Dr. Anette Waygood Head Corporate Legal | André Frei Co-Chief Executive Officer
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As of 31 December 2019
Annual Report 2019
Contents
Key figures
Message from the Chairman and the Co-CEOs
2019 at a glance – Partners Group’s business model and review of financial performance
Investments
Clients
Client outlook
Financials
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
10
17
21
22
32
34
107
123
148
178
2019 was another strong year for Partners Group in terms of
performance. It was also a milestone year for the firm in terms of
defining our approach to ownership excellence.
We are a committed responsible investor and aim to create broad
stakeholder impact through our active ownership and development
of great businesses, desirable real estate and essential infrastructure.
We would like to thank our clients, our business partners, our
shareholders and – not least – our colleagues for their continued
support and trust in our firm.
Partners Group | 3
ANNUAL REPORT 2019 Key figures
1'464
professionals
CHF
1'610
million
20
USD
94
billion
1.82%
offices around
the world
assets under
management
revenue margin1), 2)
CHF
1'008
million
CHF
900
million
CHF
25.50
per share
revenues1)
EBIT
profit
proposed dividend
Total AuM3)
(in USD bn)
Number of professionals
94.1
83.3
74.4
57.2
50.0
43.5
45.5
930
840
701
746
1'464
1'203
1'036
2013
2014
2015
2016
2017
2018
2019
2013
2014
2015
2016
2017
2018
2019
Profit4)
(in CHF m)
Share price development since IPO5)
900
752
769
558
336
292
396
1'400%
1'200%
1'000%
800%
600%
400%
200%
0%
-200%
Partners Group
+1'309%
Bloomberg European Financial Index
-49%
2013
2014
2015
2016
2017
2018
2019
2007
2009
2011
2013
2015
2017
2019
1) Revenues from management services, net, including other operating income. 2) Based on average AuM of CHF 88.4 billion in 2019 (2018: CHF 77.6 billion), calculated on a daily basis. 3) Assets
under management exclude discontinued public alternative investment activities and divested affiliated companies. 4) 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. 5 ) As of 31 December 2019.
4 | Partners Group
ANNUAL REPORT 2019 Key figures
Key performance indicators
Assets under management as of the end of the year (in USD bn)1)
Revenue margin2), 3)
Revenues (in CHF m)3)
EBIT margin4)
EBIT (in CHF m)4)
Financial result (in CHF m)
Profit (in CHF m)
Net liquidity position at end of year (in CHF m)5)
Shareholders’ equity (in CHF m)
Return on shareholders’ equity (ROE)
Equity ratio
ANNUAL REPORT 2019
2018
83.3
1.71%
1'326
65%
865
23
769
1'226
1'968
39%
67%
2019
94.1
1.82%
1'610
63%
1'008
30
900
1'035
2'288
42%
58%
1) As of 31 December 2019, we have aligned our AuM reporting currency with our investment activity reporting currency by switching to USD. 2) Based on average AuM of CHF 88.4 billion in 2019
(2018: CHF 77.6 billion), calculated on a daily basis. 3) Revenues from management services, net, including other operating income. 4) EBIT has replaced EBITDA as the firm's key performance
indicator as it will be a more suitable measure of operating performance going forward. 5) 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 2019
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
887.4
26'700'000
23.7
84.96%
26'738'582
33.66
25.50
2.9%
PGHN SW
PGHN.S
1) According to the SIX Swiss Exchange definition. 2) As per proposal to be submitted to the 2020 Annual General Meeting of shareholders. 3) Yield as of 31 December 2019.
Corporate calendar
13 May 2020
15 May 2020
18 May 2020
19 May 2020
14 July 2020
Annual General Meeting of shareholders
Ex-dividend date
Dividend record date
Dividend payment date
Assets under management announcement as of 30 June 2020
8 September 2020
Publication of Interim Report as of 30 June 2020
Partners Group | 5
ANNUAL REPORT 2019
Message from the Chairman and the Co-CEOs
André Frei Co-Chief Executive Officer, Steffen Meister Executive Chairman, David Layton Co-Chief Executive Officer
Dear clients, business partners
and fellow shareholders,
We are pleased to report a strong set of results across the
board for the year 2019. Clients from all regions entrusted us
with USD 16.5 billion in new commitments; at the same time, we
were able to invest USD 14.8 billion on behalf of our clients in
attractive businesses and assets across all private markets asset
classes.
"We have defined a clear roadmap for
the next phase of our firm's sustainable
development; 'own the business' and
'care for people'."
Management fees grew by 14% to CHF 1.1 billion during the
year, in line with average AuM growth of 14%. The combination
of strong underlying portfolio performance and very successful
divestment activity in 2019 led performance fees to increase by
46% to CHF 0.5 billion. They represented 29% of total revenues
and were at the upper end of our communicated long-term
guidance of 20-30% of total revenues. Overall, total revenues
increased by 21% to CHF 1.6 billion. Based on the solid growth
of the underlying business, we intensified the build-out of teams
across the entire organization over the last twelve months. The
growth in average number of FTEs was 20% in 2019, partially
driven by delayed hiring for approved 2018 positions, which
carried over into 2019. Ultimately, our EBIT increased by 17%
and amounted to a record CHF 1 billion in 2019. Our EBIT
margin stands at 63%. 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 25.50 per share to shareholders at the next Annual
General Meeting, representing a year-on-year increase of 16%.
While our core business continued its upwards trajectory in
2019, it was a year of reflection for Partners Group's leadership
team. We took stock of the factors that have contributed to our
success to-date, mirrored in years of uninterrupted growth, and
identified those that may slow us down in future. As a result, we
were able to define a clear roadmap for the next phase of our
firm's sustainable development.
The roadmap we have defined for our firm follows two key
themes: "own the business" and "care for people." Both themes
refer to our own operations as well as to our global portfolio of
businesses and assets spanning multiple industries.
As a company founded on entrepreneurialism, we believe it is
our duty to establish entrepreneurial governance frameworks
for our firm and for our portfolio companies that enable value
creation. At the same time, we want to ensure our own firm
continues to be managed in a principled and effective manner,
especially as we continue to grow. In 2019, we initiated a
series of significant measures to improve our organizational
effectiveness, including the launch of a new "Cell Leadership"
structure, which clearly assigns ownership of day-to-day
business decisions and processes to individual teams or "cells".
We also established an "Operational Excellence" program
to safeguard our business and strengthen our day-to-day
operations and services.
6 | Partners Group
ANNUAL REPORT 2019 Message from the Chairman and the Co-CEOs
ANNUAL REPORT 2019
To enable our leaders to develop their team members, we
launched the PG Academy, a training platform founded with
the ambition of providing relevant training for all employees
worldwide at appropriate points in their career. In addition,
we developed a number of other initiatives that will enable us
to better care for our people and foster increased employee
engagement.
We write this letter at a time when private equity's mandate is
highly appreciated by many, but is being challenged by others:
while existing investors in private markets remain excited about
the returns and sustainable impact our investments generate
for their beneficiaries, the public discourse around private
investing frequently frames the industry in a less positive
light. We believe that much of this more skeptical sentiment
reflects unobjectively on the reality that our industry, to a
large extent, creates a positive impact for the economy and
society. Nonetheless, whether the perception is fair or not, as
private markets investing becomes an increasingly standard
building block of institutional investment management, these
perspectives have the potential to truly challenge the industry.
As such, they are on our mind as we ask ourselves the question:
what will it take to sustain growth and success in private
markets over the long run?
Our answer comes in two parts. On the one hand, we clearly
need to ensure continued positive outcomes for investors. We
must protect our ability to generate sustainable and superior
investment returns for our clients and their beneficiaries.
This is our core mandate. In order to do this we must avoid
becoming victims of our own success. As a leadership team,
we have therefore explored lessons from many of the large
conglomerates that had their heyday in the last century, but
ultimately succumbed to their own hype.
"We must not deviate from the
entrepreneurial governance that is
the hallmark of – and engine for – our
investment success."
In our view, there are many similarities between the private
markets firms of today and the conglomerates of the past: a
single corporate entity holding a portfolio of businesses and
assets across diverse industry sectors, centralized resources
running a decentralized portfolio of assets, and the benefit
of access to specialist resources, senior talent, best-in-class
processes and network effects.
Where some conglomerates started to falter was in their
aspiration to increase in size at all costs. Their acquisition
strategy was often driven primarily by opportunistic M&A, with
a focus on showing top-line revenue growth to please investors,
at the cost of meaningful business development, hands-on value
creation, and clear strategic positioning. Some were pushed into
obsolescence when their non-core subsidiaries began to suffer
from a loss of focus, a lack of strategic vision, and, ultimately,
poor leadership.
This is exactly why, at this crossroads for private markets, we
must not deviate from the "entrepreneurial governance" that is
the hallmark of – and engine for – our investment success. We
remain more convinced than ever about the merits of our own
investment approach: building and managing high-performing
boards for our portfolio companies and working together with
management teams on targeted value creation initiatives, which
enable long-term, sustainable growth. However, convinced does
not mean complacent. Our approach is in constant evolution as
we build on our learnings to-date and grow our investment and
industry value creation teams in tandem with the growth in the
number of our portfolio assets.
For the second part of our answer, we can also look to
conglomerates for a lesson – albeit this time a positive one.
We believe that certain conglomerates can be a role model to
private markets in aspects of active stakeholder communication
and engagement. Due to their very public profiles, in their
prime, conglomerates enjoyed the benefits, but also faced
the challenges, of a brand halo that extended across all their
subsidiaries, driving the need for proactive communication
beyond shareholders. In contrast, our industry has grown to
this point with the perception that we do not need to actively
or consistently communicate with any stakeholders who are
not investors in our private partnerships. In future, we not only
need to improve the communication of our broader stakeholder
impact, but we also need to show we are generating superior
"returns" for a broader set of stakeholders.
Partners Group | 7
ANNUAL REPORT 2019 ANNUAL REPORT 2019
Message from the Chairman and the Co-CEOs
"We will consider a new Stakeholder
Benefits Program, which aims to
reinvest a portion of achieved value
creation for the benefit of our portfolio
companies' employees."
Though we will continue to adapt our roadmap to the terrain,
one thing that will remain constant is our commitment to
creating long-term value for all of our stakeholders: our
clients, business partners, fellow shareholders, colleagues, and
portfolio company employees, among many others. Thank you
for your continued trust in our firm.
Yours sincerely,
Steffen Meister
Executive Chairman
André Frei
Co-Chief Executive Officer
David Layton
Co-Chief Executive Officer
To this end, as well as being a responsible owner of businesses,
we also want to be a more visible, responsible and caring
employer to the more than 180'000 individuals employed by
our portfolio companies. Within our investments, caring for
portfolio company employees has always been high on our ESG
engagement agenda. In fact, our 2019 Corporate Sustainability
Report will include several examples of ESG value creation
initiatives focused on serving our portfolio company employees.
However, in 2020, this topic will be of even higher strategic
importance. We will spend more time and resources on
elevating the work environment and financial benefits of our
portfolio company employees. Our first step will be to more
systematically apply some of Partners Group's own corporate
initiatives across our portfolio, focusing on corporate and team
culture, employee engagement, learning and development, as
well as compensation and benefits. In a second step, we will
consider a new Stakeholder Benefits Program, which aims to
reinvest a portion of achieved value creation for the benefit of
our portfolio company employees and other stakeholders.
At the end of this year, Partners Group will celebrate its 25th
anniversary. As a firm, we intend to mark this milestone by being
more clear-sighted than ever about our role in the economy
and in society, and firm in our intention to foster success for a
broad range of stakeholders. As the date approaches, we will be
encouraging individual Partners Group teams to hold their own
celebratory events to "give back" to their communities.
8 | Partners Group
Partners Group | 9
2019 at a glance – Investments
Investments
USD 14.8 billion invested on
behalf of our clients in attractive
and resilient businesses and assets.
Out of the total amount invested in 2019, USD 10.1 billion
(68% of total investment volume) was deployed in direct assets,
of which USD 6.3 billion was invested as equity in individual
businesses and infrastructure or real estate assets and
USD 3.8 billion was invested in corporate debt. For our equity
investments, our entrepreneurial ownership approach, with its
focus on value creation through strong governance structures
and deep industry expertise, remains the key to generating
sustainable outperformance.
Investment activity remained geographically diversified in 2019,
with 33% of capital invested in Europe, 50% in North America
and 17% in Asia-Pacific and Rest of World, reflecting our global
reach and scope. This was broadly in line with our long-term
average and strategy of deploying 40% of capital in Europe, 40%
in North America and 20% in Asia-Pacific and Rest of World.
Private markets investments during 2019
(in USD bn)
North
America
50%
USD
15 billion
Europe
33%
Portfolio
assets
32%
s
e
i
r
a
d
n
o
Sec.
c
e
S
s
r i e
P r i m a
Prim.
USD
15 billion
Debt
Debt
Debt
Asia-Pacific/
Rest of World
17%
E
Equity
Equity
q
u
i
t
y
Direct
assets
68%
Note: figures include add-on investments but exclude investments executed for short-term
loans, cash management purposes and syndication partner investments. Direct equity
investments include all direct private equity, direct infrastructure and direct real estate
investments (including direct secondary transactions where Partners Group has a controlling
interest).
Investment environment
Against a challenging backdrop of low growth and geopolitical
uncertainty, we believe "offense is the new defense" in private
markets investing. The main driver of returns in private markets
today is growth. Therefore, we seek opportunities to build
resilience instead of buying it. We do this by focusing on assets
with value creation potential in sub-sectors with above-average
growth rates. Paying close attention to market dynamics and
applying a hands-on approach to governance and value creation
are key to growing these assets during our ownership and
positioning them to withstand business cycles. Our strategy in
this environment is to leverage secular versus macro trends,
focusing on sub-sector trends generating higher top-line growth
and identifying opportunities to create value at the asset level.
On the investment side, 2019 proved to be another solid year
for us. After a record investment year in 2018, we invested a
total of USD 14.8 billion (2018: USD 19.3 billion) on behalf of
our clients across all private markets asset classes, maintaining
our highly disciplined and selective approach.
Private markets investments 2015-2019
(in USD bn)
19.3
13.3
11.7
9.7
14.8
H2
7.9
H1
6.9
2015
2016
2017
2018
2019
Note: figures include add-on investments but exclude investments executed for short-term
loans, cash management purposes and syndication partner investments.
10 | Partners Group
ANNUAL REPORT 2019 2019 at a glance – Investments
To complement our direct assets, we invested USD 4.7 billion
(32% of total investment volume) in portfolio assets in 2019.
These portfolio assets include secondary investments
(USD 2.7 billion) in globally diversified private markets
portfolios and select primary commitments (USD 2.0 billion)
to other private markets managers.
While we continue to overweight direct opportunities from
a relative value perspective, we now also see an increasingly
attractive outlook for the secondaries segment in Europe and
the US. We look for a high degree of overlap with our existing
private equity portfolio, which allows for greater insights into
the underlying assets. Infrastructure secondaries are also
becoming more attractive as a result of a maturing market:
secondary volume in infrastructure is expected to increase on
the back of record primary fundraising over the past four to
five years.
2019 deal flow remained attractive; investment
process remained highly selective
Our global platform of over 1'400 talented professionals
across 20 offices in key investment regions, together with our
focused investment strategies, deep sector insights, wide-
ranging industry network and our proprietary private markets
intelligence tool PRIMERA1 provide us with a unique ability
to originate and access attractive investment opportunities
around the globe while maintaining our rigorous due diligence
standards in a competitive market.
In 2019, we screened around 2'600 potential direct
transactions across all private markets asset classes. Of
these, we invested in only the most attractive 3%, resulting
in 77 direct transactions completed and a decline rate of
97%. Furthermore, our integrated investment professionals
generated approximately USD 165 billion in secondary private
markets assets deal flow, investing in less than 2% of this, and
screened around 500 fund offerings by leading private markets
managers.
1 PRIMERA is Partners Group's proprietary private market database.
Deal flow 2019
Private equity
Private debt
Private real estate
Private infrastructure
Direct assets
Portfolio assets
~2'600
assets
~500 private markets
managers
~USD 165 billion
portfolios
3% invested
#77 executed1)
Executed
USD 6.3 billion in equity
USD 3.8 billion in debt
USD 2.7 billion in secondaries
USD 2.0 billion in primaries
1) USD 6.3 billion invested in 40 equity investments and USD 3.8 billion invested in 37 debt
investments; figures include add-on investments but exclude investments executed for
short-term loans, cash management purposes and syndication partner investments.
Direct equity investments include all direct private equity, direct infrastructure and direct
real estate investments (including direct secondary transactions where Partners Group has
a controlling interest).
Partners Group’s investment performance
For more than two decades, our relative value approach has
been our firm’s principle investment philosophy when it comes
to portfolio construction and investment selection.
Changing market conditions, as well as transformative and
regional trends, can significantly affect the attractiveness of
different sectors and industries. We therefore conduct regular
analysis to identify those (sub-) sectors, regions and industry
strategies likely to offer higher value relative to other segments
at that time. We combine this top-down perspective with the
bottom-up selection of specific assets with value creation/
upside potential (see Thematic Sourcing on page 12). This
approach to investment has led to a solid, long-term track
record across asset classes.
In private equity direct investments, we pursue control-
oriented investments in platform companies, niche winners and
defensive companies and leverage our inherent governance
strengths to develop these companies and systematically create
value. Our mature buyout funds have made 67 investments to-
date, of which 51 are fully or partially-realized with an average
of 3.2x gross TVPI and 29.7% gross IRR2.
2 Past performance is not indicative of future results. For illustrative purposes only. There
is no assurance that similar investments will be made. Figures as of 31 December 2019 and
include investments made in the Partners Group Direct Investments 2009 and Partners
Group Direct Investments 2012. "Mature buyout funds" represent pooled average for 2009
and 2012 programs. Aggregated performance is calculated on a pooled basis. All cash flows
and valuations have been converted to USD using fixed exchange rates as of report date of
the track record. Figures are gross of fees to Partners Group. The performance presented
reflects model performance and does not represent performance that any investor actually
attained.
Partners Group | 11
ANNUAL REPORT 2019 2019 at a glance – Investments
Our Thematic Sourcing approach results in a steady near- to
mid-term pipeline of lead direct investment opportunities,
which currently stands at around USD 100 billion for private
equity. We typically perform at least one-to-two years of work,
and selectively much more than that, before a desired asset
becomes available for sale. We develop a deep understanding
of the industry, often in an open dialogue with management
teams and industry experts who can help us with due diligence
and value creation early on. During this time, we also develop an
in-depth understanding of the industrial logic behind the asset
and establish a solid investment hypothesis. These will serve as
a basis for outlining our transformation plan and composing an
effective board for the asset.
An overview of the attractive sub-sectors that our research
team has mapped out for each asset class and the tangible
results that we have achieved with this approach can be found in
our 2020 Private Markets Navigator, which can be downloaded
here: www.partnersgroup.com/navigator
With our direct private infrastructure strategy, we target
control investments in infrastructure assets and infrastructure-
related businesses globally. We have an 18-year track record
encompassing 56 direct infrastructure investments (34
realizations) and an average gross IRR of 19.7%3 since-inception.
In private real estate, we have deployed more than USD 11
billion in more than 236 investments generating an investment
IRR in excess of 14.7%4 since-inception.
In private debt, we have a differentiated investment strategy
and over 16 years of investment experience. Our solutions
range from subordinated to senior financing (direct lending and
broadly syndicated strategies). Since 2014, we have invested
USD 9.1 billion in subordinated debt and generated an average
IRR of 11.1%5.
Partners Group’s Thematic Sourcing approach
Our Thematic Sourcing approach enables us to build a
strong conviction for selected sub-sectors and remain more
deliberate and disciplined in our sourcing efforts compared to
a traditional top-down approach. In private equity, for example,
we think about the attractiveness of sub-sectors according to
multiple dimensions, including secular growth prospects and
consolidation potential.
The sourcing of assets within sub-sectors is the result of a
collaborative approach between our dedicated research team,
which sits within our Industry Value Creation team, and our
investment teams. While our research team is responsible for
mapping out attractive sub-sectors and the most promising
companies within them, our investment professionals play a key
role in identifying actionable investment targets. Our Industry
Value Creation team then identifies and implements operational
and financial value creation initiatives at the asset level.
3 Past performance is not indicative of future results. For illustrative purposes only. Figures
as of 31 December 2019. Includes all direct investments with an infrastructure focus
completed since inception. All cash flows and valuations have been converted to USD using
fixed exchange rates as of report date of the track record. Figures are gross of fees to Partners
Group. The performance presented reflects model performance and does not represent
performance that any investor actually attained. Realizations refer to fully and partially
realized investments.
4 Past performance is not indicative of future results. For illustrative purposes only. Figures
as of 31 December 2019. Represents all real estate investments (excluding primaries) that
Partners Group made on behalf of its clientele since inception. All cash flows and valuations
have been converted to USD using fixed exchange rates as of report date of the track record.
Figures are gross of fees to Partners Group. The performance presented reflects model
performance and does not represent performance that any investor actually attained.
5 Past performance is not indicative of future results. For illustrative purposes only. Figures
as of 31 December 2019. All cash flows and valuations have been converted to USD using
fixed exchange rates as of report date of the track record. Figures are gross of fees to Partners
Group. The performance presented reflects model performance and does not represent
performance that any investor actually attained.
12 | Partners Group
ANNUAL REPORT 2019 2019 at a glance – Investments
Select private markets investments in 20196
Private debt
Private equity
In December 2019, we made a significant equity investment in
EyeCare Partners LLC (ECP), the largest vertically integrated
medical vision services provider in the US. Founded in 2015
and headquartered in St. Louis, Missouri, ECP has an extensive
network of full-scope medical optometry and ophthalmology
practices, with over 450 locations across 13 states throughout
the US. The company employs over 500 optometrists and 85
ophthalmologists who, together with over 4'400 clinic staff,
offer patients end-to-end services covering medical optometry,
ophthalmology and sub-specialties, and vision correction
products. ECP's model provides an integrated network of
services that cover the entire lifecycle of a patient's eye
care needs, which results in increased patient and physician
satisfaction and retention.
Over a period of two years, our Thematic Sourcing efforts
identified the medical vision segment as a highly attractive
sub-sector within the healthcare sector, ripe for organic growth,
expansion, and consolidation.
EyeCare Partners LLC
We will work closely with ECP's management team on strategic
initiatives to support ongoing organic and acquisitive growth.
Key areas of focus for these initiatives will include the following:
increasing the recruitment of high-quality ophthalmologists and
optometrists; optimizing the network model; expanding and
maximizing ambulatory surgical center utilization; enhancing
administrative processes and operating efficiencies; investing
in clinical technologies that enhance patient care; and pursuing
select M&A partnership opportunities that provide world-class
medical vision care and patient experience.
6 All Partners Group investments and divestments mentioned herein were made on behalf of
the firm’s clients, not on behalf of Partners Group Holding AG or any of its affiliates.
In August 2019, we committed a unitranche debt financing
to Gong Cha Group (Gong Cha), a leading global provider of
premium quality bubble and milk tea. The transaction, which
also includes a significant equity kicker, supports the strategic
growth investment in Gong Cha by the private equity firm TA
Associates.
Gong Cha Group
Founded in 2006 in Southern Taiwan, Gong Cha offers
consumers a variety of seasonal and specialty tea-based drinks.
Its main offering is Taiwanese-style bubble tea, a sweet milk
tea infused with tapioca pearls. Primarily utilizing a franchise
model, Gong Cha reaches consumers through a variety of retail
store formats, with more than 1'000 outlets in 17 countries
across the globe, including Korea, Japan, Taiwan, the Philippines,
Malaysia, Mexico, Australia, Canada, the UK and the US. Our
debt investment supports the further expansion of the company
and enhances its ability to pursue further growth.
We continue to draw upon the global presence of our private
debt team to source and execute cross-border financings. In
this space, our deal flow benefits from the significant volume of
buyouts in the US and Europe by Asian sponsors.
The investment in Gong Cha follows an earlier investment
into the unitranche debt of AGS Health, a provider of clinical
documentation and revenue-cycle management solutions
to healthcare providers. Including transactions in Australia,
Partners Group has invested more than USD 600 million in
unitranche investments over the last two years across the Asia-
Pacific region.
Partners Group | 13
ANNUAL REPORT 2019 2019 at a glance – Investments
Private infrastructure
Private real estate
In September 2019, we agreed to acquire a 50% stake in
EnfraGen, LLC (EnfraGen), a leading developer, owner and
operator of power generation assets in investment grade
countries in Latin America. Glenfarne Group, the US-based
industrial owner and operator that founded EnfraGen, has
retained the remaining 50% of the business.
EnfraGen specializes in providing back-up power for grid
stability and baseload renewable power generation through
a portfolio of thermal, solar, and hydropower assets. Overall,
EnfraGen has 1.4GW in power generation capacity across its
platform, plus an executable growth pipeline. The investment
in EnfraGen is supported by structural market tailwinds,
namely the continued build-out of renewable power generation
capacity across Latin America, and benefits from long-term
stable revenues derived from a mix of regulated and contracted
USD-linked cash flows. Back-up power generators such as
EnfraGen play a critical role in reducing load imbalance in Latin
America, and EnfraGen also provides reliable renewable energy
to local communities.
EnfraGen, LLC
One of the reasons we secured the acquisition through
a bilateral transaction was our proven experience in the
construction and operation of power generation assets globally,
particularly renewable generation assets. Going forward, we
will leverage this experience to drive improvements across the
existing EnfraGen platform and to further the development and
construction of new projects as we continue to invest in the
renewables space across the globe.
14 | Partners Group
In April 2019, we completed the acquisition of a portfolio of 14
Spanish real estate assets, totaling over 91'000 sqm in gross
leasable area. The assets are diversified across Spain's major
cities, including Barcelona and Madrid, and sectors, including
office, hotel, retail and residential. The two largest assets in the
portfolio, an office building and a hotel, make up around 60% of
the portfolio and are located in Barcelona. Barcelona has seen
outsized job growth in the period between 2011 and 2017, with
a CAGR of 1.5%7, compared to the Spanish average of 0.8%8.
Portfolio of Spanish real estate assets
During this period, this growth was driven by job creation in
the services and tech-oriented sectors, with a CAGR of 5.2%
in the information and communications technology sector
specifically9.
The value creation plan for these assets consists primarily of
enhancing occupancy and raising rental incomes. For the office
building, a capex renovation project and lease renewals are
expected to capture rental uplifts and extend weighted average
lease terms. The value creation plan for the hotel will stabilize
occupancy and daily room rates at market levels. Although
we are cautious on hospitality in general given the sector’s
cyclicality, a license ban on new hospitality supply in Barcelona
introduced in 2017 supports our investment thesis for this
specific property in terms of occupancy and valuation resilience.
The investment was sourced outside of a competitive process
through our existing relationship with the seller via a fund
investment. Given our familiarity with the portfolio, we were
well positioned to provide swift underwriting and execution,
and managed to exclude a number of weaker retail assets,
where we had concerns on location, lease terms, and liquidity.
The portfolio’s relatively high occupancy at entry and the
existing cash flows provide appealing downside protection.
7 Barcelona Activa, Barcelona City Council, 2018.
8 Instituto Nacional de Estadistica, 2018.
9 Barcelona Activa, Barcelona City Council, 2018.
ANNUAL REPORT 2019 2019 at a glance – Investments
ANNUAL REPORT 2019
Divestments in 2019
We are cognizant of the fact that the correlation of valuation
levels across different market segments tends to increase
during volatile times. Due to the pick-up in volatility caused by
the Q4 2018 market correction, we observed many investors
adopting a more cautious approach in the beginning of the year,
in particular in Q1 2019. However, we observed a reasonably
benign exit environment throughout the rest of the year.
Nevertheless, with macroeconomic factors and geopolitical
uncertainty impacting a range of investment markets,
successfully navigating private markets is becoming more
challenging and resulted in an overall lower global exit activity in
2019 (-28% compared to 2018).
Global private equity buyout exit activity
(in USD bn)
508
410
363
430
-
2
8
%
311
Q1
Q1
Q1
Q1
Q1
2015
2016
2017
2018
2019
Source: Preqin Quarterly Update, Q3 2019; Preqin Pro, Q4 2019.
H1
H2
Investors' more cautious behavior in Q1 2019 led us to
postpone select divestment decisions and, ultimately, resulted
in a lower number of realizations in the beginning of the year.
However, as we moved past Q1, the rest of 2019 provided us
with a reasonably stable environment in which we were able
to execute our planned divestment decisions. We successfully
realized a number of mature private markets assets on behalf
of our clients, leading to a total of USD 11.0 billion in underlying
portfolio distributions in 2019 (2018: USD 13.4 billion). Some
distributions to evergreen programs were re-invested for the
benefit of the program’s investment exposure.
Our work is guided by an entrepreneurial mindset. We aim
to propel growth and drive value creation initiatives in our
portfolio companies and assets and then realize value for our
clients with a carefully planned exit strategy.
Partners Group's underlying gross portfolio realizations
(in USD bn)
13.4
11.8
10.2
7.6
11.0
H2
6.3
H1
4.7
2015
2016
2017
2018
2019
A good example of this approach is the sale of our stake in Billy
Bishop Toronto City Airport's (BBTCA's) passenger terminal
at the beginning of 2019. We acquired the BBTCA passenger
terminal together with our partners in the Nieuport Aviation
consortium in January 2015. Over the last few years, Nieuport
Aviation has added significant value to the terminal, including
helping to secure key approvals to facilitate building a US border
pre-clearance facility, as well as completing a major upgrade
of the terminal. The latter added more spacious passenger
lounges; new food, beverage and retail concessions; and an
additional gate. With the completion of the terminal upgrade
project, we concluded a major value creation program and
therefore felt the time was right to divest our stake and realize a
1.81x return on our original investment.
Billy Bishop Toronto City Airport
Partners Group | 15
ANNUAL REPORT 2019
2019 at a glance – Investments
Another noteworthy example represents the sale of Vermaat
Groep B.V. (Vermaat), the Dutch market leader in high-end
catering and hospitality services, which we announced in
October 2019. We acquired Vermaat from its founding family
in 2015, when it had a total of 231 outlets in the Netherlands
and generated annual sales of EUR 138 million. We have added
significant value to Vermaat through active ownership, with
initiatives including the implementation of a new brand concept
and strengthening of the management team. Additionally, ten
synergistic add-on acquisitions were completed under our
ownership, strengthening Vermaat's market leadership in its
core customer segments of Corporate, Leisure, Hospitals and
Travel, and expanding its geographical coverage. At the time of
the sale, Vermaat had around 350 premium food and beverage
outlets across the Netherlands, including restaurants, bistros,
cafés and canteens, and a growing presence in Germany. The
Company employed over 4'000 people and generated close
to EUR 300 million of sales in 2019. Vermaat was acquired by
Bridgepoint at the end of 2019. We retain a minority position
following the transaction. The sale generated a 2.75x return on
our original investment.
Vermaat Groep B.V.
In December 2019, we successfully sold the "City Campus"
office complex, situated on Saatwinkler Damm in the
Charlottenburg district of Berlin, for a transaction value of
around EUR 200 million. We were able to source the asset off-
market in March 2018, given our relationship with key members
of the selling consortium following a failed sale. The property
includes 55'640 sqm of rental area and 479 parking spaces
across six buildings. During our ownership period we leased up
80% of the space and increased average rents by 66%. The sale
generated a return in excess of 3.0x on our original investment.
16 | Partners Group
In December 2019, we agreed to sell our stake in Merkur
Offshore (Merkur), a 396MW offshore wind farm located in
the North Sea. We, together with the consortium of Merkur
shareholders, acquired Merkur in August 2016, in line with our
firm's relative value strategy of proactively building core assets.
Over the last three years, Merkur has been transformed from
a construction-ready development site to a utility-scale wind
farm within the German exclusive economic zone off the North
Sea coast. Now fully operational, Merkur comprises 66 General
Electric (GE) Haliade-150 6MW offshore wind turbines,
which are capable of supplying green energy to approximately
500'000 households. The project benefits from a guaranteed
feed-in-tariff until 2033 and has a ten-year operations and
maintenance agreement with GE Renewable Energy for the
service and maintenance of the turbines. Partners Group and
the consortium worked closely with Merkur's management
team over the last three years to create value, including
delivering the construction in line with budget, optimizing the
operations for the next 30 years, building a strong in-house
team for Merkur and strengthening the capital structure with a
refinancing. We are proud to have supported Merkur through
its key value creation period, from development project to fully
operational core asset and to have realized a return of more
than 2.0x on our orginal investment.
In November 2019, we agreed to sell our equity stake in
Action, Europe's leading non-food discount retailer. The stake
was acquired by Hellman & Friedman. Partners Group has
held its position in the company since 2011. The transaction
valued Action at an enterprise value of EUR 10.25 billion.
Established in 1993, Netherlands-headquartered Action
operated 1'325 stores across seven countries and employed
around 46'000 staff as of 2018. Its core product assortment
includes decoration, DIY, garden and outdoor, household
goods, multimedia, sports, stationery and hobby, toys
and entertainment, food and drink, laundry and cleaning,
personal care, pets, clothing and linen. Action uses large-scale
procurement, flexible assortment, optimal distribution and a
cost-conscious corporate culture to ensure very low prices for
its customers. Action generated net sales of over
EUR 4 billion in 2018. We are pleased to have been able to
support the company through its rapid expansion across Europe
over the past eight years. Action has been able to generate
extraordinary growth by combining an entrepreneurial culture
with a unique retail format. While the sale of our stake in Action
generates a very attractive return for our clients, we leave
the company extremely well-positioned for continued future
growth.
2019 at a glance – Clients
Clients
USD 16.5 billion gross client
demand in 2019; AuM stands at
USD 94 billion.
The global fundraising environment remained generally
supportive and continued to attract a wide and growing range
of investors who are looking for the higher returns that can be
found in private markets. Private markets investments play an
ever-increasing role in the portfolio construction of investors as
they also provide the benefits of diversification and risk/return
enhancement.
As of 31 December 2019, we have aligned our AuM reporting
currency with our investment activity reporting currency by
switching to USD. This reflects the growing importance of
USD-denominated assets as a proportion of AuM. As of the end
of the year 2019, USD-denominated AuM already represented
38% of total AuM, with the remainder denominated in a variety
of other currencies.
Total AuM
(in USD bn)
1
9 )
5 % p . a .
0
2
-
9
0
0
5 % p . a .
s : 1
e
e
y
C A G R ( 2
A u M : 1
e m p l o
#
94.1
#1'464
employees
74.4
#1'036
50.0
#840
43.5
#701
31.3
#574
23.7
#361
18.3
#273
2007
2009
2011
2013
2015
2017
2019
Note: assets under management exclude discontinued public alternative investment activities
and divested affiliated companies held up to 2013. Growth rate equals the compound annual
growth rate. Please refer to the "Alternative Performance Metrics" section on page 32 of this
annual report for more information about the definition of AuM.
A broad range of investors are seeking to further build out
their exposure to private markets and we aim to meet this
demand with our traditional private markets programs and via
our bespoke solutions. These range from mandates for large
institutions, which allow us to steer investment exposure across
multiple private markets asset classes in line with clients' longer-
term investment horizons, to evergreen programs for private
individuals who are increasingly recognizing the benefits of
private markets.
AuM grew to USD 94 billion
We aim to mirror the fee basis for our various investment
programs and mandates when calculating AuM. As such, AuM
covers investment programs, mandates and select assets
to which we provide fee-paying investment management or
advisory services10. In 2019, we received USD 16.5 billion in
new commitments from our global client base across all private
markets asset classes (guidance provided at the beginning of the
year: USD 14.5 to 18.0 billion)11. This demand for programs and
mandates brings total AuM to USD 94.1 billion as of
31 December 2019 (31 December 2018: USD 83.3 billion),
representing a net growth of 13%.
10 For more information on our AuM please see our definition in the section "Alternative
Performance Metrics" on page 32.
11 EUR guidance for the full-year was EUR 13-16 billion; in USD, guidance translates into
USD 14.5-18.0 billion, rounded to the next 0.5 billion (average EUR/USD FX-rate of 1.12).
Partners Group | 17
ANNUAL REPORT 2019 2019 at a glance – Clients
The breakdown of total AuM as of 31 December 2019 is as
follows: USD 45 billion private equity, USD 22 billion private
debt, USD 15 billion private real estate, and USD 12 billion
private infrastructure. It is noteworthy to mention that our
AuM have become increasingly diversified. As of end 2019, our
combined AuM in Private Debt, Private Real Estate and Private
Infrastructure represented for the first time more than 50% of
our total AuM.
AuM by asset class
Private infrastructure
13%
Private
real estate
16%
USD
94 billion
Private equity
48%
Private debt
23%
Alongside new commitments received during the period,
tail-down effects from mature private markets investment
programs and redemptions from evergreen programs amounted
to a total of USD -7.1 billion (full-year guidance for tail-downs
and redemptions: USD -7.5 to -8.5 billion). These were skewed
towards the second half of the year as a number of larger
closed-ended programs reached the end of their lifetime. A
positive contribution of USD +1.8 billion stemmed mainly from
performance- and investment-related effects from a select
number of investment programs. The remaining
USD -0.4 billion was driven by foreign exchange effects.
Overall, this resulted in net AuM growth of USD 10.8 billion
during the period.
Total AuM development in 2019
(in USD bn, except where stated otherwise)
+16.5
-7.1
Tail-downs: -5.8
Redemptions: -1.3
+1.4
Others +1.8
FX -0.4
94.1
=EUR 83.8 bn
=CHF 91.1 bn
83.3
Full-year
guidance
provided:1)
+14.5 to 18.0
Full-year
guidance
provided:2)
-7.5 to -8.5
No guidance
provided
2018
New money/
commitments
Tail-downs &
redemptions3)
FX & others4)
2019
1) EUR guidance for the full-year was EUR 13-16 billion; in USD, guidance translates into
USD 14.5-18.0 billion, rounded to the nearest 0.5 billion (average EUR/USD FX-rate of 1.12).
2) EUR guidance for the full-year was EUR -6.5 to -7.5 billion; in USD, guidance translates into
USD -7.5 to -8.5 billion, rounded to the nearest 0.5 billion (average EUR/USD FX-rate of 1.12).
3) Tail-downs & redemptions: tail-downs consist of maturing investment programs
(typically closed-ended structures); redemptions stem from semi-liquid evergreen programs.
4) Others consist of performance and investment program changes from select programs.
18 | Partners Group
Client demand across all asset classes
Private equity was the largest contributor to assets raised in
2019, representing 43% of all new commitments
(USD 7.1 billion). Demand was tilted towards the first half of
the year and split across a wide range of different programs
and mandates, with our next-generation private equity
flagship program and our evergreen programs being the main
contributors. Our private equity AuM grew by 9% in 2019.
Private debt saw strong inflows in 2019, which represented
30% of all new commitments (USD 5.0 billion). Demand was
spread over several different programs and mandates focused
on our direct lending activities, which contributed about
three quarters of the assets raised, and our collateralized loan
obligation (CLO) business, which contributed about one quarter
of assets raised. Today, our CLO business represents around 4%
of our AuM, but this proportion is expected to grow in the years
to come, depending on market receptiveness to CLOs. Private
debt AuM grew by 25% in 2019, making it the fastest-growing
business line within our firm.
Private real estate new commitments represented 15% of
overall new client demand (USD 2.5 billion). Almost half of our
new assets raised stemmed from our real estate opportunities
investment strategy. The year-on-year growth rate of private
real estate AuM amounted to 8% in 2019.
Client demand for private infrastructure made up 12% of
all new commitments (USD 1.9 billion). Client demand was
predominantly driven by our diversified global infrastructure
offering and mandates. We started marketing our new direct
flagship offering towards the end of 2019 and we expect that to
make a meaningful contribution to fundraising in 2020. Private
infrastructure AuM increased by 14% in 2019.
Net AuM growth by asset class
(in USD bn)
+14%
+8%
+25%
+9%
83.3
10
14
18
41
2018
94.1
12
15
22
45
2019
Private infrastructure
Private real estate
Private debt
Private equity
ANNUAL REPORT 2019 2019 at a glance – Clients
Client demand by region
Client demand by type
We have an international client base of over 900 institutions
around the world. In 2019, client demand was again well-
diversified across regions: North America accounted for
the largest share of client demand, with 19% of new inflows,
followed by the United Kingdom and Switzerland, which
represented 17% of client demand each. Notably resilient
countries were Germany and Australia, which contributed 12%
and 10% of total inflows, respectively. The remainder stemmed
from all other regions, with Asia and France making strong
contributions.
Following these inflows in 2019, our total AuM by region as of
31 December 2019 stands as follows.
AuM by region
Australia
7%
Switzerland
16%
Asia
5%
Middle East
3%
South America
2%
North America
16%
USD
94 billion
Germany & Austria
16%
France & Benelux
5%
UK
22%
Southern Europe
4%
Scandinavia
4%
The USD 16.5 billion inflows in 2019 stemmed from a broad and
diverse range of clients, as outlined below.
In 2019, corporate, public and other pension funds continued
to be the key contributors to AuM growth, representing 42%
of total client demand. These investors typically seek to further
enhance the risk/return profile of their portfolios by increasing
their private markets exposure.
We saw continued demand from distribution partners (banks
and others), which accounted for 20% of client demand in 2019.
They represent private individuals and smaller institutional
investors, who 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 semi-liquid evergreen
programs, which offer quarterly, limited monthly and, in some
cases, limited daily liquidity.
Insurance companies accounted for 7% of overall inflows
in 2019, displaying particular appetite for yield-generating
private debt offerings as well as renewed interest for equity
investments.
Sovereign wealth funds and endowments accounted for
approximately 7% of total assets raised in 2019 and generally
engage with us seeking highly tailored private markets solutions
to complement their existing portfolios.
Banks also supported our fundraising, with a focus on our CLO
offerings. They strengthened our position in the European and
US broadly syndicated debt markets and made up 7% of our
total fundraising in 2019.
A further 17% of total client demand stemmed from asset
managers, family offices and other investors.
Following these inflows in 2019, our total AuM by investor type
as of 31 December 2019 stands as follows.
AuM by type
Distribution partners/
private individuals
18%
Public pension
funds
20%
Asset managers,
family offices,
banks and others
18%
SWFs and other
endowments
5%
USD
94 billion
Insurance
companies
10%
Corporate and
other pension funds
29%
Partners Group | 19
ANNUAL REPORT 2019 2019 at a glance – Clients
Client demand by product structure
Around 300 portfolios under management
Managing complex private markets portfolios is our strength
and a key differentiator for our firm. We currently manage
around 300 diverse private markets portfolios in different
stages of their lifecycle and across all private market asset
classes. These encompass traditional private markets vehicles
such as comingled, closed-ended limited partnerships;
mandates for large institutions, which allow us to steer
investment exposure across multiple private markets asset
classes in line with clients' longer-term investment horizons;
and evergreen programs.
As of 31 December 2019, our two largest investment
programs, which are both globally diversified, accounted
for 12% of our AuM. While the largest program combines
private equity and private debt investments and caters to
private investors in the US, the second largest program offers
investors exposure to all private equity investment strategies.
Private market programs and mandates relative to AuM
EUR
Around
80 billion
300 programs
& mandates
Note: total AuM of USD 94 billion as of 31 December 2019.
In 2019, client 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 tailored solutions to meet the
specific client needs of larger institutional investors. 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. Some 32% (USD 5.3 billion) of our client
commitments in 2019 stemmed from relationships with clients
through such mandates.
An additional 29% (USD 4.8 billion) of new commitments
stemmed from our evergreen programs. These open-ended
vehicles cater mostly to private individuals who are increasingly
recognizing the benefits of private markets; they have no
contractual end, but are subject to potential redemptions
(initially provided via their allocation to more liquid assets).
We have been a pioneer in the structuring of such evergreen
programs for investors. We currently manage 26% of our
AuM (USD 24.0 billion) in evergreen programs, of which
USD 21.6 billion are subject to potential redemptions.
Gating provisions are a standard feature of these evergreen
programs in order to protect remaining investors as well as
performance; net redemptions in these investment programs
are typically limited to 20-25% p.a. of the prevailing net asset
value, depending on the investment strategy and content of the
program. When deemed in the best interest of the investment
program, stricter gating rules can be enforced for select share
classes for a period of up to two years.
The remaining 39% (USD 6.4 billion) of overall inflows in 2019
was raised via traditional private markets programs, typically
limited partnerships, with a pre-defined contractual life often
with an initial term of 10-12 years for closed-ended equity
offerings and 5-7 years for closed-ended debt offerings.
Following these inflows in 2019, our total AuM by product
structure as of 31 December 2019 stands as follows.
AuM by program structure
Traditional
private markets
programs
34%
M
a
(
4
n
d
0
a
%
t
)
e
s
USD
94 billion
Tailored
private markets
programs
66%
Evergreen
programs (26%)
20 | Partners Group
ANNUAL REPORT 2019 2019 at a glance – Client outlook
Client outlook
Solid gross client demand
expected for 2020; confirmed
guidance of USD 15-19 billion.
Based on robust client demand for programs and mandates and
facilitated by the solid increase in our investment capacity, we
confirm our guidance of USD 15-19 billion for the anticipated
bandwidth of gross client commitments for the full-year 2020.
This guidance assumes that the fundraising environment will
remain benign, which is our base case scenario.
Our full-year estimates for tail-down effects from the more
mature Partners Group programs and potential redemptions
from semi-liquid programs have not changed and amount to
USD -7.5 to -9.0 billion.
Fundraising will be spread across a variety of programs spanning
all private markets asset classes, including flagship programs,
customized mandates and the firm's extensive range of
innovative evergreen programs.
Based on our strong track record of investment performance,
as well as client service excellence, we believe that we are well
positioned to continue to be a strong partner to global investors.
AuM, client demand and other effects
(in USD bn)
Full-year 2020 expectations
15-19
Client demand
+15.0
74.4
+15.7
83.3
+16.5
94.1
57.2
-4.0
Tail-downs &
redemptions
+6.2
FX & others
2017
-5.6
Tail-downs &
redemptions
-1.2
FX & others
-7.1
Tail-downs &
redemptions
+1.4
FX & others
-7.5 to -9.0
+/-
=
Tail-downs &
redemptions1)
FX & others2)
Total AuM
2018
2019
2020
1) Tail-downs & redemptions: tail-downs consist of maturing investment programs.
(typically closed-ended structures); redemptions stem from evergreen programs.
2) Others consist of performance and investment program changes from select programs.
Partners Group | 21
ANNUAL REPORT 2019 2019 at a glance – Financials
Financials
EBIT reached CHF 1 billion in
2019; proposed dividend of
CHF 25.50 per share.
Strong client demand and the continued success of our
investment activities enabled us to generate a solid 13%
increase in AuM in 2019. During the same period, underlying
portfolio realizations amounted to USD 11.0 billion
(2018: USD 13.4 billion). The market uncertainty at the
beginning of the year, caused by the market correction in Q4
2018, led us to postpone certain divestment decisions and,
ultimately, resulted in a lower number of realizations in the
first half of the year. However, supported by a benign exit
environment in the second half of the year, we successfully
exited many mature assets and saw a disproportional increase in
performance fees from CHF 130 million in H1 2019 to
CHF 343 million in H2 2019, bringing full-year performance
fees to CHF 473 million.
As a result, total revenues12 rose 21% to CHF 1'610 million
during the period. To support underlying business growth, we
have intensified the build-out of our teams across the entire
platform over the last twelve months. The growth in average
number of FTEs was 20% in 2019 (2018: +14%), partially
driven by delayed hires for approved 2018 positions, which
were carried over into 2019. This resulted in an increase of
regular personnel expenses of 24% in 2019 (2018: +17%), which
compares to an increase in management fees of 14%
(2018: +15%). Further to this, the strong increase in
performance fees (+46%) led to a corresponding increase in
performance fee-related compensation, lifting total personnel
expenses disproportionally by +30% compared to the 21%
12 Revenues from management services, net, and including other operating income.
Key financials
AuM as of the end of the year (in USD bn)1)
AuM as of 31 December 2019 (in CHF bn)
Average AuM as of the end of the year (in CHF bn)2)
Revenue margin2),3)
Attributable to management fee margin4)
Attributable to performance fee margin
Revenues (in CHF m)3)
Management fees (in CHF m)4)
Performance fees (in CHF m)
EBIT (in CHF m)5)
EBIT margin5)
Profit (in CHF m)
2018
83.3
82.1
77.6
1.71%
76%
24%
1'326
1'002
324
865
65%
769
2019
94.1
91.1
88.4
1.82%
71%
29%
1'610
1'138
473
1'008
63%
900
Growth
+13%
+11%
+14%
+21%
+14%
+46%
+17%
+17%
1) As of 31 December 2019, we have aligned our AuM reporting currency with our investment activity reporting currency by switching to USD. 2) Based on average AuM, calculated on a daily basis.
3) Revenues from management services, net, and other operating income. 4) Management fees and other revenues, net, and other operating income. 5) EBIT has replaced EBITDA as the firm's key
performance indicator as it will be a more suitable measure of operating performance going forward.
22 | Partners Group
ANNUAL REPORT 2019 2019 at a glance – Financials
growth in total revenues. As a result, total EBIT increased by
17% to CHF 1'008 million (2018: 865 million). The EBIT margin
stands at 63% (2018: 65%). Profit increased by 17% year-on-
year to CHF 900 million (2018: CHF 769 million), in line with
EBIT growth.
• Management fees from mandates are to be considered as
contractually recurring as capital is committed via long-
term partnerships, which are often not limited to a specific
contractual life and will continue for a perpetual term,
unless new commitments are discontinued. Mandates
represented 40% of our AuM as of the end of 2019.
Management fees grow in line with AuM
• Management fees can also derive from our evergreen
Management fees increased by 14% in 2019, amounting to
CHF 1'138 million (2018: CHF 1'002 million), in line with
average AuM growth of 14%. We generated other management
fee-related revenues of CHF 94 million (2018: CHF 84 million),
which included income earned for fundraising and investment
services amounting to CHF 31 million (2018: CHF 38 million),
as well as other operating income earned for treasury
management and short-term financing services amounting to
CHF 63 million (2018: CHF 46 million).
Revenue development
(in CHF m)
%
1
2
+
+ 1 4 %
1'326
324
(24%)
84
1'002
(76%)
1'610
473
(29%)
94
1'138
(71%)
Revenues1)
Performance fees
Other revenues from management
services & other operating income
Management fees2)
1'245
+ 7 %
+ 1 5 %
372
(30%)
99
873
(70%)
2017
2018
2019
1) Revenues from management services, net, and other operating income.
2) Management fees and other revenues, net, and other operating income.
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, management fees are expected to make up around
70-80% of total revenues in a calendar year. In 2019, total
management fees represented 71% of total revenues
(2018: 76%).
• Management fees will be recurring as they are based on
long-term client contracts, often with an initial term of
10-12 years for closed-ended equity offerings and 5-7
years for closed-ended debt offerings. Such closed-ended
offerings represented 34% of our total AuM as of the end
of 2019.
programs. These are predominantly semi-liquid investment
programs that have no contractual end and cater
predominantly to retail clients/high-net-worth individuals;
they represented 26% of AuM as of the end of 201913.
Management fees are contractually recurring
around
10%
Performance fees
29%
around
20-30%
around
70-80%
around
90%
71%
2006-2015
2019
long term
Performance fees1)
“quasi-recurring”
Management fees2)
“contractually
recurring”
1) Assuming that the market remains favorable to exits, Partners Group expects to continue to
generate significant performance fees from the underlying client portfolios due to the visibility
that it has on the life cycles of its programs.
2) Management fees and other revenues, net, and other operating income.
In 2019, performance fees amounted to CHF 473 million
(2018: CHF 324 million) and represented 29% of total revenues
for the full-year (2018: 24%). The expected full-year guidance
for performance fees as a proportion of total revenues was 20-
30%, assuming that the market remained favorable to exits.
Performance fees contributed meaningfully to our total
revenues in the second half of the year and amounted to
CHF 343 million in H2, as compared to CHF 130 million in
H1. The significant increase in performance fees in H2 2019
was due to a combination of strong underlying portfolio
performance and successful divestment activity.
13 Gating provisions are a standard feature of these evergreen programs in order to protect
remaining investors as well as performance; net redemptions in these investment programs
are typically limited to 20-25% p.a. of the prevailing net asset value, depending on the
investment strategy and content of the program. When deemed in the best interest of the
investment program, stricter gating rules can be enforced for select share classes for a period
of up to two years.
Partners Group | 23
ANNUAL REPORT 2019 2019 at a glance – Financials
As of 2019, more than 85 investment programs and mandates
were contributing to performance fees. 2019 performance
fees were driven by dozens of underlying assets. The largest
contributing investment program was an evergreen program
catering to US investors. It contributed 16% of the total amount
of performance fees. The largest single exit in 2019 was the
sale of our stake in Action, Europe's leading non-food discount
retailer (refer to page 16), which accounted for 24% of total
performance fees.
Performance fee contribution by number of
investment programs and mandates
Performance fee outlook
In the long term, future performance fee potential is expected
to grow in line with AuM. We currently manage around 300
diversified investment programs and mandates at different
stages of their lifecycle. Most of these vehicles entitle the firm
to a performance fee, typically subject to pre-agreed return
hurdles (see performance fee recognition further below). Due
to this diversification, we anticipate that performance fees will
be earned regularly from a wide range of investment vehicles
going forward, making them a "quasi-recurring" source of
income, assuming market conditions remain broadly supportive.
Rest (>65)
18%
Top 1
16%
Performance fee development
Top 11-20
19%
CHF
473 million
Top 2-5
29%
Top 6-10
18%
83
94
473
74
372
324
6 - 9 y e a r s
…translates
into future
performance
fee potential
Past AuM...
32
29
24
43
45
38
16
13
43
39
34
57
294
50
64
2009 2010
2011 2012
2013
2014
2015
2016
2017 2018 2019
2025
AuM (in USD bn)
Performance fees (in CHF m)
Note: assuming that the market remains favorable to exits, Partners Group expects to
continue to generate significant performance fees from the underlying client portfolios due to
the visibility that it has on the life cycles of its programs.
Significant performance fee potential embedded
Future performance fees cannot be estimated reliably. If value
creation in clients’ portfolios is strong, investment performance
for clients should improve, which will ultimately result in a higher
amount of performance fees being generated. On the other
hand, should there be limited value creation during the holding
period of an investment, performance fees could be significantly
lower (or even zero).
Between 2007-2012, we invested around USD 25 billion in
private markets, which generated the majority of performance
fees between 2016-2019 (in sum CHF ~1.5 billion). Since 2012,
we invested a further USD 84 billion in private markets assets
and have so far created substantial value in our client portfolios.
We believe that this value creation within our current portfolio
translates into significant mid- to long-term performance fee
potential, assuming that the market remains favorable to exits.
24 | Partners Group
ANNUAL REPORT 2019 2019 at a glance – Financials
Performance fee recognition
In private markets, performance fees are designed to
remunerate investment managers for the long-term value
creation for their clients. They are a profit-sharing incentive
for investment managers when their investment programs
outperform a pre-agreed return hurdle, typically defined over
the lifetime of such program. In closed-ended investment
programs, 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 illustrative example below shows the performance fee
model of a typical limited partnership program. It shows how
distributions in private markets portfolios bring forward the
maturity profile of an investment program and increase the
likelihood that the required return hurdle is reached.
Illustrative example of a closed-ended private
markets program over its lifetime
This illustrative example assumes an initial client
commitment of 100 into a closed-ended investment
program. It is agreed that the investment manager shall
receive 20% of profits over time and that the return
hurdle shall translate to distributions to the client of 140.
After a few years the investment manager generates
realizations in the portfolio and starts making
distributions to the client. After 6-9 years, the cumulative
distributions (blue triangle) received by the client exceed
140, i.e. the hurdle rate. In a first step, the investment
manager is entitled to receive subsequent distributions
above the return hurdle as performance fees, until the
investment manager “catches-up” on past performance in
excess of the client investment (“catch-up” on 140-100 =
40, and 40 x 20% performance fees = 8).
In a second step the investment manager and the client
will share any additional distributions stemming from the
sale of the remaining portfolio over time according to
the pre-defined performance-sharing mechanism. In our
example the client receives 80% of distributions and the
investment manager receives 20%. The example assumes
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.
Total performance fees received is 20 (20% of 40 + 20%
of 60 = 8 + 12) and clients receive 80% of profits (80% x
(200 – 100)).
Performance fee model in a closed-ended
investment program
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
(20% of 60 = 12)
8
catch-up
(20% of 40)
Distributions
140
Performance fees
(20% above 100)
Locked-in performance (based on exits)
Performance fee recognition (realized)
6-9 years
8
0
6-9 years
20
(20% of 100)
Note: performance fees of performance fee generating investment programs and
mandates typically range between 5-20% over a hurdle of 4-8% IRR on invested
capital, depending on the program and instruments. For illustrative purposes only.
Performance fee recognition rules
The timing and amount of performance fee payments
depends on several factors, including the pace of deployment,
performance of investments and pace of realizations (cash
distributions). Partners Group recognizes performance
fees once it is highly probable that performance fees will be
received and retained permanently, irrespective of subsequent
performance of that program. This is described through the
following steps:
•
•
Step 1, we consider performance fees which would be due
to realized investments only, taking into account the agreed
profit-sharing mechanism, including the agreed hurdle
return.
Step 2, we consider performance fees expected on the
aggregate program, i.e. on the combination of realized and
unrealized investments. We include the value of unrealized
investments with a significant discount (typically 50%,
depending on the investment strategy). This discount is
chosen such that performance fees are highly likely to
be permanent, including in case of subsequent negative
program development, i.e. such that the likelihood of a
potential claw-back situation is minimal.
Partners Group | 25
ANNUAL REPORT 2019 ANNUAL REPORT 2019
2019 at a glance – Financials
•
Step 3, performance fees are only recognized on the lower
of either realized investments (Step 1) or the combination
of realized and stress-tested unrealized investments
(Step 2).
The illustrative example below explains the conservative
approach for performance fee recognition described above.
Illustrative example of performance fee recognition in a closed-ended program
This simplified example assumes that with initial client
commitments of 450, a fund made only two acquisitions:
investment Y for 100 and investment Z for 350.
Furthermore, it is assumed that the value of investment Y
increases to 200 and the value of investment Z increases to
800 for Scenarios 1 and 2, and to 500 for Scenario 3.
The performance fee recognition under these three
scenarios would be as follows:
Scenario 1: No realizations (hurdle rate met)
Investment Y increases to 200
Investment Z increases to 800
Remaining NAV
1'000
•
•
•
Step 1: as there were no realized investments, we would
not be entitled to a performance fee. Performance fees
= 0.
Step 2: NAV stress-test: 1'000 x 50% = 500; 500
(stress-tested NAV) – 450 (cost of investments Y
and Z) = 50 (value gain); 50 (value gain) x 20% = 10 in
performance fees.
Step 3: as performance fees can only be recognized on
the lower of realized investments (step 1: performance
fee = 0) vis-à-vis the combination of realized and stress-
tested unrealized investments (step 2: performance fee
= 10), we would not recognize any performance fees.
Scenario 2: Investment Y realized (hurdle rate met)
Investment Y realized for 200
Investment Z increases to 800
800
Remaining NAV
•
Step 1: as investment Y was realized for 200, we would
be entitled to a performance fee as hurdle rate at asset
level is met. 200 – 100 = 100 (value gain); 100 (value
gain) x 20% = 20 performance fees.
•
•
Step 2: stress-test on remaining NAV: 800 (unrealized
investment Y) x 50% = 400; 400 (stress-tested NAV) +
200 (realized investment Y) – 450 (cost of investment
Y and Z) = 150 (value gain); 150 (value gain) x 20% = 30
performance fees.
Step 3: as performance fees can only be recognized
on the lower of realized investments (step 1:
performance fee = 20) vis-à-vis the combination of
realized and stress-tested unrealized investments
(step 2: performance fee = 30), we would recognize 20
performance fees.
Scenario 3: Investment Y realized (hurdle rate not met)
Investment Y realized for 200
Investment Z increases to 500
500
Remaining NAV
•
•
Step 1: as investment Y realized for 200, we would be
entitled to a performance fee as hurdle rate at asset
level is met. 200 – 100 = 100 (value gain); 100 (value
gain) x 20% = 20 performance fees.
Step 2: stress-test on remaining NAV: 500 (unrealized
investment Y) x 50% = 250; 250 (stress-tested NAV) +
200 (realized investment Y) – 450 (cost of investment
Y and Z) = 0 (value gain); as the stress-test brings the
overall return hurdle of the program in this example
below the pre-agreed threshold, no performance fees
can be recognized.
•
Step 3: as the hurdle rate has not been met, we will not
recognize any performance fees, despite there being
realized investments.
26 | Partners Group
2019 at a glance – Financials
ANNUAL REPORT 2019
Stable revenue margin from management fees
The majority of our revenue base is still recurring and based on
long-term contracts with our clients, providing highly visible
cash flows. In 2019, the management fee margin remained
stable, amounting to 1.29% (2018: 1.29%). Total revenue
margin, including performance fees, amounted to 1.82%
(2018: 1.71%).
Revenue margin development1)
The average number of FTEs grew by 20% to 1'337 (2018:
1'110 average FTEs), while regular personnel expenses grew
by 24% to CHF 306 million (2018: CHF 247 million). With
the disproportionate increase of performance fees of 46% to
CHF 473 million (2018: CHF 324 million) and the related up to
40% allocation to our professionals, performance-fee related
expenses grew by 43% to CHF 185 million (2018: CHF 129
million). This resulted in an increase of total personnel expenses
at a higher rate (+30%) than total revenues (+21%).
1.36%
1.26%
1.23%
1.39%
1.33% 1.39% 1.38%
1.89%
1.74%
1.82%
1.71%
%
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
.
%
9
2
1
.
%
9
2
%
1
7
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Management fees2)
Performance fees
1) Calculated as revenues divided by average assets under management, calculated on a daily
basis.
2) Management fees and other revenues, net, and other operating income.
Platform build-out intensified in 2019; personnel
expenses grew disproportionally
In 2019, we hired and onboarded a total of 261 net new
professionals across the entire platform to increase our
investment capacity and to support major business, corporate
and organizational initiatives. This included the delayed hiring
of certain positions from our 2018 hiring pool. Our focus on
expanding the investment platform resulted in stronger growth
in the number of investment professionals compared to other
departments. As of 31 December 2019, we counted 1'464
professionals globally.
Strong team growth globally in 2019
# of professionals
Americas
Europe
APAC
Investments
Clients
Services
Corporate
Total (+261)
Note: from 1 January to 31 December 2019.
+47
+7
+8
+12
+74
+58
+16
+9
+2
+23
+13
+41
+25
+85
+102
Personnel expenses outgrew revenues
(in CHF m)
Revenues
Total operating costs, of
which
Personnel expenses
Personnel expenses (regular)
Personnel expenses
(performance-fee-related)
Other operating expenses
Depreciation & amortization1)
EBIT
EBIT margin
2018
1‘326
-461
-377
-247
-129
-68
-17
865
+21%
+31%
+30%
+24%
+43%
+16%
+101%
2019
1‘610
-603
-490
-306
-185
-79
-34
+17%
1‘008
65% -2%-points
63%
Note: revenues include management fees and other revenues, net, performance fees and
other operating income. Regular personnel expenses exclude performance fee-related
expenses. Performance-fee-related personnel expenses are calculated on an up to 40%
operating cost-income ratio on revenues stemming from performance fees.
1) The increase was mainly driven by CHF 13 million of depreciation on newly recognized
right-of-use assets in relation to lease contracts as required by the newly adopted IFRS 16.
Until 2018, these lease expenses were reported as part of other operating expenses.
Other operating expenses grew by 16% to CHF 79 million
(2018: CHF 68 million) mainly due to the growth of the overall
platform internationally and the build out of our local premises.
Depreciation & amortization increased to CHF 34 million
(2018: CHF 17 million), driven by the depreciation impact
of our newly built Denver campus and by the application of
new requirements for the recognition of leases (IFRS 16). In
2019, these included CHF 13 million of depreciation expenses
on newly recognized right-of-use assets in relation to lease
contracts which were previously reported as part of other
operating expenses.
Partners Group | 27
ANNUAL REPORT 2019
2019 at a glance – Financials
We remain disciplined in our approach to cost management
and continue to steer the firm based on our targeted up to 40%
operating cost-income ratio on newly generated management
fees (assuming stable foreign exchange rates). We also allocate
up to 40% of revenues stemming from performance fees to our
teams through our long-term incentive programs and/or bonus
payments. The remainder (~60%) will be allocated to the firm
and its shareholders.
EBIT is our new key operating performance indicator
In 2019, we changed our primary key operating performance
indicator from EBITDA to EBIT. The application of IFRS 16
Leases as of 1 January 2019 resulted in the recognition of
right-of-use assets and lease liabilities on the balance sheet.
As a result, a lessee recognizes depreciation expenses of the
right-of-use assets, whereas, before IFRS 16 became effective,
leasing expenses (for Partners Group this was predominantly
office rents) were included in other operating expenses. This
change in accounting policy supported the development of our
EBITDA with a CHF 13 million contribution, resulting in total
EBITDA of CHF 1'041 million in 2019 (2018: CHF 882 million),
an increase of 18%. EBIT has therefore replaced EBITDA as the
firm's key operating performance indicator as it will be a more
suitable (and conservative) measure of operating performance
going forward.
In 2019, EBIT increased by 17%, amounting to CHF 1'008
million (2018: CHF 865 million) and the EBIT margin decreased
to 63% (2018: 65%). We steer the operating margin towards a
target EBIT margin of ~60% for newly generated management
fees (assuming stable foreign exchange rates), as well as for
performance fees on existing and new AuM.
EBIT margin development
59%
59%
58%
1.23
0.93
EUR/
CHF
USD/
CHF
1.21
0.92
1.07
0.96
61%
1.09
0.99
65%
65%
63%
1.11
1.15
1.11
0.98
0.98
0.99
~60%
target for newly
generated management
fees and all
performance fees
Continued diversification of AuM, revenues and cost
base
Some 84% of our revenues derive from EUR- and USD-
denominated investment programs and mandates, reflecting
our international clientele. However, 38% of our cost base is
still CHF-denominated. In recent years, though, our teams have
grown at a higher rate outside Switzerland as we have built
out our investment presence around the world, in particular
with strategic initiatives such as the establishment of Denver
as our Americas hub. This international expansion continues
to diversify our cost base further and will reduce our CHF-
denominated cost base in relative terms over time.
Currency exposure in 2019
Other
6%
GBP
10%
Other
6%
GBP
10%
EUR
46%
AuM
≈
Management
fees1)
EUR
46%
Other
6%
SGD
12%
EUR
4%
GBP
12%
≠
Costs2)
USD
28%
USD
38%
USD
38%
CHF
38%
1) Based on estimates and the currency denomination of underlying programs.
2) Includes regular personnel expenses (excluding performance fee-related expenses)
and other operating expenses.
FX fluctuations negatively impacted EBIT margin by
approximately 1.0 percentage point
Fluctuations in the EUR or USD against the CHF can affect the
absolute amount of revenues and costs, causing our total EBIT
margin to deviate from its target on incremental revenues. In
particular, the currency composition of our management fees
(typically representing 70-80% of our total revenues) differs
from the currency composition of our recurring cost.
During the period, the EUR depreciated by 4% against the CHF
and therefore negatively affected management fees in CHF
(46% of AuM are EUR-denominated vs. 4% of cost), partially
offset by a weakening of the average GBP-rate against the CHF.
Overall, currency movements throughout 2019 negatively
impacted the EBIT margin by approximately 1.0 percentage
point.
2013
2014
2015
2016
2017
2018
2019
Note: for the years 2011 – 2014, non-cash items related to the capital-protected product
Pearl Holding Limited were excluded from depreciation & amortization; foreign exchange
rates in daily averages in respective years/periods.
Given that performance fee revenues and performance fee-
related costs are similarly affected by currency movements,
they are largely EBIT margin-neutral.
28 | Partners Group
2019 at a glance – Financials
ANNUAL REPORT 2019
Proposed dividend of CHF 25.50 per share (+16%)
Based on the strong development of the business in all asset
classes and regions, the operating result and their confidence in
the sustainability of the firm’s growth, Partners Group’s Board
of Directors will propose a dividend of CHF 25.50 per share
(2018: CHF 22.00 per share) to its shareholders at the Annual
General Meeting on 13 May 2020. This represents a dividend
increase of 16% and a payout ratio of 76% (2018: 77%).
Dividend payments
F
H
C
n
i
e
r
a
h
s
/
d
n
e
d
i
v
i
D
30.00
25.00
20.00
15.00
10.00
5.00
0.00
100
25.501)
Payout ratio: 76% in 2019
(2018: 77%)2)
22.00
19.00
15.00
4.50
5.00
5.50
6.25
10.50
7.25 8.50
2009
2010
2011
2012
2013 2014
2015
2016
2017 2018 2019
T
o
t
a
l
i
A
u
M
n
U
S
D
b
n
80
60
40
20
0
1) The Board of Directors proposes that a dividend of CHF 25.50 per share be paid for the
financial year 2019 at the Annual General Meeting of shareholders to be held on 13 May 2020.
2) The dividend payout ratio is defined as the (proposed) dividend per share divided by diluted
earnings per share.
Note: assets under management exclude discontinued public alternative investment activities
and divested affiliated companies.
Financial result driven by value creation in client
portfolios; negative foreign exchange result; taxes in
line with growth
The financial result amounted to CHF 30 million
(2018: CHF 23 million), of which the main contributors are
mentioned below:
• CHF +61 million (2018: CHF 35 million): we invest into
our own investment programs alongside our clients (see
detailed description of balance sheet investments further
below). Another period of solid performance for these
investments was the main contributor to the financial
result. Overall, the average return across all stages and
asset classes of our portfolio was 10% in 2019 (2018: 7%).
For further information see note 5.3.2. of the notes to the
consolidated financial statements.
• CHF -31 million (2018: CHF -12 million): the negative
contribution stemmed from foreign exchange, hedging
and other costs. For our short-term loans outstanding
(treasury management and short-term financing services)
we hedged our exposure in currencies other than CHF. In
particular, the interest differential between the USD and
the CHF drove our hedging cost
Corporate taxes increased to CHF -137 million
(2018: CHF -118 million), broadly in line with our growing
profitability. In summary, the firm's profit increased by 17%
year-on-year to CHF 900 million (2018: CHF 769 million),
in line with EBIT growth.
Profit development
(in CHF m)
EBIT
2018
2019
865
+17% 1‘008
Total financial result, of which
Portfolio performance
23
35
+30%
+76%
Foreign exchange, hedging & others
-12 +163%
Taxes
Profit
-118
+16%
769
+17%
30
61
-31
-137
900
Partners Group | 29
ANNUAL REPORT 2019
2019 at a glance – Financials
Balance sheet
Net liquidity
We ensure that we always have sufficient cash available to
meet expected operational expenses, as well as to service
short-term financial obligations. We furthermore target an
available liquidity level that would enable us to sustain the firm's
operations with minimal disruption in a financial crisis scenario
and/or a depressed economic environment.
Net liquidity of CHF 1.0 billion on balance sheet
(in CHF m)
Cash & cash equivalents
Short-term loans
Long-term debt
Total net liquidity
Note: as of 31 December 2019.
Assets
Liabilities
933
900
799
1‘035
The firm maintains a diverse range of unsecured credit facilities
with Swiss and international banks amounting to a total of
CHF 865 million (31 December 2018: CHF 430 million). These
credit facilities can be used for general corporate purposes
and/or to provide fixed advances, with a primary focus on
working capital financing. The facilities are subject to maximum
debt covenants which were met throughout the current and
prior year. As of 31 December 2019, no credit facility was drawn
(31 December 2018: no credit facility drawn).
In June 2019, we successfully issued Partners Group's second
corporate bond, raising CHF 500 million through a fixed-rate
senior unsecured CHF-denominated issue. The bond was issued
with an eight-year term and a coupon of 0.40% and matures on
21 June 2027 (ISIN CH0419041287). It followed a fixed-rate
senior unsecured issuance of CHF 300 million in June 2017
(ISIN CH0361532895), which was offered with a seven-year
term and a coupon of 0.15% and which matures on 7 June 2024.
As of 31 December 2019, our long-term debt outstanding
amounted to CHF 799 million (31 December 2018:
CHF 299 million).
As of 31 December 2019, our balance sheet remains strong with
total assets amounting to CHF 3.9 billion (31 December 2018:
CHF 2.9 billion). We have net liquidity of CHF 1.0 billion
(31 December 2018 : CHF 1.2 billion) and hold our own
investments amounting to a total of CHF 0.7 billion
(31 December 2018: CHF 0.6 billion).
The firm's balance sheet investments consist of its financial
investments/GP commitments, seed investments and
investments in associates. Financial investments/GP
commitments (i.e. our obligation to fund investments alongside
clients) typically represent about 1% of assets invested in
a closed-ended limited partnership structure and have an
aggregated net asset value of CHF 605 million (31 December
2018: CHF 554 million) as of 31 December 2019.
Investments in associates amounted to CHF 42 million
(31 December 2018: CHF 55 million), which mainly represent
a stake in Pearl Holding Limited, a mature investment program
managed by the firm.
Partners Group also provides seed financing to certain early
stage investment programs managed by the firm based on its risk
framework. The underlying assets of these investment programs
are typically financial assets valued at the (cash-flow-adjusted)
net asset value and amount to (net) CHF 61 million
(31 December 2018: CHF 37 million).
Investments alongside clients
(in CHF m)
Financial investments / GP commitment1)
Investments in associates2)
Seed investments3)
Total investments alongside clients from
balance sheet
605
42
61
708
1) NAV excluding CHF 250 million of commitments that were not yet called but may be called
over time, typically between one to five years following the subscription of the commitment.
2) Investments in associates described in detail in note 6 of 2019 Annual Report.
3) Seed investments presented in the annual report as assets and liabilities held for sale.
Note: as of 31 December 2019.
Next to investing into investment programs alongside clients
from our balance sheet, we further align the interests of clients
with those of the firm's employees by offering all employees
preferential terms to invest alongside our private markets
programs via a global employee commitment plan. In line
with standard industry practice, such investments charge no
management fees and no performance fees.
In total, commitments by the firm's Board of Directors and
employees amounted to approximately USD 1.2 billion, as of
31 December 2019.
30 | Partners Group
2019 at a glance – Financials
The proceeds of the bonds further strengthen the sustainability
of our operations in a financial crisis scenarios and enable
us to optimize the management of our liquidity, in particular,
for short-term financing needs arising from our treasury
management services to our clients. These services allow for
efficient use of capital within our investment programs by
bridging capital drawdowns and distributions where beneficial
for clients (e.g. netting cash-flows to reduce the number of
drawdowns and distributions).
As of 31 December 2019, 278 short-term loans
(31 December 2018: 267) were outstanding, amounting to a
total of 900 million (31 December 2018 : CHF 1'113 million)
with an average outstanding loan amount of CHF 3.2 million
(31 December 2018: CHF 4.2 million). The duration of these
loans amounted to 1-3 months. These loans are secured against
unfunded commitments and are, in addition, subject to strict
loan-to-value (LTV) rules.
ANNUAL REPORT 2019
Financial outlook
• Management fees: we are moving confidently into 2020
and see solid demand for our traditional and tailored
private market programs, as well as for our evergreen
programs, from clients across the globe. We expect this
demand to translate into additional management fees and
therefore guide towards an increase of management fees
alongside an increase of AuM.
• Performance fees: we continue to expect full-year
performance fees to remain within our guidance of around
20-30% as a proportion of total revenues, assuming the
market remains favorable to exits. However, due to the
market circumstances and visibility we have on our exit
pipeline in 2020, we estimate that performance fees will be
significantly skewed to the second half of 2020.
•
Target EBIT margin: we continue to steer the operating
margin towards our target EBIT margin of ~60% for newly
generated management fees (assuming stable foreign
exchange rates), as well as for performance fees. This
means that we anticipate the number of professionals and
personnel expenses to return to growing more in line with
AuM in 2020 and beyond, after 2019's outsized hiring year.
• Balance sheet: our balance sheet remains strong. With
CHF 2.3 billion in shareholder equity and CHF 1.0 billion
net liquidity, we feel well-equipped to realize the potential
of private markets in different economic environments.
Partners Group | 31
ANNUAL REPORT 2019
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) fee-
paying 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 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 income taxes. 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).
EBIT is considered as a useful unit of measurement for
evaluating the operating performance of the group.
EBIT margin is calculated as earnings before interest and tax
(EBIT) 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
EBIT
Revenues from management services,
net, including other operating income
2019
1'008
1'610
2018
865
1'326
EBIT margin
63%
65%
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 income taxes and before
depreciation and amortization.
32 | Partners Group
Key definitions and alternative performance metrics (APM)
ANNUAL REPORT 2019
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
credit facilities drawn and long-term debt.
In millions of Swiss francs
Cash and cash equivalents
Short-term loans
Long-term debt
Net liquidity position
2019
933
900
(799)
1'035
2018
412
1'113
(299)
1'226
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.
2019
1'610
2018
1'326
88'440
77'615
Revenue margin
1.82%
1.71%
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
2019
900
2'128
2018
769
1'962
Return on equity
42%
39%
Partners Group | 33
1. Report of the auditors on the consolidated financial statements
2. Consolidated financial statements:
– Consolidated income statement for the years ended 31 December 2019 and 2018
– Consolidated statement of comprehensive income for the years ended 31 December 2019 and 2018
– Consolidated balance sheet as of 31 December 2019 and 2018
– Consolidated statement of changes in equity for the years ended 31 December 2019 and 2018
– Consolidated statement of cash flows for the years ended 31 December 2019 and 2018
– Notes to the consolidated financial statements for the years ended 31 December2019 and 2018
35
40
41
42
44
46
48
34 | Partners Group
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 2019
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 40 to 106) give a true and fair view of the
consolidated financial position of the Group as at 31 December 2019, 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.
Partners Group | 35
ANNUAL REPORT 2019
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 terms
involving multiple Group entities requires
effective monitoring to ensure all financial terms
and conditions are captured completely and
accurately and are applied appropriately.
Performance fees are inherently more complex
in nature. The assessment of the likelihood of a
future clawback on such fees and the
determination whether criteria set in the carried
interest arrangements are met require
management’s judgement. The determination of
performance fees is based on the underlying
valuation of the investment portfolio and
requires manual interventions.
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
independent third party controls reports on
valuation related processes and controls to
determine whether they were appropriate for our
purposes.
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
agreements and performing walkthrough
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;
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 by assessing
whether a sample of eligible but unearned
performance fees should have been
recognised during the 2019 financial year.
For further information on the recognition of revenues from management services (net) refer to notes
2, 3 and 19.7 to the consolidated financial statements on pages 48 to 53 and 99 to 100.
36 | Partners Group
ANNUAL REPORT 2019
Report of the auditors on the consolidated
financial statements
ANNUAL REPORT 2019
Valuation of financial investments
Key Audit Matter
Our response
As at 31 December 2019, financial investments
on the Group’s balance sheet amounted to
CHF 605.3 million (2018: CHF 554.0 million). In
addition, financial investments presented as
assets held for sale amounted to
CHF 175.4 million (2018: CHF 91.0 million).
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.
Our procedures included obtaining an
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.
On a sample basis, we obtained confirmations
from the external auditor of 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 in such financial
investments were reconciled to the Group’s
transaction records that are kept for each
investor.
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 investments refer to notes 2 and 5 to the
consolidated financial statements on pages 48 and 62 to 75.
Partners Group | 37
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.
38 | Partners Group
ANNUAL REPORT 2019
Report of the auditors on the consolidated
financial statements
— 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 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, 4 March 2020
Christoph Hochuli
Licensed Audit Expert
KPMG AG, Räffelstrasse 28, PO Box, CH-8045 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 | 39
ANNUAL REPORT 2019
Consolidated income statement for the years ended
31 December 2019 and 2018
In millions of Swiss francs
Note
2019
2018
Management fees and other revenues, net
Performance fees, net
Revenues from management services, net
Other operating income
Personnel expenses
Other operating expenses
EBITDA 1)
Depreciation and amortization
EBIT 1)
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) For definitions please refer to p. 32.
1'074.4
472.5
1'546.9
956.5
323.7
1'280.2
63.4
45.7
(490.4)
(78.5)
1'041.4
(33.8)
1'007.6
64.6
(35.0)
1'037.2
(137.3)
899.9
(376.5)
(67.8)
881.6
(16.8)
864.8
40.1
(17.4)
887.5
(118.2)
769.3
899.9
769.3
33.93
33.66
28.91
28.65
3.
5.2.
4.1.
10.
11.&12.
5.1.
5.1.
9.1.
15.
15.
40 | Partners Group
ANNUAL REPORT 2019
Consolidated statement of comprehensive income
for the years ended 31 December 2019 and 2018
In millions of Swiss francs
Note
2019
2018
Profit for the period
899.9
769.3
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.
(36.1)
(36.1)
(1.3)
0.3
(1.0)
(1.0)
(39.5)
(39.5)
(1.3)
0.2
(1.1)
(1.1)
Total other comprehensive income for the period, net of tax
(37.1)
(40.6)
Total comprehensive income for the period, net of tax
862.8
728.7
Total comprehensive income attributable to owners of the Company
862.8
728.7
Partners Group | 41
ANNUAL REPORT 2019 Consolidated balance sheet
as of 31 December 2019 and 2018
In millions of Swiss francs
Note
31 December 2019 31 December 2018
Assets
Cash and cash equivalents
Trade and other receivables
Short-term loans
Assets held for sale
Total current assets
Property, equipment and right-of-use assets 1)
Intangible assets
Investments in associates
Financial investments
Other financial assets
Deferred tax assets
Total non-current assets
Total assets
5.4.1.
5.3.4.
5.3.3.
11.
12.
6.
5.3.2.
5.3.5.
9.2.
933.0
651.9
900.2
175.4
2'660.5
237.2
68.8
42.1
605.3
292.0
43.8
1'289.2
3'949.7
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
1) As of 1 January 2019, the Group initially applied IFRS 16 using the modified retrospective approach. Under this approach, comparative information is not restated. See note 19.2.
42 | Partners Group
ANNUAL REPORT 2019 Consolidated balance sheet
as of 31 December 2019 and 2018
In millions of Swiss francs
Note
31 December 2019 31 December 2018
Liabilities and equity
Liabilities
Trade and other payables
Income tax liabilities
Provisions
Employee benefit liabilities
Liabilities held for sale
Total current liabilities
Employee benefit liabilities
Provisions
Deferred tax liabilities
Long-term debt
Lease liabilities 1)
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
7.
4.5.
5.3.3.
4.5.
9.2.
13.
8.
5.4.3
14.
179.2
83.4
3.4
161.7
114.3
542.0
208.6
6.7
4.0
798.6
55.2
46.5
1'119.6
1'661.6
0.3
(212.9)
0.2
2'500.5
2'288.1
3'949.7
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
1) As of 1 January 2019, the Group initially applied IFRS 16 using the modified retrospective approach. Under this approach, comparative information is not restated. See note 19.2.
Partners Group | 43
ANNUAL REPORT 2019
Consolidated statement of changes in equity
for the years ended 31 December 2019 and 2018
In millions of Swiss francs
Equity attributable to owners of the Company
2019
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
0.3
(143.6)
0.2
(93.3)
2'204.3
2'111.0
1'967.9
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
Reversal of contractual obligation to purchase
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
(457.4)
388.1
(457.4)
(88.5)
(88.5)
299.6
110.0
110.0
110.0
54.5
54.5
54.5
36.1
36.1
36.1
(585.4)
(585.4)
(585.4)
-
(69.3)
-
-
-
-
-
-
-
-
(473.3)
(473.3)
(542.6)
899.9
899.9
899.9
(36.1)
(1.0)
(37.1)
(37.1)
(36.1)
898.9
862.8
862.8
Balance as of 31 December
0.3
(212.9)
0.2
(129.4)
2'629.9
2'500.5
2'288.1
44 | Partners Group
ANNUAL REPORT 2019
Consolidated statement of changes in equity
for the years ended 31 December 2019 and 2018
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
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
0.3
(143.6)
0.2
(93.3)
2'204.3
2'111.0
1'967.9
Partners Group | 45
ANNUAL REPORT 2019
Consolidated statement of cash flows
for the years ended 31 December 2019 and 2018
In millions of Swiss francs
Note
2019
2018
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
Change in employee benefit assets/liabilities
Non-cash change in other financial assets
Non-cash change in other long-term liabilities
Operating cash flow before changes in working capital
(Increase)/decrease in trade and other receivables and short-term loans
Increase/(decrease) in trade and other payables
Finance expenses (other than interest) paid
Cash generated from/(used in) operating activities
Income tax paid
Net cash from/(used in) operating activities
Investing activities
Purchase of property and equipment
Purchase of intangible assets
Purchase of financial investments & assets and liabilities held for sale
Proceeds on disposal of financial investments & assets and liabilities held for sale
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
Total interest received amounts to CHF 63.9 million (2018: CHF 43.5 million).
5.1.
9.1.
11.&12.
4.2.
11.
12.
6.
5.1.
899.9
769.3
(29.6)
137.3
33.8
54.5
6.9
89.4
(100.4)
18.5
1'110.3
(87.3)
48.4
(3.3)
1'068.1
(107.3)
960.8
(113.7)
(21.9)
(135.1)
104.2
13.7
(28.4)
0.2
3.5
(177.5)
(22.7)
118.2
16.8
47.2
0.1
36.2
(79.2)
26.9
912.8
(440.0)
(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)
46 | Partners Group
ANNUAL REPORT 2019 Consolidated statement of cash flows
for the years ended 31 December 2019 and 2018
In millions of Swiss francs
Note
2019
2018
Financing activities
Repayments of credit facilities
Drawdowns from credit facilities
Issuance of long-term debts
Payment of principal portion of lease liabilities 1)
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.
8.
14.
(1'015.0)
1'015.0
499.1
(12.1)
(3.6)
(585.4)
(457.4)
299.6
-
(259.8)
(175.0)
175.0
-
-
(4.1)
(506.3)
(573.6)
425.8
1.3
(656.9)
Net increase/(decrease) in cash and cash equivalents
523.5
(437.6)
Cash and cash equivalents as of 1 January
Exchange differences on cash and cash equivalents
412.2
(2.7)
852.3
(2.5)
Cash and cash equivalents as of 31 December
933.0
412.2
1) As of 1 January 2019, the Group initially applied IFRS 16 using the modified retrospective approach. Under this approach, comparative information is not restated. See note 19.2.
In millions of Swiss francs
31 December 2019 31 December 2018
Bank balances
Petty cash
Total cash and cash equivalents
933.0
0.0
933.0
412.2
0.0
412.2
Partners Group | 47
ANNUAL REPORT 2019
Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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 2019 and 2018 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 4 March 2020 and are subject to approval at the Annual General Meeting of shareholders on 13 May 2020.
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. This exposure consists
of 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 available facts and circumstances into consideration and concluded that it acts as an agent for all
investment programs that it manages, except for investment programs financed with seed capital (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 which consider the liquidity, concentration, pricing assumptions, 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.
48 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
(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
(see note 19.7.).
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 provides its clientele with investment management services in the private markets spectrum.
These services comprise structuring and investment advisory in relation to direct investments in operating companies or assets and
investments in third party managed investment programs. As part of its management services, the Group offers diversified as well as
more focused investment programs in relation to investment styles, industry and geography of the investments in private markets.
Private equity
Private equity refers to investments made in private – i.e. non-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 in 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. non-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 subordinated 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. non-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. non-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.
Partners Group | 49
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
The activities in all operating segments consist of:
• Strategic asset allocation and portfolio management
• Investment management, value creation 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. 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 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 also not been allocated to the operating segments.
All non-directly attributable elements of profit or loss are summarized in the column labelled ‘Unallocated’.
Management believes that this is the most relevant way to report the results of its operating segments.
There were no intersegment transactions and, as such, no eliminations are necessary.
50 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
In millions of Swiss francs
2019
Operating segments
Private
equity
Private
debt
Private
real estate
Private
infra-
structure
Total
reportable
segments Unallocated
Total
Management fees and other revenues
718.5
166.4
186.3
159.3
1'230.5
2.5
1'233.0
Revenue deductions related to management fees
and other revenues
Performance fees
Revenue deductions related to performance fees
(90.8)
408.1
(29.1)
(15.5)
(33.3)
(19.0)
(158.6)
23.1
(0.1)
20.3
(1.2)
51.5
(0.1)
503.0
(30.5)
-
-
-
(158.6)
503.0
(30.5)
Revenues from management services, net
1'006.7
173.9
172.1
191.7
1'544.4
2.5
1'546.9
Other operating income
17.3
9.1
17.3
15.9
59.6
Revenues and other operating income
1'024.0
183.0
189.4
207.6
1'604.0
3.8
6.3
63.4
1'610.3
Personnel expenses
Other operating expenses
(99.1)
(35.6)
(29.4)
(34.2)
(198.3)
(292.1)
(490.4)
(3.8)
(3.4)
(1.5)
(1.9)
(10.6)
(67.9)
(78.5)
Gross segment result before depreciation and
amortization
921.1
144.0
158.5
171.5
1'395.1
(353.7)
1'041.4
Depreciation and amortization
-
-
-
-
-
(33.8)
(33.8)
Gross segment result
921.1
144.0
158.5
171.5
1'395.1
(387.5)
1'007.6
Reconciliation to profit for the period:
Net finance income and expense
Income tax expense
Profit for the period
29.6
(137.3)
899.9
Partners Group | 51
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
In millions of Swiss francs
2018
Operating segments
Private
equity
Private
debt
Private
real estate
Private
infra-
structure
Total
reportable
segments
Unallocated
Total
Management fees and other revenues
627.1
141.9
179.4
137.7
1'086.1
7.0
1'093.1
Revenue deductions related to management fees
and other revenues
Performance fees
Revenue deductions related to performance fees
Revenues from management services, net
(69.4)
314.6
(33.3)
839.0
(22.2)
(30.3)
(14.7)
(136.6)
16.9
(0.0)
13.7
(1.0)
13.0
(0.2)
358.2
(34.5)
-
-
-
(136.6)
358.2
(34.5)
136.6
161.8
135.8
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
855.2
141.6
177.2
142.8
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
770.4
113.5
149.3
112.4
1'145.6
(264.0)
881.6
Depreciation and amortization
-
-
-
-
-
(16.8)
Gross segment result
770.4
113.5
149.3
112.4
1'145.6
(280.8)
Reconciliation to profit for the period:
Net finance income and expense
Income tax expense
Profit for the period
The Group refined the segment allocation of revenues related to its multisegment investment programs. Comparative amounts have been re-presented.
(16.8)
864.8
22.7
(118.2)
769.3
52 | Partners Group
ANNUAL REPORT 2019
Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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
2019
2018
494.6
436.4
356.8
122.4
136.7
408.2
394.9
222.8
120.3
134.0
Total revenues from management services, net
1'546.9
1'280.2
In 2019 and 2018, 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
2019
2018
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
Other personnel expenses
Total personnel expenses
4.2.
4.5.2.
(251.6)
(53.7)
(117.4)
(13.9)
(3.4)
(28.3)
(22.1)
(197.9)
(46.6)
(87.5)
(12.4)
(2.9)
(14.3)
(14.9)
(490.4)
(376.5)
The average number of employees in 2019 was 1’349 (2018: 1’120), which is equivalent to an average of 1’337 full-time employees
(2018: 1’110).
Partners Group | 53
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
4.2. Share-based payment expenses
The Group recognized the following expenses for grants in 2019, as well as in previous periods:
In millions of Swiss francs
Note
2019
2018
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)
Grants 2019 (options and non-vested shares)
Share grants at start of employment
Total options and non-vested shares
Grants 2017 (MPP)
Grants 2018 (MPP)
Grants 2019 (MPP)
Total share-based payment expenses1)
-
(0.2)
(1.2)
(2.4)
(5.5)
(11.1)
(17.5)
(2.7)
(40.6)
(3.0)
(7.1)
(3.0)
(53.7)
(0.2)
(0.8)
(2.1)
(4.6)
(10.2)
(14.8)
-
(2.0)
(34.7)
(4.8)
(7.1)
-
(46.6)
4.3.1.
4.4.
4.3.2.
1) Share-based payment expenses for non-executive members of the BoD of CHF 0.8 million (2018: 0.6 million) are disclosed as a part of third-party services (see note 10.).
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. As in previous years,
the 2019 plan was a shares-only plan for the Group’s employees and its allocation to departments, teams and individuals dependent on
their performance and contribution to the overall achievement of the firm’s goals during the period.
EPPs follow 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.
Since 2015, the Group awards a management incentive plan (“MIP”) to select individuals in the senior management team who have
significantly contributed to the firm’s success in the past and who have the potential to do so in the future. 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.
54 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
Number and weighted average exercise price
The number and weighted average exercise price of 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
2019
2019
2018
2018
597.86
615.66
145.42
950.33
-
1'484'142
(74'998)
(139'590)
224'140
66'800
512.45
27.73
126.83
960.09
-
1'360'808
(10'671)
(142'488)
216'989
59'504
662.51
1'560'494
597.86
1'484'142
Exercisable as of 31 December
123'769
202'067
Of the outstanding 1’560’494 options and non-vested shares (31 December 2018: 1’484’142), 123’769 options are exercisable
immediately (31 December 2018: 202’067). All other options and non-vested shares are restricted until at least 23 September 2020.
The outstanding instruments are split by strike price and grant year as follows:
Numbers of instruments outstanding
Grant year
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
Options granted in 2019
Options granted in 2019
Non-vested shares granted from 2014 to 2019
Total instruments outstanding
Strike price in CHF
31 December 2019
31 December 2018
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
965.00
807.60
-
-
14'813
11'918
33'947
53'329
8'344
1'418
13'105
24'358
19'813
55'411
89'380
8'344
1'418
165'000
174'000
6'127
345'000
10'110
300'200
35'078
198'500
18'489
196'150
20'890
141'181
6'127
375'000
10'110
318'600
35'078
198'500
18'489
-
-
136'409
1'560'494
1'484'142
Partners Group | 55
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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 options and shares granted in 2019, and related assumptions:
Date of grant
15.5.19
23.9.19
23.9.19
23.9.19
21.11.19
21.11.19
21.11.19
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)
732.00
22.21
22.21
38.30
807.60
807.60
Share price (in CHF)
Exercise price (in CHF)
Vesting conditions
Expected volatility
Expected term of execution
Expected dividend ratio 4)
Risk-free interest rate (based on Swap rates)
732.00
773.80
773.80
807.60
807.60
807.60
965.00
965.00
807.60
5 years
5 years
6 years
5 years
3 years 3)
5 years 3)
18.96%
18.96%
15.76%
5 years
5 years
6 years
5 years
4.13%
4.13%
(0.91%)
(0.91%)
4.11%
(0.68%)
Total options/shares granted
Total value granted in 2019
(in millions of CHF)
115
70'250
133'000
20'890
19'806
46'879
0.1
1.6
3.0
2.9
0.8
16.0
37.9
0.1
0.2
(0.0)
0.5
0.4
0.8
5.7
(0.0)
10.8
(0.0)
0.1
0.2
0.5
0.4
0.8
5.7
10.8
Gross amount recognized in profit or loss
(in millions of CHF)
Forfeitures during 2019 (in millions of CHF)
Net amount recognized in profit or loss
(in millions of CHF)
Total amount recognized in profit or loss
(in millions of CHF)
- recognized in personnel expenses related to the grant 2019 (in millions of CHF)
- recognized in third-party services related to the grant 2019
- recognized in personnel expenses related to the grant 2018 1) (in millions of CHF)
18.5
17.5
0.8
0.2
1) Under the 26 September 2018 MIP, the Group granted equity incentives equaling the 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.
2) Under the 23 September 2019 MIP, the Group granted equity incentives equaling the fair value of CHF 5.9 million. The amount is allocated to the participants in two tranches, the first half in Septem-
ber 2019 and the second half in September 2020. 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 2019.
3) Linear vesting model, with proportionate annual vesting.
4) Based on historical data.
The applied expected volatility is 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.
56 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
4.3.2. Management Performance Plan
In 2017, the Group revised its dedicated performance fee-related compensation program and introduced the MPP for Executive
Committee members and non-independent Board members. Over the first five-year period of the plan, the 2019 MPP reinforces
an alignment of interests with shareholders as it is dependent on the share price development. The 2019 MPP restricts payouts to
a positive share price development relative to the share price at grant. Five years after the grant, the intrinsic value of the MPP will
be measured as an intermediate step. Thereby, the intrinsic value of the 2019 MPP cannot exceed 10x the grant fair value. Over the
period following the fifth year (typically year 5 to 14), the MPP payout commences. It can deviate from the intermediate intrinsic value
calculated in year five 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. Any payout will be in number of restricted
shares, which have a two-year selling restriction, equal to the value of the respective payout (the share price at the time of payout is
the reference). In 2019, the MPP consumed CHF 4.5 million of performance fee related compensation. For further details regarding
the MPP, please refer to the Compensation Report (p. 131).
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 similarly to the valuation of a
combination of call options and put options (based on the Black-Scholes model).
Fair value of MPP granted in 2019, and related assumptions:
Date of grant
Share price (in CHF)
Exercise price/normalized index price (in CHF)
Vesting conditions
Expected volatility
Expected term of execution
Expected dividend ratio
Risk-free interest rate (based on Swap rates)
Total fair value granted in 2019 (in millions of CHF)
Total amount recognized in profit or loss (in millions of CHF)
Short-call
options
Long-put
options
21.11.19
21.11.19
807.60
807.60
5 years
15.76%
5 years
4.11%
(0.68%)
807.60
1'121.87
5 years
15.76%
5 years
4.11%
(0.68%)
10.2
3.0
Partners Group | 57
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
4.4. Entry shares
In 2019, the Group further granted 3’943 (2018: 3’016) shares in the amount of CHF 2.7 million (2018: CHF 2.0 million) 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 terminated 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
Current liabilities
Non-current liabilities
Balance as of 31 December
31 December 2019 31 December 2018
(2.4)
(157.5)
(196.0)
(14.4)
(370.3)
(161.7)
(208.6)
(370.3)
(0.4)
(145.2)
(125.2)
(9.3)
(280.1)
(121.9)
(158.2)
(280.1)
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 (see (a) below) and the MPP (see note 4.3.2.) with the remainder, i.e. the difference between the Performance
Fee Compensation Pool and the MCP/MPP allocations, being allocated via the Performance Fee Bonus Pool (see (b) below).
In 2019, performance fees recognized in the consolidated income statement amounted to CHF 472.5 million (2018: CHF 323.7
million), of which CHF 124.9 million (2018: CHF 93.0 million) were allocated via the MCP allocation (including social securities) and
CHF 59.6 million (2018: CHF 36.5 million) via the Performance Fee Bonus Pool allocation. The Group expects for 2020 a total cash
payout of CHF 127.9 million (2018: CHF 82.1 million) for all schemes.
58 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
(a) Management Carry Plan allocation
A portion of the performance fees recognized from investments made during a relevant investment period is allocated to the broader
management teams. The allocation is based on the MCP that was introduced in 2012 and is discretionarily granted to employees on an
annual basis. The grants are only paid out to the eligible employees once the performance fees are collected by the Group.
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/MPP 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 liabilities.
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 the employer and the employees. Contributions,
which vary by the age of the employees, range from 6-13% of the covered salary and 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 arises in
accordance with the BVG. In addition to investment risk, the Pension Fund is exposed to actuarial risk, 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.
Partners Group | 59
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
Development of defined benefit asset/(obligation)
In millions of Swiss francs
2019
2018
Present value of benefit obligation as of 1 January
(68.8)
(61.6)
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
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:
Actuarial gain/(loss) on plan assets
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
(3.4)
(0.5)
(5.8)
(2.9)
(2.8)
5.0
(79.2)
68.4
0.5
(0.1)
7.4
2.8
2.8
(5.0)
76.8
(2.4)
(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)
The weighted average duration of the net defined benefit obligation is 16.9 years as of 31 December 2019 (2018: 15.6 years).
60 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
Asset allocation as of 31 December
Cash
Public debt
Public equity
Private markets
Alternatives/other
Total
2019
2018
13.2%
6.2%
25.4%
52.9%
2.3%
9.2%
10.6%
27.6%
37.7%
14.9%
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
2019
2018
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
0.25%
0.25%
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%)
Shorter life expectancy (-1 year)
Longer life expectancy (+1 year)
Impact on defined
benefit obligation
Impact on current
service cost (em-
ployer)
(7.5)
6.4
1.1
(1.2)
(0.2)
0.2
(0.7)
0.6
0.1
(0.1)
(0.0)
0.0
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 2020 are estimated to be CHF 2.8 million.
Partners Group | 61
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
5. Financial instruments including related income and expense, risks and
measurement
5.1. Finance income and expense
In millions of Swiss francs
Note
2019
2018
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)
Other finance income
Total finance income
Interest expense calculated using the effective interest rate method
Share of results of associates (Pearl)
Other finance expense
Net exchange differences
Total finance expense
5.5.
6.
6.
3.5
58.2
2.8
0.1
64.6
(4.9)
-
(3.6)
(26.5)
(35.0)
1.6
38.5
-
-
40.1
(4.3)
(3.8)
(2.8)
(6.5)
(17.4)
Total net finance income and (expense)
29.6
22.7
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.
2019
2018
60.4
0.0
3.0
63.4
41.9
0.0
3.8
45.7
62 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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 2019 31 December 2018
Financial assets
Financial assets at amortized cost
Cash and cash equivalents
Trade receivables 1)
Short-term loans
Other receivables 1)
Accrued revenues 1)
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.
5.4.1.
5.3.4.
5.4.1.
5.4.1.
5.3.5.
5.4.1.
5.3.2.
5.3.3.
5.4.1.
933.0
228.5
900.2
7.7
405.3
292.0
412.2
158.8
1'113.4
35.3
201.5
166.7
2'766.7
2'087.9
0.0
605.3
175.4
10.4
791.1
3'557.8
0.0
554.0
91.0
8.2
653.2
2'741.1
Partners Group | 63
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
The Group’s financial liabilities can be classified into the respective categories as follows:
In millions of Swiss francs
Note
31 December 2019 31 December 2018
Financial liabilities
Financial liabilities at amortized cost
Trade payables 1)
Cash collateral for forward contracts 1)
Accrued revenue deductions
Other payables
Lease liabilities 2)
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.
7.
7.
7.
7.
8.
13.
5.4.3.
5.3.3.
7.
5.4.3.
55.9
5.2
63.6
28.3
67.6
798.6
45.7
1'064.9
114.3
1.5
0.8
116.6
1'181.5
71.6
0.3
32.0
126.9
-
299.4
27.8
558.0
54.1
0.1
0.8
55.0
613.0
2) As of 1 January 2019, the Group initially applied IFRS 16 using the modified retrospective approach. Under this approach, comparative information is not restated. See note 19.2.
5.3.2. Financial investments
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
2019
2018
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 31 December
64 | Partners Group
554.0
91.8
(86.8)
-
58.6
-
(12.3)
605.3
451.8
108.9
(72.9)
45.1
35.2
0.1
(14.2)
554.0
ANNUAL REPORT 2019
Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
As of the relevant balance sheet date, the Group held investments in investment programs, split into the following operating segments:
In millions of Swiss francs
31 December 2019 31 December 2018
Private equity
Private debt
Private real estate
Private infrastructure
Total financial investments
272.8
217.6
59.4
55.5
605.3
262.4
191.5
52.6
47.5
554.0
The Group refined the segment allocation of investments related to its multisegment investment programs. Comparative amounts have been re-presented.
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 their adjusted net asset values.
Assets and liabilities of four (2018: four) 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 2019 are comprised of private equity, private real estate and private debt
related assets and liabilities:
In millions of Swiss francs
31 December 2019 31 December 2018
Assets held for sale
Liabilities held for sale
Assets and liabilities held for sale, net
5.3.4. Short-term loans
175.4
(114.3)
61.1
91.0
(54.1)
36.9
Short-term loans of CHF 900.2 million (2018: CHF 1’113.4 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. As of 31 December 2019, the
number of outstanding short-term loans was 278 (31 December 2018: 267) and the average amount per outstanding loan was CHF
3.2 million (2018: CHF 4.2 million). In 2019, the Group received an at arm’s length compensation of CHF 60.4 million (2018: CHF 41.9
million) for these activities.
As of 31 December 2019, no short-term loans are past due or impaired (31 December 2018: none). There have been no losses in the
past and the loans are fully collateralized by the underlying investments and any unfunded capital commitments.
Partners Group | 65
ANNUAL REPORT 2019
Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
5.3.5. Other financial assets
The increase in other financial assets to CHF 292.0 million (2018: CHF 166.7 million) mainly resulted from recognized performance
fees which are not expected to be settled within twelve months.
In millions of Swiss francs
31 December 2019 31 December 2018
Long-term accrued revenues
Long-term loans
Other
Total other financial assets
5.3.6. Capital commitments
230.9
58.6
2.5
292.0
134.2
31.5
1.0
166.7
As of 31 December 2019, the Group had capital commitment contracts of CHF 705.8 million (2018: CHF 638.3 million), of which
CHF 250.0 million (2018: CHF 212.8 million) were not yet called by the relevant investment managers. 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 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, and reports the results 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 trade and other receivables, loans, and cash and cash equivalents. The carrying amount of financial assets
represents the maximum credit exposure.
66 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
(a) Trade and other receivables
In millions of Swiss francs
Marketable securities
Fees receivable
Other receivables
Accrued income
Derivative assets held for risk management
Total trade and other receivables
31 December 2019 31 December 2018
0.0
228.5
7.7
405.3
10.4
651.9
0.0
158.8
35.3
201.5
8.2
403.8
The increase in trade and other receivables was mainly driven by recognized, but not yet invoiced, performance fees (typically in
closed-ended structures). The timing of performance fee recognition in such structures depends on several factors, including the pace
of deployment, performance of investments and pace of realizations (cash distributions). Performance fees are only recognized once it
is highly probable that they will be realized. This typically occurs subsequent to clients receiving distributions equivalent to their initial
commitment and after hurdle rates have been met. For further explanations see note 19.7.
Exposure to credit risk is primarily influenced by the characteristics of customers. The majority of the Group’s customers are
investment programs that are managed by the Group on behalf of its clients. Trade and other receivables with such customers are
collateralized against unfunded client commitments. These commitments can be drawn upon to repay receivables and are jointly
backed by high-quality clients. In addition, underlying assets in the investment programs serve as additional layer of 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 its customer exposure and concentration. As of 31 December
2019, there is no substantial concentration of credit risk (31 December 2018: none). The Group considers the probability of default
to be very remote. As of the reporting date, no material receivables were overdue (31 December 2018: none). The Group reassesses
the credit risk for trade and other receivables on a regular basis. Based on its assessment as of 31 December 2019, the Group has not
identified any material expected credit losses (31 December 2018: none).
(b) Loans
The Group’s loans are granted to various investment programs managed by the Group on behalf of its clients (see note 5.3.4.).
These loans are typically short-term in nature with an expected repayment date within twelve months and are collateralized against
unfunded client commitments, which can be drawn upon to repay related loans and which are jointly backed by high-quality clients. In
addition, underlying assets in the investment programs serve as additional layer of security. In order to manage the default risk, the
granting of loans is contingent on the adherence to certain loan-to-value ratios (maximum of 75%). The Group hereby ensures that the
loan to an investment program does not exceed a certain percentage of net asset values of this investment program. In addition, the
Group has established a system-based loan approval process to control the credit risk resulting from loans to investment programs.
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. Finally, the Group assesses
the probability of default, the loss given default and the exposure at default. Long-term loans (see note 5.3.5.), if considered material,
are individually assessed for impairment. For the years ended 31 December 2019 and 2018, no loans were past due or impaired. The
Group reassesses the credit risk for loans on a regular basis. Based on its assessment as of 31 December 2019, the Group has not
identified any material expected credit losses in relation to its loans (31 December 2018: none).
Partners Group | 67
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
(c) Cash and cash equivalents
Cash and cash equivalents predominantly include balances with banks that are cancelable on sight. For these bank balances, typically,
only independently rated parties with a minimum rating of “A-3” or equivalent are accepted (as per Standard & Poor’s Short-Term
Issue Credit Ratings definitions). The Group evaluates each counterparty with a proprietary risk scoring that includes 20 observable
parameters such as credit risk ratings, capital ratio, stock price and return on assets and determines the expected credit loss of its bank
balances. In addition, it assigns a maximum counterparty exposure which acts as a further layer of protection. The Group reassesses
the credit risk for cash and cash equivalents on a regular basis. Based on its assessment as of 31 December 2019, the Group has not
identified any material expected credit losses (31 December 2018: none).
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 (“ROO”) as issued by the BoD.
(a) Currency risk
The Group is exposed to transactional currency risk mainly 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. 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 not
currently 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:
2019
2018
933.0
(5.2)
927.8
961.3
(866.3)
95.0
412.2
(0.3)
411.9
1'145.7
(299.4)
846.3
In millions of Swiss francs
Variable rate instruments
Financial assets
Financial liabilities
Fixed rate instruments
Financial assets
Financial liabilities
68 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
Cash flow sensitivity analysis for variable rate instruments
A change of 50 basis points in interest rates on the balances at the reporting date would have increased/(decreased) annual profit or
loss before tax by the amounts shown below. This analysis assumes that all other variables, particularly foreign currency rates, remain
constant.
In millions of Swiss francs
Profit or loss before tax
50 bp increase
50 bp decrease
Variable rate instruments
2019
2018
4.6
(4.6)
2.1
(2.1)
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) Market risk of investments in investment programs
The Group is exposed to market risks (other than interest rate and foreign currency risk) because of its investments in investment
programs held by the Group and classified 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 third-party investors in the Group’s investment programs invested in underlying private equity, private debt, private real
estate or private infrastructure investments. These investments qualify in accordance with IAS 32 either as equity investments or
debt investments. Typically, instruments qualifying as debt investments contain embedded derivatives whose fair value is derived from
the adjusted net asset value of the underlying investment programs which in turn is based upon the value of the underlying assets held
within each of the investment program.
In assessing the market risk associated with the Group’s investments, a volatility ratio was applied to each of its investments classified
as marketable securities, financial investments or assets and liabilities held for sale. The Group used long-term data to determine the
volatilities for each asset class.
In millions of Swiss francs
2019
Volatility
2018
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
217.6
59.4
55.5
61.1
666.4
9%
18%
7%
11%
9%
12%
0.0
7%
262.4
191.5
52.6
47.5
36.9
590.9
18%
5%
8%
7%
6%
The Group refined the segment allocation of investments related to its multisegment investment programs. Comparative amounts have been re-presented.
Partners Group | 69
ANNUAL REPORT 2019
Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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
2019
2018
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
49.1
15.2
6.5
5.0
7.3
83.1
47.2
9.6
4.2
3.1
2.1
66.2
The Group refined the segment allocation of investments related to its multisegment investment programs. Comparative amounts have been re-presented.
5.4.3. Liquidity risk
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 into 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”) formally monitor the liquidity available 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 two unsecured credit facilities of CHF 460 million (31 December 2018: CHF 400 million) and CHF 375 million (new
unsecured credit facility) with a syndicate of Swiss banks and a syndicate of Swiss and international banks, respectively. These credit
facilities can be used for general corporate purposes with a primary focus on working capital financing. Interests are variable and
determined by the relevant short-term interest rate plus a margin. The facilities are subject to maximum debt covenants which have
been 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 (31 December 2018: CHF 30 million). Interest is set at a fixed interest rate. The facility is subject to a
maximum debt covenant which was met throughout the current and prior year.
70 | Partners Group
ANNUAL REPORT 2019
Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
The following table discloses the financial liabilities with their contractual maturities:
In millions of Swiss francs
31 December 2019
Note
Carrying
amount
Total
6 months
or less
6 - 12
months
13 - 24
months
25 - 60
months
More than
60 months
Trade payables 1)
Derivative liabilities held for risk management 1)
Accrued revenue deductions 1)
Cash collateral for forward contracts 1)
Other payables 1)
Lease liabilities 2)
Long-term debt
Other long-term liabilities 3)
Unfunded commitments
7.
7.
7.
7.
7.
8.
55.9
1.5
63.6
5.2
28.3
67.6
55.9
1.5
63.6
5.2
28.3
75.8
13.
798.6
818.7
55.9
1.5
5.2
28.3
7.0
2.5
63.6
6.7
10.1
19.8
32.2
2.5
307.5
506.2
46.5
46.5
35.9
10.6
250.0
250.0
250.0
1'317.2
1'345.5
350.4
70.3
48.5
337.9
538.4
1) Presented in the line item trade and other payables in the consolidated balance sheet.
2) As of 1 January 2019, the Group initially applied IFRS 16 using the modified retrospective approach. Under this approach, comparative information is not restated.
3) This line item includes long-term accrued liabilities related to the investment programs and other third parties.
In millions of Swiss francs
31 December 2018
Note
Carrying
amount
Total
6 months
or less
6 - 12
months
13 - 24
months
25 - 60
months
More than
60 months
Trade payables 1)
Derivative liabilities held for risk management 1)
Accrued revenue deductions 1)
Cash collateral for forward contracts 1)
Other payables 1)
Long-term debt
Other long-term liabilities 2)
Unfunded commitments
7.
7.
7.
7.
7.
71.6
0.1
32.0
0.3
71.6
0.1
32.0
0.3
71.6
0.1
0.3
126.9
126.9
126.9
13.
299.4
302.9
0.5
28.6
28.6
212.8
212.8
212.8
32.0
0.5
8.2
1.4
300.5
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
775.2
412.2
32.0
8.7
21.8
300.5
Partners Group | 71
ANNUAL REPORT 2019
Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
5.5. Fair value measurement
Overview
Fair value is the price that would be received by selling 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 2019
Marketable securities 1)
Derivative assets held for risk management 1)
Assets held for sale
Financial investments
Financial assets
0.0
10.4
0.0
10.4
Derivative liabilities held for risk management 2)
1.5
0.0
10.4
175.4
605.3
791.1
1.5
114.3
0.8
116.6
175.4
605.3
780.7
114.3
0.8
115.1
-
1.5
Level 1
Level 2
Level 3
Total
31 December 2018
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
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 1)
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.
72 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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 and the remaining other long-term liabilities are expected to approximate fair values since time values do not materially
differ (level 3 input).
The following tables show the reconciliation of all level 3 financial instruments in 2019 and 2018:
In millions of Swiss francs
Balance as of 1 January
Purchases
Sales
Change in fair value 1)
Exchange differences
Balance as of 31 December
In millions of Swiss francs
Balance as of 1 January
Purchases
Sales
Change in fair value 1)
Exchange differences
Balance as of 31 December
Financial assets
Financial liabilities
2019
645.0
200.4
(105.9)
58.2
(17.0)
780.7
54.9
65.3
(1.7)
(0.0)
(3.4)
115.1
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
1) Presented in the line items finance income and finance expense in the consolidated income statement.
There were no transfers between levels in 2019 and 2018.
Financial investments and assets and liabilities held for sale
Financial investments (see note 5.3.2.) and assets and liabilities held for sale (see note 5.3.3.), disclosed as level 3 financial instruments,
consist of investments in investment programs that the Group manages. 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. Such
controls include reviews of profit and loss statements 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.
Control processes also 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.
Partners Group | 73
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
Valuation techniques used to determine fair value of underlying investments
Financial investments held by the Group consist of underlying assets and liabilities within investment programs. In turn, these
investment programs are 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 debt investments can be valued by using the instrument’s expected cash flows while
direct equity 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 upon 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, other market participant 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.
74 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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 Group 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.
Sensitivity of fair values
From a Group perspective, the fair value of financial investments and assets and liabilities held for sale is typically dependent on the
adjusted net asset value 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 2019 31 December 2018
Adjusted net asset value (1% increase)
6.7
5.9
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 of its financial investments, assets and liabilities held for sale. 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.
Partners Group | 75
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
6. Investments in associates
The Group accounted for investments in associates as of 31 December 2019 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
41.6
0.5
In millions of Swiss francs
Balance as of 1 January
Redemption of shares (Pearl)
Share of results (Pearl)
Share of results (LGT)
Exchange differences
Balance as of 31 December
41.6
0.5
42.1
28%
40%
2019
2018
55.0
(13.7)
2.8
0.0
(2.0)
42.1
90.1
(28.0)
(3.8)
0.0
(3.3)
55.0
Summary of financial information of the investments in associates - 100%:
In millions of Swiss francs
31 December 2019 31 December 2018 31 December 2019 31 December 2018
Pearl
LGT
Total assets
Total liabilities
Equity
Revenues
Profit/(loss) for the period
149.4
1.6
147.8
15.3
10.1
196.9
3.4
193.5
7.7
(13.4)
1.8
0.6
1.2
2.1
0.0
1.9
0.7
1.2
2.9
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.).
76 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
7. Trade and other payables
In millions of Swiss francs
Note
31 December 2019 31 December 2018
Trade payables
Goods and services received not yet invoiced
Derivative liabilities held for risk management
Accrued revenue deductions
Cash collateral for forward contracts
Contractual obligation to purchase treasury shares
Lease liabilities 1)
Other payables
Total trade and other payables
55.9
12.3
1.5
63.6
5.2
-
12.4
28.3
179.2
71.6
3.6
0.1
32.0
0.3
110.0
-
16.9
234.5
16.
8.
1) As of 1 January 2019, the Group has initially applied IFRS 16 using the modified retrospective approach. Under this approach, comparative information is not restated. See note 19.2.
8. Lease liabilities
In millions of Swiss francs
2019
2018
Lease liabilities as of 1 January
Additions
Removals
Accreted interest
Lease payments
Exchange differences
Lease liabilities as of 31 December
Current liabilities
Non-current liabilities
Lease liabilities as of 31 December
43.8
36.4
(0.7)
1.2
(12.1)
(1.0)
67.6
12.4
55.2
67.6
-
-
-
-
-
-
-
-
-
-
As of 1 January 2019, the Group initially applied IFRS 16 using the modified retrospective method. Under this approach, comparative information is not restated. See note 19.2.
Partners Group | 77
ANNUAL REPORT 2019 ANNUAL REPORT 2019
Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
9. Income tax
9.1. Income tax expense
9.1.1. Recognized in profit or loss
In millions of Swiss francs
Note
2019
2018
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)
144.5
(0.9)
143.6
(6.3)
(6.3)
122.8
(0.0)
122.8
(4.6)
(4.6)
Total income tax expense
137.3
118.2
9.1.2. Weighted average expected tax rate reconciliation
In millions of Swiss francs
Profit before tax
2019
2018
1'037.2
887.5
Weighted average expected Group tax rate 1)
13.83%
13.26%
Expected tax expense
Non-tax-deductible expense and non-taxable income
Applicable tax rates differing from expected rate
Under/(over) provided in prior years
Other impacts
Total income tax expense
143.4
117.7
(3.0)
(1.8)
(0.9)
(0.4)
0.7
(0.6)
(0.0)
0.4
137.3
118.2
1) 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 profit before tax.
78 | Partners Group
Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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 2019 31 December 2018
Deferred tax assets
Deferred tax liabilities
Deferred tax assets / (liabilities), net
43.8
(4.0)
39.8
23.6
(2.5)
21.1
In millions of Swiss francs
2019
2018
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
21.1
6.3
12.8
0.3
(0.7)
39.8
21.8
4.6
(5.6)
0.2
0.1
21.1
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 asset and
liability classes giving rise to temporary differences are analyzed below:
In millions of Swiss francs
Financial
investments
Other non-
current
assets
Defined
benefit plan
Share-based
payment
expenses
Accrued
variable com-
pensation &
MCP
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 as of 31 December, net
(0.3)
0.2
-
-
0.0
(0.1)
(2.5)
(0.7)
-
-
0.1
(3.1)
0.1
(0.1)
-
0.3
-
0.3
12.1
(1.5)
12.8
-
(0.3)
23.1
11.3
7.2
-
-
(0.5)
18.0
2019
Others
Total
0.4
1.2
-
-
0.0
1.6
21.1
6.3
12.8
0.3
(0.7)
39.8
Partners Group | 79
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
In millions of Swiss francs
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 as of 31 December, net
Financial investments
Financial
investments
Other non-
current
assets
Defined
benefit plan
Share-based
payment
expenses
Accrued
variable com-
pensation &
MCP
(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
2018
Others
Total
2.1
(1.7)
-
-
0.0
0.4
21.8
4.6
(5.6)
0.2
0.1
21.1
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.
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
2019
2018
Third-party services
Rental expenses and maintenance costs 1)
Administrative expenses
Travel and representation expenses
Total other operating expenses
(24.5)
(5.3)
(26.5)
(22.2)
(78.5)
(14.3)
(14.2)
(22.1)
(17.2)
(67.8)
1) As of 1 January 2019, the Group initially applied IFRS 16 using the modified retrospective approach. Under this approach, comparative information is not restated. See note 19.2.
80 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
11. Property and equipment
In millions of Swiss francs
Land
Buildings
Right-of-use
assets
Construction
in progress
Office
furniture
Interior
fittings
Equipment
and
IT fittings
2019
Total
Cost
Balance as of 1 January
Recognition of right-of-use asset on initial
application of IFRS 16
Adjusted balance as of 1 January
Additions
Transfers
Disposals
Exchange differences
Balance as of 31 December
Accumulated depreciation
Balance as of 1 January
Depreciation
Transfers
Accumulated depreciation on disposals
Exchange differences
Balance as of 31 December
Carrying amount
As of 1 January
As of 31 December
7.1
-
7.1
56.7
-
-
(0.1)
63.7
-
-
-
-
-
-
5.9
-
5.9
7.0
53.6
-
(1.5)
65.0
1.4
0.9
-
-
-
2.3
-
44.7
6.1
22.2
9.5
95.5
42.7
42.7
36.3
-
44.7
42.3
-
(57.2)
(0.1)
(1.2)
77.7
-
13.0
-
-
(0.3)
12.7
-
(0.4)
29.4
-
-
-
-
-
-
-
6.1
4.0
-
-
(0.1)
10.0
3.8
1.3
-
-
-
-
22.2
0.6
0.1
(0.7)
-
22.2
15.7
2.1
-
(0.7)
-
-
42.7
9.5
3.1
4.4
-
(0.2)
16.8
7.0
2.5
0.9
-
-
138.2
150.0
0.9
(0.8)
(3.5)
284.8
27.9
19.8
0.9
(0.7)
(0.3)
47.6
5.1
17.1
10.4
7.1
63.7
4.5
62.7
-
65.0
44.7
29.4
2.3
4.9
6.5
5.1
2.5
6.4
67.6
237.2
Impairment losses incurred in 2019
nil
Construction in progress reflects the costs for the Group’s Americas headquarters in Broomfield, Denver.
Partners Group | 81
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
In millions of Swiss francs
Land
Buildings
Construction
in progress
Office
furniture
Interior
fittings
Equipment
and
IT fittings
Cost
Balance as of 1 January
7.0
5.9
Additions
Disposals
Exchange differences
Balance as of 31 December
Accumulated depreciation
Balance as of 1 January
Depreciation
Accumulated depreciation on disposals
Exchange differences
Balance as of 31 December
Carrying amount
As of 1 January
As of 31 December
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 Americas headquarters in Broomfield, Denver.
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
82 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
12. Intangible assets
In millions of Swiss francs
Cost
Balance as of 1 January
Additions
Disposals
Exchange differences
Balance as of 31 December
Accumulated amortization and impairment losses
Balance as of 1 January
Amortization
Accumulated amortization on disposals
Exchange differences
Balance as of 31 December
Carrying amount
As of 1 January
As of 31 December
Impairment losses incurred in 2019
Acquired client
contracts
Goodwill
Software Contract costs
Other
intangible
assets
4.7
32.6
-
-
0.1
4.8
4.7
-
-
0.1
4.8
-
-
-
-
(0.2)
32.4
-
-
-
-
-
32.6
32.4
18.2
5.2
-
-
23.4
12.8
4.1
-
-
16.9
5.4
6.5
45.8
14.8
(6.9)
(0.8)
52.9
23.1
9.1
(6.9)
(0.1)
25.2
22.7
27.7
2019
Total
108.5
21.9
(6.9)
(0.9)
7.2
1.9
-
-
9.1
122.6
6.1
0.8
-
-
6.9
1.1
2.2
46.7
14.0
(6.9)
0.0
53.8
61.8
68.8
nil
Partners Group | 83
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
Acquired client
contracts
Goodwill
Software Contract costs
Other
intangible
assets
In millions of Swiss francs
Cost
Balance as of 1 January
Additions
Disposals
Exchange differences
Balance as of 31 December
Accumulated amortization and impairment losses
Balance as of 1 January
Amortization
Accumulated amortization on disposals
Exchange differences
Balance as of 31 December
Carrying amount
As of 1 January
As of 31 December
Impairment losses incurred in 2018
Impairment testing for CGU’s containing goodwill
4.9
33.2
-
-
(0.2)
4.7
4.5
0.4
-
(0.2)
4.7
-
-
(0.6)
32.6
-
-
-
-
-
0.4
-
33.2
32.6
14.6
3.7
(0.1)
-
18.2
9.6
3.3
(0.1)
-
12.8
5.0
5.4
36.5
9.5
-
(0.2)
45.8
15.2
8.0
-
(0.1)
23.1
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
The carrying amount of goodwill as of 31 December 2019 (CHF 32.4 million; 2018: CHF 32.6 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 17.2 million (2018: CHF 17.5 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 15.2 million (2018: CHF 15.1 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 in 2016 and into Partners Group (Luxembourg) S.A. in 2019, has been
allocated to the private equity segment.
84 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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 (2020–2024). 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 2020 to 2024.
• Other operating expenses growth was applied at a constant rate of 10% p.a. (2018: 10% p.a.).
• Personnel expenses growth was applied at a constant rate of 5% p.a. (2018: 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 (2018:
35%)).
• Pre-tax discount rates of 7.4% (PG RE; 2018: 8.0%) and 6.3% (PG Italy; 2018: 7.4%), respectively, were applied in determining the
recoverable amounts of the CGU’s. The Group applied market interest rates of 1.8% (PG RE; 2018: 2.9%) and 1.0% (PG Italy; 2018:
3.0%), 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
Balance as of 1 January
Issuance of long-term debts
Accreted interest
Balance as of 31 December
2019
2018
299.4
499.1
0.1
798.6
299.2
-
0.2
299.4
The Group issued the following corporate bonds denominated in Swiss francs and listed on the SIX Swiss Exchange:
ISIN
CH0361532895
CH0419041287
Date of
issue
Face value in
millions of CHF
Coupon
in %
Year of
maturity
Issue price
in %
Redemption
price in %
7 June 2017
21 June 2019
300.0
500.0
0.150%
0.400%
2024
2027
100.052%
100.000%
100.098%
100.000%
The fair values of the corporate bonds as of 31 December 2019 were CHF 301.8 million and CHF 515.0 million, respectively (2018:
CHF 300.0 million and n/a, respectively), and were determined by the quoted market price (level 1 input).
Partners Group | 85
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
14. Share capital, capital management and reserves
In effective number of shares
2019
2018
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 (2018: 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 2019 (31 December 2018: CHF 218’100),
consisting of CHF 217’100 (31 December 2018: CHF 217’100) for legal reserves from capital contributions and of CHF 1’000
(31 December 2018: 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 278’645
(2018: 207’805) 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 conditionally purchase some of its registered shares. As of 31 December 2018,
the total notional amount of CHF 110.0 million was directly recognized in equity. The amount was reversed during 2019 (see note 16.).
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 22 per share on 21 May
2019 (16 May 2018: CHF 19). As the Company’s treasury shares are not eligible for a dividend payment, the dividend distribution of
CHF 587.4 million approved in May 2019 (May 2018: CHF 507.3 million) was not fully distributed, i.e. a total of CHF 585.4 million was
paid out (May 2018: 506.3 million). After the balance sheet date, the BoD proposes a dividend distribution of CHF 680.9 million (CHF
25.50 per share) for 2019.
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 2019 and 2018.
86 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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
Purchase of treasury shares
Disposal of treasury shares
Balance as of 31 December
Weighted average number of shares outstanding
during the period (360 days)
Shareholders above 5% (in % of shares issued) based on notification received
Dr. Marcel Erni
Alfred Gantner
Urs Wietlisbach
BlackRock Inc.
In effective number of shares
Balance as of 1 January
Purchase of treasury shares
Disposal of treasury shares
Balance as of 31 December
Weighted average number of shares outstanding
during the period (360 days)
Shareholders above 5% (in % of shares issued) based on notification received
Dr. Marcel Erni
Alfred Gantner
Urs Wietlisbach
BlackRock Inc.
Shares
issued
Treasury
shares
2019
Shares
outstanding
26'700'000
207'805
26'492'195
618'861
(618'861)
(548'021)
548'021
26'700'000
278'645
26'421'355
Shares held
2'673'659
2'673'659
2'673'659
1'639'500
Shares
issued
Treasury
shares
26'520'620
in %
10.01%
10.01%
10.01%
6.14%
2018
Shares
outstanding
26'700'000
105'165
26'594'835
807'304
(807'304)
(704'664)
704'664
26'700'000
207'805
26'492'195
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
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. The Group is
not part of this transaction and therefore the transaction is not recognized on the consolidated balance sheet.
Partners Group | 87
ANNUAL REPORT 2019
Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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
2019
2018
756.50
708.92
685.19
595.51
Note
Earnings
per share
Profit for
the period
2019
Number of
shares
Profit for the period (in millions of Swiss francs)
899.9
Weighted average number of ordinary shares outstanding
14.
26'520'620
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.
33.93
33.66
Note
Earnings
per share
Profit for
the period
1'310'821
(1'092'859)
26'738'582
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
1'181'094
(937'813)
26'849'976
As of 31 December 2019, the Group had 1’560’494 options and non-vested shares outstanding (2018: 1’484’142) (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.
88 | Partners Group
ANNUAL REPORT 2019
Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
16. Related party transactions
The Group has related party relationships with its 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 2019, associates purchased services from the Group in the amount of CHF 5.6 million (2018: CHF 7.1 million).
As of 31 December 2019, loans to employees of the Group amounted to CHF 9.2 million (2018: CHF 7.2 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
2019
2018
Purchase of treasury shares from shareholders employed by the Group
6'641
5'499
Average purchase price per share (in Swiss francs)
739.02
714.63
In 2018, the Company also entered into an agreement with an executive committee member to purchase some of its registered shares
at arm’s length. The maximum transaction value amounted to CHF 110 million and was recorded in equity. 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 was below the agreed threshold of CHF 700, the transaction did not take place
and was reversed through equity.
The Group is managed by the Board of Directors (“BoD”) and the Executive Committee (“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 third-party services (see note 10.) and amount to:
In millions of Swiss francs
2019
2018
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
2.3
0.3
4.5
7.5
0.1
2.4
0.2
3.1
6.2
0.1
14.7
12.0
7.0
0.5
12.5
9.7
0.6
30.3
45.0
8.2
0.2
10.7
10.2
0.4
29.7
41.7
Partners Group | 89
ANNUAL REPORT 2019
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 2019 31 December 2018
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
66'355
-
171'135
237'490
82'675
2'025
166'323
251'023
31 December 2019 31 December 2018
8'372'538
8'385'206
110'607
647'379
8'483'145
9'032'585
For further information in accordance with Art. 663c of the Swiss Code of Obligations, refer to note 15. of the entity accounts of
Partners Group Holding AG.
The Group aligns the interests of clients with those of the Group’s employees by offering all employees preferential terms to invest
alongside the Group’s investment programs via a global employee commitment plan. In line with standard industry practice, no fees
are charged on such investments. In total, commitments by the Group’s BoD and employees amounted to approximately CHF 1.2
billion as of 31 December 2019.
17. Subsidiaries
17.1. Changes in scope of consolidation
Incorporation of new Group entities
Name
Incorporation date
Principal activity
Partners Group Property AG, Switzerland
4 June 2019
Purchase, sale, construction, reconstruction, maintenance
and management of real estate
Partners Group Management VI (USD) S.à.r.l., Luxembourg
14 January 2019
Serve as manager to investment programs
Partners Group Management V (GBP) S.à.r.l., Luxembourg
14 January 2019
Serve as manager to investment programs
Partners Group Management IV (EUR) S.à.r.l., Luxembourg
14 January 2019
Serve as manager to investment programs
Partners Group US Management III LLC, Delaware (USA)
7 January 2019
Serve as manager to investment programs
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
8 July 2018
Support the Group’s investment activities in the region
Partners Group Cayman Management IV Limited,
Cayman Islands
29 March 2018
Serve as manager to investment programs
Partners Group Private Markets (Australia) Pty. Ltd., Australia
14 March 2018
Support the Group’s investment activities in the region
90 | Partners Group
Notes to the consolidated financial statements for the years ended 31 December 2019 and 2018ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
17.2. Involvement with structured entities
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.
17.3. Subsidiaries
Details of the Group’s operating subsidiaries as of the reporting date are set out below:
Place of incorporation and operation
Registered office
Country of incor-
poration
Share Capital in
thousands
Interest %
Interest %
Name of the subsidiary
31 December 2019
31 December 2019
31 December 2018
Partners Group AG
Baar-Zug
Switzerland
Partners Group Advisors (DIFC) Limited
Partners Group Japan Kabushiki Kaisha
Partners Group Private Markets (Australia)
Pty. Ltd.
DIFC
Tokyo
UAE
Japan
CHF 200
USD 300
JPY 10'000
Sydney
Australia
AUD 200
Partners Group Prime Services Solutions
(Philippines), Inc.
Taguig City,
Metro Manila
Philippines
PHP 13'734
Partners Group (Brazil) Investimentos Ltda.
São Paulo
Partners Group (Canada) Inc.
Nova Scotia
Brazil
Canada
Partners Group (Deutschland) GmbH
Munich
Germany
BRL 795
CAD 0
EUR 32
Partners Group (France) SAS 1)
Paris
France
-
Partners Group (Guernsey) Limited
St Peter Port
Guernsey
GBP 31'500
Partners Group (India) Private Limited
Mumbai
India
INR 29'615
Partners Group (Luxembourg) S.A.
Luxembourg
Luxembourg
EUR 1'350
Partners Group (Shanghai) Co., Ltd.
Shanghai
China
CNY 12'363
Partners Group (Singapore) Pte. Limited
Singapore
Singapore
SGD 1'250
Partners Group (UK) Limited
Partners Group (USA) Inc.
London
New York
UK
USA
GBP 569
USD 75
1) In 2019, Partners Group (France) SAS was merged into Partners Group (Deutschland) GmbH
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%
Partners Group | 91
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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 2019
31 December 2018
Place of incorpora-
tion and operation
Number of subsidiaries
Financing/treasury
Holding of land and property
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
Switzerland
Switzerland
Guernsey
Scotland
Germany
Cayman Islands
USA
USA
USA
UK
Luxembourg
Guernsey
Guernsey
Guernsey
1
1
18
3
1
4
4
1
1
1
6
1
6
3
1
-
18
3
1
4
3
1
1
1
3
1
6
3
No events took place between 31 December 2019 and 4 March 2020 that would require material adjustments to the amounts
recognized in these consolidated financial statements.
92 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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.
The Risk & Audit Committee (“RAC”) performed an assessment of the risks to which the Group is exposed to. 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 2019 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 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 and low-value leases. In addition, the nature of expenses related to applicable leases changed as IFRS 16
replaced the operating lease expense with a depreciation charge for the right-of-use assets and an interest expense on lease liabilities.
The accounting policies relating to leases are outlined in note 19.9.
As permitted by the transitional provisions of IFRS 16, the Group applied the modified retrospective approach. The cumulative effect
of adopting IFRS 16 was recognized as an adjustment to the opening balance of the respective line items as of 1 January 2019 with no
impact on equity. Comparative information was not restated.
Partners Group | 93
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
The following practical expedients were elected when applying IFRS 16 where the Group is the lessee in leases previously classified as
operating leases under IAS 17:
• Exemption not to apply the requirements of IFRS 16 for short-term leases whereby short-term is defined as leases with a lease term
of twelve months or less.
• Recognition exemption not to apply the requirements of IFRS 16 for leases for which the underlying asset is of low value.
Where an extension option exists, the Group concluded that the extension for the offices will be exercised, unless it was reasonably
certain that the extension option would not be exercised. Overall, the adoption of IFRS 16 resulted in an increase in both the total
assets and the total liabilities on the Group’s consolidated financial statements of CHF 42.7 million. The impact of the transition is
summarized below:
31 December 2018
Impact
1 January 2019
Current assets
2'020.4
-
2'020.4
Right-of-use assets
Other non-current assets
Non-current assets
Total assets
Trade and other payables 1)
Other current liabilities
Current liabilities
Lease liabilities
Non-current provision for dilapidation
Other non-current liabilities
Non-current liabilities
Equity
Total liabilities and equity
-
928.7
928.7
2'949.1
234.5
257.7
492.2
-
0.3
488.7
489.0
1'967.9
2'949.1
42.7
-
42.7
42.7
7.2
-
7.2
32.5
3.0
-
35.5
-
42.7
42.7
928.7
971.4
2'991.8
241.7
257.7
499.4
32.5
3.3
488.7
524.5
1'967.9
2'991.8
1) Impact reflects an addition of current lease liabilities of CHF 11.3 million less a reversal of previously recognized accrued rent expense of CHF 4.1 million.
When measuring lease liabilities, the Group discounted future lease payments using an incremental borrowing rate. The weighted-
average rate applied was 1.9%.
For individual lease contracts, the payments are comprised of variable lease payments that depend on an index or rate and are initially
included in the lease liability using the index or rate as at the commencement date of the lease. After the commencement date, the lease
liability is remeasured to reflect changes to the lease payments arising from changes in the index or rate.
There were no uncommenced leases to which the Group was committed as per 31 December 2019.
As a lessor
The Group sub-leases some of its properties. Per IAS 17, the head lease and sub-lease contracts were classified as operating leases.
Upon transition to IFRS 16, the right-of-use assets recognized from the head leases were measured at cost. The sub-lease contracts are
classified as operating leases under IFRS 16.
94 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 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:
• 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)
• Annual Improvements to IFRS Standards 2015–2017 Cycle – various standards
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 17, “Insurance Contracts”
Revisions and amendments of standards and interpretations
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)
Interest Rate Benchmark Reform
(Amendments to IFRS 9, IAS 39 and IFRS 7)
* No significant impact is expected on the consolidated financial statements of the Group.
*
*
*
*
*
Effective date
Planned adoption
by the Group
1 January 2021
Reporting year 2021
1 January 2020
Reporting year 2020
1 January 2020
Reporting year 2020
1 January 2020
Reporting year 2020
1 January 2020
Reporting year 2020
Partners Group | 95
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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.
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.
96 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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.
(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.
Partners Group | 97
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
(d) Applied foreign currency exchange rates
The Group applied the following currency exchange rates against the Swiss franc:
Year
2019
Year
2018
Currency
Balance sheet rate
Average rate
EUR
USD
GBP
SGD
1.0872
0.9684
1.2827
0.7202
1.1124
0.9937
1.2692
0.7286
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
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.
98 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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 fair value through profit or loss.
• A financial liability is classified as at fair value through profit or loss if it is a derivative or it is designated as such on initial recognition.
Financial liabilities at fair value through profit or loss 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 investment programs, 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.
Partners Group | 99
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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 2019, the applied discount was 50%
(31 December 2018: 50%).
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
Definition of a lease
The Group assesses whether a contract is either a lease or contains a lease based on the new definition of a lease. A contract is either
a lease or contains a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for a
consideration.
As a lessee
The Group recognizes a right-of-use asset and lease liability at the lease commencement date. The right-of-use asset is initially
measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value of outstanding lease payments at the commencement date, discounted
by using an incremental borrowing rate. The lease liability is subsequently increased by the interest cost on the lease liability and is
decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index
or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or, as appropriate, changes in
the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably
certain not to be exercised. Any remeasurement is generally adjusted against the right-of-use asset.
The Group, as a lessee, identified leases mainly relating to rental contracts for its offices (including parking).
100 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
As a lessor
The sub-lease contracts are classified as operating leases under IFRS 16.
19.10. Third-party services
Third-party services 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.
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.
Partners Group | 101
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
19.15. Assets and liabilities held for sale
The Group may seed invest capital into investment programs that the Group typically manages with the objective of providing initial
scale and facilitating 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 that 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
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.
102 | Partners Group
ANNUAL REPORT 2019
Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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 in order 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. The
estimated useful life of intangible assets is as follows:
• Goodwill
• Software
• Contract costs
• Client contracts
indefinite
3–5 years
2–5 years
3–5 years
• Other intangible assets
3–10 years
Partners Group | 103
ANNUAL REPORT 2019
Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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.
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.
104 | Partners Group
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
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 upon 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.
Partners Group | 105
ANNUAL REPORT 2019 Notes to the consolidated financial statements
for the years ended 31 December 2019 and 2018
(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.
106 | Partners Group
ANNUAL REPORT 2019 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 2019 and 2018
– Balance sheet as of 31 December 2019 and 2018
– Notes to the financial statements for the years ended 31 December 2019 and 2018
108
111
112
113
3. Proposal by the Board of Directors of Partners Group Holding AG for the appropriation of available earnings as of
31 December 2019
122
Partners Group | 107
Partners Group | 107
ANNUAL REPORT 2019
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 2019, 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 the financial statements (pages 111 to 122) for the year ended
31 December 2019 comply with Swiss law and the company’s articles of incorporation.
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.
108 | Partners Group
ANNUAL REPORT 2019
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.
Partners Group | 109
ANNUAL REPORT 2019
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, 4 March 2020
Christoph Hochuli
Licensed Audit Expert
KPMG AG, Räffelstrasse 28, PO Box, CH-8045 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.
110 | Partners Group
ANNUAL REPORT 2019
Income statement of Partners Group Holding AG
for the years ended 31 December 2019 and 2018
In millions of Swiss francs
Note
2019
2018
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.
4.
1'161.1
61.7
1.1
1'223.9
(3.0)
(1.4)
(0.1)
(99.3)
1'120.1
(0.0)
1'120.1
449.2
53.6
4.6
507.4
(2.1)
(1.4)
(0.2)
(77.5)
426.2
(0.0)
426.2
Partners Group | 111
ANNUAL REPORT 2019 Balance sheet of Partners Group Holding AG
as of 31 December 2019 and 2018
In millions of Swiss francs
Note
31 December 2019 31 December 2018
Assets
Cash and cash equivalents
Other current receivables
Accrued income
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
112 | Partners Group
5.
2.
6.
7.
8.
9.
10.
11.
633.0
605.3
900.0
2'138.3
47.5
2'524.8
2'572.3
4'710.6
2'159.4
4.4
2'163.8
800.0
0.6
4.0
804.6
2'968.4
0.3
0.2
0.0
834.5
1'120.1
(212.9)
1'742.2
4'710.6
94.9
587.6
0.0
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
ANNUAL REPORT 2019 Notes to the financial statements of Partners Group
Holding AG for the years ended 31 December 2019 and 2018
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 7.).
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. Dividend income
The Company has elected to recognize CHF 900 million of dividend income related to the 2019 financial year profit of its subsidiary
Partners Group AG in 2019 (the year in which it was earned). As this dividend will not be paid until 2020, this amount has been recorded
as accrued income.
3. Other finance income
In millions of Swiss francs
2019
2018
Interest income
Foreign exchange gains
Gain on treasury shares transactions
Total other finance income
7.2
44.3
10.2
61.7
2.7
29.6
21.3
53.6
Partners Group | 113
ANNUAL REPORT 2019 Notes to the financial statements of Partners Group
Holding AG for the years ended 31 December 2019 and 2018
4. Finance expense
In millions of Swiss francs
2019
2018
Interest expense
Foreign exchange losses
Loss on treasury shares transactions
Other finance expense
Total finance expense
5. Other current receivables
(15.2)
(34.0)
(47.6)
(2.5)
(99.3)
(9.7)
(21.4)
(45.4)
(1.0)
(77.5)
In millions of Swiss francs
31 December 2019
31 December 2018
Third parties
Subsidiaries
Total other current receivables
6. Financial assets
0.3
605.0
605.3
5.8
581.8
587.6
In millions of Swiss francs
31 December 2019
31 December 2018
Loans to subsidiaries
Total financial assets
47.5
47.5
26.9
26.9
114 | Partners Group
ANNUAL REPORT 2019 Notes to the financial statements of Partners Group
Holding AG for the years ended 31 December 2019 and 2018
7. Participations
Partners Group AG
Partners Group Corporate Finance AG in Liquidation
Partners Group Property AG
Partners Group (Deutschland) GmbH1)
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 Management IV S.à r.l.
Partners Group Management V S.à r.l.
Partners Group Management VI S.à r.l.
Partners Group (France) SAS2)
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
Partners Group Advisors (DIFC) Limited
Partners Group 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
1) Effective from 11 February 2020, the legal name changed to Partners Group (EU) GmbH
2) In 2019, Partners Group (France) SAS was merged into Partners Group (Deutschland) GmbH
Ownership and voting interest
Domicile
31 December 2019 31 December 2018
Switzerland
Switzerland
Switzerland
Germany
Germany
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
France
Brazil
USA
USA
Canada
Singapore
China
India
Philippines
Japan
UK
UK
UAE
Australia
Cayman Islands
Cayman Islands
Cayman Islands
Cayman Islands
100%
100%
100%
100%
100%
100%
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%
0%
100%
100%
100%
100%
100%
100%
0%
0%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Partners Group | 115
ANNUAL REPORT 2019 Notes to the financial statements of Partners Group
Holding AG for the years ended 31 December 2019 and 2018
Ownership and voting interest
Domicile
31 December 2019 31 December 2018
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
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
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%
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%
116 | Partners Group
ANNUAL REPORT 2019 Notes to the financial statements of Partners Group
Holding AG for the years ended 31 December 2019 and 2018
8. Other current liabilities
In millions of Swiss francs
31 December 2019
31 December 2018
Accrued audit expenses
Other accrued expenses
Other liabilities
Total other current liabilities
0.1
3.9
0.4
4.4
0.2
4.9
0.4
5.5
9. Non-current interest-bearing liabilities
The Company issued the following corporate bonds denominated in Swiss francs and listed on the SIX Swiss Exchange:
ISIN
Date of
issue
Face value in
millions of CHF
Coupon
in %
Year of
maturity
Issue price
in %
Redemption price
in %
CH0361532895
CH0419041287
7 June 2017
21 June 2019
300.0
500.0
0.150%
0.400%
2024
2027
100.052%
100.098%
100.000%
100.000%
10. Provisions
In millions of Swiss francs
Provisions for compensation to board members
Option grants
Management carry program
Social security expenses on management carry program
Total provisions
31 December 2019
31 December 2018
3.0
0.9
0.1
4.0
2.4
0.6
0.0
3.0
Partners Group | 117
ANNUAL REPORT 2019 Notes to the financial statements of Partners Group
Holding AG for the years ended 31 December 2019 and 2018
11. Treasury shares
Balance as of 1 January 2018
Purchase of treasury shares
Disposal of treasury shares
Balance as of 31 December 2018
Purchase of treasury shares
Disposal of treasury shares
Balance as of 31 December 2019
Number of
shares
Weighted
average price
Total
value
In Swiss francs
In millions of
Swiss francs
105'165
807'304
(704'664)
207'805
618'861
(548'021)
278'645
543.10
710.53
691.31
690.98
739.03
708.15
763.93
57.1
573.6
(487.1)
143.6
457.4
(388.1)
212.9
The Company has 1’560’494 (31 December 2018: 1’484’142) 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).
12. Share and option grants to members of the Board of Directors and the
Executive Committee
In Swiss francs
2019
2018
Number of
instruments
Weighted
average price
Total
value
Number of
instruments
Weighted
average price
Total
value
In Swiss francs
In millions of
Swiss francs
In Swiss francs
In millions of
Swiss francs
Board of Directors
Shares
Options
Executive Committee
115
20'890
732.00
38.30
0.1
0.8
337
18'489
668.50
33.81
0.2
0.6
Shares
13'500
807.60
10.9
-
-
-
118 | Partners Group
ANNUAL REPORT 2019 Notes to the financial statements of Partners Group
Holding AG for the years ended 31 December 2019 and 2018
13. Commitments and contingent liabilities
In millions of Swiss francs
31 December 2019
31 December 2018
Guarantees for third parties
Guarantees for subsidiaries
57.7
865.0
56.5
430.0
The Company and certain subsidiaries maintain the following lines of credit as of 31 December 2019 (see note 5.4.3. of the consolidated
financial statements):
• CHF 460 million
(31 December 2018: CHF 400 million)
• CHF 375 million
(31 December 2018: CHF 0.0)
• CHF 30 million
(31 December 2018: CHF 30 million)
The amounts drawn by subsidiaries are guaranteed by the Company.
As of 31 December 2019 there are no amounts drawn (31 December 2018: CHF 0.0).
14. Shareholders above 5%
As of 31 December 2019, the Company had received notification of four significant shareholders whose voting rights exceed 5%.
Dr. Marcel Erni
Alfred Gantner
Urs Wietlisbach
BlackRock, Inc.
31 December 2019
31 December 2018
10.01%
10.01%
10.01%
6.14%
10.01%
10.01%
10.01%
6.14%
Partners Group | 119
ANNUAL REPORT 2019 Notes to the financial statements of Partners Group
Holding AG for the years ended 31 December 2019 and 2018
15. Share and option holdings by members of the Board of Directors and
the Executive Committee
Number of shares and options
31 December 2019
Share
ownership
Non-vested
shares
Options
Board of Directors
Steffen Meister, Executive Chairman
Dr. Eric Strutz, Vice Chairman
Dr. Marcel Erni
Michelle Felman
Alfred Gantner
Grace del Rosario-Castaño
Dr. Martin Strobel
Patrick Ward
Urs Wietlisbach
Total Board of Directors
Executive Committee
André Frei, Co-Chief Executive Officer
David Layton, Co-Chief Executive Officer
Juri Jenkner
Andreas Knecht, Chief Operating Officer and General Counsel
Marlis Morin
Dr. Michael Studer
Total Executive Committee
350'675
102
2'673'659
102
2'673'659
102
580
-
2'673'659
8'372'538
49'383
2'916
7'853
7'061
17'203
26'191
-
-
-
-
-
-
-
-
-
-
3'096
3'746
2'631
2'198
1'035
2'305
110'607
15'011
-
13'659
-
10'694
-
12'226
4'570
25'206
-
66'355
32'820
24'500
32'404
34'400
-
32'000
156'124
Total
8'483'145
15'011
222'479
120 | Partners Group
ANNUAL REPORT 2019 Notes to the financial statements of Partners Group
Holding AG for the years ended 31 December 2019 and 2018
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
Total Board of Directors
Executive Committee
André Frei, Co-Chief Executive Officer
Christoph Rubeli, Co-Chief Executive Officer
Juri Jenkner
Andreas Knecht, Chief Operating Officer and General Counsel
David Layton
Marlis Morin
Dr. Michael Studer
Total Executive Committee
350'675
10'000
3'248
2'673'659
102
2'673'659
102
102
-
2'673'659
8'385'206
50'271
538'993
7'638
4'109
2'664
16'969
26'735
647'379
-
-
2'025
-
-
-
-
-
-
-
-
30'597
6'000
-
7'430
-
8'962
11'661
18'025
-
2'025
82'675
112
112
555
592
592
464
472
32'820
2'500
32'404
37'100
24'500
1'700
32'400
2'899
163'424
Total
9'032'585
4'924
246'099
16. Full-time employees
The Company did not have any employees in the reporting year or in the previous year.
Partners Group | 121
ANNUAL REPORT 2019 Proposal by the Board of Directors of Partners Group
Holding AG for the appropriation of available earnings as of
31 December 2019
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 2019
1'120.10
834.52
1'954.62
(680.85)
1'273.77
122 | Partners Group
ANNUAL REPORT 2019 Compensation Report
Grace del Rosario-Castaño member of the Board of Directors and Chairwoman of the Nomination and Compensation Committee
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
2019 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 2019.
2019 financial and investment performance
In 2019, Partners Group continued its growth trajectory as
measured by most key figures. We realized further potential in
private markets and invested USD 15 billion on behalf of our
clients, maintaining our highly disciplined approach and rigorous
standards of selectivity across all private markets asset classes.
Assets under management grew by 13%, net, to USD 94 billion
and management fees grew by 14% to CHF 1’138 million.
Revenues increased by 21% year-on-year to CHF 1’610 million
and EBIT by 17% and CHF 1’008 million, respectively. Based
on the solid development of the business in all asset classes and
regions, the Board of Directors will propose a dividend of
CHF 25.50 per share to shareholders at the next Annual
General Meeting, representing a year-on-year increase of 16%.
Review of our compensation disclosure and shareholder
feedback in 2019
Although the general philosophy behind our compensation
policy has remained unchanged since inception, we undertake
periodic reviews of our compensation structure and adjust as
necessary to ensure that the interests of clients, shareholders,
employees and other stakeholders remain well aligned.
In 2019, we reached out to major shareholders and several
proxy advisors once again to reflect on industry trends and
gather outside perspectives. During our meetings, we discussed
the topics which we believe caused controversy among our
shareholders and proxy advisors, resulting in a comparably low
acceptance rate of only 69% for our Compensation Report at
our last Annual General Meeting. This result motivated us to
further improve the transparency and clarity of our approach
to three main topics related to our short- and long-term
compensation.
“We believe that executives’
compensation should be more directly
linked to achieving the objectives
outlined by the firm.”
To address these topics in this year’s report, we have made
amendments and/or provided additional information on the
following:
•
•
First, we clarify that the total short-term cash
compensation granted to the Executive Committee is
relatively consistent across the committee and represents a
stable compensation component. It is equally split between
a cash base salary and a deferred cash payment and not
linked to performance targets (see section 3.1).
Secondly, the Nomination & Compensation Committee
suggested replacing one of the two payout components of
our long-term incentive (LTI) scheme. The component in
question links the payout to executives to a combination
Partners Group | 123
ANNUAL REPORT 2019 Compensation Report
•
of 1) outperformance against a benchmark index1, and, 2)
the performance fee development of a given vintage pool.
The Committee replaced this component with restricted
shares of Partners Group Holding as it believes that
executives’ compensation should be more directly linked
to achieving the objectives outlined by the firm (“pay-
for-performance”). As of today, the payout component
following the outperformance against a benchmark index
represented half of the LTI grant value and only indirectly
linked the pay of executives to the actual performance of
the firm (via the share price development of a peer group).
This view was also shared by our shareholders. Restricted
shares as well as the remaining payout component better
incentivize the team to reach company-specific objectives
(see section 3.2).
Thirdly, we follow the general corporate governance
principle of “comply or explain” and explain why we grant
(restricted) options to independent members of the Board
as part of their total annual Board fee. We also provide
insights into the Board compensation structures used in
our industry.
In private markets, independent directors on portfolio
company Boards are expected to actively participate
in developing value-enhancing strategies. In addition,
independent directors are typically expected to invest a
meaningful proportion of their own net worth into the
portfolio company alongside private equity investors
in order to participate in both upside potential and
downside risk. In line with this principle, and to encourage
engagement in value creation initiatives, incentive schemes
for independent Board members may allow for additional
upside through options – but only if these Board members
materially share the downside risk.
These compensation schemes have proven to be efficient
and effective as a means to reward success during Partners
Group’s more than 20-year history as a private markets
investment manager. While it is not possible to fully mirror
the private markets approach to Board compensation in
a public markets context, we wish to benefit directionally
from this highly successful model (for more details see
section 5.6).
1 S&P Listed Private Equity Index.
124 | Partners Group
During our meetings with shareholders and proxy advisors,
we also acknowledged upcoming focus topics and introduced
our firm’s current environment social governance (ESG)/
corporate social responsibility (CSR) targets to stakeholders.
Our targets include (i) achieving our 20 by 2020 and 25 by
2025 diversity targets2, (ii) ensuring at least 90% of employees
are trained on ethics-related issues, and (iii) establishing a
deep-dive ESG engagement with every one of our lead direct
investments. These targets are included in our overall executive
compensation assessment (see Exhibit 2).
Compensation of the Executive Committee
The total short-term cash compensation granted to the
Executive Committee in 2019 was similar to the amount
granted in 2018. Half of the cash compensation was granted
in the form of a base salary and the other half in the form of a
deferred payment. We confirm that we have no intention to
change this cash compensation approach in 2020 and clarify
that the total short-term cash compensation granted to the
Executive Committee is based on function and represents a
stable compensation component.
“In private markets, independent
directors on portfolio company Boards
are expected to actively participate in
developing value-enhancing strategies.”
The Executive Committee was also granted LTIs in 2019,
which had a similar grant value to those granted in 2018. In
our annual review of our LTI scheme, we did not amend the
methodology we use to determine the overall LTI pool. Our
performance review confirmed that the overall objectives of
the Executive Committee were met (see section 4.1): first, the
Executive Committee met its financial targets (management fee
EBIT increased in line with expectations), second, it modestly
underperformed its investment objectives (a lower amount
invested compared to the previous year resulted in slightly
less performance fee-related investment volume) and third,
it outperformed its qualitative objectives, which included
the implementation of our “ownership excellence” programs
across the organization resulting in increased operational
effectiveness, improved leadership and organizational learnings
2 By 2020, we wish to have female ambassadors at 20 top universities globally in order to
attract the next generation of talented young women and, by 2025, we wish to substantially
increase the number of our female Partners and Managing Directors to at least 25 (see CSR
report 2018/2019).
ANNUAL REPORT 2019 Compensation Report
(for e.g. our newly introduced PG Academy platform, a
company-wide training platform). As a result of this assessment,
the Nomination & Compensation Committee set the nominal
amount of LTIs allocated in 2019 equal to the amount allocated
in 2018 (i.e. as outlined in section 4.2., the overall compensation
factor for the full-year 2019 LTI allocation was set at 1.0x).
Around two thirds of the value were granted in restricted
shares and around one third in Management Performance Plan
(MPP) rights.
Compensation of executive Board members
Our approach to the compensation of executive members of
the Board is similar to that of the Executive Committee. We
determined the overall LTI pool by looking at quantitative and
qualitative criteria. We then determined the individual LTI
allocation based on performance relative to assignments and
committee roles.
For the 2019 compensation, the combination of quantitative
and qualitative assessment led to a compensation factor
of 1.00x, based also on a moderate underperformance on
performance fee-weighted investment volumes and an
outperformance on leadership and strategic direction (e.g.
driving “ownership excellence” programs, fostering the firm’s
approach to entrepreneurial governance across portfolio
companies). As such, the overall amount of the LTI pool for
executive members of the Board was similar to the amount
granted in 2018. Also, individual LTI grants were set at the
level of the previous year based on the achieved objectives of
the executive Board members. Due to their already significant
shareholding in the firm, executive members of the Board were
granted their LTI entirely in MPP rights.
Compensation of independent Board members
As indicated in our 2018 Compensation Report, the Board
has amended the compensation framework for independent
Board members and proposed a more detailed, module-based
compensation approach. This approach considers individual
business assignments, the time each member allocates to Board
committee responsibilities, and their additional contribution to
the firm’s business beyond their committee responsibilities (see
section 5.4).
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
Partners Group | 125
ANNUAL REPORT 2019 Compensation Report
1. Philosophy & principles
1.1 Philosophy
Our investment approach favors trusted, long-term
relationships that extend beyond our USD 94 billion AuM
and our more than 1’450 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 180’000 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 private
assets in which we invest.
Our compensation framework honors this responsibility and
promotes a corporate culture that contributes to the company’s
sustained success, while adhering to its values. 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.
1.2 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 results, 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.
• 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.
126 | Partners Group
Our compensation philosophy stems
from our firm’s values
Our purpose is to deliver our clients superior and
sustainable investment performance on a mid- to long-
term basis, 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 trust 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 understand our clients’ 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
ANNUAL REPORT 2019 Compensation Report
2. Pay for performance
The total short-term cash compensation granted to the
Executive Committee is based on function and represents a
stable compensation component. It is not linked to performance
targets and is equally spilt between a cash base salary and
a fixed deferred cash payment. In contrast, the allocation of
LTIs, which should encourage true entrepreneurialism and a
long-term perspective, is linked to two equally weighted annual
performance assessments:
• Quantitative achievements, which assess the firm’s
financial performance and investment development.
• Qualitative assessments, which emphasize strategy
implementation and leadership achievements.
In these annual performance assessments, the nominal LTI pool
granted the previous year serves as a basis to calculate the LTI
pool for the year under review. Based on the assessment of
both quantitative and qualitative achievements, a compensation
factor is determined, which is then multiplied by the previous
year’s nominal LTI pool. The Nomination & Compensation
Committee has decided to cap the compensation factor at a
maximum of 2.0x the previous year’s LTI pool on the upper
end, and at a minimum of 0.5x on the lower end, preventing
either excessive upside and downside for LTI participants. For
example, a compensation factor of 1.0x means that the nominal
LTI pool in the year under review remains the same as in the
previous year.
2.1. Assessment of quantitative measures
The financial performance of the firm reflects its operational
strength and is typically a result of successful past decision-
making. As such, the year-on-year development of the firm’s
financial performance is one of two quantitative input factors
used to determine the compensation factor.
• Assessment of financial performance (50% weighting)
We assess financial performance based on the year-on-
year change in management fee EBIT (defined as EBIT
adjusted for non-management fee-related and non-
ordinary items).3
Successful investments made in the year under review provide
the basis for potential future performance fees. Their year-
on-year development serves as the second quantitative input
factor determining the compensation factor.
3 As of the Nomination & Compensation Committee meeting in November of the year under
review.
• Assessment of investment development (50%
weighting)
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).
Exhibit 1: Year-on-year adjustment of 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
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
2.2. Assessment of qualitative measures
The Nomination & Compensation Committee also applies a
qualitative assessment, which is equally important and considers
performance metrics such as strategy implementation and
leadership achievements.
• Assessment of strategy implementation: we assess the
successful implementation of key strategic initiatives as
well as continued business & operational excellence across
our platform and businesses.
• Assessment of leadership achievements: we assess
the progress 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 the firm’s purpose
The final compensation factor is derived from a combination
of the abovementioned qualitative assessment and the
quantitative assessment.
Partners Group | 127
ANNUAL REPORT 2019
Compensation Report
2.2. Bottom-up LTI allocation to individuals
2.4. Equal pay analysis
Our Human Resources department regularly performs equal
pay analyses and shares the results with the Nomination &
Compensation Committee. In the course of the audit of the
2019 compensation report, KPMG acknowledged this analysis
and took note of the results and the considerations presented to
the Nomination & Compensation Committee.
The analysis is performed on the basis of a global job grading
system, which classifies functions according to different
dimensions such as responsibilities, experience, skills, leadership
and regional differences. Based on these criteria, the analysis
identified no pay gap between male and female professionals
within similar grades and within the same geography.
Once the top-down allocation for the Executive Committee
and the Board has been completed, the individual assessment
of each executive member commences. Individual goals differ
depending on a member’s function and level of responsibility
and are outlined in Exhibit 2:
• At Executive Committee-level, each member has additional
objectives with a greater focus on either investment-,
client-, corporate-, service- or environmental social
governance (ESG)/corporate social responsibility (CSR)-
related activities.
• At Board committee-level, each executive member of
the Board has additional responsibilities through his/her
membership in the respective sub-committees.
2.3. 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.
128 | Partners Group
ANNUAL REPORT 2019 Compensation Report
Exhibit 2: Group- and Executive Committee-level objectives & Board committee responsibilities
Group level
Objectives
Investment platform
• Achieve sustainable growth and scale of investment capacity
• Create long-term value in portfolio assets
Financials
• Focus on sustainable growth
• Balancing 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 via an entrepreneurial leadership culture
• Develop talented individuals who are committed to our purpose
ExCo1)-level
Objectives
Investments
Clients
Services
Corporate
ESG/CSR
• Achieve asset class-specific investment goals
• Meet asset class-specific return targets
• Establish best practices in corporate governance amongst portfolio assets
• Extend client coverage (regional and type of investors)
• Best-in-class client coverage (incl. compliance)
• Achieve fundraising goals (mandates, flagship programs and evergreen programs)
• 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 corporate IT infrastructure landscape to ensure operational excellence
• Maintain excellent compliance track record
• Ensure framework for hiring, onboarding, developing and retaining of top talents
• Achieve our 20 by 2020 and 25 by 2025 diversity targets3)
• Ensure at least 90% of employees are trained on ethics-related issues
• Establish a deep-dive ESG engagement with every one of our lead direct investments
Executive 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
• Lead the coverage of the firm’s key client prospects and global consultant network
1) Executive Committee.
2) PRIMERA is our proprietary private markets database.
3) By 2020, we wish to have female ambassadors at 20 top universities globally in order to attract the next generation of talented young women and, by 2025, we wish to substantially increase
the number of our female Partners and Managing Directors to at least 25 (see CSR report 2018/2019).
Partners Group | 129
ANNUAL REPORT 2019
Compensation Report
3. Compensation components
The Nomination & Compensation Committee continues to
strive for consistency in the firm’s approach to compensation
and has not changed the methodology used to determine
the size of the compensation pools since last year. While the
total short-term cash compensation is fixed and not linked to
performance targets, the LTI compensation has a clear link to
strategy and tangible targets.
In 2019, an amendment to the firm’s LTI scheme was proposed
and implemented, involving the replacement of one of the two
payout components of the scheme. The component in question
links the payout granted to executives to a combination of
1) outperformance against a benchmark index4, and, 2) the
performance fee development of a given vintage pool. The
Committee replaced this component with restricted shares of
Partners Group Holding via its Employee Participation Plan
(EPP) as it believes that executive compensation should be
more directly linked to achieving the objectives outlined by
the firm (“pay-for-performance”). The payout component we
have replaced represented half of the LTI grant value and only
indirectly linked the pay of executives to the actual performance
of the firm (via the share price development of a peer group).
Restricted shares (EPP), as well as the remaining payout
component, better incentivize the team to reach company-
specific objectives.
Exhibit 3: Compensation components for the
Executive Committee
Type of compensation
Instrument
Timing
Total
cash
compen-
sation
Long-
term
incen-
tives
Base salary & benefits
Deferred cash payment1)
Previously
Going
forward
Cash
Short-
term
Absolute MPP
performance
Absolute MPP
performance
Equity
(share-based)
LTI
Relative MPP
performance
Restricted
EPP shares
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.
4 At the time, the Nomination & Compensation Committee believed that the S&P Listed
Private Equity Index (Ticker: SPLPEQTY) was the closest industry benchmark and that it
therefore represented the best proxy to measure Partners Group’s relative performance
within the private markets industry. The calculation of the intrinsic value of the 2017 and
2018 LTI grants after the initial grant (grant date + 5 years) related to absolute shareholder
return as well as to a total return outperformance against the benchmark.
130 | Partners Group
3.1. Total cash compensation
The total cash compensation is based on function and
represents a stable compensation component. More specifically,
it is based on an individual’s role and level of responsibility for
the upcoming year and is typically only adjusted with a change of
role. The total cash compensation is equally spilt between a cash
base salary and a fixed deferred cash payment.
Cash base salary & pension benefits: cash base salaries 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.
Deferred cash payment: the fixed deferred cash payment
is awarded at year-end to the Executive Committee. The
individual deferred cash payment set by our compensation
framework is intended to be stable and predictable. The
Nomination & Compensation Committee has the flexibility to
adjust the fixed deferred cash compensation downwards (not
upwards) in the rare case the firm or an individual committee
member severely underperforms in the year under review.
An adjustment could also be applied in exceptional cases,
such as crisis years. Any such adjustment, and the reason for
the adjustment, would be made transparent to shareholders.
Executive Committee members are typically notified of their
deferred cash payment at year-end and receive the cash the
following February.
Exhibit 4: Total cash compensation for Executive
Committee members in 2019
(in thousands)
Function
Cash
base salary
Deferred cash
payment
Total cash
compensation
Co-CEOCH
Co-CEOUSA
Executive
Committee
member
CHF 750
USD 750
CHF 750
USD 750
CHF 1‘500
USD 1‘500
CHF 500
CHF 500
CHF 1‘000
ANNUAL REPORT 2019
Compensation Report
3.2. Long-term incentives (LTIs)
LTIs consist of two payout components, the Management
Performance Plan (MPP) and the Employee Participation Plan
(EPP). The Nomination & Compensation Committee believes
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 senior leaders
are strongly aligned with those of clients and shareholders and
involve a focus on both sustainable financial performance and
long-term investment success. Around one-third of the value
of LTIs was granted in MPP and two-thirds in restricted shares
(EPP).
3.1.1 Management Performance Plan (MPP)
The 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. The MPP’s long vesting
schedules and even longer payout periods are highlighted below
(see Exhibit 5).
• 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 two-year selling and exercise
restriction. It starts in year five and ends in year 14. The
MPP payout can deviate from the intermediate intrinsic
value calculated in year five 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 5: Vesting and expected payout of the MPP, one of the firm's LTI payout components
Intrinsic
value of MPP
right
Vesting parameters
Expected payout of intrinsic value
Evaluation of the intrinsic
value of an MPP right1)
20%
20%
20%
20%
Better than
expected
100%
Worse than
expected
Payment based on underlying performance
fees generated on 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 is determined after five years of the grant and relates to absolute shareholder return (net of dividends). Thereby, the intrinsic value of the 2019 MPP cannot
exceed 10x the grant fair value. See detailed description in Appendix A.1.
2) The time period following the determination of the intrinsic value of MPP rights focuses entirely on how such value 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.1.
Partners Group | 131
ANNUAL REPORT 2019 Compensation Report
3.1.2 Employee Participation Plan (EPP)
Partners Group has a long-term history of granting equity
incentives to all its professionals. These are awarded at year-
end and aim to align all Partners Group employees’ interests
with those of external shareholders. As of 2019, the EPP was
introduced as a new LTI component for Executive Committee
members. The stringent EPP vesting and restriction parameters
and payout mechanism are highlighted below:
• Vesting: the EPP grants vest linearly over a period of five
years, contingent on continued employment with the firm.
• Restriction: any vested EPP to the Executive Committee
has a two-year selling and exercise restriction. This selling
and exercise restriction is intended to incentivize long-term
sustainable value creation and profitability.
Exhibit 6: 2019 EPP vesting parameters (shares) for
Executive Committee members
20%
20%
20%
20%
20%
+2y selling
restrictions
2020
2021
2022
2023
2024
2025
2026
While the allocation of restricted shares de-risks the
compensation profile due to the higher intrinsic value of these
shares at grant, the Nomination & Compensation Committee
mitigates any concerns around this by providing less upside
potential through a lower allocation of Management Performance
Plan rights (due to the option-like nature of MPP rights as
opposed to restricted shares). Eligibility to receive restricted
shares is subject to the same annual performance review process
as all other parts of the LTI scheme (see section 2).
3.3. Further benefits provided disclosed according to
“Ordinance against Excessive Compensation (OaEC)”
The OaEC requires board members of listed companies to
disclose all benefits directly or indirectly provided to the
Executive Committee and the Board of Directors, even if not
related to compensation. As such, in relation to our firm-wide
Employee Commitment Plan (ECP), we disclose any preferred
terms granted to members of the Executive Committee and the
Board for select investments in Partners Group programs.
132 | Partners Group
The firm has a history of investing into its own investment
programs alongside its clients (typically around 1% of the
program’s size) with its balance sheet. This aligns the interests of
clients with those of the firm and its employees. For select direct
investment programs, our institutional clients’ expectations
around the size of such investments increases.
In order to meet these expectations, Partners Group’s Board
has introduced the ECP to increase incentives for employees
to provide more substantial commitments and align an even
greater number of employees with clients. In line with industry
practice, Partners Group offers its employees (including the
Executive Committee and the Board of Directors) similar
preferential terms & conditions to invest into its private markets
programs, offering such investments at no management fees
and no performance fees.
According to the OaEC, these discounted fees are subject to
approval by shareholders. The Nomination & Compensation
Committee discloses in this report all such discounted fees
granted to the Executive Committee and members of the Board
of Directors for investments made alongside investors in the
firm’s closed-ended investment programs (see Exhibit 10 for
the Executive Committee or see Exhibit 13 for the Board of
Directors).
3.4. Equity incentive plans have caused no dilution of
number of shares for shareholders since the IPO
There has been no dilution of Partners Group’s share capital
since the IPO in March 2006, as the firm holds treasury shares
to provide shares for existing equity incentive programs.
Furthermore, the treasury shares necessary to cover the
granted non-vested shares have already been purchased by
the firm. 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 2019 Annual
Report.
As of 31 December 2019, the Group had 1’560’494 options and
non-vested shares outstanding (2018 1’484’142). 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. As of 31 December 2019,
to cover the outstanding in-the-money options at the year-end
share price of CHF 887.40 (2018: CHF 596.00), net (i.e. after
considering the respective strike price) 291’045 treasury shares
would be necessary (2018: 173’223). As of 31 December 2019,
Partners Group held 278’645 treasury shares, corresponding to
1.04% of the total share capital.
ANNUAL REPORT 2019
Compensation Report
4. Executive Committee
compensation 2019
4.1. Total cash compensation
The total cash compensation granted to the Executive
Committee amounted to CHF 7.8 million in 2019 (2018: CHF
7.3 million, excluding former Executive Committee members in
order to allow for a better like-for-like comparison). The total
cash compensation granted to the Executive Committee slightly
increased due to the increase in cash compensation granted to
David Layton, who became Co-CEO as of 1 January 2019. In
2018, he earned a lower cash base salary compared to his Co-
CEO colleague André Frei.
Exhibit 7: Development of total cash compensation
(like-for-like) for the Executive Committee
(in CHF m)
Total short-term incentives
Cash base salary
Deferred cash payments
Total cash compensation
2018
2019 Deviation
3.0
3.7
7.3
3.5
3.5
7.8
+15%
-5%
+6%
Note: excludes 2018 compensation of Christoph Rubeli, former Co-CEO of Partners
Group, who left the Executive Committee as of 31 December 2018.
4.2. LTIs
The Executive Committee was granted nominal LTI (EPP+MPP)
amounting to CHF 16.5 million in 2019 (2018: CHF 16.5 million,
excluding former Executive Committee members), representing
no change from the previous year. Around two thirds of the
value were granted in restricted shares (EPP) and around one
third in MPP (see Exhibit 10).
The quantitative achievements in 2019 resulted in both
quantitative factors assessed to come in slightly below 1.0x
(see Exhibit 8):
•
Financial performance 2019: given that the financial
performance met expectations, it resulted in a
compensation factor of 1.0x. The management fee EBIT
considered at the time by the Nomination & Compensation
Committee grew by 10% (excluding a special compensation
adjustment initiated by the Board). This achievement of
the Executive Committee was in line with the original 2019
Board expectations of ~10%.
•
Investment development 2019: investment development
modestly underperformed expectations and therefore
resulted in a compensation factor below 1.0x. The slight
decrease was mainly due to the decrease in the firm’s
performance fee-weighted investment volume, by slightly
more than 10%, compared to the previous year.
Exhibit 8: quantitative assessment 2019
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
The assessment of the qualitative performance considers
performance metrics, such as strategy implementation and
leadership achievements. As outlined below, the qualitative
compensation factor came in slightly above 1.0x due to the
strong leadership achievements of the Executive Committee.
•
The Executive Committee met expectations in
strategy implementation: among other achievements,
the Executive Committee (1) built out our longer-term,
business-oriented entrepreneurial governance approach
(e.g. establishing a dedicated business unit and further
developing our approach to Board excellence); (2) further
built out the firm’s Thematic Sourcing approach (e.g.
establishing a dedicated research unit next to the Industry
Value Creation team which builds strong conviction
for select sub-sectors and enables us to remain more
deliberate and disciplined in our sourcing efforts compared
to a top-down approach; implementation of monthly
Relative Value meetings for specific industry verticals); and
(3) further developed the firm’s next generation mandate
solutions, allowing clients to strategically build up private
markets exposure over the long term.
Partners Group | 133
ANNUAL REPORT 2019
Compensation Report
•
The Executive Committee outperformed expectations
in leadership achievements: the Executive Committee
initiated its “ownership excellence” program, which further
strengthened organizational effectiveness across the
entire firm. It also implemented operational excellence
guidelines across almost all business units, increasing
corporate effectiveness/efficiency with a focus on day-to-
day operations and services. The Executive Committee
further implemented leadership development programs for
its mid-level leaders and key talents as well as a systematic
approach to implementing organizational learnings
based on a newly introduced PG Academy platform, a
company-wide training platform. For example, systems and
processes were improved and expanded to an increasing
number of professionals globally. Training programs
focused on compliance and business ethics matters were
also enhanced in 2019.
Combining quantitative and qualitative factors
The Nomination & Compensation Committee concluded that
the overall compensation factor for the full-year LTI allocation
should be set at 1.0x. This means that the nominal amount of
LTIs allocated in 2019 equals the amount allocated in 2018.
4.3. Co-CEO compensation
In 2019, the total cash compensation across the entire
Executive Committee and the Co-CEOs is outlined in Exhibit 4.
In 2019, the total compensation for the firm’s Co-CEOs are as
follows:
André Frei
André Frei earned a cash base salary amounting to CHF 0.75
million and a deferred cash payment of CHF 0.75 million. This
brings his total cash compensation to CHF 1.50 million (2018:
CHF 1.50 million).
The Nomination & Compensation Committee assessed
the performance of André Frei based on his achievements
of the Executive Committee-level objectives outlined in
Exhibit 2. His results met expectations on all objectives and
exceeded expectation on leadership achievements. His LTI
grant therefore increased by 7% (CHF +0.25 million) to CHF
3.75 million (2018: CHF 3.50 million). This compares slightly
favorably to the overall flat development of the entire LTI pool.
David Layton
David Layton receives his total cash compensation in USD.
Expressed in CHF, he earned a cash base salary amounting to
CHF 0.75 million and a deferred cash payment amounting to
CHF 0.75 million. This brings his total cash compensation to
CHF 1.49 million in 2019 (2018: CHF 1.25 million). He received
a lower base compensation compared to André Frei in 2018 as
he only became Co-CEO as of 1 January 2019.
David Layton’s performance was also assessed based on his
achievement of the Executive Committee-level objectives
outlined in Exhibit 2. The results achieved under his direct
leadership met the firm’s expectations on all objectives.
However, the results achieved on investment development
were modestly below expectations. The investment
development in 2019 resulted in somewhat lower performance
fee-weighted investment volume in 2019 and impacted his
LTI grant by 6% (CHF -0.25 million), which amounted in total
to CHF 4.25 million (2018: CHF 4.50 million). This compares
somewhat unfavorably to the overall flat development of the
entire LTI pool.
4.4. Highest paid Executive Committee member
The highest paid Executive Committee member in 2019 was
David Layton, who became Co-CEO as of 1 January 2019. He
was awarded a total cash compensation of CHF 1.49 million
(2018: CHF 1.25 million) and LTIs to the value of CHF 4.25
million (2018: CHF 4.50 million). The total compensation
amounted to CHF 5.8 million in 2019 (2018: CHF 5.8 million).
See Exhibit 10 for further details.
4.5. Compensation caps
The 2019 compensation for the Executive Committee did not
exceed the firm’s defined compensation caps. Compensation
caps are calculated in relation to the cash base salaries of an
individual member of the Executive Committee. The ratio
between the Executive Committee members’ deferred cash
payment compared to their cash base salary was 1.0x in 2019
(cap = 3x). The ratio between the committee members’ LTIs,
compared to their cash base salary, ranged from 2.0x to 5.7x
in 2019 (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.
134 | Partners Group
ANNUAL REPORT 2019 Compensation Report
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 2019, 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 2018 and 2019.
4.8. AGM 2020: Executive Committee compensation
approvals
At the 2019 AGM of shareholders, the Nomination &
Compensation Committee prospectively asked shareholders
for the approval of one single compensation budget for the
Executive Committee combining cash base salaries, deferred
cash payments and LTIs. At the 2020 AGM of shareholders, the
Board will ask shareholders to vote prospectively on the total
cash compensation and retrospectively on the LTI allocations.
The Nomination & Compensation Committee believes this will
allow shareholders to better evaluate the link between pay and
performance. The Board will ask shareholders at their annual
meeting for their approval of the following proposals below.5
•
•
The Board of Directors applies for the retrospective
approval of an LTI compensation6 of CHF 16.5 million for
the Executive Committee for the 2019 fiscal year (2018:
CHF 20 million in total or CHF 16.5 million, excluding a
former Executive Committee member7).
The Board of Directors applies for the prospective
approval of a maximum total cash compensation8 of
CHF 7.5 million for the Executive Committee for the 2021
fiscal year.
5 The final proposals will be outlined in the invitation sent to shareholders for the AGM to be
held on 13 May 2020.
6 Excludes social security payments; includes Employee Participation Plan (EPP) amounting to
CHF 10.9 million and Management Performance Plan (MPP) amounting to CHF 5.6 million.
7 Excludes the 2018 compensation of Christoph Rubeli, former Co-CEO of Partners Group,
who left the Executive Committee as of 31 December 2018.
8 Includes cash base salary, pensions, other benefits, a deferred cash payment and a technical
non-financial income but excludes social security payments. See also Partners Group’s Article
of Association Art. 37, 6. If new members of the executive management are appointed and
take up their position with the Company after the annual shareholders’ meeting has approved
the maximal total compensation to the members of the executive management for the fiscal
year concerned, these newly appointed members of the executive management may be
paid an additional amount for compensation periods that had already been approved by the
shareholders’ meeting. This additional amount may, in aggregate for all newly appointed
members of the executive management, not exceed 40% of the total compensation to the
members of the executive management already approved by the shareholders’ meeting. This
additional total compensation is deemed to include indemnification received to compensate
for disadvantages caused by the change of employment, as the case may be.
Partners Group | 135
ANNUAL REPORT 2019 Compensation Report
Exhibit 9: Composition of the Executive Committee 2019 and functions of its members
Name
André Frei
David Layton
Juri Jenkner
Andreas Knecht
Marlis Morin
Dr. Michael Studer
Joined Partners
Group in
Nationality
Age
2000
2005
2004
2009
Swiss
American
German
Swiss
2003
Swiss/Italian
2001
Swiss
44
38
44
50
49
47
Position
Co-Chief Executive Officer
Co-Chief Executive Officer and Head Private Equity
Head Private Infrastructure
Chief Operating Officer and General Counsel
Head Client Services
Chief Risk Officer and Head Portfolio Solutions
Exhibit 10: Executive Committee compensation for the full-year 2019 (audited)
In thousands of Swiss francs
Cash base
salary
Deferred
cash
payment
Other1)
Subtotal
cash
compensation
LTI (EPP)
LTI (MPP)2)
Total3), 4)
2019
André Frei, Co-Chief Executive Officer
David Layton, Co-Chief Executive Officer and Head
Private Equity
750
745
750
271
1'771
2'500
1'250
5'521
745
58
1'548
2'751
1'500
5'799
Total Executive Committee
3'495
3'495
1’081
8'071
10’903
5'600
24'574
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.1.
3) Figures above exclude discounted fees for investments made alongside investors in Partners Group’s investment programs under the firm’s Employee Commitment Program. Including these accrued
but not yet paid items the total compensation for the entire Executive Committee amounts to CHF 24’584 thousand, including CHF 10 thousand for discounted fees. The total compensation of André
Frei and David Layton amounts to CHF 5’526 thousand (including CHF 5 thousand of discounted fees) and CHF 5’799 thousand (including CHF 0 thousand of discounted fees), respectively.
4) Total compensation of the Executive Committee, excluding LTIs and social security costs represents CHF 7.1 million and lies within the approved compensation budget of CHF 7.5 million at the 2019
AGM of shareholders in May.
Exhibit 11: Executive Committee compensation for the full-year 2018 (audited) DRAFT
In thousands of Swiss francs
Cash base
salary
Deferred
cash
payment
Other1)
Subtotal
cash
compensation
LTI (EPP)
LTI (MPP)2)
2018
Total
André Frei, Co-Chief Executive Officer
David Layton, Co-Chief Executive Officer and Head
Private Equity3)
650
489
734
850
134
1'634
Total Executive Committee
3'039
3'684
Christoph Rubeli, Co-Chief Executive Officer4)
650
850
Total Executive Committee incl. former members
3'689
4'534
55
586
61
647
1'278
7'309
1'561
8'870
-
-
-
-
-
3'500
5'134
4'500
5'778
16'500
23'809
3'500
5'061
20'000
28'870
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.1.
3) Effective from 1 January 2019, David Layton, Partner and Head Private Equity, succeeded Christoph Rubeli as Co-Chief Executive Officer.
4) Member until 31 December 2018.
136 | Partners Group
ANNUAL REPORT 2019 Compensation Report
5. Board compensation 2019
The Board consists of nine members, of whom five are classified
as independent and four as executive members, and has the
goal to build a sustainable, entrepreneurial business over
the long term for the benefit of its clients, employees and
shareholders. The Board thereby 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.
Beyond their statutory duties and supervisory and risk
management tasks, 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.
5.1. Review of compensation framework 2019
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. The remuneration of the
executive members of the Board was set as follows:
• Cash base salary: the cash base salary is fixed at
CHF 0.30 million p.a.
•
LTIs: Our approach to the compensation of executive
members of the Board is similar to that of the Executive
Committee. We determined the overall LTI pool by looking
at quantitative and qualitative criteria. We then determined
the individual LTI allocation based on performance relative
to assignments and committee roles.
For the 2019 compensation, the combination of
quantitative and qualitative assessment led to a
compensation factor of 1.00x, based also on a moderate
underperformance on performance fee-weighted
investment volumes and an outperformance on leadership
and strategic direction (e.g. driving “ownership excellence”
programs, fostering the firm’s approach to entrepreneurial
governance across portfolio companies). As such, the
overall amount of the LTI pool for executive members of
the Board was similar to the amount granted in 2018. Also
individual LTI grants were set at the level of the previous
year based on the achieved objectives of the executive
Board members.
Due to their already significant shareholding in the firm,
executive members of the Board were granted their LTI
entirely in MPP rights.
In 2019, the Board amended the compensation framework for
independent Board members and proposed a more detailed
module-based approach to compensation. This will largely be
determined by the business assignments carried out and the
time each member allocates to Board committee responsibilities
and their additional contribution to the firm’s business beyond
their committee responsibilities. The compensation framework
for independent Board members is outlined in the table below.
Independent Board members are each paid 50% in cash and
50% in (restricted) options delivered in one installment in the
current board period. They did not receive any LTI and pension
benefits.
Exhibit 12: Compensation framework for independent
Board members
Description
Board
membership
Regular Board work, includ-
ing offsites, client AGM and
other Board-related work.
Chair/
member*
(NCC, IOC,
COC)
Member
(RAC, SC)
Chair (RAC)
Additional Board meetings
together with preparation of
meeting materials, additional
meetings and regular calls as
well as team interaction.
Official RAC meetings
and ~10+ (mainly internal)
meetings and international
traveling
Special
assignments
Value creation and other
PG-related initiatives
Time allocation/
remuneration
Est. time allocation:
~10+%
Compensation:
CHF 0.10 million
Est. time allocation:
~5+%
Compensation:
CHF +0.05 million
(for each
assignment)
Est. time allocation:
~10+%
Compensation:
CHF +0.10 million
Compensation:
CHF +0.10 million
(for each additional
~10%)
*The Strategy Committee (SC) and the Client Oversight Committee (COC) are not
expected to be led by Independent Board members.
Consistent with industry standards, Board members may
also invest into Partners Group investment programs on a
no management fee and no performance fee basis. Any such
discounted fees granted to members of the Board of Directors
for investments made alongside investors in the firm’s
closed-ended investment programs will be disclosed in the
compensation report (see section 3.3).
Partners Group | 137
ANNUAL REPORT 2019
Compensation Report
5.2. Executive Chairman of the Board
The Chairman’s role 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
focus on strategic projects and drives forward business and
corporate development (through his engagement as chair of the
Strategy Committee). Moreover, he is actively involved in the
development of client-related initiatives (through his seat 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 is a member of the board of
directors of the firm’s portfolio company Hearthside Food
Solutions and 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 (2018: CHF 0.30 million). He was assessed by the
Nomination & Compensation Committee and met his Board-
level performance objectives outlined in Exhibit 2. Based on
his achievements in 2019, he received the same compensation
factor as the Executive Committee (1.0x). The Chairman
therefore was granted LTIs amounting to CHF 1.50 million
(2018: CHF 1.50 million), entirely granted in MPP. This brings
his total compensation to CHF 1.9 million (including pension
benefits as outlined in Exhibit 13).
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. Each is a founding partner of the firm and dedicates a
substantial amount of his time to the firm. Each of them also
plays an instrumental role in determining the firm’s business
and corporate strategy (via the Strategy Committee), in
assessing the quality and consistency of decision processes,
the investment performance achieved, the realization of
the projected appreciation on individual investments, and
the investment risks incurred (via the Investment Oversight
Committee), and/or in driving forward major client relationships
(via the Client Oversight Committee). All executive members of
the Board hold various boards seats in Partners Group’s lead/
joint-lead portfolio companies.
138 | Partners Group
The Nomination & Compensation Committee assesses their
contribution to each Board-level 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 (2018: CHF 0.30 million). With regards
to their LTI allocation, each member met the expectations
of the Nomination & Compensation Committee on all Board
committees and were each awarded an LTI grant of CHF 1.00
million (2018: CHF 1.00 million), entirely granted in MPP. This
brings their total compensation to CHF 1.4 million (including
pension benefits as outlined in Exhibit 13).
5.4. Independent members of the Board
The independent Board members who focus on their Board-
and committee-related mandates at Partners Group are
Grace del Rosario-Castaño, Michelle Felman, Dr. Martin
Strobel, Dr. Eric Strutz and Patrik Ward. Independent Board
members spend a significant amount of time contributing to
several strategic board-level initiatives. They have many formal
and informal interactions with management and employees
across the firm on an extensive range of matters and projects
(e.g. key strategic growth projects, key client-related matters,
legal, compliance, audit, promotion considerations, leadership
development etc.). Independent Board members are each
paid 50% in cash and 50% in (restricted) options and do not
receive any LTIs or pension benefits. Select independent Board
members hold boards seats in Partners Group’s lead/joint-lead
portfolio companies (see detailed overview in Partners Group’s
Corporate Governance Report 2019).
Dr. Eric Strutz acted as Vice Chairman and Lead Independent
Director and was paid an annual base Board fee of CHF 0.10
million. He additionally received CHF 0.10 million for chairing
the Risk & Audit Committee. This brings his total compensation
to CHF 0.21 million (including base fee and other compensation
as outlined in Exhibit 13).
Grace del Rosario-Castaño was paid an annual base Board
fee of CHF 0.10 million. She additionally received CHF 0.05
million for chairing the Nomination & Compensation Committee
and CHF 0.05 million for being a member of the Investment
Oversight Committee. Furthermore, she was entitled to CHF
0.05 million (~5% additional time allocation) for her special
leadership and corporate development assignments in Asia, in
particular in the firm’s main offices in Manila and Singapore,
and her work on the local board of Partners Group’s Manila
entity. This brings her total compensation to CHF 0.26 million
(including base fee and other compensation as outlined in
Exhibit 13).
ANNUAL REPORT 2019 Compensation Report
Michelle Felman was paid an annual base Board fee of CHF
0.10 million. She additionally received CHF 0.05 million for
chairing the Investment Oversight Committee and CHF 0.
05 million each for being a member of the Nomination &
Compensation Committee and the Risk & Audit Committee.
This brings her total compensation to CHF 0.26 million
(including base fee and other compensation as outlined in
Exhibit 13).
Dr. Martin Strobel was paid an annual base Board fee of CHF
0.10 million. He additionally received CHF 0.05 million for being
a member of the Strategy Committee, CHF 0.05 million for
his contribution in the Risk & Audit Committee and CHF 0.05
million for being a member of the Nomination & Compensation
Committee. Furthermore, he devoted ~10% additional time to
Partners Group providing guidance on operational excellence
matters globally. In this special assignment, Martin Strobel
advises, amongst others, the Technology Steering Committee
and the firm’s “operational excellence” program. He received
another CHF 0.10 million for this special assignment. This brings
his total compensation to CHF 0.36 million (including base fee
and other compensation as outlined in Exhibit 13).
Patrick Ward was paid an annual base Board fee of CHF
0.10 million. He additionally received CHF 0.05 million for
being a member of the Client Oversight Committee. Further,
he supported the firm with a special assignment by driving
forward the corporate development in the UK and building out
client relationships in the UK and Middle East in his capacity as
Chairman UK and Middle East. He received CHF 0.30 million
for this assignment (~30% additional time allocation). He was
also entitled to CHF 0.10 million for his special assignment on
the local board of Partners Group’s UK entity (~10% additional
time allocation). This brings his total compensation to CHF 0.57
million (including base fee and other compensation as outlined
in Exhibit 13).
5.5. Comply or explain: options as part of Board fees
for independent directors
Long-term option plans with a five-year selling and exercise
restriction
Independent Board members receive a part of their
compensation in long-term options. Given the fact that
independent Board members are elected on a yearly basis,
the options vest at grant date but have a five-year selling and
exercise restriction. The long-term nature of annual grants
serves as a guarantee that no speculative orientation arises
from the incentive system.
Because of this five-year selling and exercise restriction
and the fact that grants are made annually, the Nomination
& Compensation Committee fundamentally believes that
this does not incentivize any asymmetric short- or mid-term
decision making for independent Board members in any given
year. Neither does it hinder their independent judgement,
nor incentivize behaviors that could inhibit the long-term
sustainability and success of Partners Group.
Speculative decision-making should not be rewarded
The Nomination & Compensation Committee favors this
plan over a traditional (restricted) stock allocation, as it
fundamentally believes that speculative decision-making that
destructs long-term shareholder value should not be rewarded.
With a traditional stock allocation, unlike shareholders who
have to buy shares in the market and who would lose money if
the share price performs negatively, Board members who are
awarded shares for a service, which is expected to always have a
positive value, would be paid even if the stock underperforms.
Conversely, if independent Board members are paid in stock-
options, in the best-case scenario – and in line with the interests
of shareholders – they participate disproportionately in any
share price increase. However, there is also a risk that they
never receive any payout from their rights; if the share price
remains below the options’ strike price, their payoff is zero.
In our entrepreneurial environment, this asymmetric payout
structure is desired and has proven to be successful.
Partners Group | 139
ANNUAL REPORT 2019 Compensation Report
Industry context
5.8. AGM 2020: Board compensation approvals
The Board will ask shareholders at their annual meeting for their
approval of the following proposals below.9
•
•
•
The Board of Directors applies for the retrospective
approval of an LTI compensation10 of CHF 4.50 million
for the Board of Directors for the period from the
annual shareholders’ meeting in 2019 until the annual
shareholders’ meeting in 2020 (previous period: CHF 4.50
million).
The Board of Directors applies for the retrospective
approval of a total technical non-financial income of
CHF 5.69 million stemming from preferential terms under
the firm’s global employee commitment plan for the Board
of Directors for the period from the annual shareholders’
meeting in 2019 until the annual shareholders’ meeting
in 2020 (previous period: CHF 0.00 million). The non-
financial benefits stemming from these preferential terms
are explained in detail in section 3.3.
The Board of Directors applies for the prospective
approval of a maximum total compensation (excluding
LTI)11 of CHF 3.00 million for the Board of Directors for the
period until the next annual shareholders’ meeting in 2021.
9 The final proposals will be outlined in the invitation sent to shareholders for the AGM to be
held on 13 May 2020.
10 Excludes social security payments; includes only Management Performance Plan (MPP)
amounting to CHF 4.5 million.
11 Excludes social security payments; includes cash base salary, pensions and other benefits.
In line with best practice in the private markets industry,
we expect all of our portfolio company directors to actively
participate in developing value-enhancing strategies. True
to the predominant view in private equity that there must be
meaningful downside risk as well a meaningful upside potential,
independent members of the Board are typically expected
to invest a relevant portion of their own net worth into the
company alongside the private equity programs. In order to
encourage engagement in value creation, incentive schemes
may allow for significant upside through options – but only if
independent Board members materially share the downside risk.
While it is not possible to fully match the private markets
approach in a public markets context, the Nomination &
Compensation Committee wishes to benefit directionally from
this model, which has proven to be efficient, effective and a
means to reward success since Partners Group’s foundation as a
private markets investment manager.
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 2019, 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 2018
and 2019.
140 | Partners Group
ANNUAL REPORT 2019 Compensation Report
Exhibit 13: Board compensation for the full-year 2019 (audited)
In thousands of Swiss francs
Steffen Meister, Executive Chairman
Dr. Eric Strutz, Vice Chairman
Dr. Marcel Erni
Michelle Felman
Alfred Gantner
Grace del Rosario-Castaño
Dr. Martin Strobel
Patrick Ward
Urs Wietlisbach
Total Board of Directors
Dr. Charles Dallara, former member6)
Dr. Peter Wuffli, former member6)
Total Board of Directors incl. former members
Cash
Other1)
Subtotal
cash
compensation
Shares /
options
2019
LTI (MPP)3)
Total 5), 7)
300
100
300
125
300
125
175
275
300
2'000
195
75
2'270
55
8
55
10
65
10
14
20
61
298
89
6
393
355
108
355
135
365
135
189
295
361
2'298
284
81
2'663
-
1'500
1004)
-
-
1'000
1254)
-
-
1'000
1254)
1754)
2754)
-
800
842)
-
884
-
-
-
1'000
4'500
-
-
1'855
208
1'355
260
1'365
260
364
570
1'361
7'598
368
81
4'500
8'047
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. Patrick Ward received UK national insurance payments amounting to CHF 7’246. The remaining payments to the following members of
the Board exclusively represent social security costs in relation to their compensation: Michelle Felman, Grace del Rosario-Castano, Dr. Martin Strobel, Dr. Eric Strutz and Patrick Ward.
2) Shares: Dr. Charles Dallara was allocated 115 PGH shares in the value of CHF 732 per share on 15 May 2019.
3) Fair value of Management Performance Plan (MPP) as outlined in section A.1.
4) Options: each option has a strike price of CHF 807.60 and vests immediately. The selling restricting is 5 years. The number of options allocated to each Board member is as follows: Michelle
Felman (3’264 options), Grace del Rosario-Castano (3’264 options), Eric Strutz (2’611 options) Dr. Martin Strobel (4’570 options) and Patrick Ward (7’181 options). For further information on the
fair value of options and shares granted in 2019, please see consolidated financial statement under 4.3.
5) Figures above exclude discounted fees for investments made alongside investors in Partners Group’s investment programs under the firm’s Employee Commitment Program. Including these
accrued but not yet paid items the total compensation for the entire Board of Directors amounts to CHF 13’734 thousand, including CHF 5’687 thousand for discounted fees. The total fee discounts
received by the Board of Directors are listed below:
• Steffen Meister received a technical non-financial income stemming from fee discounts amounting to CHF 34 thousand
• Dr. Marcel Erni received a technical non-financial income stemming from fee discounts amounting to CHF 1’568 thousand
• Alfred Gantner received a technical non-financial income stemming from fee discounts amounting to CHF 2’511 thousand
• Grace del Rosario-Castaño received a technical non-financial income stemming from fee discounts amounting to CHF 0.5 thousand
• Dr. Martin Strobel received a technical non-financial income stemming from fee discounts amounting to CHF 2 thousand
• Urs Wietlisbach received a technical non-financial income stemming from fee discounts amounting to CHF 1’555 thousand
• Dr. Peter Wuffli received a technical non-financial income stemming from fee discounts amounting to CHF 16 thousand
6) Board member until the Annual General Meeting of shareholders on 15 May 2019.
7) Total compensation of the Board, excluding LTIs and social security costs represents CHF 3.0 million and lies within the approved compensation budget of CHF 3.25 million at the 2019 AGM of
shareholders in May.
Partners Group | 141
ANNUAL REPORT 2019
Compensation Report
Exhibit 14: 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
LTI (MPP)4)
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
-
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.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.
142 | Partners Group
ANNUAL REPORT 2019 Compensation Report
6. Appendix
A.1. LTIs
2019 changes to the MPP
In 2019, the Nomination & Compensation Committee has
implemented adjustments to its parameters to further simplify
the pay-for-performance link by aligning it more strongly to the
development of the share price:
• Previously (100% of LTI pool): the entire LTI pool was
allocated via two kinds of MPP rights. One was measured
based on an increase of the share price over a period of five
years (50% of the grant value) and the other on a relative
outperformance over a benchmark index12 over a period of
five years (50% of the grant value). The payout depends on
the actual performance fees generated from the particular
year in which MPP rights were granted.
• Going forward (100% of LTI pool): going forward, the
intrinsic value of MPP will only be measured based on an
increase of the share price over a period of five years. The
payout remains dependent on the actual performance fees
that the firm generated from the particular year in which
MPP rights were granted. MPP will no longer be measured
on a relative outperformance over a benchmark index. The
relative outperformance right was replaced by restricted
shares. Around two thirds of the LTI grant value was granted
in restricted shares and around one third in MPP rights.
The 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 a positive development of the share price of Partners Group
Holding AG (i.e. price return on PGHN). A negative development
of the share price results in no payout.
12 At the time, the Nomination & Compensation Committee believed that the S&P Listed
Private Equity Index (Ticker: SPLPEQTY) was the closest industry benchmark and that it there-
fore represented the best proxy to measure Partners Group’s relative performance within the
private markets industry. The calculation of the intrinsic value of the 2017 and 2018 LTI grants
after the initial grant (grant date + 5 years) related to absolute shareholder return as well as to a
total return outperformance against the benchmark.
The intrinsic value of these MPP rights will be measured five
years after the grant date and cannot exceed 10x the grant fair
value. We believe that measuring performance over an extended
five-year period is consistent with the long-term orientation of
the firm’s business.
Component 2: performance fee achievement (year 5 to 14)
While component 1 focuses on the price return of the share
in order to determine an intrinsic value, component 2 focuses
entirely on how the intrinsic value 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 depends on the actual
performance fees that the firm is able to generate from its
2019 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 15).
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 15), or lower than the originally
anticipated nominal amount in the case of lower investment
performance (“3” in Exhibit 15). In the worst-case scenario,
the amount can be zero, irrespective of the intrinsic value
determined through component 1.
Exhibit 15: Illustration of actual MPP payout based on
underlying investment performance
Underlying
investment
performance
100%
2
1
3
Intrinsic value
of MPP rights
(example)
Actual MPP
payout
Partners Group | 143
ANNUAL REPORT 2019
Compensation Report
•
Timing: the MPP payout occurs as the performance fees of
the underlying investment vintage materialize, as illustrated
in Exhibit 16. 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 2019 investment year pay
out 15% of its anticipated total payout (100%) in 2024,
we would pay out 15% of the intrinsic value of MPP rights
determined in component 1 to plan participants in the form
of restricted Partners Group shares in 2024.
Exhibit 16: Illustration of actual MPP payout based on
underlying investment performance
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.
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
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.
Vesting rules in case of 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.
144 | Partners Group
Illustrative example: performance fee payout structure
for the 2019 investment year
Future potential performance fees will depend on
investments made between Q4 2018 and Q3 2019 (“2019
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 17.
Exhibit 17: 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
ANNUAL REPORT 2019 Compensation Report
A.2. Compensation governance
Committee members
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).
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.
As of 31 December 2019, the members of the Nomination &
Compensation Committee were Grace del Rosario-Castaño
(Chair), Michelle Felman and Dr. Martin Strobel. According
to the independence criteria outlined in our Corporate
Governance Report (section 3), Grace del Rosario-Castaño,
Michelle Felman and Dr. Martin Strobel are independent Board
members. The members were elected by shareholders for a
one-year term with the possibility of re-election.
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 2019, 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 several informal meetings throughout the year and holds
two decision meetings in the second half of the year:
•
•
In its first decision meeting (Q3), the Nomination &
Compensation Committee confirms the budget allocations
for short term cash payments and LTIs (MPP and EPP).
During the meeting, the committee defines guidelines for
the allocation of the various compensation pools.
In its second decision 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 18. Partner- and
Managing Director-level promotions and compensation are
ratified individually.
A.3. Review: binding budgets 2014-2018 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 2019, the actual payout to current and former
executive Committee member or to executive members of the
Board has never exceeded the approved budgets between
2014 and 2018.
Partners Group | 145
ANNUAL REPORT 2019
Compensation Report
Exhibit 18: 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 & Compensation Committee (NCC) members, the Board member concerned does not
participate in the recommendation involving his or her own compensation.
146 | Partners Group
ANNUAL REPORT 2019
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 2019. 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 10 to 11 on pages 135 and 136 as well as sections 5.6 to 5.7 and
exhibits 13 and 14 on pages 140 to 142 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 2019 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, 4 March 2020
Christoph Hochuli
Licensed Audit Expert
KPMG AG, Räffelstrasse 28, PO Box, CH-8045 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
ANNUAL REPORT 2019
ANNUAL REPORT 2019
Corporate Governance Report
Partners Group has entities in various jurisdictions regulated
by, including but not limited to, the Swiss Financial Market
Supervisory Authority (FINMA), the U.S. Securities and
Exchange Commission (SEC), the United Kingdom Financial
Conduct Authority (FCA), the Monetary Authority of Singapore
(MAS), the Commission de Surveillance du Secteur Financier
(CSSF) and the Bundesanstalt für Finanzdienstleistungsaufsicht
(BaFin), which uphold the requirements that these regulations
imply. 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 (including its annex)” issued
by the SIX Exchange Regulation and also takes into account the
“Swiss Code of Best Practice for Corporate Governance” issued
by economiesuisse.
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. Furthermore, the board of directors of Partners
Group Holding AG shall be referred to as “Board” or “Board of
Directors”.
1) Formed for the purpose of purchasing, construction, maintenance or management of land and property (non-investment related).
As of 19 February 2020 (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.
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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, Luxembourg, Germany, the United Kingdom, Guernsey,
Singapore and other jurisdictions. The chart on the previous
page provides an overview of the group structure as of
19 February 2020.
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 2019 was CHF 23.7 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. For more detailed information on the non-
listed operating subsidiaries of the group, including principal
activity, place of incorporation, registered office and ownership
interests, please see section 17 of the notes to the consolidated
financial statements in the Annual Report 2019.
1.2. Significant shareholders
Partners Group has the following significant shareholders
holding over 3% of the shares and voting rights of Partners
Group Holding AG as of 3 March 2020.
The founding partners and largest shareholders of Partners
Group Holding AG, Dr. Marcel Erni and Messrs. Alfred Gantner
and Urs Wietlisbach (the “Founding Partners”), each hold
2’673’659 shares in Partners Group Holding AG, corresponding
to 10.01% each of the total share capital of Partners Group
Holding AG.
On 3 December 2015, Dr. Marcel Erni and Messrs. Alfred
Gantner and Urs Wietlisbach entered into a five-year derivative
transaction plan with Morgan Stanley & Co. International plc,
each for up to 4.12% of Partners Group Holding AG’s total
share capital (the “Derivative Transaction Plan”). The Derivative
Transaction Plan involves collars, which include the purchasing
of put and the writing of call options (each a “Derivative
Transaction”). Each Derivative Transaction expires on 17 June
2021, subject to early termination, including optional early
termination by the Founding Partners. In order to coordinate
the exercise of their Derivative Transactions, the Founding
Partners have formed a group for their total derivative
transaction positions of 12.37% (4.12% each) of the total share
capital.
On 20 February 2017, the Founding Partners extended the
Derivative Transaction Plan each by another 0.87% of Partners
Group Holding AG’s total share capital (each an “Extension”).
Each Extension involves another collar that also expires on
17 June 2021, subject to early termination, including optional
early termination by the three Founding Partners. Neither the
Derivative Transaction Plan nor the Extension is intended to
change the size of the Founding Partners’ stake in Partners
Group Holding AG until the maturity of the collars.
On 3 March 2020, 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 4’056’081 shares,
corresponding to 15.19% of the total share capital. Of these
shares, 4’004’100 shares, corresponding to 14.99% of the
total share capital, relate to the Derivate Transaction Plan and
Extension with the Founding Partners described above.
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.
As of 31 December 2019, Partners Group held 278’645
treasury shares, corresponding to 1.04% 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
2.1. Capital
The issued nominal share capital of Partners Group amounts to
CHF 267’000, divided into 26’700’000 fully paid-in registered
shares with a nominal value of CHF 0.01 each.
2.2. Authorized and conditional share capital
As of 31 December 2019, Partners Group has no authorized
share capital.
As of 31 December 2019, the following conditional share capital
is available to Partners Group’s Board of Directors: a maximum
amount of CHF 40’050 through the issuance of no more than
4’005’000 registered shares, with restricted transferability,
that are to be fully paid-in and that have a nominal value of
CHF 0.01 each.
The right to subscribe to new shares as part of the conditional
share capital increase is granted to members of the Board
of Directors and employees of Partners Group through the
exercise of option rights (the “Beneficiaries”). Subscription
and pre-emptive rights of shareholders are excluded for this
conditional capital increase in favor of the Beneficiaries. The
Board of Directors will determine all details of the terms of
issue, such as the amount of 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 below.
2.3. Changes in capital
No changes in share capital have occurred during the last three
years.
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 in accordance
with our articles of association (available at http://www.
partnersgroup.com/articlesofassociation). The shares have
been issued in the form of book-entry securities. Shareholders
do not have the right to ask for printing, emission or delivery of
share certificates. Shareholders may, however, request at any
time that Partners Group issues an attestation of their stock
holding.
All shares have equal rights. Each share carries one vote at
shareholders’ meetings. 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. All shares
are entitled to full dividend payments.
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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2.6. Transfer of shares, restrictions on transferability
and nominee registration
Share transfers, as well as the establishing of a usufruct (each
hereafter the “Share Transfer”), require the approval of the
Board of Directors of Partners Group Holding AG. A Share
Transfer may only be refused if the Share Transfer would cause
the shareholder to reach a shareholding exceeding 10% of the
total nominal share capital of Partners Group Holding AG or
if the shareholder does not expressly declare the acquisition
in their own name. Approval for Share Transfers due to
inheritance or matrimonial property law may not be refused.
The Board of Directors may grant exceptions to this rule in
relation to the trading of shares, for example the recording of
persons holding shares in the name of third parties. Nominees
may be entered in the share register with voting rights for a
maximum of 5% of the total nominal share capital and may be
allowed to exceed this limit if they disclose the names, addresses
and shareholdings of the persons for account of whom they
are holding the shares. The Board of Directors concludes
agreements with such Nominees in relation to disclosure
requirements, representation of shares and exercise of voting
rights.
Share Transfers approved based on false representations of the
transferee may be revoked and the shareholder deleted from
the share register. A Share Transfer is deemed to have been
approved if it has not been declined within 20 days.
Amendments to the applicable transfer restrictions regime
requires shareholder approval with a quorum of at least two-
thirds of the represented votes and the absolute majority of the
represented nominal share capital.
During the financial year 2019, no exceptions to the limitations
on transferability and nominee registration were granted.
For more details, please see articles 5 and 6 of our articles
of association (available at http://www.partnersgroup.com/
articlesofassociation).
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 (ISIN: CH0361532895). The bond
was issued with a seven-year term and a coupon of 0.15% and
matures on 7 June 2024. On 21 June 2019, Partners Group
issued its second corporate bond, raising CHF 500 million
through a fixed-rate senior unsecured CHF-denominated issue
(ISIN: CH0419041287). The bond was issued with an eight-
year term and a coupon of 0.40% and matures on 21 June 2027.
Please see section 13 of the notes to the consolidated financial
statements in the Annual Report 2019 for comprehensive
information on the bonds 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 2019 for comprehensive information on the
share and option program of the firm.
Partners Group has not issued any further options or warrants.
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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 2019, the Board of Directors consists of nine members. All members were elected at the
annual general meeting of shareholders (“Annual General Meeting”) 2019 for a one-year tenure with the possibility of re-election.
The table below shows the current composition of the Board of Directors and Committee membership (for further details and
allocation of tasks see section 3.5 below):
Name
Independent
Director
Strategy
Committee
Investment
Oversight
Committee
Client Oversight
Committee
Risk & Audit
Committee
Nomination &
Compensation
Committee
Steffen Meister, Chairman
Dr. Eric Strutz, Vice Chairman
Dr. Marcel Erni
Michelle Felman1)
Alfred Gantner
Grace del Rosario-Castaño
Dr. Martin Strobel
Patrick Ward1)
Urs Wietlisbach
Member
Chair
Lead Independent Director
Note: next to the committees mentioned above, the Crisis Committee has the following members: Steffen Meister (Chairman), Dr. Eric Strutz and Alfred Gantner.
1) Michelle Felman and Patrick Ward will retire from the Board as of 13 May 2020.
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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
33%1)
>10 years
11%
≤2 years
11%
>60 years
11%
≤50 years
Average
Board tenure
11.3
years
22%
3-5 years
Average
age
55.6
years
33%
6-10 years
1) Including the Founding Partners.
Gender
diversity
22%
women
78%
51-60 years
10%
Filipina
5
different
nationalities2)
50%
Swiss
20%
German
10%
British
10%
US American
Due to rounding, numbers presented may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
2) Graph takes into account board members with double nationalities.
9
Private markets industry know-how1)
5
Risk management experience3)
9
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
7
C-level experience2)
7
Operational experience4)
8
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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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, a 100% privately held subsidiary of
Partners Group Holding 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 group,
such as group entities in the UK, the US and the Philippines.
The following provides information on the independence criteria
for members of the Board of Directors and on the professional
history and education of each such member, 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.
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. 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.
First and foremost, when searching for an external independent
member of the Board, Partners Group looks for accomplished,
distinctive and competent personalities who are respected
based on their achievements. Moreover, they are selected
based on their ability to 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.
Independent members of the Board may not:
•
have a line management function (i.e. positions with
substantial decision-making authority) for Partners Group,
or any of its affiliates, currently or in the three years prior
to their appointment;
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•
be employed or otherwise affiliated with our statutory
auditors, currently or in the three years prior to their
appointment;
•
have an overall tenure of more than ten years.
Partners Group also applies the following additional criteria to
independent Board members, whereby the materiality of such
criteria is evaluated on a case-by-case basis:
•
•
limited financial dependence on Partners Group in terms
of employment, income and shareholding relative to their
individual 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. Eric Strutz (Lead Independent Director),
Michelle Felman, Grace del Rosario-Castaño, Dr. Martin Strobel
and Patrick Ward.
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 members 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.
Lead Independent Director
Dr. Eric Strutz is the firm’s Lead Independent Director. The
Lead Independent Director is an independent Board member
with the main mandate to coordinate and align the views
of independent Board members in case of fundamental
disagreements and conflicts with non-independent, executive
Board members. The Lead Independent Director is elected by
the Board for a term of office of typically one year. Re-election
is possible.
ANNUAL REPORT 2019 Corporate Governance Report
History and education of each member of the Board of Directors, including their responsibilities and 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 Baar-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 part-time assignments
at Swiss Reinsurance Co. and the Department of Mathematics of the
Swiss Federal Institute of Technology (ETH) in Zurich. He has 24 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: 49
Nationality: Swiss
Board Committees:
Strategy Committee (Chairman),
Client Oversight Committee
Other board mandates:
Crossiety AG (Co-Founder and
Chairman), FAIRTIQ AG
Board mandates at Partners
Group’s portfolio companies*:
Hearthside Food Solutions
Key qualifications and skills
Private markets industry know-how
C-level experience
Risk management experience
Operational experience
Broad international exposure
Investment experience
*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.
Dr. Eric Strutz
Dr. Eric Strutz is the Vice Chairman and Lead Independent Director
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: 55
Nationality: German
Board Committees:
Risk & Audit Committee
(Chairman)
Other board mandates:
HSBC Bank plc.
HSBC Trinkaus & Burkhardt AG
Board mandates at Partners
Group’s portfolio companies*:
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
*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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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 Baar-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 28 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: 54
Nationality: Swiss
Board Committees:
Investment Oversight
Committee
Other board mandates:
PG3 AG
Board mandates at Partners
Group’s portfolio companies*:
AMMEGA, Global Blue,
GlobalLogic
Key qualifications and skills
Private markets industry know-how
C-level experience
Broad international exposure
Investment experience
*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.
Michelle Felman
Michelle Felman is an independent member of the Board of Directors
of Partners Group Holding AG. She is on the investment committee
of the Turner-Agassi Charter School Facilities Fund, an investment
platform focused on social impact investing in education. She
furthermore teaches at Columbia University. 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 29 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: 57
Nationality: US American
Board Committees:
Investment Oversight
Committee (Chairwoman),
Risk & Audit Committee,
Nomination & Compensation
Committee
Other board mandates:
Cummings, 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
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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 Baar-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 28 years of industry experience
and holds an MBA from the Brigham Young University Marriott School
of Management in Utah, USA.
Director since: 1997
Age: 51
Nationality: Swiss
Board Committees:
Strategy Committee,
Investment Oversight
Committee
Other board mandates:
PG3 AG, PG Impact
Investments Foundation
(Board of Trustees)
Board mandates at Partners
Group’s portfolio companies*:
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
*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. As part of her mandate,
she oversees corporate and investment-related environmental, social
and governance topics at Board level. 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 graduated magna cum
laude with a degree in Bachelor of Science 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: 56
Nationality: Filipina
Board Committees:
Investment Oversight
Committee,
Nomination & Compensation
Committee (Chairwoman),
Board mandates at Partners
Group’s portfolio companies*:
BCR Group
Key qualifications and skills
Private markets industry know-how
C-level experience
Risk management experience
Broad international exposure
*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.
Dr. Martin Strobel
Dr. Martin Strobel is an independent member of the Board of Directors
of Partners Group Holding AG. Dr. Martin 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. Martin Strobel spent almost three years as an operating partner at
private equity firm Advent International.
Director since: 2019
Age: 53
Nationality: German/Swiss
Board Committees:
Strategy Committee, Risk &
Audit Committee, Nomination
& Compensation Committee
Other board mandates:
RSA Insurance Group plc.
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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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
40 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: 67
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 Baar-Zug. Prior to founding Partners
Group, he worked at Goldman Sachs & Co. and Credit Suisse. He has
31 years of industry experience and holds a master’s degree in business
administration from the University of St. Gallen (HSG), Switzerland.
Director since: 1997
Age: 58
Nationality: Swiss
Board Committees:
Client Oversight Committee
(Chairman)
Other board mandates:
Entrepreneur Partners AG,
PG Impact Investments AG
(President of the Board),
PG3 AG, Swiss Startup Factory
AG (Advisory Board member)
Board mandates at Partners
Group’s portfolio companies*:
KR Group (Board observer)
Key qualifications and skills
Private markets industry know-how
Broad international exposure
Investment experience
*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
On 4 March 2020, Partners Group announced changes and
nominations to the composition of its Board of Directors and
related committees, which will be proposed at the next Annual
General Meeting of shareholders on 13 May 2020.
Lisa A. Hook will be nominated for election as a new
independent member of the Board and as a member of the
Risk & Audit Committee, the Nomination & Compensation
Committee and the Investment Oversight Committee. Ms.
Hook would bring to the Board a wealth of experience derived
from her strong track record of business building as a C-level
leader in technology and telecom companies, as well as from
her senior role in a private markets investment firm. Next
to her committee assignments at Partners Group, she will
contribute to strategic Board-level initiatives, with a focus
on entrepreneurial governance for the benefit of the firm’s
portfolio companies, especially in the US.
Separately, two current independent Board members will
retire from the Board effective 13 May 2020. Patrick Ward,
UK and Middle East Chairman, retires after seven years as an
independent Board member; he will remain a senior advisor to
the firm with a focus on corporate development in the UK and
client relationships in the UK and Middle East. Michelle Felman
departs after four years as an independent Board member;
she will also remain a senior advisor to Partners Group in
conjunction with the firm’s real estate business development
activities.
3.2. Other activities and vested interests
Please see note 3.1. above.
3.3. Ordinance against excessive compensation in
listed joint stock companies – Number of mandates
pursuant to the OaEC
In accordance with art. 12 para. 1 of the OaEC and art. 25 of
the articles of association, each Board member may hold 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 Partners Group Holding
AG or controlling Partners Group Holding AG; 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 Board member may hold a
maximum of ten such mandates; mandates in associations, non-
profit organizations, foundations, trusts, and employee pension
foundations, whereby each Board member may hold a maximum
160 | Partners Group
of ten such mandates; and mandates in legal entities serving the
sole purpose of managing their own private assets, whereby
each member Board member may hold a maximum of ten such
mandates.
The term “mandate” as used in the articles of association
includes activities within other superior governing or
administrative bodies of legal entities which must be registered
in the Swiss commercial register 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 must consist of at least three members.
All members, including the Chairman of the Board of Directors,
are to be elected individually at the shareholders’ meeting, for
a term of one year in accordance with the OaEC. 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. The year that each
Board member was first appointed is listed in the table at the
beginning of this section.
3.5. Internal organizational structure
The Board of Directors has adopted written internal
organizational 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.
The Board of Directors has ultimate responsibility for the
management of Partners Group. Please see the table at the
beginning of this section as well as section 3.1 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 “ROO”; Organisationsreglement); in 2019,
four formal meetings, which lasted between three and eight
hours each, were held. The majority of all Board members was
present at all meetings. The meetings of the Board of Directors
were also attended by relevant non-members of the Board of
ANNUAL REPORT 2019 Corporate Governance Report
Directors who hold key functions or responsibilities within the
company. 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, the Investment Oversight Committee and the
Crisis 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.
Meetings can be called by each committee member or by
the Chairperson. In order for resolutions or motions to be
validly taken or made, the majority of the committee members
must attend the meeting (in person or, if need be, via phone/
video conference). All resolutions or motions must be passed
unanimously, otherwise the business activities will be re-
assigned to the Board. Quorums and motions may also be
passed by circular resolutions.
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 is presided over by, and only
consists of, independent Board members. Until 15 May 2019,
the members of the RAC were Dr. Eric Strutz (Chair) and Dr.
Peter Wuffli. As of 15 May 2019, the members of the RAC
are Dr. Eric Strutz (Chair), Michelle Felman and Dr. Martin
Strobel. The RAC held four formal meetings in 2019, which
each lasted approximately two to four hours. In addition, the
external auditors attended all meetings of the RAC in 2019. 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 is presided over by, and only consists
of, independent Board members. Until 15 May 2019, the
members of the NCC were Grace del Rosario-Castaño (Chair)
and Dr. Peter Wuffli. As of 15 May 2019, the members of the
NCC are Grace del Rosario-Castaño (Chair), Michelle Felman
and Dr. Martin Strobel. The NCC held two formal meetings in
2019, which each lasted approximately two to three hours, to
discuss the annual compensation for the Board of Directors
and the Executive Committee as well 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.
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Strategy Committee (SC)
Investment Oversight Committee (IOC)
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. Until 15 May 2019, the members of the SC were
Steffen Meister (Chair), Dr. Marcel Erni, Alfred Gantner, Urs
Wietlisbach and Dr. Peter Wuffli. As of 15 May 2019 until 21
November 2019, the members of the SC were Steffen Meister
(Chair), Dr. Marcel Erni, Alfred Gantner, Dr. Martin Strobel and
Urs Wietlisbach. On 26 August 2019, the SC proposed the new
composition of the SC and on 21 November 2019, the Board
resolved to constitute the SC as follows: Steffen Meister (Chair),
Alfred Gantner and Dr. Martin Strobel. Dr. Marcel Erni and
Urs Wietlisbach stepped down from the Strategy Committee
as of this date. The SC held six formal meetings in 2019, which
each lasted approximately four to six hours. The majority of the
meetings were attended by all SC 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 SC 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. Until 15 May 2019,
the members of the COC were Urs Wietlisbach (Chair), Dr.
Charles Dallara, Steffen Meister and Patrick Ward. As of 15
May 2019, the members of the COC are Urs Wietlisbach
(Chair), Steffen Meister and Patrick Ward. The COC held
four formal meetings in 2019 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
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 (GIC) 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
GIC. For any transaction approved by the GIC, each IOC voting
member furthermore has the right to request a discussion
in the IOC about whether or not to approve the respective
transaction, whereby any transaction declined by the IOC shall
no longer be pursued. As of 31 December 2019, the members
of the IOC are Michelle Felman (Chair), Dr. Marcel Erni, Alfred
Gantner and Grace del Rosario-Castaño. Furthermore,
Stephan Schäli, Partners Group’s CIO, is a non-voting member
of the committee. The IOC held two meetings in 2019, which
lasted approximately three hours each. The meetings were
attended by the majority all members. 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.
Crisis Committee (CC)
The CC shall ensure appropriate organization, communication
and decision-making during a crisis. It consists of the
Chairperson, the chair of the RAC and another member of the
Board, as determined by the Board (typically for a term of office
of one year, whereby re-election is possible). Upon the request
of the Chairperson and the chair of the RAC, additional persons
can be nominated as ad-hoc members (solely Board members)
and/or as non-voting advisors to the CC. During a crisis, the CC
may, on behalf of the Board, act in accordance with the ROO
and the articles of association, insofar as prompt decision-
making is advisable, subject to the applicable instructions.
“Crisis” shall mean an emerging or suddenly occurring
extraordinary event within Partners Group (including its
portfolio companies) that entails significant legal, operational,
ANNUAL REPORT 2019 Corporate Governance Report
financial and/or reputational risks with the realistic probability
of substantial damage to Partners Group, which calls for prompt
decision-making. The CC convenes only on an ad-hoc basis in
case of a Crisis. The CC held no meetings in 2019 as no Crisis
occurred during the year.
Formal meeting attendance
The members of the Board are encouraged to attend all
meetings of the Board and the committees on which they
serve. The formal meetings were complemented by regular
and considerable informal interactions with management and
employees across the firm.
Formal meeting attendance
BoD
RAC
NCC
SC
COC
IOC
4
9
2
0
4
4
0
0
2
3
0
0
6
5
0
1
4
2
2
0
2
3
1
0
95% 100% 100% 90%
88%
88%
Meetings held in
2019
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
BoD: Board of Directors, RAC: Risk & Audit Committee, NCC: Nomination & Compensation
Committee, SC: Strategy Committee, COC: Client Oversight Committee, IOC: Investment
Oversight Committee
Note: the formal meetings attendance table takes into account the changes to the Board
composition and its various committees, as described in greater detail on the previous pages.
3.6. Definition of areas of responsibility
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
ROO. 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 ROO and particularly by the
determined authorities and responsibilities set forth in
the ROO 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 ROO;
6.
Initiating legal actions and concluding settlements
according to the authorities and responsibilities set forth in
the ROO;
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ANNUAL REPORT 2019 Corporate Governance Report
7. Organization, management and implementation of
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 financial plan (budget) for approval by
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 ROO and the
authorities and responsibilities set forth in the ROO;
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/General Counsel 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.
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
Board of Directors
Risk management
Risk & audit
Executive Committee
Risk & Audit Committee
Investment risk control
Investment Oversight
Committee
Strategy risk control
Strategy Committee
Operations
Legal &
regulations
Finance
Financial
review
Internal
and
external
audit
Corporate
risks
Legal and
regulatory
risks
Department
heads
General
Counsel and
Compliance
team
Co-Heads
Group
Finance and
Corporate
Development
Co-Heads
Group
Finance and
Corporate
Development
Head of
Group
Internal
Audit and
KPMG
Chief Risk
Officer and
Chief
Operating
Officer
Head of
Compliance
Investment risks
Strategy risks
Chief Investment Officer
Co-Chief Executive Officers
Annual risk assessment
Annual risk report by
Chief Risk Officer
Annual risk assessment
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ANNUAL REPORT 2019 Corporate Governance Report
Partners Group’s risk governance framework comprises the
following elements:
• Risk management;
• Risk control and audit;
•
•
Investment risk control; 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 distinguishes 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.
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 2019, Partners Group issued an ISAE
3402 Type II controls report with no qualification relating to its
investment management services as of year-end 2018, 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 and external auditing;
corporate risk management (in particular, financial and
operational risk management); and
•
legal, compliance and regulatory risk management.
The RAC’s responsibilities are further defined in the 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. 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 as
well as the Co-Chief Executive Officers, the Co-Heads of Group
Finance & Corporate Development, the Chief Risk Officer
and the Chief Operating Officer/General Counsel. The scope,
responsibilities, tasks and priorities of Group Internal Audit
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ANNUAL REPORT 2019 Corporate Governance Report
are regularly discussed with and approved by the RAC and are
reflected in the Group Internal Audit Directive.
As an independent controlling function, the risk control function
includes the following responsibilities:
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.
•
Supporting the RAC and the Board in reviewing the risk
profile (risk policy, risk appetite and risk limits) of the
organization;
3.7.1.4. Investment Oversight Committee (IOC)
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 and
value creation 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 and reputation, 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 ROO for Partners
Group Holding AG.
3.7.1.5. 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 ROO
for Partners Group Holding AG.
3.7.1.6. 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 Chief Risk Officer. 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.
• 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 Chief Risk Officer 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 its function.
The Chief Risk Officer reports to the Executive Committee
typically every quarter or on an ad-hoc basis, as necessary.
He informs the RAC about their activities and findings at
the Committee’s regular meetings. In between meetings,
the Chairman of the RAC and the Chief Risk Officer liaise to
prepare meetings and address specific issues on an ad-hoc basis.
The Chief Risk Officer provides an annual risk report to the
Board of Directors comprising the risk assessments of the
Executive Committee, the RAC, the IOC and the SC. A copy
of this report must be made available to Internal Audit and the
external auditors.
3.7.1.7. Conflict resolution
Partners Group strives to avoid situations that result in a
conflict of interest. However, in certain situations conflicts
cannot be avoided. To assess and resolve conflict of interest
matters within the group, a Conflict Resolution Board has been
appointed by the group companies. 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).
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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;
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.
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:
•
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 the risks that Partners Group
suffers due to a loss directly or indirectly from non-
compliance with rules of professional conduct and
applicable laws and regulations or inadequate or failed
internal processes, human error, systems or external
events. Compliance with rules of professional conduct
and applicable laws and regulations as well as internal
processes and systems is dependent on the awareness
and enforcement of such rules and their application in
relation to all of Partners Group’s business and support
activities. To ensure this, Partners Group has issued the
internal Operational Internal Control System Directive
and, based thereon, has implemented a task control
system automatically generating electronic task lists and
documenting and monitoring the execution of tasks and
obligations necessary for the adherence to applicable
rules and obligations, such as the Product Obligations and
Procedures system (POPs), the Regulatory Obligations
and Procedures system (ROPs) and the Legal Obligations
system (LOPs). Moreover, compliance risks are also
monitored by Partners Group’s Compliance team and
regularly reported to the Head of Global Compliance and
the General Counsel, who, in turn, reports such risks to the
RAC.
•
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.
Partners Group | 167
ANNUAL REPORT 2019 Corporate Governance Report
(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 Chief Risk Officer 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.
However, investing alongside clients or providing seed
financing for new initiatives is ancillary to Partners Group’s
business.
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. Our balance
sheet positions subject to market risk aremonitored on a
regular basis and periodically reported on to the RAC by
the Chief Risk Officer.
• 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,
Investment Committees and Risk Team,
• 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.
• Ongoing risk management: Risk Team
Further details on the purpose and powers of the respective
committees are highlighted in the relevant policies and
directives.
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4. Executive Committee
The table below shows the current composition of the Executive Committee:
Name
André Frei
David Layton
Juri Jenkner
Andreas Knecht
Marlis Morin
Dr. Michael Studer
Joined Partners
Group in
Nationality
Age
2000
Swiss
2005 US American
2004
2009
German
Swiss
2003
Swiss/Italian
2001
Swiss
44
38
44
50
49
47
Position
Co-Chief Executive Officer
Co-Chief Executive Officer and Head Private Equity
Head Private Infrastructure
Chief Operating Officer and General Counsel
Head Client Services
Chief Risk Officer and Head Portfolio Solutions
4.1. Members of the Executive Committee
David Layton
As also outlined in section 3.6 above, the Board of Directors has
delegated the operational management of the company to the
extent as permissible by law and the articles of association to
the Executive Committee.
The Executive Committee manages day-to-day investment and
client activities as well as the 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. He is based in Baar-
Zug. Together with David Layton, he
leads the Executive Committee and the
Global Executive Board. As part of his
mandate, André oversees corporate
and investment-related environmental,
social and governance topics at Executive Committee level. He
has been with Partners Group since 2000 and has 20 years
of industry experience. He is a member of the board of the
Swiss-American Chamber of Commerce. 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.
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
and member of the Global Investment Committee. Previously,
he was the Head of Partners Group’s Private Equity business
in the Americas and has represented Partners Group on the
Board of Directors of several of the firm’s portfolio companies,
including Universal Services of America, Nobel Learning
Communities, MicroPoise Measurement Systems, Cabot
Credit Management, Pacific Bells, and Strategic Partners.
David has been with Partners Group since 2005 and has 17
years of industry experience. He holds a bachelor’s degree in
finance from Brigham Young University’s Marriott School of
Management.
Juri Jenkner
is Head of the Private Infrastructure
business department. He is based
in Baar-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 was the 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 20 years of industry experience. Prior to joining
Partners Group, he worked at Privatbankiers Merck Finck &
Partners Group | 169
ANNUAL REPORT 2019 Organizational changes to senior management
Partners Group reviews its organizational structure on an
ongoing basis and implements adjustments whenever necessary
to support and enable the continued successful growth of its
investment platform for the benefit of the firm’s clients and
shareholders, while ensuring continuity and stability in its core
leadership team.
4.2. Other activities and vested interests
Other activities outside of Partners Group, if any, of members
of the Executive Committee are listed in section 4.1 for each
respective member. 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. 29of
the articles of association, each member of the executive
management may hold a maximum of one additional mandate in
listed corporations and a maximum of four additional mandates
in other legal entities. For mandates exempt from this limitation,
see section 3.3 above.
4.4. Management contracts
Partners Group has not entered into any management
contracts with companies or individuals not belonging to the
group.
Corporate Governance Report
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.
He is based in Baar-Zug. He is the
Head of the Corporate Operations
business department and member
of the Executive Committee and the
Global Executive Board. He has been
with Partners Group since 2009 and has 24 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 admitted to the Swiss bar.
Marlis Morin
is Head of the Client Services business
department. She is based in Singapore.
She is a member of the Executive
Committee and the Global Executive
Board. She has been with Partners
Group since 2003 and has 26 years of
industry experience, having previously
built and headed the firm’s Group Internal Audit function. She
also opened Partners Group’s services and operations hub in
Manila. 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.
Dr. Michael Studer
is the Chief Risk Officer of Partners
Group and Head of the Portfolio
Solutions business department. He
is based in Baar-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 23 years of industry
experience. He holds a PhD in mathematics from the Swiss
Federal Institute of Technology (ETH) in Zurich, Switzerland.
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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
Roberto Cagnati1)
Robert Collins2)
Fredrik Henzler
Adam Howarth3)
Sergio Jovele3)
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 2020.
2) Member as of 1 July 2019.
3) Member until 30 June 2019.
Joined Partners
Group in
Nationality
Age
2016 US American
1999
2016
Swiss
British
2004
Swiss/Italian
2005 US American
2012
Swedish
2007 US American
2005
2014
2000
2016
1999
2008
2010
Italian
Chinese
Swiss
Swiss
Swiss
Swiss
Swiss
2008
Australian
52
49
52
41
43
48
41
50
46
46
53
51
42
51
46
Position
Head Private Debt
Chairman Global Investment Committee
Co-Head Private Real Estate
Co-Head Portfolio Solutions
Head New York Office
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
54
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 Baar-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).
On 30 June 2019, Adam Howarth, Head of Portfolio
Management for the Americas, and Sergio Jovele, Client
Solutions Europe, left the Global Executive Board. Robert
Collins, Managing Director, Client Solutions Americas, joined
the Global Executive Board as of 1 July 2019 and Roberto
Cagnati, Co-Head Portfolio Solutions, joined the Global
Executive Board as of 1 January 2020.
Members of the Global Executive Board
Bill Berry
is Head of the Private Debt business
department, based in Denver. He has
24 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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Corporate Governance Report
René Biner
is Chairman of the Global Investment
Committee at Partners Group. He is
based in Baar-Zug. He has been with
Partners Group since 1999 and has 26
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 Partners Group’s
London office, Co-Head of the Private
Real Estate business department and
Co-Head of the European Private
Real Estate business unit. He has 31
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’s degree from Cambridge University, UK, and is a
qualified chartered surveyor
Roberto Cagnati
is Co-Head of the Portfolio Solutions
business department and Co-Head of
the Portfolio Management business
unit, based in Baar-Zug. He has been
with Partners Group since 2004 and
has 16 years of industry experience.
Prior to joining Partners Group,
Roberto worked at Deutsche Bank Asset Management and
Credit Suisse Private Banking in the alternative investment
space. He holds a master’s degree in economics with a
specialization in statistics and financial markets from the
University of Konstanz, Germany.
Robert Collins
is Head of Partners Group’s New York
Office. He leads Partners Group’s US
distribution practice and is President,
Portfolio Manager and Member of the
Board of Managers of Partners Group
Private Equity (Master Fund), LLC
and Partners Group Private Income
Opportunities, LLC. He also chairs Partners Group (USA) Inc.’s
Investment Committee. Robert joined the firm in 2005 as a
member of the Private Equity investment team and has 21
172 | Partners Group
years of industry experience. Prior to joining Partners Group,
he worked at UBS Warburg and Salomon Smith Barney. Robert
holds an MBA from the Johnson School at Cornell University,
New York, USA where he was a Roy H. Park Leadership Fellow,
and a BA from Tulane University, Louisiana, USA, where he
majored in economics and history. He is a CFA charterholder.
Fredrik Henzler
is Head of the Industry Value Creation
business department and Head of the
Industrials Industry Value Creation
business unit. He is based in Baar-
Zug. 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 25 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.
Dr. Kevin Lu
is Partners Group’s Chairman of Asia
and Head of Partners Group’s Singapore
office. He has been with Partners
Group since 2014 and has 22 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, based in Baar-Zug.
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 24
years of industry 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.
ANNUAL REPORT 2019 Corporate Governance Report
Amelia Räss-Fernandez
is Global Head of the Human
Resources business unit, based
in Baar-Zug. She has 26 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.
Martin Scott
is Head of Partners Group’s Sydney
office and Head of the Australian Client
Solutions business unit and Director of
Partners Group Australia. He has been
with Partners Group since 2008 and has
27 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.
Dr. Stephan Schäli
is the Chief Investment Officer of
Partners Group. He is based in Baar-
Zug. He has been with Partners Group
since 1999 and has 23 years of industry
experience. Prior to joining Partners
Group, he worked at UBS and Goldman
Sachs & Co. He holds an MBA from the
Anthony Shontz
is Head of Partners Group’s Denver
office and Co-Head Private Equity
Integrated Investments Americas. He
has been with Partners Group since
2007 and has 18 years of industry
experience. Prior to joining Partners
Group, he worked at Pacific Private
University of Chicago, Booth School of Business, Illinois and a
PhD in business administration from the University of St. Gallen
(HSG), Switzerland.
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 and Co-Head
of the Private Real Estate Americas
business unit, based in New York. He has
been with Partners Group since 2007
and has 33 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.
Dr. Yves Schneller
is Head of the Investment Services
business department, based in Baar-
Zug. He has been with Partners Group
since 2008, previously heading the
Transaction Services team, and has
15 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 and 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. He is based
in Baar-Zug. He has been with Partners
Group since 2010. He has 27 years 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.
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6. Compensation, shareholdings
and loans
7. Shareholders’ participation
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, shareholders may be represented
at the shareholders’ meeting either by a legal representative
who needs not be a shareholder or an 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
The following resolutions of the shareholders’ meeting require
at least two-thirds of the represented votes and the absolute
majority of the represented nominal share value:
•
•
the cases listed in art. 704 para. 1 of the Swiss Code of
Obligations, and
the reversal or amendment of the transfer restrictions (see
section 2.6 for details in relation to such restrictions).
6.1. Principles, content and method of determining
the compensation
Pursuant to art. 14 and 15 of the OaEC, all compensation
paid in 2019 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 2019. In the Compensation Report 2019,
the firm outlines its compensation principles, components and
method. The Compensation Report can be found in the Annual
Report 2019 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. There were
no loans outstanding as of 31 December 2019 for the Board of
Directors and the Executive Committee (refer to sections 4.6
and 5.6 in the Compensation Report).
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
2019 were granted before the entering into force of the OaEC.
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Corporate Governance Report
7.3. Convocation of the general meeting of
shareholders
The Annual General Meeting of shareholders takes place within
six months after the close of the financial year. All registered
shareholders receive a written invitation to the Annual General
Meeting 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 Annual General Meeting. In
2020, the Annual General Meeting of shareholders is scheduled
for 13 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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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;
• 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;
• 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.
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 and
were re-elected at the Annual General Meeting 2019.
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.
9.2. Auditing fees
In the financial year 2019, KPMG AG and other KPMG
companies received a total of CHF 1.8 million
(2018: CHF 1.6 million) for audit services.
9.3. Additional fees
In addition, KPMG AG and other KPMG companies received
CHF 0.1 million (2018: CHF 0.1 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 2019.
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 2019 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 2020 are as follows
Event
Annual General Meeting
of shareholders
Ex-dividend date
Dividend record date
Date
13 May 2020
15 May 2020
18 May 2020
Dividend payment date
19 May 2020
AuM announcement
as of 30 June 2020
14 July 2020
Publication of Interim Report
as of 30 June 2020
8 September 2020
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 2019
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 2019 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
Partners Group | 177
ANNUAL REPORT 2019
Contacts
Shareholder relations contact
shareholders@partnersgroup.com
Media relations contact
media@partnersgroup.com
partnersgroup@partnersgroup.com
www.partnersgroup.com
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Zug
Zugerstrasse 57
6341 Baar-Zug
Switzerland
T +41 41 784 60 00
Denver
1200 Entrepreneurial Drive
Broomfield, CO 80021
USA
T +1 303 606 3600
Houston
Williams Tower
2800 Post Oak Blvd., Suite 5880
Houston, TX 77056
USA
T +1 346 701 3900
Toronto
Exchange Tower
130 King Street West, Suite 1843
Toronto, ON M5X 1E3
Canada
T +1 416 865 2033
New York
The Grace Building
1114 Avenue of the Americas, 41st Floor
New York, NY 10036
USA
T +1 212 908 2600
São Paulo
Rua Joaquim Floriano 1120, 11° andar
CEP 04534-004, São Paulo - SP
Brazil
T +55 11 3528 6500
London
110 Bishopsgate, 14th Floor
London EC2N 4AY
United Kingdom
T +44 20 7575 2500
178 | Partners Group
Guernsey
P.O. Box 477
Tudor House, Le Bordage
St Peter Port, Guernsey
Channel Islands, GY1 6BD
T +44 1481 711 690
Paris
14, rue Cambacérès
75008 Paris
France
T + 33 1 70 99 30 00
Luxembourg
35D, avenue J.F. Kennedy
L-1855 Luxembourg
B.P. 2178
L-1021 Luxembourg
T +352 27 48 28 1
Milan
Via della Moscova 3
20121 Milan
Italy
T +39 02 888 369 1
Munich
Skygarden im Arnulfpark
Erika-Mann-Str. 7
80636 Munich
Germany
T +49 89 38 38 92 0
Dubai
Dubai international Financial Centre
Gate Building, Level 15, Office 55
P.O.Box 121208
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
8 Marina View
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
Philippines
T +63 2804 7100
Shanghai
Unit 1904-1906A, Level 19
Tower I, Jing An Kerry Center
No. 1515 West Nanjing Road
Jing An District, Shanghai 200040
China
T +86 21 2221 8666
Seoul
25th Fl. (Gangnam Finance Center,
Yeoksam-Dong) 152 Teheranro
Gangnam-Gu, Seoul 06236
South Korea
T +82 2 6190 7000
Tokyo
Daido Seimei Kasumigaseki Bldg. 5F
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
ANNUAL REPORT 2019 9
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