Good evening from my side to Partners Group's H1 business update and outlook call. My name is Philip Sauer, Head of Corporate Development, and among others, responsible for shareholder relations at Partners Group. Also on today's call are Dave Layton, our CEO, Sarah Brewer, our Global Co-head of Client Solutions, and for the first time, Roberto Cagnati, our Chief Risk Officer and Head Portfolio Solutions. Before I will hand over to Dave, I would like to inform you that our approach on how we will handle Q&A changes a bit. After a brief presentation from our senior leaders, Sarah will open the lines for questions. We will then start asking questions from the first five people on the queue over the phone. We'll then switch and take questions on the webcast from the next five people. I will read out the names and the organizations.
Thereafter, we will switch back to the phone and so on. Everybody has five rounds. We believe this will give everybody on the call the ability to ask questions, whether you're on the call or on the webcast. Without further ado, I would like to hand over now to Dave.
Thank you, Philip. I'll start on slide 2. So far this year, we've seen signs of gradual improvement to the transaction environment. We've been pleased with increased availability of financing. As asset valuations are at slightly more reasonable places today. We've got easier financing terms, at least for top-tier transactions, which makes trades more achievable, and we have quite a bit of dry powder outstanding in our space. Now, with regards to dry powder within the private markets, you use it or lose it within a certain period of time. And so over the next few years, as that dry powder associated with peak of the market fundraising starts to hit year 4, year 5, we think we're going to see things start to move.
We've had ebbs and flows in our industry, of course, but all things considered, if buyout volumes end up this year on par with the levels of activity that we were seeing in 2018, 2019, 2020, that's a reasonable industry backdrop to be operating within, in our view. We're at a reasonably stable place versus the IPO markets, for example. Next slide. Realizations and liquidity levels continue to be hot topics in the market. We've seen an increase in overall transactions, but private equity realizations remain relatively low, maybe up a little from last year. Industry data shows a promising trend, with twice as many investments announced in Q2 versus Q1. There's a sense and a sentiment that things are looking up for distribution activity as we continue through 2024. Now, these low levels of liquidity can log jam close-ended fundraising.
If no money is flowing off of old commitments, investors are understandably slow to make new commitments. This is just another factor that's shaking up our space. While transaction activity is gradually improving and realizations are gradually improving, fundraising within our industry is expected to be down again this year, as you can see on the next slide. The changes that we've seen over the past few years, higher rates, lower levels of distributions, have initiated a period of natural selection within our space. Today, the number of firms that can successfully raise capital is down meaningfully from just a few years ago. But the genuinely differentiated firms have fundraising trend lines that are up year over year as they take share from the previously fragmented landscape of managers. Partners Group is a differentiated investment firm.
We have a globally diverse client base, multiple channels through which we go to market, custom solutions that help clients to steer their portfolios more effectively, access to the wealth segment of the market, which has different dynamics than those of the broader industry, and we have significant resources to build businesses and to drive operating results within our portfolio. So even though we're having to swim upstream somewhat this year, we continue to expect to buck the industry trend and to see meaningful growth in our asset raising this year. I do believe that our industry will continue to consolidate behind winning platforms. On the next slide, we highlight some of the key business results from H1. Overall, our leadership team has been pleased with the robust results our platforms delivered during the half.
We invested $9 billion in H1, taking advantage of the gradually improving environment, as well as the deep pipeline of opportunities our team has established through their thematic research. This is an uplift of 55% from the same time period last year. On the realization front, while private equity, infrastructure, and real estate realizations are still slow, we've seen a marked improvement in credit realizations, in particular, with the refinancing activity that's been picking up. Realizations were up 69% versus a very low base in H1, 2023. In terms of new assets raised, we raised $11 billion in new commitments during the period. Considering the challenging environment, this is a significant achievement. Bespoke solutions continue to help differentiate us, and that's where we had the majority of client demand. We like what we're seeing for the private wealth segment in particular.
Overall, our fundraising was up 39% from the same period last year. On the next few slides, I'll provide some additional details on some of these topics, starting with investment activity on slide 6. Out of the $9 billion that we invested during the period, 57% of this was direct assets, while the remaining 43% was invested into portfolio assets. Our investments were diverse and spanned across the platform. The ability to offer a comprehensive suite of investment options to our clients is an important part of our bespoke solutions offerings. Most recently, we've been seeing increased traction on the credit and secondary side of the business. The majority of credit investments right now are refinancings, and we're pleased to be actively deploying capital for our clients into known assets at updated terms. I'm glad that we have a strong secondaries business in this environment.
We've been providing our clients with diversification into compelling opportunities that may not be readily available via whole buyouts today. That is an active segment of the market. I was recently sitting down with our secondary team, and I went through their pipeline. Our members of our secondary team have been picking and choosing from a very big opportunity set. We had over $55 billion worth of secondary opportunities that we've screened over the past few months alone. Direct equity investments amounted to $3.3 billion. We had a number of topics that we've been following for several years, which finally hit this year. One of those opportunities is found on the next slide. It's an investment that we're excited about, Fair Journey Biologics.
Our team has been talking about this one for over a year, and we're finally glad we finally got it signed in H1. The company is dedicated to discovering innovative antibody treatments, a topic that's pivotal to a number of key themes within pharma. There has been an increase of outsourcing of pharmaceutical research services, and there's growing demand for comprehensive solutions for drug development and manufacturing. Biologics is a steadily increasing part of global pharma's R&D spend. It's reached approximately 30% of the pie in 2023, and Fair Journey has positioned itself as a premium platform in the space. We see significant potential for growth. We've got plans to broaden the company's existing preclinical R&D, grow wallet share with existing clients, and expand into new technologies. Our goal here is to transform this local hero into a world-class global platform.
That's what we do, and this type of private equity company is one where there continues to be strong demand from clients. Now, on the next slide, I mentioned earlier, liquidity levels remain low across our industry. Against this backdrop, we achieved $9 billion of realizations during the period. That's a big uplift of over 60% from the same period last year. Now, this is a business update and an asset management call, not a financials call. But before expectations for performance fees get out of whack, I do really want to encourage you to look below the headline there and point out that most of this activity was driven by credit and by portfolio assets, which most of you know are not big contributors to performance fees. Those two categories combined for 68% of total realizations.
We had a handful of exits of direct equity companies. We'd like to get more of these done in future periods. We have a strong pipeline of exitable companies and do have a few trades we expect to announce in H2, but driving full exits right now is still tedious. We continue to confirm our guidance around performance fees for the full year. They're expected to account for 20%-30% of total revenues in the next 1-2 years, and 25%-40% for the years thereafter. As you all know, we don't provide guidance on half-year performance fee revenues. Portfolio performance continues to be strong. Portfolio company earnings continue to grow. We feel good about the underlying portfolio positions. Now let's get some color around inflows, and for that, I'll hand things over to Sarah.
Thanks very much, Dave. Today, I would like to provide additional background on the $11 billion of funds raised. As Dave mentioned, despite the industry challenges, we have seen a gradually improving fundraising market during the first half of this year. In private equity, our fundraising was predominantly driven by private wealth clients as well as mandates. In May, we had the successful closure of our fifth direct private equity strategy, surpassing our $15 billion target. While the majority of this fundraising was completed prior to 2024, it again underscores the continued strength of our platform, even during the more challenging times. Private credit experienced strong fundraising and direct lending and successful capital raising for CLOs. Infrastructure fundraising was led by mandates and continues for our direct infrastructure strategy.
We anticipate that this program will further contribute to our fundraising efforts into 2024 and early 2025. In real estate, while there are attractive secondary opportunities, overall demand was lower due to the perceived continued challenges within the asset class. Last but not least, our new private markets royalties asset class saw its first inflows as we build out our seed portfolio. We're actually seeing a lot of interest from clients in this asset class, and therefore, we expect this to translate into more meaningful inflows into 2025. If we then turn to slide 10, I can dive into client demand across the different strategies during this first half of the year. We've continued to see strong demand for bespoke client solutions, and that accounted for a significant 77% of our fundraising.
Starting with mandates, you may recall that we raised a record number of new mandates in 2023, and I'm pleased to announce that this momentum has indeed persisted into the first half of this year. The private wealth segment is increasingly engaging with private markets, and this first half, we've observed a notable acceleration in demand as more and more individuals seek diversified portfolios with exposure to our industry. Roberto will actually expand on this opportunity shortly.
Previously, we discussed how current allocations from private wealth clients stand at around 1%-2%, and indeed, recent industry surveys also reveal that in private equity alone, 94% of wealth managers interviewed wanted to either increase or maintain their clients' allocations. This is really to kind of match the allocation profile of professional institutional investors. For our traditional programs, client conversion periods did remain extended.
However, we're in the market with several strategies, across our asset classes. I will now hand over to Roberto, who will actually delve into our bespoke solutions and how they stand out quite distinctly in the market today.
Hello, everyone. I'm Roberto Cagnati, and I serve as the Chief Risk Officer and Head of the Portfolio Solutions Department at Partners Group. I'm based in Zug. My role focuses on ensuring that the client portfolio, ranging from our most complex mandates to our evergreen solution, aligns with our predefined parameters and the guidance received from our clients. I have been with Partners Group for 20 years, and today I'd like to delve into the details of our mandates and evergreens, two differentiated programs we offer here at Partners Group. Now, first, let's talk about the similarities and the differences between those solutions. As you can see here on the left, the mandates and the evergreens both don't have a defined end date, so they're good till cancel.
That is a very substantial difference to the traditional funds as it enables those solutions to compound over time rather than having a natural end date. Moving into the mandate, those are bespoke solutions, tailored often to the needs of one single investor or group of investors. They need to be built up, but then they usually turn into evergreen, either maintaining a target size or maintaining a constant growth rate along with their overall portfolio. On the evergreens, in contrast, you talk about communal solutions, where investors get fully invested from day one, and Partners Group takes on the responsibility to steer the investment level. You subscribe, and you're invested, and everything is being taken care of. There's no capital calls or distributions to be dealt with.
An important effect, as you can see here in the curves, is that the characteristics of both bespoke solutions are that you maintain an 85%-95% investment level. Whereas in the traditional funds, with the build up and the wind down periods, you're on average only 50%-60% invested. Needless to say, from a client relationship perspective, it's much more long-term relationships that you build when you do not have a defined end date, retendering the whole relationship every few years. Now, on the next slide, please. Diving into mandates, how are we actually doing it? I think underlying, maybe taking a step back, it's important to understand that Partners Group has a unique architecture. As we say, we like to say we're built differently when it comes to governance and integration.
The key concept here to grasp is the concept of single lines. So when Partners Group starts a mandate for a client, it's not just merely an investment in three, four other Partners Group funds, but it's actually investing directly into the underlying assets or into the underlying companies. And most importantly, the way we do that at Partners Group, we follow a pro rata approach, how we allocate those investments. So every client gets a fair allocation to the investment made, no matter whether it's a private wealth, a mandate, or a traditional fund. Every mandate has a dedicated portfolio manager who focusing on building up the portfolio, following the guidelines of the specific clients.
Needless to say, the single line portfolio approach really allows us to pursue a next level of portfolio management when it comes to portfolio construction, steering the target size of a program, or also shifting allocations to where the relative value is most attractive. On the evergreen side, it's really the same architecture benefits that set us apart in the market. The investment level steering hereby has a paramount importance, as we need to make sure that at all time we're fully invested. This is something that sets us apart in the industry, being able to react swiftly to flows on the client side. Next slide, please. We spend a second on the milestones that we have achieved and where the bespoke solutions business really stand, to give you a bit more of a feeling.
On the mandate side, here on the left, we talk about 150 mandates that we're managing. 80% of those are invested in two or more asset classes, and almost half of them are in three or more. So many clients choose over time to invest across the whole private market spectrum with us. The 15% net returns is certainly one of the reasons why our mandate clients today stand at about 3 times the size versus where they started their mandate a number of years ago. That can come via topping up and increasing the mandate size, or simply by growing, by compounding over time. On the Evergreen side, we manage 17 funds across private markets. Here, it's really the industry-leading track record, both when it comes to return levels and the length of the track record.
We started a long, long time ago. I think one thing that specifically sets us out is our performance in difficult markets in downturns. That has gained us a lot of trust with our investors. We've been launching five new funds over the last three quarters, focusing on areas such as infrastructure, growth, private equity directs and a BDC, and more funds are coming online as we speak. For example, royalties or a BDC offering focusing on private debt for the UK market. In summary, on the next slide, it's no surprise that within bespoke solutions, both mandates and Evergreens have been strong growth engines, and we're convinced that tailored solutions will drive future growth. Bespoke and customized investment options play an increasing role as the industry is evolving.
Next slide, please. So now let's take, let's take a closer look at our AUM bridge for the first half of the year. As you're aware, our guidance specifically covers fundraising and taildowns. Sarah has covered the $11.1 billion of gross inflows, so I'll discuss the impacts of taildowns, redemptions, exchange rates, and performance-related effects. Starting with taildowns, which are largely formula-based, they amounted to $4.5 billion. For context, our full year guidance was eight to nine billion dollars in H1. They primarily resulted from credit distributions, and they're in line with guidance. This leads us to a new net, new money of total $7 billion or a 9% annualized AUM growth if you only consider the factors we guide for. Moving to redemptions, they came in at $2.5 billion.
This represents a redemption rate of about 10% of average Evergreen AUM on an annualized basis. Moving forward, we believe 10% is a reasonable run rate for these programs, as they are expected to get larger, both in terms of size and investor base over time. Performance-related effects amounted to $0.2 billion. They include contributions from a select group of products where AUM tracks their NAV developments. We continue to believe that redemptions from Evergreen programs are often netted out by performance effects in a normalized environment. Hence, it's fair to assume that in the second half of the year, redemptions and performance slash other factors will offset each other.
Last but not least, foreign exchange effects had a negative impact of $2.2 billion, mainly due to the strengthening of the US dollar against the euro as per the end of H1 compared to the end of last year. 44% of our AUM is in euro-denominated programs and mandates. With this, I, I hand back to, to Sarah for the outlook.
Thanks, Roberto. So let's move to our final slide, which is the 2024 outlook. So our globally spread fundraising pipeline really reinforces our strong presence and reach across the various markets. And as all of you on this call have observed over the many years, our platform really thrives on the principles of diversification. And this is reflected not only in the solutions we offer and our investment track record, but really also through the diversity of our client base. So I'm very happy to confirm our guidance for the fiscal year 2024, with projected gross client demand ranging from $20 billion-$25 billion. So with that, thank you all for your attention and participation today, and we are now ready to take any questions that you may have.
The telephone operator will now take questions on the phone conference. The first question is from Angeliki Bairaktari with JPMorgan. Please go ahead.
Good afternoon, and thank you for taking my questions. Can I ask first a question on the Evergreens in the U.S.? Blackstone's private equity fund, which launched in the beginning of this year, has already seen around $4 billion of fundraising inflows since the launch. How does that compare to the flows that you have seen, to the fundraising that you have seen in your Act 1940 funds in the U.S. year to date? And are you at all concerned about the pace of fundraising by Blackstone as a competitor?
And then secondly, with regards to the CHF 6.9 billion of drawdowns and redemptions, that we saw in the first half of the year, that seems to be a big percentage of sort of what we had previously as a sort of full year run rate guidance or indication of around CHF 11 billion-CHF 13 billion. So, how should we think about drawdowns and redemptions in the second half? And that's also, I hear you on redemption rate of around 10% going forward. Historically, it has been 8%, so I guess we should expect a higher number also in the second half of the year and going forward there in terms of redemptions. Thank you.
So maybe I'll take the first one, and Roberto, why don't you address the second one? So the industry has experienced much of its growth over the past 30 years from institutional investors that have expanded their allocations into privates from, you know, 1% 30 years ago to something like 10.5% on average today. And one of the things that this rate hike cycle has told us is that those allocations probably aren't going to 20%, at least not in the near to medium term. Okay? But there is still meaningful structural growth in our space. It's just coming from different channels.
This wealth channel is an area of structural growth, and as allocations within that segment follow a similar trajectory, moving from about 1% you know today to, you know, I don't know, 5, 6, 8, 10% in the future, that's gonna add something like $5-$10 trillion of structural growth for our space. And so, of course, there's going to be competition, and there's going to be resources that shift from the institutional market into the wealth market, no question about it. And Blackstone's a firm that obviously brings a lot of muscle, and they've come into that segment of the market. But this is not yet a pie that we're divvying up. I'd say this is a wave that we're preparing to ride.
You know, we've been an innovator, we've been an early mover. We've got a long track record within that fund. You've seen a host of new competitors that have come into that space, you know, Blackstone most notably, but there's numerous other ones as well. And if we can still grow in an environment of rapid expansion, of competition coming into that space, that's something we feel pretty good about. It also speaks to the structural growth that's occurring within that category. The fact that those of us who are there and those of us who are coming in are all having success at the same time, I mean, tells you that this is, this is a topic and a trend that's just getting going.
We are not at all focused on, I'd say, market share within the wealth segment. We're focused on having a fantastic offering, that we can, you know, ride this wave with. You know, we actually welcome the competition because you have wealth advisors, you know, that we've known for a long time that like the topic, but didn't really move on it in the past because it was just us and a handful of other firms, and it wasn't quite there. As there's been so much interest and attention and buzz around this topic that's been created recently, we think it creates tailwind for us in the long run. Roberto, maybe you can speak to the second one.
Happy to, Dave. I think there was a question around taildowns for the full year. That is something that typically evolves rather mechanical. So at this point, I think we're going to stay well within the $9 billion that we have indicated in the range. When it comes to redemptions, I think for the full year, I would work with a number of around $4.5 billion, which represents around 10%, is what I mentioned before. I'm also confident that this will offset with a performance effect, which typically compounds at a similar rate.
Thank you.
The next question is from Nicholas Herman with Citi. Please go ahead.
Yes, good afternoon, good evening. Thanks for taking my questions. Three, if I may, please. One on fundraising, one on, actually, evergreens as well, and then the third one on kind of the environment and, and-
Are there specific questions coming to those three topics, or do you want us to just expand on them more broadly? Nicholas?
I think he dropped out somehow.
Okay, why don't we move to the next question then, and let him get back online and ask his question? Next question, please, operator.
The next question is from Hubert Lam with Bank of America. Please go ahead.
Hi, good afternoon. Thanks for taking my questions. I've got three of them. Firstly, on wealth, if you don't mind me poking on it again, can you give us a little more flavor as to where the flows are coming from in wealth, in terms of both geography and distribution type? Is it mainly coming from the U.S.? If you talk a little bit more about where and also by distribution. I think, previously alluded to, there's more competition. We've seen that in the warehouses in the U.S. this morning, where you're seeing most of your flows coming from by both geography and distribution. Secondly, is on the pipeline for traditional programs.
What's in the pipeline in terms of new product launches and closings for the second half, or say, over the next six to 12 months? Any flagships you have out there that we should be looking for? And the final question is on the fund performance. I know it's relatively flattish in the half year, about $200 million. Just wondering why is it so, why it's such a low number? Is there a reason for that, or what, any reason why it's, you know, any particular reason around that? Thank you.
I might be taking, this is Roberto, taking the first question around private wealth. The flows come around 40% from the U.S. and about 60% from Asia, Europe. I want to highlight the U.K. and, and Australia here. It's a rather broad phenomenon. What I want to say, though, is next to the, I would say, large global distribution houses, there's this increasing tendency of smaller regional distributors. Regional local banks are contributing, uh, to the flows in, in private wealth.
And then you mentioned on your question, too, the flagship program. So we have, as I mentioned, our, our direct infrastructure fund out in the market. We have secondary programs for clients across private equity, infrastructure, as well as real estate, and a number of closed-ended products available across different jurisdictions on the credit side. And then I think question three was about performance.
Look on part three, on the fund performance. I think it's fair to say that, coming into the year, with the year-end valuations coming in across the industry, we have seen a bit of a lag, a bit of a weak fourth quarter that has entered program performances in early Q1. So our Q1 was a little bit slower, but I don't think it's an unusual phenomenon, something we've seen across our funds as well, and has been picking up for the second quarter since. So for us, not a reason for concern in the longer term, but certainly something that has affected the programs into the start of the year.
Okay, thanks.
The next question is from Nicholas Herman with Citi. Please go ahead.
Hello. Can you hear me now? Can you hear me now?
Yes, very well.
I think I dropped off earlier. Okay, great. So just I'm going to try again with my questions. So just firstly, in light of the fact that activity is expected to increase in the second half, and you're already well within the fundraising range on a run rate basis, is it fair to say you see yourself ending this year, at least in the midpoint of the target range? And where do you see the flex around that? On the Evergreens, there was a big step up in the inflow rates for the Evergreens. Could you just provide us some detail on the sources of those strong inflows? I guess it seems particularly lumpy, so were there any kind of institutional flows within that?
And can you talk about the pipeline on institutional mandate pipeline, Evergreen, please. And yeah. And then finally, in terms of, like, general environment and loan issuance, I guess we discussed previously how a wall of maturities next year in 2026 could potentially put a limit on this low activity environment because asset holders would be forced to sell or refi at higher rates. I guess with a much more constructive refi environment, and we have seen refi activity notably picking up, does that change kind of your view on a pickup in activity for the industry? Thank you.
Thanks very much, and great to have you back. So, your first question on around the guidance. So look, in January, on our AUM call, I actually mentioned that I expected our fundraising to lean towards the second half. However, we actually observed momentum picking up and accelerating already in the first half, quite frankly. You know, a few things went our way. Some of the conversions that we had projected for the second half already came in the first half. So that's the trajectory with which we go into H2. I obviously watched our pipeline extremely closely. Our most recently performed bottom-up analysis puts us around, as you say, around the middle of that expected range.
Again, clearly, if you know, transaction volumes, exits, et cetera, pick up over the second half and accelerate beyond that, and distributions come back, freeing up capital from clients for reups, then clearly, you know, that could be at the higher end of the range. But currently, on our most recently performed bottom-up analysis, it really puts us in the middle of that expected range.
The second question regarding the flows on the Evergreen side, I think you're onto something. It's not unusual. About 30% of our Evergreen AUM is typically smaller institutional investors. And indeed, about 20%-30% of those Evergreen inflows have been coming from institutionals, not too dissimilar, like in 2023 and in previous years.
And on, [audio distortion] [crosstalk]
I mean, in terms of outlook? [crosstalk]
Roberto, in terms of outlook, he asked.
In terms of outlook, if I also think about the nature of the size of those tickets, there wasn't a single lumpy one, so I would expect a continuation of the trend that you've been seeing there.
Thank you very much.
With regards to the environment and transaction activity and when it's gonna pick up, you know, it's a multivariable equation. You know, one of the variables that we've talked about that could drive increased activity is this wall of maturities. And indeed, owners have, as they approach their maturities, decisions to be made on do they sell or do they put fresh equity in? And there is still many of those decisions that need to get made because of maturities, probably fewer. I think that's fair because of the robustness of the refinancing environment. And it is a full-on bull market, right, within the credit market. I think that's safe to say.
You know, these last couple of transactions have been financed, you know, spreads that are effectively on par with what we were seeing just a few years ago. Base rate's obviously high. But you are correct, this is a very robust refinance environment, and much of the activity that's happening right now in the credit markets is around refinancing activity. But you also have this phenomenon around dry powder, right? A lot of money was raised in the 2021 time period, and that dry powder has a deployment, you know, pattern that it needs to follow. You're bumping up against year 4, year 5, coming up here over the next couple of years. That serves as another catalyst.
Valuations, you know, are looking more interesting, you know, and have come down from about 12x on average for the industry to about 11x on average today. So there's a number of factors that I think could drive increased activity.
Really helpful. Thank you so much.
Yep.
The next question is from Gregory Simpson with BNP Paribas. Please go ahead.
Hi there. Thanks for the presentation. 2 questions from my side. The first is on the mandates. I'm wondering if there's a positive denominator effect now, given how strong public equities have been. Is there a lot of mandates that have a target allocation percentage of a portfolio, and therefore, clients need to put more money to work, and so can flows pick up from the $4 billion level they've been running at in recent halves? That was the first question. The second question, with that stat you gave about the number of managers successfully raising capital being down 40%, has your appetite for M&A changed at all in terms of potentially being able to be opportunistic and acquire maybe managers who are in a bit of distress? Thank you.
Hello, this is Roberto again. Yeah, I think you're right there. There is some sort of a denominator effect with the strong public equity performance, but also recovery of the bond portfolios. There's a second factor that relates to the distributions that have been picking up, which is something we've definitely been seeing to free up investment capacity amongst our mandate clientele.
With regards to consolidation, I think much of the consolidation that we're going to see within our space is gonna happen through natural consolidation of investors concentrating their incremental dollars with the firms that are most relevant in the current environment. You asked if it increases our appetite for distressed managers or managers that are kind of struggling. Probably not distressed managers. That's not the word we're that interested in.
But as we think about the platform that we're building, the offerings, you know, that we're able to provide to clients, being a comprehensive solution provider, you know, could this environment create an opportunity for us to pick up some, you know, world-class talent, you know, that we could integrate into that bespoke solutions engine and investment engine? Potentially. We talked about that a little bit on our annual results call, but the dynamics haven't changed materially, you know, since we talked about it last.
The next question is from Bruce Hamilton with Morgan Stanley. Please go ahead.
Hi there. Good evening. Thanks for taking my questions. Firstly, maybe just a bit more color on sort of portfolio health and any sort of risks that you might be seeing from the sort of higher for longer environment. And sort of, you know, whether EBITDA growth is still sort of running in the kind of double digits, mid-teens? Is that looking pretty good? And then secondly, just coming back to the point on the performance, I wasn't quite clear on the answer, 'cause I guess, you know, getting back to the sort of 10%-15% AUM growth per annum looks a bit of a stretch from where we are today, unless performance is neutralizing the kind of redemption effect.
Why, why should we be so confident, or why are you so confident that those two will sort of net off and therefore growth recover? Just to make sure I understand. Thank you.
Thanks, Bruce. First of all, on portfolio health, indeed, the portfolio continues to perform as expected. We continue to see good, good growth, double digit in most parts of the portfolio, and continue to feel good about the health and the quality of the underlying assets in which we're invested. You know, the higher for longer scenario, I think, is the base scenario that you operate within. We have a reasonable amount of debt, you know, on the portfolio. It's been largely hedged up until this point.
There is some point in time in which those hedges come off, but we've done all the sensitivity analysis and feel good about our ability to continue to manage those assets, even through that future state. So nothing I would flag from a portfolio health perspective that's contrary to what we've talked about in the past. Roberto, do you want to talk a little bit about the second question?
Look, I think that from a netting our perspective versus performance, I think we are obviously at a point in time, especially, as an industry, towards the last two years, while we haven't seen the type of drawdown and recovery that the public market has seen, we've definitely seen valuation adjustments, across our portfolio and the rising rates that Dave has mentioned, and everything that goes with it. At the end of the day, there is a couple of simple numbers. Our EBITDA was up around 28% over the last two years across our portfolio companies, but the valuations are up just in the low teens, and that is really the gap, where it comes from.
Having said that, I think there's good reason to assume, based on what we have been seeing, both on the interest rate front and the private equity market, that this adjustment process has come to an end, that we're through that. We make a forward-looking return projections on our program. We don't see reasons to assume that they should be subpar. The usual return assumptions that we have, the returns that we're targeting, are somewhere between 10%-14% for the evergreen funds. And as such, if I compare that with the historically observed redemption rate, even in the more volatile times, are typically 2%-3% below that. So I think there's a margin of error. So the netting assumption is something we very much believe in going forward.
Okay, that's helpful. So basically, you're saying that just the kind of lag effect, both on the way up and the way down, is what's feeding through in the first half, and that should normalize as we move forward?
So, thanks, Bruce. Now we would basically switch quickly to the webcast questions. Charles Bendit from Redburn asked about the trade-off between having a large opportunity set for private wealth in the U.S. and increasing competition, but I guess, we have answered that question already in the beginning. So, there are no further webcast questions, so I would hand back now to the operator to move on with the phone calls.
The next phone call question from Oliver Carruthers with Goldman Sachs. Please go ahead.
Hi there. It's Oliver Carruthers from Goldman Sachs. Maybe a bit of a left field question, but perhaps one for Roberto, given that he's on the call. There's been a lot of discussion in the last couple of weeks on the potential to create broad-based investable indices in private markets. So it would be very interested to hear if you think that this could be a market that could potentially develop over time, particularly given your positioning in portfolio construction mandates, and evergreen products.
It's an interesting idea. I think my first reaction to that would be interesting, but probably comes with some challenges in terms of the requirements that you usually have for indices, with being investable, being replicable in size. I could imagine that this is much, much more difficult to replicate in a private market industry than, for example, what we've seen on the hedge fund industry many, many years ago. So at least what I see, what we need to do to create a performance, it doesn't feel that you can create this in a beta type of way by just deploying.
I think the way how we create value or we generate growth, how we actively own businesses or develop assets, that has a significant contribution to the overall return equation, especially in a world where interest rates are not zero anymore. So I think it's something we need to discuss, but it's probably not the most obvious thing in the Partners Group to jump on.
Got it. Thank you.
The next question is from Tommie Jintawichakul . Please go ahead.
Hi. Hi, guys. You've been busy on the secondary side, clearly. I guess anecdotally, we'd heard some signs of pricing dynamics tightening. Is that something you'd agree with? And are there any sort of data points you'd put around that? And then, you know, I've also seen a stat that buyout funds require over $300 billion of distributions by the end of 2026, which I think is about 5.5 times the available liquidity from secondary transactions. I guess everyone's expecting the conventional exit channels to reopen before that, or hoping at least. But I'd be interested to hear your thoughts around sort of supply-demand dynamics there. Thank you.
Thanks. Yep, we have indeed been busy on the secondary side. You have quite a few players in the secondary market today. It is a competitive market, but that's, I think, overlaid against quite a significant opportunity set that's out there at the moment. As I mentioned previously, we looked at about $55 billion worth of secondary opportunities over the past couple of months, and it is quite robust. Pricing for high quality, high quality assets, inflection assets that have material upside in them, has probably tightened from kind of the low 90s, around 90, last year, to, you know, I'd say low-to-mid 90s in terms of pricing, based on what I've seen through the investment committee more recently. So yeah, I think that's probably fair.
It's probably tightened up quite a bit, but it does feel like there's a very healthy supply of opportunity sets that continues to exist out there. Now, you've seen a shift in dynamic in that market away from GPs facilitating liquidity on individual assets or groups of small assets, which has, you know, grown to be about 50% of the market in recent years. That's fallen to be a smaller part of the story overall, and the biggest opportunity set and biggest volume that we're seeing come through the secondary market this year is from institutional investors rebalancing their portfolios, by and large.
Thanks, Dave. Very helpful.
Yeah.
We have a follow-up question from Angeliki Bairaktari with JPMorgan. Please go ahead.
Thank you for taking my follow-up. Just one on exits, please. The SRS Distribution exit, where I think you had a minority stake, can I please check whether this, this one closed for you in H1, 2024, and whether we should expect to see performance fees from that, from that exit already in the first half of the year? Thank you.
Yes, SRS closed just before period end. And so, yes, that that transaction will fall within that first half results.
We have a follow-up question from Nicholas Herman with Citi. Please go ahead.
Yes, thank you. I also have a question, a follow-up question on exits. Just broadly, you talked about a strong pipeline of exits with multiple exit processes. Just broadly, in terms of these, the target buyers, are these typically strategic or secondary buyers? Thank you.
Yeah, so if you, if you look at a couple of the results from the first half of this year, SRS, which we were just asked about, you know, that was an exit to a strategic, Civica, we sold to Blackstone. You see a blend of both. I'd say, you know, the broad network of private markets managers who are not able to raise capital at the moment, and are loathe to fundraise and come back and fundraise at the moment are sitting on dry powder and not as active. But I'd say the winners within the space, strategics, they're sitting on piles of cash. Those are the groups that are most active within sale processes right now.
So, a healthy blend and a healthy mix between the two?
Healthy mix.
Which gives you confidence in, on those exits coming through.
Yeah, that's right.
Cool. Thank you.
We have the last questions on the webcast today, and from Albert Mueller, who asks probably a question to you, Roberto: Is you have mentioned valuation contracting in the market. Do you see differences between the different asset classes, private equity, infrastructure, real estate?
Happy to take that one. I think bit simplified, but infrastructure, certainly we have seen barely any effect. That's simply because of the projects reaching the milestones, reaching completion, which is less dependent on valuation multiples. I think compared to private equity, the real estate market has certainly been affected more strongly, not least because also the debt maturities are a bit shorter in that space, and as such, is certainly the most affected sector within private markets.
Thank you, Roberto. And with that, we went through all the questions, and I would like to thank all of you for listening in and the trust you put in Partners Group. I would like to close and look forward seeing you. I just want to mention that already, on the third September, see or hear you on third September, 7:00 A.M. CET, we will publish our half year results. At 10:00 A.M. CET, we will do the conference call out of our London office. And with that, all the best. Hopefully a nice summer break and we look forward hearing, seeing you soon again. All the best. Bye-bye.