Partners Group Private Equity (PEY) has seen its five-year annualised return fall into negative territory as it prepares to give disgruntled shareholders a 30% exit.
Interim results show that six successive months of investment losses knocked 8.6% off the net asset value (NAV) of the investment company in the first half of the year, nearly as much as it shed in 2025.
Chair Peter McKellar said the “continuation of the poor NAV performance” by Swiss fund manager Partners Group meant PEY had generated an average -1% investment return in the five years to 30 June. Over 10 years, the annualised annual return was only 6.5%.
“Such performance is disappointing and below what the board expects,” said McKellar who will next month publish details of the new share realisation class announced in June that will see it return up to 30% of its capital over a period of time.
PEY’s euro shares have tumbled nearly 29% this year as its poor underlying returns have alarmed investors with the discount, or gap, to NAV widening to 36% from 19.6% at 31 December. This fuelled demands for the gradual exit which will start in the third quarter.
The company blamed investments in 2021-23, which were made at high prices and relied on large amounts of debt before interest rates shot up, for generating nearly two thirds of the half-year loss. The rest was largely due to softer trading conditions caused by the war in the Middle East.
“Against this background, the investment manager remains focused on delivering new and existing value creation initiatives at investee companies. For the board, the focus is on finalising, and executing on, the reconstruction proposals to be sent to shareholders in September,” said McKellar.
While other private equity funds also invested poorly at the peak of the market three to five years ago, PEY did at some scale with this vintage accounting for 48% of the portfolio in June.
Partners Group said the 2024-26 cohort of investments accounting for 21% of the portfolio were “demonstrating encouraging early momentum”
Three private companies in particular drove most of the write-downs in valuation. The biggest was United States Infrastructure Corporation, which lost customers as construction companies took the task of locating buried gas lines and water pipes in house.
Emeria, a French real estate services provider, also struggled to retain customers, while Pharmathen, a Greek medical technology group, was hit by restrictions to its US exports.
Performance of its publicly listed companies was “mixed” with Vishal, an Indian discount retailer, slumping at the start of the year despite strong operating performance. PEY reduced the position with the €15.4m (£13.2m) sale of a 14% stake in March. It also sold out of Galderma, the Swiss dermatology company, making €19.3m (£16.6m), 3.5 times its original investment.
With exits and sales from four private holdings, PEY saw total proceeds from its portfolio jump to €110.6m (£94.8m) from €39.6m a year ago. That enabled it to return €35.7m (£30.6m) to shareholders through dividends and share buybacks, make €13.5m (£11.6m) of investments and lift its cash balance to €51.2m (£43.9m) from €8.1m at the end of December. Its €150m credit facility remains undrawn.
Our view
James Carthew, head of investment company research at QuotedData, said: “Across the listed private equity sector, the message has been that exit activity needs to pick up before net asset values (NAV) start to rise. That is being borne out, with double-digit NAV return from Patria Private Equity (PPET) over the past year, for example. However, in Partners Group Private Equity’s case, achieving exit proceeds of 14% of the portfolio in just six months has been accompanied by another NAV fall – largely driven by poor stock selection decisions. It now stands out as the worst-performing trust in its sector. That suggests to me that the 30% realisation opportunity will be taken up in full.”
