations;
Reversal or amendment of the transfer limitation as set forth in
section 2.6.
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7.3. Convocation of the general meeting of
shareholders
The AGM of shareholders takes place within six months after
the close of the financial year. All registered shareholders
receive a written invitation to the AGM including detailed
descriptions of the items to be discussed and the motions of the
Board of Directors no later than 20 days before the date of the
AGM. In 2019, the AGM for shareholders is scheduled for 15
May.
Shareholders representing at least one-tenth of the share
capital may at any time request that a shareholders’ meeting be
called. The request must be submitted in writing at least 45 days
ahead of the meeting by stating the items on the agenda and the
motions to be introduced by the shareholders.
7.4. Inclusion of items on the agenda
Shareholders representing at least one-tenth of the share
capital may submit proposals to be placed on the agenda at a
shareholders’ meeting, provided these items are received by the
Board of Directors no later than 45 days prior to the meeting
by stating the items on the agenda and the motions to be
introduced by the shareholders.
7.5. Entries in the share register
The general rules for registration as a shareholder apply as
described in sections 2.4 and 2.6. The qualifying date for the
registration of shares is defined by the Board of Directors for
every shareholder meeting.
8. Changes of control and defense
measures
8.1. Opting-out
Partners Group has elected to opt out of the rule that an
investor acquiring 33 1/3 % of all voting rights has to submit a
public offer for all outstanding shares.
8.2. Clauses on change of control
The contracts with the members of the Board of Directors and
the Executive Committee do not contain any change of control
clauses.
In particular, no protection measures such as
•
•
•
•
•
•
severance payments in the event of a takeover (“golden
parachutes”);
special provisions on the cancellation of contractual
arrangements;
agreements concerning special notice periods or longer-
term contracts where they exceed 12 months (in line with
OaEC);
the waiver of lock-up periods (e.g. no options that can be
exercised with immediate effect);
shorter vesting periods/accelerated vesting; and/or
additional contributions to pension funds
exist that protect the above-mentioned persons by certain
contractual conditions against the consequences of takeovers.
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ANNUAL REPORT 2018 Corporate Governance Report
9. Auditors
Key factors in assigning the external audit mandate to KPMG
AG were:
• Detailed audit budget proposal containing expected hours
9.1. Duration of mandate and term of office
and the relevant hourly rate
The consolidated financial statements and the statutory
accounts of Partners Group Holding AG are audited by KPMG
AG. The statutory and group auditors are elected for one-
year periods at the Annual General Meeting of shareholders.
KPMG AG was first elected statutory and group auditor on 21
November 2001. The lead auditor, Thomas Dorst, has been in
charge of the mandate since 10 May 2017 and is subject to a
seven-year rotation interval.
• Comprehensive debriefing after completion of audit, during
which suggestions for improvement are discussed from
both sides
• Quality of service provided
•
•
•
International expertise in regard to audit and accounting
Independence and reputation of the audit firm
Industry knowledge and qualifications
9.2. Auditing fees
• Competitive fees
The Risk & Audit Committee reviews and assesses the auditor’s
performance on an annual basis. In this context and in the
spirit of upholding good corporate governance, Partners
Group periodically conducts appraisals of the audit mandate,
in which budget issues, in particular, are reviewed to ensure
audit fees are kept at a competitive level in the best interests of
shareholders.
Please also refer to the sections 3.5 as well 3.7.1.3 concerning
the Risk & Audit Committee.
In the financial year 2018, KPMG AG and other KPMG
companies received a total of CHF 1.6 million (2017: CHF 1.3
million) for audit services.
9.3. Additional fees
In addition, KPMG AG and other KPMG companies received
CHF 0.1 million (2017: CHF 0.2 million) in fees for non-audit
related services such as consulting services (tax, regulatory and
IFRS) rendered to Partners Group and its subsidiaries in the
financial year 2018.
9.4. Supervision and control vis-à-vis the external
auditors
The Board of Directors is responsible for the acceptance
and processing of the reports from the statutory and group
auditors. In this, the Board of Directors is supported by the
Risk & Audit Committee, which periodically interacts with and
monitors the qualification, independence and performance of
the external auditors.
Based on the constant dialogue with KPMG AG and its annual
presentation to the Board of Directors evaluating all audit
findings, the Risk & Audit Committee conducts its assessment.
This assessment further includes oral and written statements
made by KPMG AG throughout the year concerning individual
aspects or factual issues in connection with the accounting
and audit. During the 2018 financial year, the external auditors
participated in all four meetings of the Risk & Audit Committee
in order to discuss audit processes as well as regulatory
guidelines and monitoring. Among others, the external auditors
were also involved in evaluating findings on risk factors and
processes.
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10. Information policy
11. Non-applicability/negative
disclosure
It is expressly noted that any information not contained or
mentioned herein is non-applicable or its omission is to be
construed as a negative declaration (as provided for in the SIX
Exchange Regulation Corporate Governance Directive and the
Commentary thereto).
As a company with its shares listed on the SIX Swiss Exchange
AG, Partners Group is committed to pursuing an open,
transparent and consistent communication strategy vis-à-vis its
shareholders as well as the financial community.
Key dates for 2019 are as follows:
Event
Annual General Meeting
of shareholders
Ex-dividend date
Dividend record date
Date
15 May 2019
17 May 2019
20 May 2019
Dividend payment date
21 May 2019
AuM announcement
as of 30 June 2019
16 July 2019
Publication of Interim Report
as of 30 June 2019
10 September 2019
Partners Group’s Interim and Annual Reports are available
for download on the website at www.partnersgroup.com/
financialreports.
Partners Group also distributes all current news via regular
press releases. All published press releases are available on the
website at www.partnersgroup.com/pressreleases.
To receive all information automatically upon publication via
email, shareholders and other interested parties may subscribe
to press releases at www.partnersgroup.com/subscriptionform.
Partners Group’s Compensation Report outlining the 2018
compensation recommendations for the Board of Directors
and Executive Committee can be found on the Partners Group
website at www.partnersgroup.com/compensation-report or in
the 2018 Annual Report.
For all investor enquiries Philip Sauer can be reached as follows:
Philip Sauer
Zugerstrasse 57
6341 Baar-Zug
Switzerland
Phone: +41 41 784 66 60
Fax: +41 41 784 60 01
Email: philip.sauer@partnersgroup.com
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ANNUAL REPORT 2018
Contacts
Investor relations contact
Philip Sauer
T +41 41 784 66 60
philip.sauer@partnersgroup.com
Media relations contact
Jenny Blinch
T +44 207 575 2571
jenny.blinch@partnersgroup.com
partnersgroup@partnersgroup.com
www.partnersgroup.com
Follow us on LinkedIn
Follow us on Twitter
Zug
Zugerstrasse 57
6341 Baar-Zug
Switzerland
T +41 41 784 60 00
Denver
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Denver, CO 80202
USA
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Houston
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Houston, TX 77056
USA
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New York
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New York, NY 10036
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Brazil
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London EC2N 4AY
United Kingdom
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P.O. Box 477
Tudor House, Le Bordage
St Peter Port, Guernsey
Channel Islands, GY1 6BD
T +44 1481 711 690
178 | Partners Group
Paris
14, rue Cambacérès
75008 Paris
France
T + 33 1 70 99 30 00
Luxembourg
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Italy
T +39 02 888 369 1
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80636 Munich
Germany
T +49 89 38 38 92 0
Dubai
Dubai International Financial Centre
Level 3, Gate Village 10
P.O. Box 125115
Dubai, UAE
T +971 4 401 9143
Mumbai
Suite 3103, Four Seasons Hotel
Plot No. 1/136, Dr. E Moses Road, Worli
Mumbai 400 018
India
T +91 22 4289 4200
Singapore
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Asia Square Tower 1 #37-01
Singapore 018960
T +65 6671 3500
Manila
18/F Net Park Building
5th Avenue Corner 26th Street
Bonifacio Global City, Taguig
1634 Metro Manila
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T +63 2804 7100
Shanghai
Unit 2003, Level 20, Tower II
Jing An Kerry Centre
No. 1539 West Nanjing Road, Jing An District
Shanghai 200040
China
T +86 21 2221 8666
Seoul
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Yeoksam-Dong) 152 Teheranro
Gangnam-Gu, Seoul 06236
South Korea
T +82 2 6190 7000
Tokyo
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1-4-2 Kasumigaseki, Chiyoda-ku
Tokyo 100-0013
Japan
T +81 3 5532 2030
Sydney
L32, Deutsche Bank Place
126 Phillip Street
Sydney, NSW 2000
Australia
T +61 2 8216 1900
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