- Strong first half results fails to inspire market
- Private equity market outlook remains uncertain
- Debt financing instability holds back private equity activity
Shares in Swiss investment management company Partners Group Holding (PGHN:SWX) moved 0.6% higher to CHF 968.6 following the announcement of first half results that were ahead of expectations.
Management confirmed guidance for full year 2022 gross client demand of $22-to-$26 billion.
First half results exceeded analysts’ expectations with a 9% EBIT (earnings before interest tax depreciation and amortisation) beat.
Total revenues of CHF 881 million represented a 5% beat on improved management fees. However this was partially offset by lower than expected performance fees.
HIGHER UNCERTAINTY IN PRIVATE MARKETS
The valuation correction that has been taken place within public equity markets has impacted Partners Group's private equity portfolio valuations.
These have fallen by 5.2% during the first half of 2022.
The increased uncertainty regarding the reliability of private market valuations has been reflected in the growing divergence between the bid/offer spread (the difference between price being asked by sellers and the price buyers are prepared to pay).
This ambiguity over private equity pricing of assets is impacting transaction volumes and realisations.
Rising interest rates have caused instability in the debt financing markets.
The high-yield market has almost ground to a halt. A mere $83 billion of risky debt has been issued so far in 2022, 75% less than in the same period last year.
Private-equity firms no longer leverage firms with debt of 85% of the total value. Last year the average loan-to-value ratio for private-equity deals was closer to 50%.
However until debt markets stabilise the environment for private equity deal-making is likely to remain decidedly frosty.
EXPERT VIEW
Commenting on today’s numbers Jefferies analyst Tom Mills said:
‘First half results are reassuring strong with a 6% management fee beat helping to drive a 9% EBITDA (earnings before interest, tax depreciation and amortisation) beat’.
