Ladies and gentlemen, welcome to the annual results 2021 conference call and live webcast. I am Alice, the conference call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to David Layton, CEO. You will now be joined into the conference room.
Great to be with everyone. Welcome to our annual results call. My name is Dave Layton. I'm the Chief Executive of the firm, joining from the U.S. I'll be on today with my partner and our Chairman, Steffen Meister, as well as our partner and our CFO, Hans Ploos. We're excited to present our results, but before we get into it, I wanted to provide you all with a little window into our four-day investor conference, which we just finished wrapping up here in the United States. We had a few hundred attendees from more than 20 different countries. After virtual events in 2020 and 2021, this was the first in-person conference that we've been able to hold in a few years, and we were very, very pleased with the take-up.
We actually held the event inside of our Americas headquarters in Colorado, which was a unique and a meaningful venue. We got updates from many of our clients on their outlooks and their reactions to the current market dynamics. It's sufficient to say that despite geopolitical turmoil at the moment and the noise and volatility in the market, we continue to feel very good about the private market industry's structural tailwinds and about our positioning. Because last week we discussed with our investors what we see happening in the broader market, how we're positioning ourselves as transformational investors and as business builders. We held detailed investment reviews and portfolio reviews.
We walked our clients through each asset class, and we provided deep insights into our new investments, exits, our portfolio developments across asset classes, and our thematic investing top topics, as well as numerous examples and case studies of the impact of our entrepreneurial governance approach, which enables us to successfully navigate today's very complex market. Now, in the first section of the presentation today, we thought it would be interesting to share with you all our outlook for the industry, which we discussed in detail with our clients last week. With that, Steffen, we'll hand it over to you.
Thank you, David. Good morning, everybody. Also from my side, it's a pleasure to have at least partially an in-person annual conference event again. As Dave said, last week, we spent quite a bit of time with our investors talking about the business overall, but also the outlook, sharing some perspectives. I wanna start today and kick this off actually with the same presentation, sharing the perspectives around private markets that we shared with our clients. We think it's of similar interest for shareholders, for analysts, for media. I'll use the same materials, but I don't have as much time actually as I had last week in Denver. To warn you, I'll do this a little bit faster, okay? I'll use the slides.
We'll not go through all details of the slides, but I'm sure if there's questions, we'll find some time in the Q&A or after the presentation on a more bilateral basis. The title is Private Markets Become the New Traditional Asset Class. That's a pretty bold title, I realize that. Let me try to walk you through our considerations here in four steps. One is we wanna talk about the change of roles between public and private markets over time, and as we see that to continue. The second topic is how we see the broader economies in the future increasingly being built in private markets, actually.
The third one is with all of that, we will see growth, maturity for market competition, and that will eventually lead to bifurcation, active and passive investing also in private markets, and we'll explain that, and also our answer to these, opportunities and challenges. With that, let me dive back a few decades just to give a little of context. This industry started with buyouts mostly that were essentially highly leveraged investments into household names with some form of dismantling strategy in mind. A bit like event-driven hedge fund strategy. Very, very opportunistic. These were the good old times of the IPOs. When public markets looked for household names, brands, stability, robustness in a very risk-averse way, actually. IPOs at that time were the pinnacle of corporate developments of companies. That started to change quite a bit 20 years ago.
On the one hand, what we saw was private markets more institutionalized by then, less transactionally oriented, certainly with less leverage, reaching out to the broader economy and becoming much more of a standard allocation for many investors globally. At the same time, we saw public markets changing quite a bit their stance towards investments. They developed this incredible appetite for startup companies at the turn of the millennium. Suddenly they start to find it's not only profitable businesses for corporate development reasons, but suddenly they also give essentially capital at a valuation that was unthinkable in venture capital and growth markets, in private markets. That was the start of a bigger change. In the last 20 years, I think this only continued. We see today private markets nearly a bit more boring asset class, very long-term oriented.
Leverage has come down pretty much across the economy, financing mostly profitable businesses. Today, public markets, if anything, they focus really on non-profitable businesses, we'll see that, and offering essentially a valuation arbitrage and really disproportionately rewarding speculative growth that you would actually not see in private markets happening. Let me try to put some numbers behind that. The first is an observation here that the composition of the public market or the dependence of the broader economy has certainly come down. You look at here the Standard & Poor's 500 index, and the allocation to the more traditional economic sectors has come down by about a quarter only in the last 10 years. Why is this happening? One big reason is because the IPOs do not represent any longer the broader economy.
You see it's really in the year 2000 where we saw the start of a new era in IPOs. There's one fundamental thing that happened at that time. The ordinary company would not do an IPO anymore because they got the financing for capital formation, or they got the proceeds for an exit, for an owner, for instance, for an asset in private markets. There are really only two main reasons left in the last 20 years to do an IPO. One was if an asset was too large for private markets. Still as of today, if an asset has an enterprise value of CHF 20 billion, CHF 30 billion, CHF 40 billion and above, that's very hard actually to transact in private markets. A second reason more often is the valuation arbitrage.
A valuation arbitrage is not just across the economy, it's with a particular focus on these assets that show more of the speculative growth. I wanna show you this by using here one dimension, that's the profitability of companies that get IPO'd over the last 30 years. What you see is that this percentage has come down from or close to 100% 40 years ago to about 85% in the 1990s. That's by the way, U.S. IPOs, I should say, to about 20% today. Today it's one out of five companies that has a positive earnings per share number during the IPO. What are the companies that actually do an IPO today?
The last two years, about two-thirds are SPACs, so that's very far away from traditional IPOs, and about a quarter is actually, I would say, the more traditional type of IPOs, that we know from the time maybe 20, 30, 40 years ago. What's interesting is if you look at this quarter, 26%, and we ask the question, where are these companies coming from? Who has financed these companies previously? You'll see that 89% had a venture capital or private equity background. In other words, in a very ironic way, it's the private markets that now drive this kind of piece of the IPO market that is still a bit more the traditional part of it. Why are private market firms doing this like ourselves? It's not that we believe public market is so much a better place for our companies.
Actually, it takes quite a bit of convincing of owners, of the boards, of management teams to go into the public market process. There's a simple reason, it's exactly that valuation arbitrage. We have a fiduciary duty to get maximum out of our realizations, and so often this can be the IPO that has a better valuation tag than the private markets. But there's clearly a tendency here, I mean, that these are companies that are often more growth capital oriented and that really appeal to public markets. Now, I think what's important is to quickly pause for a second and just kind of think about what that really means, what's happening in public markets. It's important, I think, to understand the psychology of public markets and private markets.
The IPO used to be a strategic corporate development tool 30- 40 years ago. Today, the IPO is a tactical financial instrument for capital formation or for realization of investors. It's a massive change of the psychology and what an IPO actually means. Let me take a bit of an additional perspective beyond profitability, and it's a little bit more complicated, I have to warn you, but I think it's important to understand what's going on between public and private markets. I wanna introduce here a little definition. I wanna refer to certain activities in the economy as foundational as far as they concern the creation of services, products, providing critical infrastructure and installations. Often, they are more human or capital intensive. You see some keywords here, R&D, supply chain, machinery, installations.
Typical company like Rovensa here at the lower end, you see, one of our portfolio companies. It's a biological agriculture support product company. Very typical foundational, so very, very strong, very, future economy oriented. However, B2B, a little bit operating behind the scenes. There's companies that are not behind the scenes, a little bit more in front of the curtain on the stage. We call them, that's really for lack of better word, spotlight maybe-oriented activities. Those that focus a little bit on the delivery of end customer branded IP services and products. High public awareness, often less human and capital intensive. You see some of the success factors, network effects, information capital, brand, intellectual property. Companies like Google would certainly be part of that group. Let me be clear. There's companies that flow all the way through this iceberg here.
I mean, a company like Nestlé, I mean, clearly has a spotlight effect, but also a lot of foundational elements. The second comment I would make is that this is not judgmental. There are great companies on either side here of this waterline. There is one comment I want to make, and that is that the public markets disproportionately value these spotlight elements. There are thousands of examples. I want to just take one we have come across last year when investing in one of our portfolio companies, a healthcare apparel business. It is a company that produces the medical uniforms, scrubs for nurses, for surgeons, for doctors, with special textiles, materials, and things like that. Very strong company. They had one of their competitors in public markets, actually. I would say a little bit less foundational in their activities and strong, but very oriented towards this direct-to-consumer healthcare strategy.
With that, they got a valuation which was at peak 10 times higher than what we actually paid in the private market space. You wonder maybe why is this happening? Why is there this kind of bifurcation valuation on these kind of businesses between public and private markets? I think there's two reasons. The first reason is that there is probably an expectation that some of these non-foundational activities are a little bit simpler. They can get more viral. They can probably grow faster. There's a little bit of winner-takes-it-all effect. I think in some cases that's true, in some other cases probably not so true. And also keep in mind, winner takes it all means there's usually one or two winners. There's not thousands of winners. Often, the hurdles of entry aren't actually that high in these businesses.
Let's leave it there. A second reason is that increasingly it seems that public market investors have a sense that the new economy. The most successful business in the future, they need less these foundational activities. They all look a little bit like these spotlight kind of companies, and that is extremely wrong. Now I wanna quickly walk you through one example here. I picked the food value chain or the modern, the future food value chain as example. Food value chain is one of our, what we call internally, a mega theme, which is really a cluster of themes where we see a lot of trends changing, the future activities in that part of the economy.
If you look at the typical food value chain today or the modern chain, you have delivery with companies like DoorDash, $30 billion market cap, negative earnings, at least the last time I looked it up. Typical kind of spotlight company. You have the actual value chain or ecosystem of the food value chain. There, and this is a very simplified way of looking at it, between restaurants, food production, food processing, agriculture, plus then of course, the derivative or the second layer, which is supportive functions like water treatment and irrigation and food packaging and a lot of other things. Very simplified. What you'll see is that below this waterline, these companies that are more foundational, a little more B2B, they're very strong companies.
They're driving the new economy maybe more than actually the last mile delivery companies, but they all happen to be in private markets. This is exactly because they prefer private markets. Size-wise, it works for them, and there's just no reasons for them to do an IPO. Most of them will never do an IPO, actually. This is clearly showing, in this example at least, you know, how these foundational elements that are financed by private markets, much more from the public markets, are extremely critical for the future. Now, you can generalize that, and I'll do this very quickly here. If we look at the other 11 out of about total 24 mega themes we have in our corporate equity business, and for each, I do a similar kind of analysis of the whole value creation.
I look at whether they're a little more foundational, then we fill this low part of the iceberg here, or a bit less foundational, that's the upper part or both might be filled. If you look this systematically through all these mega themes, and I do the same for our real asset mega theme, you will see that the vast majority of these mega themes that in our opinion will be absolutely critical for the next 10, 20, 30 years, the building of a new economy, of new businesses, they are very foundational. In other words, this huge economy will still be driven largely by these foundational events. What that means in turn is that a lot of that will actually be driven by private markets and not necessarily by public markets. I wanna pause here and just, you know, summarize, I mean, our perspective.
What that means is with the current way of how public and private markets operate, we see that there is a tremendous opportunities in the 10, 20 years ahead of us as it is concerning the building of the new economy through private markets. That's the good news. Now it gets a little bit more challenging. I wanna turn from the investment side to the fundraising side. How big is actually this private market economy going to be? I start first maybe with a observation that I don't think it's actually so well known in the market out there. Since 5 years when you look at the new activity, so new fundraising, private markets, equity capital, relative to traditional, issuance and IPOs, you see there's more fundraising actually in private markets over public markets.
I think it's important because most people when they look at public and private markets, they look a little bit into the mirror and they look at the past, and of course public markets are 100 years older, so there's a big stock of companies out there in public markets, much bigger. If you look at the change, you see actually there's more happening in private markets already these days. Is this going to change? We don't think so. We have seen, on the institutional investor side, there's some numbers for the largest 25 in the world, a doubling of allocations over the last 10 years. Many of them are actually our clients. When we speak to them, we expect actually with what they also see in private markets happening, a very similar development in the next 10 years. There's more than that.
There's new pockets of capital. We see that VC markets increasingly open up. It started in Australia. We see it happen in U.K., and I think also eventually in U.S., these markets will not be shielded anymore from the better private market returns, and there's a lot of push that, there's more activity there. Finally, I mean, you hear a lot about the democratization of private markets. There's clearly also a trend that there's more private clients, more retail programs eventually coming up. All of that probably means that, there's a good chance we see again a tripling of the size of the market like in the last two decades. To be honest, it doesn't really matter so much whether it's getting to 20 - 30 - 40 trillion. That's not even so much the point.
The point is, as we go directionally to this kind of number, there's probably 1 problem which is there is hardly any large investor that will not in 1 or the other way try to be active in private markets. What that will mean is a massive competition in private markets, much more similar to what we know from the public markets the last 30, 40 years. Next to thousands of private market firms, you have corporates, you have large asset managers, sovereign wealth funds. I read over the weekend actually 10 days ago that hedge funds invested $2,180 billion in private markets. There's a big change here. With that, structurally high valuations, there's nothing like a free lunch, very, very effective markets.
There's also these timelines for transactions which come down, I mean, a little bit like block trades really in public markets at times, which are completely crazy. I mean, there's no way you can really transact in these timelines unless you prepare for these investments well ahead of the actual transactions. What's the outcome of all that? Well, I think it's a little bit similar to what we've seen in public markets, but with a little bit different, let's say, meaning. Let me go quickly through that. We are absolutely convinced that we see more of a bifurcation in private markets between more passive and more active investment. Especially a lot of these newer players, a lot of the GPs who are in today, but also a lot of the newer investors will be more passive.
Passive means something different in private markets than public markets. Passive means that investors dedicate most of their time and their resources on the transactional side of things. That means they try to understand with brokers, intermediaries, what kind of transactions come to the market. They try to get involved. They do this maybe based on some form of, I don't know, sector analysis, a bit crude, a bit like what we know from public markets. That's the passive side. Active means nearly the opposite. Active means you spend your resources and your time either before the actual investment transaction, that can be a year, 2, 3, 4 years' time, or you spend it once you own an asset, on the asset, working with the company and to create value in the company. We believe we see some of that bifurcation already today.
Let me explain that. We have last year seen a pretty interesting report coming out of Preqin. That's one of the largest provider of data, especially performance data in private markets. What they did is an analysis of the largest 30 buyout firms globally, and they looked at the average rating quartile ranking of their funds since the global financial crisis. The logic was they said, "Well, after financial crisis, we've seen a new era in private markets with much more focus on value creation," or that's at least what people say they are doing. They wanted to look a little bit at how does performance stack up relative to the positioning and the promises of people.
What's interesting, because when we looked at that in more detail, we found that there's a little bit of a clustering actually between their performance and some of their positioning. What we did is actually we looked at that from a little bit different perspective and actually took the largest 50 groups in the world by AUM. Overall AUM, the largest 50 in the world, and we look at the quartile ranking of their buyout funds between 11 and 13 vintage years relative to size. What is interesting is what you see here is that on the right-hand side at the bottom, that some of the most successful firms in the world, successful measured by AUM growth, you know how large these are. In the meantime, they're a couple of hundred billion dollars on average, these large firms.
They're not quite holding up there in terms of performance relative to the best. There's a group of firms that somehow lost a little bit their positioning. Some of them were actually brand names back in the nineties, very early players in private markets, but they're kind of a little bit stuck between either size or resources or active investing. You see a group of very successful but smaller firms. They cannot play at scale, but very, very successful. You have a number of firms, including Partners Group, that are fairly large, that clearly go for scale but don't compromise scale versus return. Everybody here says they're active, okay? Let me have a word quickly on what really active means in our opinion.
Active with what I said before in terms of the pre-transaction phase and the actual ownership phase means essentially you are a business builder or an asset builder. That's the only way you can really be active. Everything else is probably more of a branding thing. Where do you learn to be a business builder? I have to tell you, and I told this very bluntly at our LP community last week in Denver, this is not something you learn in private markets, actually, because the market historically has been very transactionally oriented. This is actually something you learn from, for instance, the best conglomerates. This might sound a little bit controversial because there's also terrible conglomerates that failed, but there's also some very good ones. There's a lot of similarities, right? Conglomerates have like a corporate entity that's centralized. They have a portfolio around it.
They have centralized resources, centralized investment, divestment decision-making, and so forth. What you learn from the best conglomerates is really five things. That's why we hire a lot of people, not from the industry actually, but from these kind of institutions. You learn about the strategic rigor in the industrial logic in whatever you do. The second thing you learn is the operational value creation, meaning you don't focus on large M&As. You focus maybe on smaller ones, platform building, a lot of organic growth, R&D, and things like that. You learn about a very managed, very actively managed playbook, base managed, but decentralized, very entrepreneurial governance, which is really the secret for the success during the holding.
Then you learn about how you apply best in class systems, processes, and how you go about leadership development, recruiting in a centralized way, so that you can dispatch actually the best talent across the portfolio over time, again and again and again. As you have heard us in the past, and you'll hear us a lot in the future, talk about thematic or transformational investing. Transformational investing is really our playbook for business building, and it's really the answer to these challenges and opportunities ahead of us. We see that based on these two pillars. One is the thematic investing, that's the pre-transaction pillar and the actual entrepreneurship at scale. Dave will talk a bit about that later on.
In summary, what we shared last week with our investors and what we'd like to leave with you today is that we have a clear conviction that we are actually in the next decade, seeing private markets become the new traditional asset class for many, many investors. We see this because we believe there's a clear change of roles between public and private markets. The broad economy is clearly built increasingly in private markets, but with that, we see more competition. We see that bifurcation change of the dynamics in the industry and that's why our answer to this business building or transformational investing. Thank you.
Thank you, Steffen. It's so true, and it should give you all a very good context as to why we're putting so much emphasis on transformational investing and on business building. Let's turn now to the next slide and quickly recap 2021. This will be an important introduction to our financials. Last year was clearly an exceptional year. You may recall in 2020, I told you that I was feeling positive about realizations and investment activity for 2021, and this positivity was clearly manifest in our results. We had CHF 31.7 billion in new investments. We operate in a competitive market, as Steffen just mentioned, and attractive private markets content is indeed a scarce resource. We felt very good about our ability to secure this level of attractive investment for our clients.
We had CHF 29.1 billion of realizations during the period. As we mentioned on our last call in January, both investment and realizations were aided by a pipeline rollover effect from 2020. We also took advantage of the strong market to bring forward a small number of realizations that may have, at one point in time, been projected for 2022. This level of realizations was quite exceptional and our clients are expecting this to normalize next year. Looking into 2022, we know that it's an uncertain global situation, but based on our insight to date, we don't believe that the Ukraine crisis has fundamentally impacted the demand for quality private markets assets. Private debt financing continues to be available from private funds, and investors seem to be keeping a long-term view. Accordingly, we continue to feel good about our 2022 outlook.
We will of course do recognize that a prolonged period of market volatility, maybe extreme instability caused by the geopolitical crisis in Eastern Europe, inflationary spiraling or more extreme supply chain disruptions, these things could of course lead to a further weakening of economic growth. It's been a strong start to the year, but we will of course watch these factors closely and keep you all updated on market throughout our results calls during the year. We've already onboarded some exciting new investments to the portfolio this year, which is great. Let's move to the next slide. We spend a lot of time as a leadership team selecting new investments in our investment committee with a strong focus on quality.
As you all are aware, we put a lot of emphasis on developing those assets to their full potential with our governance approach. This quality focus and the impact of our strong ownership approach shows through in our portfolio performance. This was another solid year for us from a performance perspective for essentially all of our asset classes. Maybe just one word on infrastructure. In 2021, we had a record number of new investments within private infrastructure. Those new investments were obviously added to the track record at cost, which weighed on our overall net performance figures, resulting in a 9.7% IRR during the period. Mature assets in this asset class continued to develop as expected in the mid-teens. Moving to the next slide.
In the first section, that Steffen mentioned, we provided you all with an overview of where the industry is at. We believe that the private markets industry has the potential to grow to 30 trillion in assets under management over the next 10 - 12 years. As a firm, we're focused on being a high-quality institutional private market solution provider that can be one of the platforms prepared to absorb this continued shift of investor demand from public to privates. I wanna let you all inside some of our executive team's planning and walk you through some of the strategic initiatives that we believe will aid us to achieve sustainable growth over the coming years. Our strategic pillars are divided across the categories of investments, clients, and people. Our investment business will focus on transformational investing and on scaling investment activity.
Our client teams will be focused on continuing to differentiate us with bespoke solutions and on growing our client base in the U.S. Then lastly, but also very important as an organization, we'll be focused on developing our next generation of leaders and organizing for scale. Let's talk just a little bit about these dimensions. Our first strategic focus area is that of transformational investing, and we've talked a lot about that in the past, and we're going to continue to talk a lot about that in the future. Simply put, this is our approach to focusing on the most attractive sectors which we believe will benefit from transformational trends. Our sourcing is concentrated in those areas. Then after we successfully make acquisitions, we seek to roll up our sleeves and drive transformational change.
The end objective is to own well-positioned market leaders in areas of the economy that we believe have the potential to grow at above average rates for the next 10+ years. It's our firm belief that there's very little inefficiency left in the private markets, and if it does continue to develop along the lines that Steffen just outlined, increasing to $30 trillion in size, you better believe all of the inefficiency that does remain will be gone. Accordingly, we continue to strongly emphasize a continued shift away from the more transactional side of the business towards a more active approach. We're no longer in the quote-unquote, "deal business". We're in the business of transforming assets.
In order to maintain a growing pipeline of target companies to meet our investors' demands, we have been developing a very strong set of thematic teams focused on sub-sectors that we believe have structural tailwinds, and we'll further invest in research. Increasing our research capabilities will in turn increase the number of themes that we can cover at any point in time. We have dozens and dozens of lines in the water today, but we feel that we can do more and we can go deeper. We've also built out a dedicated team focused on helping us to strengthen entrepreneurial governance across our global portfolio and on finding directors of our portfolio companies that can help drive specific impact in various cases.
These are external resources that are very close to our teams, and they give us a tremendous amount of expertise and frankly, leverage. We'll also continue to invest in developing our investment leaders. We want them to think and operate as entrepreneurial board members of our companies with the mindset of a founder, not that of a typical financial investor. Transformation isn't just about financial performance, it's also about impact, and we'll talk about ESG a little bit later. Let's move to the next slide. We're a firm that's always thought about how to build an institution and an institutional approach in this industry. Before becoming CEO, I was operationally leading our direct strategy, which for any of you that have followed us for the past decade or so will recall was a big area of emphasis for us.
Direct assets have indeed been a strong growth driver, increasing at a 24% CAGR over the past few years. We'll continue to scale this part of the business. We will likely, however, be slowing down the treadmill a bit, extending holding periods for long-term winners. This is in line with requests from clients, and every year they seem to focus a little bit less on liquidity and a little bit more on compounding value. With all of the attention that we put on driving growth on the direct side, we have, however, not put as much strategic emphasis on our portfolio investing strategies during that period of time. Our growth in this category was only 11% over the past few years, which is obviously below the overall growth rate.
Well, it's not like the market for portfolio assets is any less robust, and we believe that we can reinvigorate growth here on this side of the business. We were perhaps a little bit less excited about the last 6-7 years of the secondary market. For example, we saw a huge influx of investment capital, lower and lower yields for secondary purchases. We picked our spots more carefully, and we grew a little below some of our peers as a result. However, if you look at the market today and where it's going, you see much more value-added underwriting, more concentrated portfolios, more potential for relationships to help influence outcomes with GP now controlling more divestiture decisions. We think today's market plays more to our strength.
In addition, we're gonna continue to scale our private debt platform through program innovation in both closed-ended and open-ended programs. A prominent example of this is our growing activity in the BSL market. In order to fully capture these opportunities, as well as the wealth of data in the secondary market, we're gonna enhance our data analytics support and our investment analysis to drive further effectiveness in our underwriting. Let's turn to the next slide. Now, moving into the future, as demand for private markets grows across a variety of investor types, we believe that the requirements for more sophisticated products and client solutions will also increase. We're positioning ourselves to be a leader here. The reality is that limited partnerships were tools developed for individual wealth creation in the nineteen seventies and eighties, and today they've been jerry-rigged to now hold trillions of dollars of assets.
They're not hyper-sophisticated tools. They don't tell investors when their capital will be called, they don't give them the ability to steer exposures during their life, and they don't tell investors when to expect capital back. It's possible that high levels of wealth creation in the industry may have pacified innovation, but we believe that as a client-centric firm, we can do more to improve the client experience. We see the demand firsthand. We've now reached 66% of total assets under management in bespoke client solutions. These are structures either created for the needs of a specific investor or the needs of a group of like investors. In these structures, we can really showcase our unique portfolio management capabilities, which enable us to tailor investment content to the specific objectives and parameters of each client's risk-return profile and predefined target investment level.
We'll continue to position ourselves as innovation leaders for the influx of smaller investors and private individuals seeking to access private markets for the first time, for whom traditional solutions are not always appropriate. For those clients, we will expand our differentiated evergreen solutions, which provide access to the same private markets investments as larger institutions get, but the wrapper is more conducive to their needs. When people think about Partners Group, when they see our puzzle ball logo, we want them to think that that's the firm that pulls together investment solutions from across asset classes into comprehensive custom solutions. We have great traditional funds for people that want individual puzzle pieces. I think our flagship funds stack up very nicely against our competitors in terms of performance. What truly differentiates us on the client side is our platform's ability to build bespoke solutions.
This is more challenging for some of our competitors because of how siloed many of them tend to be. Let's move to the next slide. One additional area of strategic emphasis for us is the growth of our U.S. client base. We're actively working to increase our presence here and to transfer the success that we've had creating tailored portfolios for European clients to the U.S. While the U.S. typically accounts for around 50% of our incremental investment activities each year, it only makes up about 19% of our incremental fundraising. We've been expanding our team and our reach in the market, and we've already increased our overall mix of U.S. investors from where it was just a few years ago.
It shouldn't be a surprise to anyone that we held our investor conference in the U.S. this past week with a number of key prospects sitting alongside our longtime investors. The VC market is still on the comeback in this market, but we will continue to position ourselves as thought leaders here, leveraging the same product innovation and the same technology that we've used in the wealth space in the U.S. with very good results. While this has been a strong market for us, growing at above average growth rates, we'll continue to invest in growing our incremental share of fundraising stemming from the U.S. We have the ambition to be above 30% incremental fundraising from the U.S. market in the medium term. Let's continue to our final two strategic focus areas on the next slide.
It goes without saying that our people are our most valuable asset. Every year, we look internally to promote leadership, aiming to retain our diverse and highly talented group of professionals who are responsible for our firm's growth. We took our foot off of the gas a little bit on hiring during COVID, but we're back hiring again full steam, and we expect to onboard several hundred employees this year. The last few periods have been some of our strongest for onboarding diverse talent, which we're very proud of. We're also investing CHF millions into our training and development programs, particularly for our emerging leaders.
We've historically been a quite centralized organization, and it's true that at certain times in the past, we may have put more emphasis on execution than leadership development, but we're working hard to ensure that the upcoming generations of leaders understand and live our values and our culture that has really helped us to be independent thinkers, and we'd like to see that continue. At the same time, we're investing into technology which will allow us to organize for scale and further improve our processes. In other words, we want to manage increasing assets under management with the same degree of operational excellence across our service platform.
To sum up, we strongly believe that these six strategic focus areas will help us to build on our strong foundation and will help us move forward into executing our vision over the next few years. On the next slide. We believe that we're uniquely positioned in the industry. As you can see, our assets under management are very diversified across programs and structures. We currently have around 300 various private markets portfolios that we oversee. Some of these funds are specific to a particular asset class, and others blend together content from multiple asset classes into more comprehensive solutions. From an investment perspective, we are diversified across more than 90 sectors. This means we're less likely to run into material issues with supply chain disruption or sector-specific volatility. Let me give you some numbers.
In oil and gas and drilling and exploration, we have an NAV exposure of about 3%. In agriculture, including farm equipment and related topics, our exposure here is about 1%. From a country perspective, we're also geographically very well-diversified. We have no direct investments in Russia or Ukraine, and our indirect assets under management exposure is only via third-party funds, and that is only 0.2% of our total assets under management. Our direct and indirect assets under management exposure to China is approximately 4%. Our strong diversification helps us to avoid a lot of concentration issues that other places have encountered. While we're aware of potential supply chain issues and volatility in the, you know, in the future, but we continue to believe that our portfolio demonstrates strength.
Today, we don't see any meaningful impact of supply chain-related disruptions on our returns. Let's turn to the next slide. As a firm, we have a steadfast commitment to responsible investment and stakeholder impact. We have our CSR report coming out in a few weeks, and I don't wanna front-run that too much. In that report, you'll see us establish clearly defined targets on both the corporate level and the portfolio level for our controlled assets. As a firm, we'll aim to achieve net zero emissions for Scope 1, Scope 2, and a detailed Scope 3 greenhouse gas emissions as part of our carbon reduction program.
At the portfolio level for controlled assets, we will implement our climate change strategy in order to create long-term value by investing in the low carbon economy and leading assets on their path to net zero. We also have a meaningful social and governance ambitions, which we'll be touching on on that call later. Let's move to the next slide. We discussed our outlook for 2022 on our last assets under management call in January. We know a lot's happened in the world since January, but based on the results so far this year in the first couple of months, we remain confident for the year ahead, and we affirm the guidance that we provided on our last call. We expect gross client demand of $22 billion-$26 billion.
Let me provide some sensitivity on that range. At the lower end of the range, that assumes more potential market uncertainty, and the conditions in transactional markets will soften to a certain extent. At the upper end of the range, that assumes a continued reasonably supportive market environment for fundraising and investments throughout the year. With that overview, let me now hand it over to my partner, Hans, who will cover the financials.
Thanks, Dave, and also a warm welcome on my behalf. 2021 was an exceptional year, and we're pleased to report a strong set of financials. Assets under management grew 17% to CHF 127 billion. Management fees increased by 25%, as we had the benefit from late management fees. Total revenue grew 82%, driven by a record increase in performance fees to 46% of revenue. Profitability remains strong at a 63% EBIT margin. We propose a dividend of CHF 33 or an increase of 20%. This is underpinned by continued strong AUM growth, healthy cash flow, and reiterates the confidence that our business will continue to deliver strong profitable growth. Let's look at revenue in more detail, starting with the management fees.
Management fees grew 25%, ahead of the AUM growth of 17%, as we had the benefit of higher late management fees following the closing of traditional funds, including our direct equity fund our flagship fund. Late management fees are reported under other revenue from management services and more than doubled to $132 million. If you look at the performance fees, we saw the performance fees increase to $1.2 billion and 46% of revenue. As mentioned by Dave, we had two things in 2021 which made the performance fees exceptional. First, we had the benefit of catch-up activity following the COVID year 2020.
Second, we had the benefit of some select portfolio realizations which were originally planned in 2022, which we brought forward to 2021 as we were already delivering on our value creation targets. This makes the year exceptional, and it's important to say two things to that. First, it's a testimony for the demand of the quality assets we're building, and that follows through in very strong performance fees. Secondly, this exceptional year, we need to watch when we go into 2022 and then look at the future that performance fees will normalize back to the 20%-30% of revenue as we always have been delivering in the past. If we go to the next slide, we see the diversification of our performance fees.
Performance fees come from over 70% different products and mandates with portfolios across multiple vintage years. If you look at the diversification across investments, over 70 direct investments and hundreds of portfolio assets did contribute to the performance fees, which confirm the strength of the diversification. If you look at the largest investment, GlobalLogic, that contributed 23% of the performance fees. Recall we made a 5x return on that investment. If you look at investment programs, the largest contributing program was a mature private equity evergreen program, which contributed 17% of the performance fee, all confirming the strength of the diversification. Let's now look at performance fees over time. Performance fees over time will grow with AUM growth. There's just a time lag of around 6-9 years.
If you look at the period since 2017, we delivered over CHF 3 billion in performance fees over the five years since 2017. They stem and come from investments from the period 2011 - 2016. If you look what we invested in the five years following that, 2017 - 2021, we invested more than double, which confirms that we continue to build a strong pipeline of performance fees. Let's not forget that the newer programs are more performance fee heavy as we have more direct investments into the mix. If we turn to the next slide, we see the revenue margin.
The first thing to call out, which is important, that we have management fee stability, because if you look over the longer period, our management fee margin is around 125 basis points or 1.25%. Yes, they vary in any given year, but that's more related to the timings of fee close. So we have underlying strength of price discipline as we also continue to innovate in new client solutions to keep driving against the client expectations so that we can keep that management fee stability. You see that this year, performance fee margin is higher because of the exceptional year of 2021. Let's turn to profitability. Our EBIT margin remains strong at 63%. The largest part of our cost is personnel cost, which are 88% of our cost structure. They increased by 100%.
First, we had higher performance-related personnel cost, which correlate with our performance fees. We allocate 40% of the performance fees to our employees, so the increase in the performance-related cost is a direct outcome of the exceptional performance fees. Regular personnel costs increased 28%. We had two things there. First, we had a higher bonus as we had higher management fees. Second, we had an increase in Social Security costs, which is related to the equity program as our stock price increased by 45% in 2021. If you look at the FTEs, as Dave already mentioned, our FTEs were up 4% to 1,573 FTEs. We had the benefit still from the hiring activity of the previous periods as we entered 2021, which gave us the capacity to deliver the growth.
We also recognized the importance to continue to invest in the teams and the growth and started to step up the hiring activity in the second half of the year to make sure we keep delivering on the growth and have the right headcount to support the future growth and build out our investment platforms. If you look at the EBIT margin over a longer period, you see that we have delivered, and this year we're also delivering on our target margin to be above that 60%. One thing to call out is exchange rates. We're a very international business. 44% of our revenue comes from euro-based programs, and 41% comes from U.S.-based programs. In 2021, that only had a modest impact on the margin by 0.2%, so exchange rate had not much impact in 2021.
If we turn to the next slide, we see the items below EBIT and our balance sheet. Along with our clients, we invest CHF 770 million into our investment programs. We delivered a 16% return on those programs, which yielded a CHF 76 million financial result in the P&L. If we look at the tax rate, our tax rate increased from 13.3% - 15.2% following two items. First, we repatriated dividend from the U.S., on which we have to pay withholding tax. Secondly, as our business becomes ever more global, that will have an impact on the tax rate. Therefore, we guide our tax rate to be between 14% and 17% in the years to come as our business is becoming more global. That leads to a net profit of CHF 1,464 million.
CHF 1.464 billion, which is an increase of 82%. Let's look also at the balance sheet. We have very strong liquidity of CHF 1.6 billion. That consists of a cash of CHF 900 million, and we have CHF 1.5 billion invested in short-term loans to our products. It's important to remember that in that calculation, we deduct our long-term debt of CHF 800 million, all confirming that we have a very strong level of cash and liquidity. Turning to the last point, our dividend proposal. We propose a dividend of CHF 33 per share, which represents a 20% increase.
Since the IPO, we have been growing our dividend in line with AUM growth at around 18%, and we continue to follow this progressive dividend strategy that we grow our dividend in line with AUM, because in the end, AUM growth is future earnings growth in management fees and performance fees. With that, it concludes the presentation. We would like to start with questions. We would propose that we first do the questions from the room. We have a microphone. It's important we use the microphone so that everybody can follow the questions here, and then we open the questions to the wider group.
Good morning. This is Daniel Regli from Credit Suisse. Thank you for the presentation, for taking my questions. I have a couple of questions. I think I start with three and then pass the mic on, maybe ask more questions later. My first question is about the valuation levels currently in the private market, and in how far do you see a danger to valuation levels in private markets coming from, let's say, higher inflation and consequentially higher interest rate levels? I would assume that your discount rates are quite sensitive to interest rate levels, and thus, if we have higher central bank rates, we also have higher discount rates and thus lower multiples in the market. Then my second question is just regarding investments and realizations. I just noted that over the last two years you had to.
If you deduct the realizations from the investments, you only had about CHF 1.1 billion net investments. If you want, maybe correct me if my view is wrong on this one, but is this causing any problems that you have kind of ample investment needs or you have an overhang in investment need in the next couple of years? Then maybe just my third question and last question for the moment regarding the timing of performance fees versus investment. Does the recent events like the cr- Pandemic and the corrections around the pandemic and now the Ukraine war. Do you expect this time between investment and performance fees to have become rather shorter or rather longer?
Maybe I start with the last one, and Dave, you pick the first two questions. As we said in the presentation, this year was an exceptional year on the performance fees, and we expect performance fees to get back to the what we have been done in the past between 20% and 30% over time. It's important over time. We don't see that from the timing, the 6-9 years that is structurally changing, and we believe the strength of our investment portfolio and how we build the assets, that will continue to do so.
What can happen in any given year, which we have seen in the year of COVID, if there is a little bit more volatility, that's last 2020 was a little lower, but what's in the pocket stays in the pocket, and it came back when the volatility goes a little bit away. We don't see any structural change in the ratio of the performance fees and in that time lag of investing to performance fees. Dave?
On the topic of valuations, you know, the academic impact of rate increases, and then you have the reality on the ground of really strong demand being present for high quality assets. Yes, it is true that the rates do have an impact on valuations, but we see real capital continuing to gravitate towards the type of businesses that we look to develop within our portfolio and for the exit discussions, you know, that we've been having and exploring, there's not a huge difference actually in the types of valuations that people are talking about right now versus what they were talking about six months or so ago. The private markets industry does tend to have a very long-term view.
Valuations remain quite robust, and obviously we're gonna have to watch it very carefully. We have debates constantly in our investment committee every Tuesday on our buy-in levels and looking at comps and what's happening to them. There's not been any structural shifts that have occurred within private markets valuations over the past point in time. With regards to investments and realizations, it's an interesting way to look at it, to kind of net the two out. If we had 100% open-ended vehicles, that would be an interesting way, particularly interesting way to look at it. We don't. We have 20-something% open-ended vehicles that need to redeploy the realizations that they harvest.
The reality is that you should compare the realization numbers with the investment levels about 6 years ago, on average. That's a more fulsome way to look at, you know, the impact that we've had as an active owner, and you'll see quite strong uplift over that period of time. The vast majority of the capital that we generate from realizations we return to our investors. But there is about, you know, 20-25% that of those realizations that we end up redeploying, particularly those in evergreen structures.
To that quickly, this last point. We try to have our dry powder around like 1.5-2 times annual investment level. That's how we kind of steer also the thematic investing side of things, the pipeline. I think we're pretty much also there at the moment. You see of course then, depending on when realizations happen, and last year was very active, you might see it a little bit more lumpy in one year. Another, 2020 was of course a very, very slow realization year. It's really the dry powder that we target when we build our pipeline.
Andreas Venditti, Vontobel. Your equity keeps on building. You're approaching CHF 3 billion now. I guess that's well above regulatory capital. Maybe Hans can say a word on that. Maybe to you, Steffen, I know you never considered share buybacks. What would make you change your mind on this? Another point on competition, you mentioned that it's getting hotter. We could read recently also relating to mid-market, more competition probably from both sides, from larger ones and smaller ones. Can you maybe talk a bit more on this, how you see yourself positioned on this one? Thank you.
Sure. Maybe Dave, you talk a bit about the competition. Shall I quickly go first? I mean, we actually buy shares all the time, so we should not quite forget that. We do buy shares because we wanna cover our equity programs, which has been a very material part of our compensation system 20 years ago, but is still quite relevant today actually, as far as the executive team or also the broader leadership team is concerned. We're pretty much at the same number of shares as at the time of the IPO, actually, the 26.7 million. I think beyond that, I think we're a little bit hesitant to now necessarily reduce further our share capital. Now you could argue maybe you can optimize something around that, and we do have some debt on our balance sheet.
I mean, we do have about a $1 billion yearly of investments alongside our clients that are a little bit illiquid. I think we see a little bit more, you can say maybe as a conservative entrepreneurial, maybe a little bit Swiss style measure of robustness and solidity. I don't expect that this is something that is going to change. We feel pretty comfortable, and I would say the marginal impact you have with a little bit of share buyback, we don't necessarily attribute so much, you know, importance to that or relevance.
Which I think is consistent with being builders of business versus financial engineering. Yeah, we have a strong balance sheet, and I think we prefer that strong balance sheet. The question relates probably with the dividend. We believe it's important that we grow our dividend in line with AUM, because over time, that is, in essence, where, over the years, the business performance will follow through. Last year we had a higher payout ratio because we grew it with AUM, but last year, performance fees were lower. The payout ratio last year was 90%. This year it's a little lower. I think that's from a long-term perspective, gives a good predictable dividend in line with our business growth, which then yields future things, and that is underpinned with a healthy balance sheet.
With regards to competition in the middle market, the middle market's always been competitive. It's a little bit less competitive than maybe some other segments. It'll surprise you sometimes because you have the smaller firms that every once in a while will punch above their weight class, and you'll have competitors that you weren't expecting, or you'll have some of the larger firms that'll move down a weight class every once in a while and add to competition. The mid-market is in fact a competitive segment of the market.
One of the things that we're finding is that in order to differentiate ourselves because there's a lot of money in almost every segment of the market today being early and spending 1 year, 2 years, 3 years in advance of a formal sale process kicking off getting to know that specific business and everything there is to know about it from an outside-in perspective is really the way that we're standing out in a lot of the processes that we're competing in. We're willing to spend those speculative resources on businesses that won't be for sale for 1, 2, 3 years. A lot of firms with less resources haven't been willing to spend that. We've been able to outmaneuver a number of our friendly competitors as a result of that. It is competitive, but we're finding our way just fine.
There are still some questions over the phone. Any chance to have the people on the screen maybe on our line, or?
Sorry, can you hear me?
Much better now.
Say it again, Bruce.
Start again, yeah?
Thank you.
Okay, yeah. In terms of performance fees, it sounds as though given the increase in direct investments, we should be thinking perhaps upper end longer term of that 20%-30% range. I guess for 2022, are you saying it should be in the 20%-30% range, or you simply don't have enough visibility, so it's possible it could dip slightly below like 2020, but that it's just a delay? That's kind of the message, just to make sure I've got it. Secondly, on the investments in terms of, you know, FTEs, should we expect that there might be a bit of a dip in 2022 in EBIT margins because there's a bit of a catch up in terms of investment in headcount in the platform, or am I sort of overreading?
Finally, on the point around sort of active, passive within private markets, would it be true to say at the moment that the kind of the competition on the passive side is strongest in buyout and growth equity, i.e., from hedge funds and long-onlys who perhaps don't do the transformational work, so it's just kind of putting capital in, or is that too simplistic? Thank you.
Let me start with the performance fees. I learned a new phrase in Switzerland once, "Don't get ahead of your ski tips," which means, make sure you deliver what you need to deliver. We think that 20%-30% we are able to replicate, and it's good to recall that over the last 5 years, we've already had a fair share of direct investments. We were in the middle of that range, to be precise, 26%. I think it's too early to talk about specifically 2022. We have a strong start of the year, but there's also some volatility. It's very hard to give a specific number for any given year because of that.
I think what is always important to remember with the quality of assets we built, that what's in the pocket, like we have seen with COVID, comes back because there is just high demand for the quality of assets we built. I would just modeling with that in mind, and I think that's a good statistic to use. On your question on the headcount, yes, we will see some catch up into the hiring into 2022. Should also not forget exchange rates. Might be a little bit more challenged this year, but we will continue to deliver a margin of 60+, as we invest in the future growth of the business, but in any given year, right, because of the ebbs and flows, it can be a little bit different. That structurally continues to be a strong margin.
Dave, do you want to talk about the?
On the active versus passive. Steffen, you can clarify. I don't think it's limited to growth in VC investors in that passive category, Bruce. I think there's a lot of private equity firms, thousands and thousands and thousands of buyout firms out there, a portion of which we believe have been going long leveraged equity, with more of a transactional mindset. I think the distinction is much more with regards to how you orient yourself as a business. Do you orient it around more transactional buying and selling and trading activities? Or do you orient yourself around rolling up your sleeve and fundamentally impacting the companies in which you invest? Steffen, maybe I don't know if there's anything you add. It was your classification, but.
I think the involvement with the growth capital business or with the VC business is quite different than with an established firm. If we talk about, for instance, this entrepreneurship at scale, what it really is about, you know, bringing this institutionalized way of business building to these companies, whether that's now how we operate the board, how we define these value creation initiatives in a very systematic way, and we are pretty brutal in how we actually implement this in a very systematic way, also the playbooks and things like that. That is very different from a, for a growth capital business. If you have an entrepreneur who started a business, I mean, that is maybe even still negative on the EBITDA, it's different type of decisions that you have to make or not to make to bring that business to success.
It's probably not the fine-tuning of a playbook on how you run HR and supply chain and things like that. It has much more to do with the, I would say, the crude strategic analysis of how you position a product, how you position a service, how you think about competition. I would say in both cases, I think an active investor can make a hell of a lot of difference. I do think it's two quite different ways of interacting with the entrepreneurs or the management teams between the two. What we see is clearly, I mean, where there has been an influx of massive amount of capital from hedge funds. I mean, hedge funds, the $180 billion that has mostly been put into growth capital in VC.
I mean, that is where we actually see least involvement on the active basis. It's pretty passive financial investment by many of these firms.
Great. Thank you.
The next question from the telephone comes from the line of Hubert Lam with Bank of America. Please go ahead.
Hi, good morning. I've got three questions. Firstly, can you discuss the performance of your private asset funds, year to date? How have your investments been affected by lower market valuations, particularly for the sectors you've invested in, which tend to be more growth-oriented, but certainly have returns been negative this year? That's the first question. The second question is, can you talk about the realizations you've seen so far this year and how much of your exits depend on the IPO market versus private sales? Lastly, a question on the tax rate. I know you're guiding for 14%-17% going forward. What are your assumptions there? Do you think this will change going forward? Just give, you will possibly be even higher going forward, just given the global minimum tax rate, or is this already assumed in that 14%-17% assumption? Thank you.
Yeah. Maybe I start with the tax rate and then Dave and Steffen give some more color on the market and the early realization. The tax rate of 14%-17% reflects that our business will become more global as we grow our business. We talked about more US into the business mix as well. That assumes the current tax rate. It does not yet include the impact if we would go to the minimum tax rate of 15%. Remember, in Switzerland, the tax rate is a little lower given our location, but it's too early to give an indication to that because there might be other things which have come into the mix, and that's still too premature. That's the one to watch is that's still something which might come. There are also other things, and that's why we give a range 14%-17%.
Is it fair, Hans, to add that the tax rates we see in Switzerland are two-digit, a little bit lower than the 15%?
Yeah.
Anywhere else, they're pretty much anywhere above that. It's not that we expect fundamental difference.
No, that won't be. That's good, too. It's not something to get spooked about because it's only in Switzerland where it's 12%-15%, and in the other jurisdictions, you're already above the 15%. It's good clarification.
Yeah. On the performance, year to date on both investment performance as well as realizations, there's nothing that I would flag in particular about the performance or realizations that have happened so far this year. We're still early in the year. Many of the sectors that we invest into, as you point out, are growthy in nature. There's structural tailwinds behind them, but they are not, you know, the areas of high tech, you know, that had the large corrections that we saw in the first two months of this year.
They have been more stable in nature than many of those areas. We haven't concluded a lot of realization so far this year, but from the discussions that we have been having, we see no reason to alter any of our realization plans to date and continue to see really strong demand at similar valuation levels that we have seen in years past. We have very little expectation of large scale IPO activity within the portfolio and our exit pipeline doesn't depend particularly on the IPO markets for us to achieve our objectives.
I may just quickly add one word here. I mean, what's important is to understand the mandate that we have from our clients. That's by and large a outperformance compared to public equity, and ideally an outperformance compared to other people in private markets. So far, I mean, you know, knock on wood, we have achieved that. It's important to keep that in mind because realistically, I mean, if you looked at these 10-year returns in private equity net returns, and that's including all the new investments, they're still going through a J-curve, right? That's a 20% net return on direct investments for 10 years. For the realized direct investments, that's much more than that.
That is clearly a reflection of 10 years that were extremely benign as an environment, with multiples going up during the time, with central banks giving support. I think everybody in our firm is completely realistic about that. And of course, the outperformance was there even though that was a bull market. Now, in an environment which might change, and I don't think we have the crystal ball, you know, to see, I mean, how the next 5-10 years will look like, but the environment is clearly going to change. There will be some headwind here with inflation. I mean, there's other questions around how long some of these supply chain issues are going to last and things like that.
It's a different environment, and in that different environment, I think there's a good chance that returns across the industry, also our own returns, they will come down. That's not something we're so necessarily concerned about as long as we have the feeling that we can further create that outperformance. Creating that outperformance in the past at least, I mean, the last 25 years of Partners Group, was actually easier to achieve in a more difficult environment than in a very, very bull market type of environment. That's why you see us a little bit kind of, you know, with two kind of reactions here, a little bit cautious about the outlook, but not necessarily concerned about our mandate for our clients.
Great. Thank you.
The next question comes on the line of Arnaud Giblat with BNP Paribas. Please go ahead.
Yeah, good morning. I've got three questions. Firstly, if I remember historically, when discussing investment opportunities six months ago, you were talking a bit more cautiously about deploying and the competition for new investments. Given what you've said around purchase price multiples not adjusting significantly recently, I'm wondering how you are viewing the pricing levels currently. My second question's around performance fees. Ballpark, it sounds like GlobalLogic was about CHF 275 million in the performance fee contribution. We calculated quite a bit more.
I'm wondering whether some of the performance fees generated by GlobalLogic didn't necessarily crystallize in all your mandates and therefore there's more GlobalLogic sitting in the tank for-
We've always been an organization that's been thoughtful with regards to deploying capital, but also steadfast in seeking out relative value that we see in any given year. We're not an organization that typically tries to time the market and come in at this time and not at that time. In any given year, we're looking for the best opportunities that we can find in that particular vintage year. Sometimes you have some better vintage years than others. But if we're able to outperform based on our very rigorous investment selection process, based on the research that we do to get out ahead of interesting opportunities, based on our thematic work picking sectors, then we feel good about that. We continue to invest.
We've already onboarded a number of new investments this year and feel very good about those new additions to the portfolio. We invest with a view of oftentimes five, six, seven, eight years business plan that we're looking to develop those companies across. We continue to feel like we can drive outperformance within our existing business. We're not pumping the you know the brakes because of the valuation environment. In fact, if you think back to that presentation that Steffen just provided about how the industry's going to develop, you're going to see a maturation within our industry. You're going to continue to see timelines come down.
You're going to continue to see valuations go up and competition go up, and we're looking to differentiate ourselves based on how well we can drive value within our portfolio in an efficient market. So we continue to invest and feel good about the investments that we're making. Hans, do you wanna talk a little bit about WPs as well as what we've seen in Evergreens so far year to date?
Yes. We had a little bit of breakup, so I'll just repeat what I said. GlobalLogic was in the performance fees of 2021, the way we recognize performance fee and how it flows through the different mandates and programs. It's important following that exceptional year that we keep reiterating that performance fees will return to the level we have been delivering over the years between that 20%-30%.
Did you talk about the evergreens? Our evergreen vehicles have not done anything out of the ordinary in the volatility that we've seen in the first couple of months of this year, and continue to operate within the bands that we have been expecting. We've now been managing open-ended structures and evergreen vehicles for a very long period of time through a variety of different cycles, and continue to feel good about the stability that they represent, even in an environment like 2020, where you had huge corrections in the market. We still had net inflows within our evergreen structures. That's a segment of the market that we continue to feel a lot of appetite for, and we believe that we're one of those providers that knows how to steer those vehicles around various market situations.
Just to be clear, I mean, they have come down in valuation, so they're down maybe year to date something like 2% or so. It's not massive, but of course, they cannot escape, you know, from the change in market valuations. Because, I mean, all these mutual funds, these open-ended evergreen funds, I mean, they have effectively some form of mark-to-market. They look at peers in the public market, and then we'll apply a similar kind of, you know, corrections or valuations. It's not that they will be independently valued from public markets.
Thank you very much.
The next question comes from the line of Martin Emmet with UBS. Please go ahead.
Good morning, everyone, and thank you for the presentation. I have three questions, please. First one, just referring back to Dave's comments at the beginning of the presentation and your discussions with your LPs. Could you perhaps share what your LPs see as the main pain points in the current environment? Also perhaps longer term, is the denominator effect or the higher interest rates, longevity? Any color on that would be appreciated. Secondly, on your comments regarding the reactivation of growth in portfolio assets, could you clarify what that means exactly?
Are we likely to see a higher pace of growth relative to directs, perhaps even a shift towards portfolio assets, or it's just that directs perhaps gaining share at a lower pace? My last question is on M&A. I know that historically you've been quite conservative or quite cautious to the topic for a number of reasons, including culture, governance, valuations, and so on. We've seen a number of transactions in the industry. One of your European competitors as well did a fairly significant deal in Asia just a couple days ago. I'm just wondering, in the current environment, do you see merits in doing perhaps bolt-on M&A in certain segments or regions that could help you accelerate building out the business? Any comments on that would be appreciated as well. Thank you.
Maybe I'll take a crack at some of these, and then we'll pass it around. First of all, we did do some survey work with our clients at the conference. Of all of the topics kind of that are on people's mind today, inflation was one of the kind of current topics that they were most interested in and believed it required the most steering, and we shared with them a lot of the work that we've been doing with our portfolio.
We're quite a centralized firm, as mentioned, and so we have a centralized effort to send out instructions to our teams with regards to having these conversations at the board level to report back on the various forms of inflation that they're seeing, on the various pricing strategies that they have, on sharing best practices on inflation with other boards and companies on how to manage pricing dynamics. Then we have an inflation plan that we have for each of our assets that we're going through and making sure that our teams are operating according to. That's one of the maybe more near-term events.
Over the long term, as you talk to clients, the thing that they all want to figure out as it relates to private markets is how to better compound value within our asset class. You have a lot of people that are trying to put $1 billion to work, and with the capital calls, you know, distributions coming back, they have a hard time hitting their NAV targets and compounding at the level that they'd like to hit. The returns on the segment of the portfolios that are at work are doing quite well, but that's the thing that we hear time and time again. That's where we've been able to really differentiate ourselves with our bespoke solutions.
With regards to the reactivation of growth on the portfolio side, I don't think that it comes at the expense of our direct investment activities. The teams, while they do coordinate quite a bit, it's not a shared pool of resources that they operate from. We have two separate teams. We believe that we can drive incremental growth and a higher growth rate by some of the strategies that we have implemented, in particular on the secondary side, where we see that part of the market coming to us. I don't think it comes at the expense of our direct investment business, but I think it's incremental.
I don't think it comes at the expense of our direct investment business, but I think it's incremental. On the M&A side, you know, we're an organization that is a little different than some other firms. We are not a portfolio of franchisees, each operating their own separate fund series who kind of have shared economics with the house. We are truly a unified platform. So, we have looked at M&A in the past. We've had a lot of intense discussions about M&A in the past.
For an organization like ours, M&A might mean something different than it does at another institution where an acquired company might operate, continue to operate somewhat independently with their own investment committees and their own series of funds. Within Partners Group, it would be a quite integrated company, and I think it would look a little bit different than it does for some of our peers. We have an integrated model that I think serves us well, that allows us to do a number of things, in particular on the bespoke solutions side, where we benefit from that integrated platform. It does require a little bit more of a platform approach as opposed to, you know, a portfolio of different product types that we put through the same distribution channel.
The economics work a little bit differently within a firm like ours for M&A than it does perhaps with another organization. We do consider it, but we are an integrated firm, which just adds another level of complexity to that calculus.
Maybe to quickly add on the portfolio asset side of things. Also here, there's a passive and there's an active approach. I mean, passive approach for portfolios, secondaries or loan books is essentially a market share approach. If any large portfolio comes to the market, there might be a number of large groups, some wealth funds, other large pension funds, some GPs that essentially bid the highest price, and they try to get some share. Often they team up. That is, I guess, what Dave talked about. I mean, there was a lot of activity in secondary market actually in this kind of format, and we weren't super impressed by these opportunities, and we have arguably actually lost market share in this area. We were one of the very early secondary players, but we weren't so intrigued by these kind of situations.
What we see now in the last three, four years is there's really new interesting opportunities coming out of that market by, for instance, other GPs, you know, peers, competitors that wanna hold on to certain individual assets for longer. They form so-called continuation funds, where they often need someone like Partners Group, another GP, to take a bigger part actually to also verify the pricing, make that legitimate for their LPs when they actually roll this and keep maybe that assets for another four, five, six years.
There's new funds coming out which really allows us also with an active approach on the portfolio side, which is asset by asset underwriting, at least at that level, to be active. I think with that, we'll see more, some growth coming back also in this area.
Okay. Thank you.
The next question comes from the line of Yong- Xin Zhong from AWP. Please go ahead.
Thank you. Two questions, if I may. One also regarding hiring. Did I understand you correctly that you're planning on hiring several hundred professionals this year? How many employees in total did you imagine in the end of this year? My second question is, you said Partners Group has no Russian or Belarusian clients in your closed-ended programs. Do you have Russian clients in other programs, or do you have mandates with Russian clients? Thank you.
Maybe I answered. The line was a little bad, so if I don't fully answer the question, feel free to tell me. The first question, I think, was regarding the growth of our professionals for 2022. Headcount grew a little less last year, as I mentioned, which is important. We had still the benefit of some intensified hiring over the 2019 period. When we ended the year, we had good capacities to support the growth. We have stepped up the hiring to support the future growth and prepare for the growth in the future. You will see some catch-up in the hiring when we enter 2022, and we will report that as we go along.
Yes, we will continue to focus to invest in the business while we also deliver on our EBIT margin target of 60%+. I believe the second question was related to clients in Russia. We do not have any Russian clients in our closed-ended funds, as we speak today.
Yeah. We do have. The reason why we qualify that as in our, you know, direct Russian clients is because we do have some distribution relationships with banks and other people where the partner that we're distributing through, and we don't have transparency into that. For the funds that we manage where we have transparency, we don't have any Russian clients. We have had a lot of debates and fights about whether or not to accept Russian clients, people where the partner that we're distributing through, and we don't have transparency into that. For the funds that we manage where we have transparency, we don't have any Russian clients. We have had a lot of debates and fights about whether or not to accept Russian clients in the past, but we have no exposure today.
Thank you. Regarding the first question, I think you said earlier that you plan on hiring several hundred professionals this year. Did I understand that correctly? Thank you.
It's a bad line. I think you're looking for kind of where could we potentially end up at the end of this year from a headcount perspective. Directionally, I think-
You said several hundred professionals, correct?
That's right.
Several hundred professionals.
Directionally, if we end up at around, you know, 1,800 employees at the end of this year, I wouldn't be surprised.
Thank you.
Yep.
The last question from the telephone comes from the line of Gurjit Kambo with J.P. Morgan. Please go ahead.
Hi. Good morning, and thank you for the presentation. Just two questions from my side. In the outlook, I think you sort of referred to the fact that, you know, as the asset class becomes more traditional, we may see some more regulatory scrutiny. Now, is that sort of more of a general comment or are you seeing any regulatory developments already in the pipeline? That's the first question. The second one is just on client return expectations. Is there any feedback from perhaps your conference or anything you're hearing more broadly around, you know, what clients are expecting across the different asset classes for returns? Thank you.
Sure. Shall I go first, maybe with the
Sure.
Did you want to do the regulatory?
No. Why don't you do the regulatory side, Steffen? I'll talk about the client return expectation.
I mean, it's both. It's the generalized, but it's also more concrete comment. I mean, you might have seen that specifically in the U.S. I mean, there was a bit of a discussion with the SEC or by the SEC around maybe potential new rules around private market activities. A little bit hard to say, I mean, what will eventually make it into law and what's the process, because it's a question of what can be done by the SEC, what is actually a change of law, which I think is much more difficult with the current situation of the House. I think we don't wanna speculate too much around this.
It's something I can show you we look at very closely and with working group and analyzes it just to make sure we are prepared, we know what it means in practice. We're not so worried about that because we believe that like in the past, you know, when we have seen the AIFMD in Europe, for instance, happening that, I would say at the margin, the larger firms usually had a little bit of an advantage over the smaller firms with some of these new rules popping up. It's not something we're deeply worried about. It's just something we'll be monitoring and it could lead to maybe, I don't know, different investment programs, different type of reporting around ESG, for instance, other big thing in Europe. I don't think it's something that should diminish our, you know, opportunities going forward.
Yep. Yep, I agree. You know, with we have been managing clients' expectations, I think, on returns, for a couple of years now. Returns continue to be very, very strong, I think, aided by market tailwinds as well as strong impact that we've been having within our own portfolio. I don't think it fundamentally changes the calculus. I think Steffen laid out the case very, very well that our expectation and our client's expectation is actually that we deliver relative outperformance. I find them to be quite understanding if the absolute levels of return come down with changes in the environment, the growth in the asset class and more competition, as well as other factors that we have been talking about. I think, as long as we can deliver consistent outperformance to our clients, I think we've done our job, and that's where we orient ourselves.
That's great. Thank you.
Yeah. That was the last question. I think throughout the question, what's important to emphasize that the structural growth towards the asset classes in the introduction we see continuing. We reiterate our-
That's great. Thank you.
Yeah. That was the last question. I think what's important to emphasize that the structural growth towards the asset classes in the introduction we see continuing. We reiterate our outlook for the year and I mean, the clients group yesterday, we see continued demand coming in. There are lots of questions on inflation and things which you also ask, but the client demand continues as we speak, while the world is maybe a little bit more volatile. We will continue to deliver strong AUM growth supported with those performance fees as we discussed. I wanna thank you for your attention.
Thanks a lot for being with us today. It feels good to have, as I said, a little bit partially, but to have an in-person event again. Thank you for the presence, and I guess, yeah, hopefully we stay in touch if there's more questions anyway. Okay. Thanks for joining us.
Thank you.
Thank you. Appreciate it. Have a good day.