Partners Group Holding AG (PGHN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Partners Group AuM Announcement Conference Call and Live Webcast. I'm Alice, the Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to the Partners Group Management. Please go ahead.

To our investors and media representatives, a warm welcome to today's assets under management announcement call for 2019. My name is David Layton, Co-CEO of Partners Group. I have with me on the call today, my partner and Co-CEO, André Frei; Philip Sauer, our Co-Head of Group Finance and Corporate Development; as well as Alex Soppera, a member of our Corporate Development and Shareholder Relations team. As always, we appreciate you taking time for this call and for your interest in our business and our organization. Over the next 20 minutes or so, we will provide you with a business update focused on investments in clients as well as an update on developments related to our assets under management. As a reminder, on this call, we will not be discussing detailed full year financials. We'll present those in Zurich in March. And we're looking forward to meeting most of you in person at that time. With this, I'd like to turn to Page 3 of the presentation. Partners Group is a private markets-focused investment firm with a global footprint made up of 20 offices and more than 1,400 professionals. Our large platform, our talented professionals and our focused investment strategies give us a unique ability to originate and access attractive investment opportunities around the globe. On the investment side, 2019 proved to be a solid year. After a record investment year in 2018, we have invested $14.8 billion in private markets opportunities on behalf of our clients. Last year, in terms of strategy, we invested the majority of our capital, 68% or about $10.1 billion in direct transactions while the remaining 32% or about $4.7 billion went into diversified portfolio assets. This is a modest uptick in direct investments, and in some cases, this was due to our relative value view that in a highly robust valuation environment, like we see today, we prefer to allocate our clients for whom we have broad discretion in a very choosy and selective way asset by asset into the most attractive situations as opposed to via too many diversified pools. In terms of regions, we've invested 50% or around $7.4 billion in North America. The U.S. remained an attractive region and offered us many high-quality investment opportunities. Our European investment activity was also strong and amounted to roughly $5 billion. This was driven in part by a number of meaningful transactions in private equity, private infrastructure as well as our lending activities. Lastly, our investment activity in Asia Pacific and the rest of the world amounted to approximately $2.5 billion or 17% of deployment. In these regions, we focused mostly on direct assets. Let us now turn to the next slide, Slide 4, illustrates the transactions we have screened and executed in 2019 across asset classes. Deal flow is the lifeblood of any investment organization, and that's particularly the case in private markets. You'll see that we were able to generate significant deal flow in direct secondary and primary investment opportunities. We saw about 2,600 direct opportunities, $165 billion in secondary deal flow, and we assess about 500 partnerships during the period. Needless to say, we kept our highly disciplined and selective investment approach in this fast-paced market with our various screening, investment committees and other decision-making bodies spending most of their time saying no. We declined 97% of all of the opportunities that came into the firm. We're allocating much of the new investment resources that we have towards research-driven investment themes, and I believe that our team today is much more focused and less opportunistic than in years and decades past. Turning to Page 5. I will provide you with some color on the exit environment. As we've discussed in the past, the market volatility, which occurred in Q4 2018, spilled over into private markets to some extent, and some found it challenging to close the bid-ask spread in the first part of 2019. Q1 2019 was particularly soft for private equity exits, as shown on the left-hand part of this slide. But as we moved past Q1, we found that the rest of 2019 provided us with a reasonably solid backdrop on which to execute our divestment decisions according to plan. Overall, we were pleased with the $11 billion of gross underlying portfolio realizations achieved during the year for our clients. We work within the portfolio with an entrepreneurial mindset. We aim to propel growth and drive value-creation initiatives in our portfolio companies and then realize value for our clients with a carefully planned exit strategy. Page 6 highlights the breadth and the diversity of our global investment platform. We show here some select examples of transaction activity from our portfolio in 2019, both on the buy and on the sell side. Our global capabilities provided us and our clients with a degree of stability to access investment content from around the world. Each week in our investment committee, we hold up opportunities from Europe alongside those from North America, alongside those from Asia and the rest of the world, and we debate relative value. With this dynamic global approach, we have a good track record of spotting attractive investments and staying away from areas that don't stack up in that time period. Turning to Slide 7 for our investment outlook. Our top-down views are broadly unchanged since our last earnings call in September. We continue to believe that global late-stage expansion has further room to run on the back of robust private demand. We expect growth to maintain its positive, albeit modest upward trajectory. Risk to this outlook, however, remains pronounced. It's certainly a very complex environment with meaningful downside risk. Over the past number of years, more broadly, but in private markets, in particular, investors have been gravitating towards large, defensive bond proxy-like assets with the hope that these stable businesses will provide shelter during periods of potential volatility or dislocations in the future. And what has happened more recently, in our view, is that the valuation premiums that are being paid for these types of defensive assets, combined with the incremental leverage that's often added to these platforms, has reached a level that's largely negating the defensive characteristics of the underlying assets. And so we have been compelled to rethink defensiveness for our clients. Instead of jumping in and bidding up the next large defensive deal, we've instead been rolling up our sleeves in slightly smaller businesses and working hard to proactively grow and diversify these platforms. We've been focused on putting our clients' capital to work behind transformative tailwinds, where we expect continued structural growth over the medium to long term, and we've been factoring in longer hold periods and multiple contraction. This environment for us is one of hard work and of preparation. On the next slide, our thematic sourcing approach enables us to build strong conviction for selected subsectors and remain more deliberate and disciplined in our sourcing efforts compared to a more opportunistic approach. We think about attractiveness of subsectors according to multiple dimensions, including secular growth prospects and consolidation potential. The sourcing of targets within these subsectors is the result of a very collaborative effort between our dedicated research team, which is part of our broader Industry Value Creation effort as well as our investment professionals. While our research team is responsible for mapping out attractive subsectors and the most promising companies within those sectors, our investment professionals play a key role in identifying actionable targets. The professionals in our firm are expected to maintain at all times a dynamic list of near-term, mid-term and additional long-term investments, which we use as a target list. Within our private equity business, for example, we now have about $100 billion pipeline, which our professionals are developing. Now not all of these assets will transact over the coming years, and we certainly won't be successful in acquiring all of them, but this initiative helps focus the origination efforts of our team on what we want to own in the long run instead of what's for sale at the moment. Despite the market environment, which is characterized by elevated valuations and geopolitical uncertainty, we are convinced that we'll be able to continue to invest in a significant opportunity set of attractive assets. This pipeline allows us to look ahead with confidence, with the leadership team have never had better visibility on future transaction targets. The following 3 pages provide examples from some of the transactions that have benefited from our thematic sourcing efforts in 2019, and we have positive examples from across our corporate real estate and infrastructure initiatives. With that, I'll hand things over to my colleague, Philip Sauer, who will walk you through the next section.

Thank you, Dave, and also a warm welcome from my side. Today, I have the pleasure of walking you through our fundraising efforts and our AuM development for the full year 2019. We reached USD 94 billion AuM. Our business is a people's business, and we need highly skilled professionals helping us to source, transact and create value for our long-term assets, as Dave just said. This is why we, today, employ 1,465 professionals worldwide. On the left side of Slide #13, you see the development of our AuM in U.S. dollars, and the right side, the development of our total number of professionals. There is an interesting observation, which I would like to share with you. Our AuM in U.S. dollars has been growing fairly consistent between 12% to 13% over the past years, if we exclude some years with exceptional FX movements like, for instance, 2017. As a firm, we try to hire additional people broadly in line with that growth of AuM. However, there are periods where AuM grew slightly more than the number of professionals. I'm referring here to the period between 2011 and '16, for example. During this time, AuM grew 13% per annum as opposed to the number of professionals, which only grew by 10%. There were also periods where AuM grew less than the number of professionals. In particular, this was the case in the last 2 years. AuM grew 12% per annum as opposed to number of professionals with 19% per annum. We refer to these years as so-called catch-up years on hiring. In these last 2 years, we consciously decided to increase our hiring efforts, and we're willing to accept a disproportional growth rate of number of employees. André will later elaborate in greater detail in which areas we hired in 2019. Going forward, we expect our number of professionals to grow broadly in line with AuM. You might have observed that we reported our AuM in U.S. dollars now, and I would like to explain you why we decided to change our AuM reporting currency to U.S. dollars. With that, let us go to Slide #14. Historically, we have reported AuM and investment figures in the dominant currency of each activity, which is why we use euro for report on client demands and U.S. dollars to report on investment activity. Since 2010, the proportion of euro-denominated AuM steadily decreased and represents today 46% of total AuM. From today onwards, we will align our AuM reporting currency with our investment activity reporting currency and switch to the U.S. dollars. This reflects the anticipated growing importance of the U.S. dollar-denominated assets as a proportion of total AuM. As you can see, 38% of our total AuM is, today, in U.S. dollars and already 50% of the net inflows. We believe that this change will also simplify our reporting to external shareholders. We will, however, continue to report Partners Group Holding financials in Swiss francs. With that, I would like to move to Page #15. On the left side, you see the breakdown of assets raised by asset class, and on the right side, the breakdown of AuM as of the end of 2019. In terms of assets raised, we received a well-diversified commitment across all private market asset classes amounting to a total of USD 16.5 billion. Among the main programs contributing to fundraising during the period were a range of successor programs, including private equity direct, diversified infrastructure real estate opportunities and multi-asset credit and senior loans. In terms of number of programs, there were over 20 individual close-ended programs, 2 dozen mandates and several semi-liquid funds across all asset classes, which contributed as well. In terms of AuM by asset class on the right side, it is noteworthy that our AuM gets increasingly diversified. Our combined AuM in private debt, real estate and infrastructure represent, for the first time, more than 50% of our total AuM. At the bottom right side, you see the AuM by structure, and I would like to start with the tailored private market programs. They represent 65% of our total AuM and can be broken down in 2 categories. The largest one are mandates. These are highly tailored programs for our largest and most sophisticated clients and can get as complex as steering the investment exposure across multiple private market asset classes in line with the client's long-term investment horizon and in line with the growth of their portfolio. These tailored mandates represent today almost 40% of our AuM and made up 1/3 of our client demand in 2019. The other type of tailored AuM are our structured fund solutions. These vehicles focus mostly on private individuals who are increasingly recognizing the benefits of private markets. These funds are distributed by our global distribution partners. Investors in these vehicles typically require a certain amount of liquidity and expect to subscribe and redeem on a monthly or quarterly basis. These features make these vehicles more complex from a portfolio composition and operational handling perspective. This is why we have not come across other participants offering the scope and size of these products as we do it. We currently manage almost USD 25 billion in these funds or roughly 25% of our AuM. Last but not least, our traditional close-ended private market programs today still represent 35% of AuM and represented roughly 40% of the inflows in 2019. With that, I would like to move to Page #16. We started 2019 with $83 billion AuM and ended 13% higher at $94 billion. During the year, we saw $16.5 billion in new client commitments that remained with our full -- remain within our full year guidance of $14.5 billion to $18 billion. For the sake of transparency, we included the respective euro-denominated amounts below the actual U.S. dollar amounts. I would like to draw your attention to the so-called other factors, which we call tail-down and redemptions and FX and others. On tail-downs and redemptions, we provide you with full year guidance because we have a good visibility on both of them. The tail-downs and the redemptions amounted to $7.1 billion and were slightly below the guidance provided. Let me give you some color about tail-downs. As you know, the majority of our programs have a long duration. These programs will mature one day, and the AuM will decline. The decrease in AuM is typically based on a mathematical formula, preagreed with the clients at the time their contract is formed. We expected, in 2019, tail-downs to be significantly larger skewed to the second half of the year. This is mainly due to the fact that some larger close-ended private equity secondary and private real estate programs tailed off completely. I would like to give you an example. The largest contributor of our tail-downs in 2019 was our $2.5 billion secondary fund, which we raised in 2008. Its tail-downs alone represented over EUR 1 billion. Regarding redemptions, we currently manage USD 20 billion in structured fund solutions, which provide some sort of liquidity. In these open-ended programs, we have redemptions. In the past, inflows in these programs exceeded redemptions, and therefore, net new assets have been growing. In 2019, redemptions amounted to a total of $1.3 billion and are expected to grow in line with AuM growth, assuming the fundraising environment remains benign. Now let us talk about, quickly, about other factors where we do not have a lot of visibility on and, therefore, do not provide guidance. In 2019, the majority of other factors stem mainly from performance and investment-related effects from a few investment programs, which link their AuM to the NAV development. They made up $1.8 billion. With that, I would like to move on to Slide 17 and 18, the last slide of my part. They show you our AuM development by asset class in U.S. dollar. Equivalent euro numbers are shown on the following slide. All our business lines grew in 2019, resulting in a net growth of 13% in U.S. dollars and 15% in euro. In particular, private debt and infrastructure grew the fastest. Let me give you some color on fundraising per asset class. Private equity inflows amounted to $7 billion and were tilted towards the first half of the year. Fund raising was a mix of funds raised of our next-generation private equity direct strategy and many semi-liquid strategies and customized mandates. We expect our direct equity strategy also to contribute significantly to fundraising in the next 12 months. Overall, we expect private equity to see another strong year. In private debt, we saw $5 billion in new client commitments in our -- and slightly -- and saw a slight tilt towards the second half. Similar to the year before, our debt business continues to benefit from low yields of traditional fixed income investments. In particular, the floating base rate and the shorter time to ramp up the debt portfolio are seen as highly attractive by clients. There are 2 main drivers of our fundraising in private debt. First, it's our direct lending business. It contributed 3/4 of our assets raised. The second is our CLO business, which contributed 1/4 of our assets raised in private debt. We were able to close another 3 CLOs in 2019, and our entire CLO business today represents 4% of our AuM. And it is expected to grow strongly in the years to come. We expect private debt growth rate to normalize in 2020 as we see all the programs to mature and tail-downs to increase. For reference, over the last 3 consecutive years, private debt grew more than 20% net per annum. In private real estate, we saw $2.5 billion in new commitments. Almost half of these new commitments stem from our real estate opportunity strategies, and we expect this strategy to continue to contribute to our fundraising in the next 6 to 9 months. Overall, we expect the growth rate of private real estate to be largely similar to what we have achieved in 2019. Private infrastructure contributed another $1.7 billion. They were roughly equally split between H1 and H2. Our new direct flagship offering will make a meaningful contribution to fundraising in 2020, and we expect a pickup in growth rate this year. Our new direct infrastructure strategy follows the successful deployment of 2 successor programs and targets control investments in infrastructure assets and infrastructure-related businesses globally. With that, I would like to hand over to André, who will provide you more color on our 2020 fundraising and AuM outlook.

Thank you, Philip. Well, you've heard that we have seen a strong team growth across the entire platform in '19, and now we count over 1,400 employees at Partners Group. Over the last 12 months, in particular, we constantly intensify the build-out of our teams and actually successfully onboarded more than 250 new professionals globally, which corresponds to about the 22% growth in terms of employees. And as Philip said, this compares to an assets under management growth of 13% in 2019. So where did we hire over these last 12 months? First and foremost, of course, we concentrated on investment capacity and capabilities. We hired dedicated professionals in line with the opportunity set, which Dave spoke about, as our focus region for hiring were, what really, the Americas and Europe. And these 2 regions accounted for more than 100 investment professionals, and that's over 80% of the total investment-related hires, roughly in line with the deployments that we see, which is like 40 States, [ 4 Europe and 20 ] in Asia. Importantly, of course, also in our Denver campus, we staffed additional services and corporate function. We have been delighted to announce the opening of our Canada office early this year. Our presence in Toronto allows us to cater to the demand from a broad spectrum of Canadian institutions for private market solutions of Toronto. It's more of a client location than an investment location at this point in time. So 20 offices. Right now, for 2020, I do not expect that Partners Group will open additional offices. You also see that we launched our services teams, predominantly in the Asia Pacific region. We hired more than 100 professionals here. As Philip said, 2019 can be considered a catch-up year for hiring. Growing at this pace is, of course, a challenge. It does require very conscious efforts not only for the HR team, but actually for the entire leadership team and our colleagues who onboard new people. And then while we don't talk about financials on this call today, I can say that this catch-up does still happen in line with our communicated operating margin target. If I look at 2020, we will continue to hire across business lines and regions. I expect the growth of employees to be roughly in line with assets under management growth, so that could amount to like 150 to 200 professionals in the next year. And with this, I'd like to turn to Slide 21. I think they've been very thoughtful as an organization about what it does take to realize our potential. And when you grow assets under management and also the number of employees by 10% to 20% for a number of years, of course, that requires us to invest substantial time and also money into making this an effective exercise on the one hand, but also to keep and maintain our culture and DNA as a company. Today, we focus on developing talent via high-quality training and leadership programs. We are institutionalizing our learning and development approach, and I'm really proud of what we call the Partners Group Academy, which enjoys learning and development in a very thoughtful way. Importantly, we also work closely with portfolio companies because we believe that we can learn from our assets. And equally, our assets can learn from Partners Group. So in short, we do our very best, and I believe we do well to develop our existing tenants and to onboard the new joiners to our firm. The second focus area is service and operational excellence, and that continues to be a very strategic topic for Partners Group. We want to be excellent not only at investing, but equally going to be excellent at servicing our clients and managing our company. As a matter of fact, we have identified a number of initiatives, both for the short term and the mid-term, that will allow us to maintain the reliability and the scalability and importantly, of the satisfaction for our different stakeholders. And yes, it's precisely these efforts, these operational excellence initiatives that will ultimately allow Partners Group to offer a broad set of products and mandates to our clients over the future. The same actually holds true for systems and technology. At Partners Group, we continue to invest significantly in systems and technology. At Partners Group, we call it PRIMERA, which stand for Private Markets Intelligence to Manage, Explore, Report and Analyze. I believe we have really built something very differentiating that equally benefits our investment practice, our clients and Partners Group as a firm. And we'll build on what we have. We are advancing data analytics, [ enjoy ] cybersecurity and all of this with a real determination to remain a technology leader in private markets. With this, I'd like to turn to the last slide, Slide 22, where I'd like to talk about the expected growth client demand for 2020. We have set our expected range of new growth client commitments for 2020 to $15 billion to $19 billion. The 2020 guidance assumes that the benign fundraising and investment environment continues. And while many variables, of course, will drive the actual outcome, we are really confident that this year will be another solid fundraising year. Fundraising in the next 12 months will be spread across a variety of solutions across all asset classes, including flagship programs, customized mandates as well as the semiliquid structures to fund solutions that Philip talked about. In practice, as you know, from the past, actual client demand will be split across like 2,000 products and mandates also in 2020. Tail-downs effects from mature Partners Group programs and potential redemptions from liquid and semiliquid programs are expected to amount to about $7.5 billion to $9 billion. And while tail-downs and redemptions did grow substantially in 2019, I would estimate that it will grow slower in the next few years. If you take the midpoint of both factors guided, that is gross client demand plus tail-downs and redemptions, our net -- our anticipated net assets under management growth remains around 10% in 2020. And as in previous years, we don't provide guidance on other effects, such as asset [ spreads ], for example. So that concludes the guidance. It also concludes the official part of our presentation. And with this, I would like to open up for questions on -- by the audience.

[Operator Instructions] Our first question comes from the line of Young-Sim Song, AWP.

I have one question regarding professionals. Is it correct that you expect less growth this year compared to 2019 and maybe even less than the assets under management growth? And second question, regarding the reporting currency, and you said you will stick to Swiss francs regarding reporting of the financials. Haven't you considered to also switch to U.S. dollars? If not, why not? Wouldn't it be easier to have one currency?

Well, Philip, maybe I take the first question, you take the second. In terms of professionals, you're right, that in 2020, we expect to grow, let's say, 2/3 of the pace that we have grown in 2019. So that is like 250 professionals in '19. I think 150, 175 is a more realistic number, we would assume, for 2020. So it's a conscious decision. We have made an effort to grow the platform at an accelerated pace like in '19. And I think with the strong growth we have seen and the efforts we want to make to onboard those professionals, 150 to 175, 200 people is the right number that we'll need to really service our clients raise assets, invest assets, create value. So your comment is right.

In terms of reporting currency, indeed, it would be easier if we have one currency overall. We have checked that. It is, unfortunately, not as easy to do. So we decided, after considering, to not do it and remain in Swiss francs.

Your next question comes from the line of Hubert Lam, Bank of America.

I've got 3 questions. Firstly, in terms of the investment breakdown, do you expect in 2020 -- how do you expect it to change versus 2019? Do you expect more direct assets from what you had in -- when what you had last year? That's the first question. Second question is on the asset raised by asset class. How do you -- again, how do you expect that to change year-on-year? Are there any big flagship launches that you've expected in 2020 to maybe skew it towards one particular asset class? And lastly, if you can just give us an update in terms of return expectations now from the clients for the different asset classes, if that's changed over the last year.

So I'll take the first. With regards to the investment breakdown, we go through a process over the course of the year to really assess and evaluate which opportunities, which asset classes are giving us the best relative value. Based on what we see today, I think the mix that we showed in 2019 is probably a good proxy for what we see in 2020. I think it's a healthy mix of direct assets that give our clients the bigger, chunkier positions that can help drive alpha in their portfolios. At the same time, oftentimes, when clients come to Partners Group, they don't come to us just to get them exposure to 10 to 12 companies that all look and feel the same. Oftentimes, they're looking for broader portfolios. And for some of our clients, we run their entire private markets portfolio for them. And so we do use some of those portfolio assets to really help diversify the portfolios that they have with us. But I don't expect a meaningful mix shift in 2020 based on what I see today. André, why don't you take question number two?

Absolutely. So in terms of asset classes that we want to raise for in 2020, I don't expect a big shift compared to like the aggregate assets under management yesterday. And also, I don't expect a massive shift compared to what we have seen in 2019. You will not be surprised that we expect private equity to be the strongest asset class. I believe the stock is going to be a strong year with the offerings that we have on the plate. But equally, private debt and real estate will strongly contribute. This is not like something we want to actively steer. It's important to us as a company that we have a product suite that offers all 4 asset classes, and that is what I expect to see in 2020. So like the equity stronger, there may be an uptick in infrastructure, and I expect to see continued strong demand for the semiliquid structures, which often combine more than one asset class. So it's kind of like in terms of asset raising and investing, Dave Layton and the investment departments can expect to see available assets for all for asset class.

Yes. And with regards to return expectations, our clients have -- in some cases, have indicated that they have lower return expectations that they have in years past, given the evolution of rates in other asset classes. However, we don't see a meaningful change in underwriting or in the opportunity set that we have today versus in years past. We do oftentimes have to work harder to achieve the same returns that we did in years past with valuations at elevated levels, debt levels relatively the same and moderate growth assumptions. We're finding ourselves having to add resources, add impact to the investments that we're making in a more transformative way in order to achieve the same types of returns. But we don't anticipate a meaningful decline in underwriting standards, for example, based on where we are today.

So for example, in private equity, like what absolute return are clients looking for or other absolute or relative to public markets?

Yes. So relative to public markets, they're looking for a couple of hundred basis points of outperformance. 300-plus basis points of outperformance is generally what they're communicating to us. And in terms of absolute performance, it's safe to say that the mid-20s returns that we've been able to generate for our clients in that asset class, historically, is not their expectation today, and we don't guide them towards that. Today, we do have a number of instances where that is possible. But I'd say high-teens, mid-teens on a net basis is generally where investors' expectations are.

Next question comes from the line of Máté Nemes, UBS.

I have a question on hiring and the link to the expected asset growth. And given the 260-plus FTEs you added in 2019, and I think you mentioned 150, 175 FTEs to be added perhaps this year, it's a very strong growth and as you mentioned, catch-up in hiring. I'm just wondering if you could share your thinking on how exactly this relates to the expected AuM development and expect the assets raised. Shall we expect an increase actually in the pace of inflows here? Or this catch-up was really necessary just to maintain this low-teens pace of AuM growth going forward?

Well, actually, the way I look at it, its employees more lagging than leading assets under management and deployment, right? So we think of it like a commitment to further build the platform, to grow the platform with business success, asset raising investment deployment that allows us to build out the platform. So I don't believe you should -- it's kind of like linked future growth to the number of people we have hired more recently. But it's more like the business success, asset under management deployment that allows us to hire and build out the platform.

The next question comes from the line of Gregory Simpson, Exane BNP Paribas.

Just 2 questions on my side. The first is on Slide 5, private equity industry exit activity in H2 actually looked pretty low relative to H1 of 2019 or even H2 of 2018. Could you comment on how you're seeing the exit environment today as we head into 2020? And then the second question was -- is could you give an update on the fund performance, in particular, when you're outraising your next flagship funds like indirect equity? Would you describe partners as having a top quartile performance in the predecessor funds?

So first of all, with regards to exit activity, to be honest, I was surprised to see the broader market statistics coming down. It felt like a very robust exit environment for us and in the processes that we pursued. I think it provided -- we were able to engage with buyers on a very constructive basis, and there was eager demand for the assets that we were to market. And so I wouldn't put too much weight into the connection between the market and the exit activity that we see and experience on our platform. Obviously, if there's a big shock or a big dislocation, you have to take that into account. But we found the market environment to be reasonably supportive. And with regards to fund performance, we have benefited from, I think, both the benign environment that we've had largely over the last couple of years as well as the meaningful resources that we've added on the value creation side and have experienced very strong performance. So yes, we have very strong top quartile performance for many of the programs that we have in the market for the predecessor programs on many of those programs.

Great. Is 20% net IRR still the long-term track record roughly in private equity?

Yes, thereabout. Yes.

The next question comes from Bruce Hamilton from Morgan Stanley.

Two questions for me. Firstly, when you think about the -- across the business on the investment side or the risk environment, which are the areas where you think the markets look frothiest? And I think sort of through the course of last year, it sounded like you felt that private credit was most extended and where you are perhaps more nervous. But comments earlier suggest maybe a bit more balanced across the piece and that maybe the cycle has got legs, and you feel a bit more comfortable. So interesting color there. And then secondly, on the sort of structured fund solutions, you're kind of differentiated in accessing the private client space. Do you expect that, that will be a much more important growth source versus, say, other clients looking forward just because of your competitive advantage? Or should we expect the demand from clients remains pretty balanced?

Bruce, I'll take the first topic. So you are right, we have seen pockets of froth develop really in all of the asset classes. And we have a very robust debate every Tuesday in our investment committee as we're going through our various pipeline and as we are allocating resources between pockets. We haven't found any kind of bubble-like symptoms kind of affecting entire asset classes or affecting entire regions, but it's more situation-specific where we feel like there's some irrational behavior going on in this little pocket, and so we redirect resources elsewhere. We've actually found a reasonably constructive risk return profile. You have to work a little harder. You have to put more effort in. You have to turn over a lot more stones. You have to be more focused in terms of where you allocate your resources. But with the size of team that we have today and the number of professionals that we have, we're still able to find reasonable risk-return opportunities for our clients. Second question, André, do you want to take that?

Yes. In terms of like the semiliquid structures, this is an exciting offering. I really believe it's differentiating because we have 4 asset classes that we can invest in direct kind of asset. We own control, but we can also invest in the secondary market. You combine all of this, it's a pretty differentiated offering. And competition is strong, but I believe this combination of asset classes, global footprint, various investment styles, that is what really what differentiates Partners Group. Now what we do with the companies, we want to be really disciplined, and we want to actively steer these cash flows. So Partners Group is a long-term investor, not the short-term kind of investor. So we actively manage these inflows. We want to -- we don't want to raise too quickly, build up too much cash and dilute investors. That's why kind of like today's assets under management contribution of, let's say, 20%, 25% is what I would expect approximately for the future. We don't have the ambition to outgrow the overall platform by accelerating the pace and the growth of this structure.

[Operator Instructions] We have a question from Ms. Andreas Venditti from Vontobel.

First one, on the change of the AuM reporting currency to U.S. dollars due to the anticipated growth in U.S. dollar-denominated assets. Shall we see this as a confirmation that's the build-out of the Denver hub is working and that you would expect a bigger demand in future from this region? That's the first one. Second one, also on semi-liquid and the differentiated offering you have there, could you maybe talk us through your thoughts related to potential regulatory changes in the U.S. related to the SEC that might be coming?

Yes. Andreas, regarding the demand of the switch to the U.S. dollars, this is more a global kind of -- it's globally driven. We have -- the majority of our programs are euro denominated -- are euro denominated still. But the net growth, the net inflows in U.S. dollar-denominated assets is more a global theme. We have more and more clients requesting a global -- a U.S. dollar sleeve or U.S. dollar programs. And if we continue to raise kind of more U.S. dollar-denominated programs, it just makes sense to align currencies. It has nothing to do with the Denver campus. But on the other hand, obviously, we want to increase our fundraising efforts in the U.S., I think that is a theme you know already that we want to grow our presence in the U.S., and that's why I think you can combine those 2, and that is the reasoning behind it.

In relation to regulatory change, I assume you refer to like this expanded definition of what an accredited investor. I believe it's relevant and important. I believe the private market is an important asset class for institutional investors, it has been so for quite a while. Providing access to private markets also for accredited investors is something that I believe is very beneficial for these investors, and I welcome that change. It's important that the investment managers to provide solutions for these investors really excelled portfolio construction, proper diversification, deal flow. So it's not -- while I welcome maybe increased demand for such investors, I really believe it's important that you cater to this need in a very particular way, like firms could have done for certain offerings for more than a decade.

We have a question that's come in over the webcast. Somebody asked about the opportunities that we see in the secondary market. One of the things that we have appreciated about the secondary market more recently is that there's been a shift from more tail-end portfolios, where we have not historically allocated a lot of client capital towards more what we call inflection assets, which are typically funds that are 2 to 5 years old and provide more upside to investors. And so that's been one area of interest for us. In addition to that, the infrastructure secondary's market is developing nicely. Secondary volume for infrastructure is expected to increase in the next couple of years on the back of record primary raising. And so we have been organizing ourselves to be able to really take advantage of that opportunity as it unfolds here over the next year or 2. In addition to that, we were asked about our investment strategy for Asia Pacific. Asia is interesting. If you look at a lot of the market statistics, it suggests that the investment volume in Asia is high 20% in some recent years in terms of percentage of overall transaction volumes. And for us, it's markedly less. I think it was around 17% this year, and it's been even a little bit less, maybe 14%, 15% in some years past. And so we have been underweight this region for a couple of few reasons. Number one is when our clients come to us, they generally comes for institutional quality opportunities. And that many of the opportunities that we've seen in Asia Pacific, historically, have been in noninstitutional situation, so investing behind a founder or in a non-institutionally controlled situation. And we have oriented our Asia Pacific activities to be very much aligned with the rest of our platform to be focused on institutional quality, institutionally owned and controlled situations, which maybe limits the opportunity set but provides our clients with the same global standards for our content across regions. And so that's how we think about Asia Pacific right now.

That -- thank you, Dave. With that, there are no further questions, I assume, on the line. And thank you very much, and looking forward to see you all in March at our financials presentation in Zurich. Thank you very much.

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