Dear ladies and gentlemen, welcome to the conference call of Partners Group. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. During the presentation, you may type your questions in the Adobe Q&A box. Your questions will be answered at the end of the presentation. After the presentation, there will also be an opportunity to ask questions via the telephone lines. If any participant has difficulty hearing the conference, please press star key followed by zero on your telephone for operator assistance. May I now hand you over to the Partners Group management. Please go ahead.
Good morning, everyone, and a warm welcome. Today's assets under management call for the first half of 2018. My name is André Frei and together with Christoph Rubeli, I serve as Co-Chief Executive Officer of Partners Group. Today on the call, we also have Philip Sauer, our co-head of the Group Finance and Corporate Development Department, as well as two investment leaders who will join us to update us about recent investments made. These are Todd Miller, private equity based in Denver, and Tim McCullough, private infrastructure based in Sydney. As always, we appreciate you taking the time for this call to follow our business and organization. We'll spend the next 30 minutes about clients, about investments, and our assets under management outlook for the full year 2018.
We will not cover financials. I look forward to our call in September when Christoph, Philip, and I will meet you in Zurich to talk about the whole year results together with our recently elected new Chairman, Steffen Meister. With this, I'd like to hand over to Philip Sauer.
Thank you, André, and a warm welcome from my side as well. I'm on slide four now, where you can see the development of our AUM and our employees since 2005. The most important drivers for our AUM growth remains the structural growth in institutional AUM globally and the rising allocation to private markets of these institutional investors. These drivers led to an industry growth over the last 10 years with over 10% plus per annum. We clearly benefited from this development and continue to build out our investment platform as a pure play private markets firm. However, this platform build-out comes with limited scalability, as you can see. We simply need more resources in order to source, transact, and create value on our long-term assets. This is also why we try to continue to hire the best-in-class talent in order to meet increasing investment demand from clients.
In the first half of this year, we increased the number of professionals by about 5% to almost 1,100. Today, our AUM stands at $67 billion and has grown since 2005 with an annual growth rate of 22%, since 2010 with 17%, since 2015 with 16%, and in the first half of this year with net 8%. I'm moving now on to slide number five. We saw a strong first half of 2018, with total new commitments amounting to EUR 6.2 billion. Tail downs and redemptions reduced AUM by $1.8 billion. On both factors, as you can see, we provide you with full year guidance because we have a good visibility on both of them. We do not have any visibility on other factors, though, and therefore we do not provide any guidance. Let me say something about tail downs first. The majority of our programs have a long duration.
However, these programs also mature at one day. As such, when they mature, our AUM decline. The decrease in AUM is based on a mathematical formula pre-agreed with the client at the time when the contract with the client is made. We expect these tail downs to grow because our AUM grew in the past. We will provide you with guidance about the magnitude of the tail downs on a yearly basis going forward, as we have done so in the past. With regards to redemptions, we have about EUR 15 billion assets under management in open structures, in open-ended structures, which provide some form of liquidity. This can be quarterly, it can be monthly, or in some cases, even daily. In these open-ended programs, we can have redemptions. In the past, the inflows in these programs exceeded the redemptions, this is why the net new assets have been growing.
If we look now into the full year 2018, we expect tail downs to grow in the second half of the year. This means concretely that our full year tail down and redemption guidance will be tilted towards the second half of the year. Lastly, let me quickly talk about FX and other effects. 51% of our AUM today is euro denominated. 36% is US dollar denominated. That means any weakening or any strengthening of the US dollar will affect our euro denominated AUM. In the first half of 2018, the US dollar strengthened against the euro by almost 3%. This was literally the driver of the other factors. Out of the $0.7 billion positive contribution to AUM, 90% related to this US dollar strengthening.
With this, I would like to move on to page number six and talk about our EUR 6.2 billion new client commitments. You may recall that we saw a record demand for flagship direct programs across private equity, private debt, private infrastructure last year. We also had a strong initial demand for our new flagship secondary real estate program in 2017. Currently, so in H1 2018, we have no flagship programs in the market. However, you can see still all asset classes contributed to the overall growth of AUM, with private equity and debt contributing the lion's share, so almost 75% of new assets raised. Let me talk about private equity first. Our private equity business grew at the net rate of 7% and marks with 50% of AUM, our largest asset class.
The inflows amounted to EUR 2.4 billion and represented 38% of all new commitments and stemmed from a dozen different programs and mandates. The split between mandates and programs was roughly equal. The focus topic in the first half of the year was our global diversified relative value strategy. In this strategy, what do we do? We combine direct transactions. This is where Partners Group sources and underwrites an opportunity and is solely responsible for the value creation. We combine this strategy with portfolios of highly diversified pools of assets. This diversification is achieved either via secondaries or primary investments. On the private debt side, we also saw strong new commitments, which represented also 35% of total new commitments. Our debt business continues to profit from low yields on traditional fixed income.
The strong growth of 17% in the first half also shows that we can further scale this business. In private debt, we focused on two things this year or in the first half. First, our corporate senior debt lending activities. They contributed about two-thirds of assets raised. Second, our CLO business. We raised two CLOs, which contributed about one-third of the assets raised in private debt. New commitments in real estate amounted to EUR 0.9 billion and represented 15% of the overall client demand. Real estate grew by 7% in the first half. During the period, we rounded up our recent real estate flagship product, which started fundraising already back in 2017. This program was the main contributor to H1 real estate fundraising. It basically seeks to acquire high-quality property portfolios or single real estate assets in need for more time or capital to realize their full value creation potential.
New commitments in infrastructure amounted to EUR 0.6 billion, which represented 9% of overall new client demand. With a 3% growth rate, or with a 3% net growth rate in the first half of the year, infrastructure grew the least of all asset classes. Later in 2018 or early 2019, we will approach the market with new global relative value strategies. Similar to private equity, these strategies combine direct transactions with more diversified private market portfolios in sectors and regions we believe are most attractive. In short, this means fundraising in private real estate might be skewed somewhat to the second half of the year. With this, please let me move on to slide seven and show you some highlights or some stats on our H1 fundraising. You can see on the left side, I talked about already. On the right side, I would like to highlight two points.
One is from an asset raising perspective, we have raised pretty much 50% of our new commitments from investment programs, so funds where many investors are investing in. 50% of the new commitments stem from mandates, so literally separate accounts. The importance of these mandates is likely to persist also in the future. From an AUM perspective, I would like to highlight that mandates and investment programs each represent about 40% of our AUM. Another 20% of our AUM are in so-called liquid or semi-liquid investment vehicles. This is my update from the asset raising side. With this, I would like to hand over back to André.
Thank you, Philip. Let's turn to slide nine, please, where we show an overview of our platform activities in the first half of 2018. On the investment side, it proved to be a solid six months. In aggregate, you see that we invested $7.7 billion in private markets on behalf of our clients, which is at a similar level as in the second half of 2017. Needless to say that we kept our highly disciplined and prudent approach to source and transact on the most attractive investment opportunities in this fully priced and competitive market. We grew our platform to almost 1,100 employees worldwide. In the quarters and years to come, you should see Partners Group further grow our investment platform in all aspects. As a matter of fact, we have been and will be hiring in all asset classes to build out capability and capacity.
In the first half, we invested the majority of our capital, about 60% or $4.7 billion in direct transactions, while the remaining 40%, or about $3.1 billion, were in secondary transactions and primary commitments. This is in line with our long-term estimates to invest about 60% direct, about 20% in secondaries, and about 20% in primaries. The geographic split of our direct investments illustrated on the right-hand side demonstrates our truly global approach. Of the 40 direct investments, we did 27 in North America, 19 in Europe, and four in Asia Pacific and emerging markets. Let's turn to slide 10, please, which illustrates the number of transactions we have screened and executed in the first half of 2018. You see that we were able again to generate significant deal flow. We saw over 1,400 direct opportunities.
We screened $73 billion of secondary deal flow. We did assess over 250 partnerships during that period. In our investment selection process, in the first half, yes, we did remain highly disciplined. You see that we declined about 97% of the transactions we did look at, which is at a very high level, and again, similar to what we have seen in the past. Our guiding principle is that we want to buy what we want to own and not what for sale. In all the investments that we did screen, we looked for a special angle, and we made sure that these investments are in line with our relative value assessment, as well as our governance and value creation principles.
In summary, we put a lot of efforts to invest the $7.7 billion in the first half of the year. I can say that we're truly proud of our team on the investment side, equally on the client side and on the search and corporate side, which enabled this capacity. Slide 11 reports the investment split between regions and types of investments in the first half. You can see a broad diversification across regions, sectors, and investment strategies. 48% or roughly $3.7 billion in North America. The U.S. remained an attractive region and offered us many high-quality investment opportunities. For example, GlobalLogic, a leader in digital product engineering services, and the deal example we have chosen for today that will be presented by Todd Miller. In Europe, investment activity was also strong.
It amounted to roughly EUR 2.7 billion in the first half. We have been able to close on a number of sizable equity transactions and further ramped up in our lending activities. Lastly, Asia, EUR 1.2 billion or 16% of investment volume, which was mostly focused on direct assets in that region. Direct investments did dominate our investment activities in the first half. As I've highlighted, 60% of the volume was direct, split about 60/40 in terms of equity investments and debt investments if you look at the capital structure of these assets. Secondary investments remained opportunity-driven. We have acted selectively in this heated market. In 2018, we invested 24% or EUR 1.9 billion in secondary transactions, including larger and more complex transactions where we were chosen to be the preferred solution provider for the seller.
Primary investments, last but not least, continued to remain an integral part of our business in order to diversify our client portfolios. We invested 16% or EUR 1.2 billion of our total investment amount with select investment class managers. Slide 12 illustrates our relative value approach, which remains key for Partners Group to perform and outperform. At Partners Group, we focus on top-down asset allocation and portfolio construction on the one hand. We equally focus on bottom-up asset selection on the other hand. We want to combine these two approaches to build sound portfolios based on the most attractive investments. In short, we first assess asset class returns for the next five to seven years. We define regions and sectors where we see most relative value. Finally, we dive deep into regions and sectors to find those sub-segments with outsized growth potential.
Our relative value approach has been a very good guide for us in the past, actually for more a decade now, where to allocate capital. It does guide us well in the first part of private markets investing when we source and diligence attractive opportunities. As we all know, the real work in private markets, however, only starts once the transaction has closed. In the second part of private markets investing, it is about value creation. That is what I want to cover on my next slide. Slide 13 talks about the second part of private markets investing, the value creation phase. At Partners Group, we want to be systematic about governance. You actually find an interesting and relevant booklet about this topic on our website.
This booklet is called Governance Correctness. Our Chairman, together with the investment committees and investment leaders, describes the entrepreneurial governance approach as the true catalyst to value creation and superior performance in private markets. We highlight that private equity has moved away from financial engineering. It's about working hands-on with portfolio companies. As board members and owners, we want to work with our management teams as a team. We want to incentivize these management teams to achieve excellent and sustainable results. At Partners Group, we want to be equally systematic about board governance. We want to tailor the boards for each company we own. For this, we leverage our industry networks.
In other words, Partners Group's expertise grows well beyond the 1,100 professionals we have when we factor in the network of senior advisors and operating partners who serve as non-executive directors and chairman in our portfolio of assets. With that, we ensure that we can create value in our portfolio of assets that we perform and outperform. I would like to hand over to Christoph Rubeli to shed some more light on this aspect.
Thank you, André. I will start with very briefly talking about the macro environment in which we operate. Growth has eased somewhat around the globe. In our portfolio, we start to note the inflationary pressures, especially in the U.S. Interest rates have been rising faster than implied by the market, we therefore expect more volatile public markets and potentially lower valuations. For our investments, we look therefore for resilient companies and opportunities in industry sub-sectors that show above average growth, either because of demographic shifts or because of technology disruption. In this high-price environment, we remain disciplined and selective, the key emphasis is on adequate hands-on corporate governance, operational added value to build stronger and more solid companies and real assets. If you turn to page 16, let us briefly look at corporate assets, that is private equity and private debt.
In the private equity sector, we continue to see quality assets trading at record multiples with large cap company values at enterprise value to EBITDA multiples of between 30 and 15, slightly above the 2017 valuations. The mid-market space, which we favor in our investment strategy, valuations have remained around 10 times. Traditionally, the due diligence process for new investments has typically been between three and six months. With higher competitive pressure, most processes are run on a much tighter schedule, allowing only for about two to three months. In order to be able to perform detailed and in-depth work, we start usually one to two years ahead of a process, getting to know the asset, establishing a close relationship with management teams and the vendors in order to have a detailed and very concrete actionable plan that we are considered a partner of choice.
The emphasis is on proactive deal development, starting with the relative value analysis that André described and a strategy based on operational added value. In private debt, the market of leveraged loan volumes has reached new heights. Focus is on offering flexible one-stop shop direct financing solutions, complemented by active portfolio management for liquid broadly syndicated loans. Demand for private debt financing remains strong on the back of the significant amounts invested in private equity funds and the growing number of private equity transactions that require financing. Private debt direct loans continue to yield a healthy premium to public debt, therefore offer an attractive risk return profile to our clients. Let me visualize how we proactively develop investment opportunities, starting with the top-down relative value analysis performed in every industry vertical.
A sector where we see positive dynamics by our TMT team is the information technology space in North America. A deep dive in that sector has shown that outsourcing of IT and more specifically, the outsourced product development, shows strong growth perspective in the coming years, driven by the need to adapt traditional business models with new software solutions, increased R&D spend, and the trend to outsourcing. Within that sub-sector, we identified a California-based company called GlobalLogic as an ideal target and started to pursue it. My colleague, Todd Miller, will now share with you an investment rationale.
Thank you, Christoph, and good morning. I am a managing director on the private equity direct team in Denver, and I led the GlobalLogic transaction. GlobalLogic represents a proprietary acquisition of a high growth outsourcer of software development services. We enjoyed a long-term relationship with the CEO, which one of our colleagues had had for over 10 years, and he ultimately, after getting to know us better, decided that we were his preferred partner and that allowed us to acquire the company outside of a normal sale process. The company participates in the project engineering services industry. That is a corner of the overall IT services industry that is enjoying very robust growth, I'd say outsized growth, generally north of 20%. What these companies do is they contract with traditional businesses to develop fundamental software applications for their underlying businesses.
The growth that these companies are enjoying is really driven by software disruption that is happening not only in the overall software world, but also in traditional industries. They tend to employ software engineers that have the cutting edge capabilities and work with companies to develop applications that generally have something to do with the revenue of the client. A couple of examples of that are Medtronic is a major customer, and GlobalLogic helps Medtronic with software that is in underlying medical device applications like pacemakers and otherwise. Another example is Kohl's, the global retailer, where GlobalLogic has helped Kohl's develop the applications that consumers use to interface with Kohl's when they are in underlying stores. The company has 1,100 software engineers throughout the world in locations like India and Eastern Europe, Argentina, and the U.S.
They put together dedicated teams that work with their clients on long-term projects. We got very excited about the underlying growth rate of the business, and we believe that it will sustain for a long time as software is becoming an increasingly part of the driver for many different industries. We had a very specific value creation plan that we're working with management on. An example of one of the levers in that value creation plan is expansion in Europe. The company today has a customer base that is primarily in the United States, but there is excellent expansion opportunities, particularly in Europe. With the resources that we have, we're working with management to drive more growth to build out the European business. With that, I'm going to hand it back over to Christoph.
Thank you, Todd. We turn to page 18, what we call real assets, real assets being the combination of infrastructure and real estate. High levels of dry powder in the search of yield continue to drive up the prices in the real estate market. To find value, we continue to shift our investment focus towards special situations. We find there's off-market transactions where hidden potential can be unlocked. We have identified several areas that benefit from secular trends, the rise of e-commerce, and the need to fulfill the delivery of internet-related commerce with new regional and local warehouses and logistic facilities. Secondly, the trend to move back into cities and the new wave of urbanization that generates the demand for modern offices and apartments. Demand by the institutional clients for infrastructure investment continues to be high, resulting in a high degree of competition.
We continue to develop and build core assets or expand platforms in the areas of renewable energy, communications, and in the energy infrastructure sectors, which all show transformative growth. We search around the globe for opportunities in stable, well-governed economies with an above-average risk-return profile. A good example of this strategy is the activity in Australia, where the government is strongly supporting the development of wind and solar installations and where the market features attractive feed-in tariffs. Often, we look for platform investments where we can develop or construct several infrastructure projects under one corporate roof. My colleague, Tim McCullough, based in Sydney, is illustrating this with the platform strategy in a company called Grassroots Renewable Energy Platform. Please, Tim.
Thank you, Christoph. Hello, everyone. Just a bit about myself. I'm a vice president in the Asia Pacific infrastructure team based here in Sydney. I've been with Partners Group for four years now, and most recently, I was the deal leader on the Grassroots Renewable Energy transaction, which totals a AUD 700 million equity commitment from PG's products, which I'll talk you through now. Just by way of background, in December 2016, we committed AUD 250 million to a project called Sapphire Wind Farm, which is the largest wind farm in New South Wales, 270 MW of capacity in total, and was a partnership with a developer called CWP. We are quite selective with our developer relationships. CWP had a fantastic project.
They've proven to be a very experienced, capable developer, and we, from financial close of Sapphire, were very keen to broaden our relationship with CWP and get access to their attractive portfolio. Just a word on the market. Australia has quite an attractive renewable market, as Christoph outlined. Renewables actually only make up 5% of the generation mix at this point in time. There really is a substantial room for growth and quite strong market fundamentals, which we find quite attractive, and this creates quite a strong scope for renewable investment for platform opportunities. Grassroots itself is a exclusive transaction with CWP that we've been developing since financial close of Sapphire Wind Farm.
CWP are actually making their portfolio exclusive to Grassroots and to Partners Group and our products, and on such a basis that we remain in control over the underlying investments and not taking any underlying development risk. In exchange for that, we've provided an AUD 450 million additional commitment to CWP. That's Australian dollar commitment on top of the AUD 250 million commitment we've made to Sapphire Wind Farm, so AUD 700 million in total. CWP actually have one of the largest portfolios of renewable developments in Australia and by far the largest in New South Wales, which is the state that we're targeting. New South Wales we see as being the most attractive state for investment. Through Grassroots, we're targeting a mixture of wind, solar, and storage investments to create a diversified energy mix and aim to develop 1 gigawatt or to construct 1 gigawatt of capacity by 2020.
That would make Grassroots one of the largest Australian renewable energy platforms and give us enough electricity or provide enough electricity to power roughly 500,000 average Australian homes. With respect to investment risks, the key risk for this investment really relates to power prices, and that's something which we typically mitigate by entering into long-term contracts with creditworthy offtake counterparties. Australia is a relatively competitive market, and by making use of this platform approach, we feel that it gives us a distinct competitive advantage in securing offtake arrangements. For example, over the last 6 months, there are three opportunities which we sourced, which were only possible because of this platform approach and only because we were able to trade electricity across different assets and sell it to a customer who wants that energy profile.
The intention as part of Grassroots is to compete less on price and more on quality of products and give the underlying customer the product that they want. Net return target for Grassroots is 14%. Now that's net of all Partners Group fees, that's net of all tax leakage, that's in EUR, and after taking into account any currency leakage. Grassroots is a deal that we feel has a very strong scope for value creation. In fact, we feel that we're able to improve the returns for Grassroots above and beyond what one would typically expect from a core Australian renewables asset by 500-600 basis points. We do that by negotiating attractive commercial arrangements with the developer, which we've done, which was the diligence phase, structuring and financing the underlying transactions, sourcing offtake arrangements and negotiating a favorable platform for our underlying investments.
In conjunction with our dedicated asset management team, managing construction and managing transition to operations. Once we've done all that, we expect to have created a de-risk core platform of renewables assets. That's our building core strategy and platform expansion strategies, then look to sell down either to a pension fund or a core infrastructure fund, any investor who will really has a lower cost of capital and we should benefit from a substantial rerate in the risk and therefore a meaningful capital gain. Ultimately, that's the thesis behind Grassroots. With that, I'd like to thank you for your attention and hand back to Christoph.
Thank you, Tim. I'll pass you back to André, who will conclude this presentation with an outlook on our fundraising plans for 2018.
Well, thank you everyone. We are on slide 20, please. I'm happy to reconfirm our expected range of new growth client commitments for 2018 of EUR 11 billion-EUR 14 billion. This 2018 guidance assumes a benign market environment as we have it today, and we expect this to hold up. In 2018, we continue to expect fundraising to be spread across a variety of programs and mandates across all asset classes. These assets will be raised through more than 25 programs and mandates. You see we have a substantial number of established offerings open for investors, including semi-liquid structures which offer limited liquidity, and also these semi-liquid structures have been an important driver of asset raising in 2018. Tail down effects from more mature programs, and potential redemption from liquid and semi-liquid programs, are still expected to amount to EUR 4.5 billion-EUR 5.5 billion negative effects.
As in previous years, we don't provide guidance on other effects such as FX rates. In summary, I can say that I'm satisfied that after a strong 2017 momentum on the client end investment side, did hold up. We are strengthening our team. We continue to expand our client and business partner network, based on Partners Group's strong track record and service excellence. I look forward to 2018 being a strong year. With the final statement, I would like to conclude today's presentation. I'd like to open up for questions from the participants on this call.
Thank you. We will now begin our question and answer session. If you have a question for our speakers, please dial zero one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it is your turn to speak, you can dial zero two to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment please for the first question. We've received the first question. It comes from Al Alevizakos from HSBC. Please go ahead. Your line is now open.
Hi, good morning. Thank you very much for the presentation. I have got a couple of questions. Question number one, I can see that the H1 was very good in terms of hiring. What I want to know is actually which area do you hire the most in terms of products? The second question is, I know that you do not manage the business based on pre-made targets, but given that private equity AUM have gone down from 60% of the total to 50% in the last four years, what would be your expectation for private equity AUM over the cycle? Thank you very much.
Well, thank you. Maybe I take question number one about hiring. I can say that Partners Group at this point, literally hires across the spectrum. This includes junior hires, FAs, APs to strengthen the future mid-level and senior level ranks in years to come. We also do hire laterally. That means proven leaders on the investment client service corporate side, who can immediately kind of like be plug and play and contribute to the platform. We hire across the spectrum in terms of ranks. In terms of asset classes, actually we continue to expand the platform in private equity, that is real estate and infrastructure.
There is no particular focus at this point in time, that will clearly outweigh It is not like infrastructure is much less important than equity or real estate, but it is true that we look for investment leaders in these sectors that have the capability and experience to strengthen, for example, deal flow, due diligence and value creation. The latter one is a really important one. We have talked about value creation. That is maybe the one area where I would see most outsized focus, not maybe in terms of number of employees or leaders, but in terms of focus and relevance for the company. We need and want to have a number of value creation professionals internally and externally, to create value in our portfolio companies. That is what I strictly refer to on the external side by referring to the senior advisors and the industry network more generally.
Al, if you may, I answer the question with the AUM. Now you have seen AUM of private equity moving down from 60% to 50% over the recent years. It is fact that the private equity is the largest asset class and is one of the largest contributors to our AUM in absolute terms. If you look at the other asset classes, which are today a bit smaller, they, yet smaller, they are growing by faster rates on average, if you look at the past couple of years. We expect, of course, that we will have a slightly more diversified picture in the future, on our asset classes simply due to the fact that infrastructure, real estate, and debt is growing fast.
If you look at that over the cycle, I think the clear strength of Partners Group is that we have these four asset classes, which show you a very sustained growth of AUM, sometimes depending on the year, more in private equity and sometimes more in the other asset classes. The picture should be a bit more diversified going forward.
That is great. Thank you. If I can have a follow-up quickly, just for my understanding, is there going to be a flagship fund in the second half of the year or not?
Well, actually, Partners Group has just highlighted we have 25 plus programs and mandates, right? Flagships or flagship funds and funds in general are raised when the predecessor fund is substantially invested. It's ordinary practice that you launch the fund after one. For private equity, for example, it could be that around year-end, we'll be in the market with the next flagship fund. Importantly, that this does not impact our guidance, right? The $11 billion-$14 billion guidance does assume just a blend or a broad number of products being in the market.
Great. Thank you very much.
Thank you. We have the next question. It comes from Gurjit Kamboh of JP Morgan. Please go ahead. Your line is now open.
Hi. Good morning. Just two questions. The first question is just on the asset raising expectations. The implication is that the second half, somewhere between CHF 4.8 billion-CHF 7.8 billion is expected to raise. What will determine the range? Obviously, it doesn't feel like there's a big flagship fund coming in through, but what sort of parameters should we be thinking about for that range? That's the first question. The second one is on the debt investments. Clearly, you had quite a big investment in debt raising this year. Where is that going into? In terms of the tranches, what's sort of a typical debt investment for Partners Group?
Well, in terms of asset raising, so we have six months to go, right? It's just first half. We're still in July, early H2. At this point, I can reconfirm the guidance, but I don't believe we are at the point where we should refine the guidance. It's still the EUR 11 billion-EUR 14 billion. I guess the, not uncertainty, but the one thing that is most difficult to predict is simply timing, right? Do you have a closing earlier? Do you have it later? Is it going to happen already in 2018 or it's going to happen in 2019? I don't believe I should refine the guidance, but I'm very happy to confirm the EUR 11 billion-EUR 14 billion guidance at this point in time.
Maybe on the question of debt, where does it actually go? I think it's really a combination of, on one hand, broadly syndicated loans, where we have extended the business quite massively. On the other hand, it continues to be very much the second lien business, the subordinated sort of structures where we offer one-stop solutions, flexible solutions for our private equity partners around the globe to really help them to transact with flexibility, with customized solutions. Very often we're the sole provider of finance in those situations. What is less prevalent today, sometimes, but still not a huge amount, is the traditional mezzanine piece. We'd love to have a lot of that. Given the public markets where they are, that is actually today a little bit below par.
Okay, great. Thank you very much.
Thank you. The next question is from Jacqueline Hare of Morgan Stanley. Please go ahead. Your line is now open.
Hi, this is Jackie Hare from Morgan Stanley. Thank you for taking my question. It is just one question from me. Can you please give us an update on how your U.S. expansion is going? Are you seeing more client demand for particular asset classes from that region? Thank you.
U.S. expansion, the answer could be threefold. It could be investments, it could be employees, and it could be clients. The United States is a key market for us in all aspects. In terms of people, we are building out our presence by way of building a campus in Denver. Going forward, we are going to have a multiple office and the biggest office in Denver that will allow us to cater to client needs, but also for investment purposes across this very large and important country. On the client side, the United States has and will be an important market. It is true that Partners Group is bigger and maybe more well-known in Europe, but we see that the Americas is also getting strong attraction on the client side. For example, driven by the important and sizable and actually well-known transactions that we are doing.
Clients is important today. I expect the U.S. to be larger over time, and it will be fueled, I think, by the investment activity. In terms of activity, which is the third leg, you have to heard that we invested a sizable amount in the U.S., above 40%. Long-term, it's about 40/40/20, 40 Americas, 40 Europe, 20 Asia. With this, the U.S. is a hugely important market for Partners Group in all aspects, be it employees and leaders, be it clients, and be it investments.
Just to follow up on my second question, are you seeing more client demand from U.S. investors, in particular asset classes?
I think client demand in the U.S. is across asset classes. I would not highlight one asset classes. It's broadly spread.
Okay. Very clear. Thank you.
Thank you. The next question is from Tom Mills of Credit Suisse. Please go ahead. Your line is now open.
Good morning, guys. Thanks for taking the question. Just a question about whether you see much exposure in your portfolio to U.S., China trade tariffs. Thank you.
Do you mind repeating the question? I didn't hear the last part.
Yes. Do you see much exposure in your portfolio to trade tariffs between the U.S. and China?
No, to be honest, no. We continue to be active in China. The majority of the transactions we do in India, China, and other emerging markets tends to be in the consumer space, and that is very local as a business. It sort of builds on the thesis that a local shift in demography will actually be quite helpful to the underlying companies. We have been investing into restaurant chains. We've been investing into healthy food sort of things in the Latin American markets but also in China. These tend to be quite shielded from the overall global trends.
That's very clear. Thank you.
Thank you. At the moment, there are no further questions. As a reminder, if you would like to ask a question, please press 01 on your telephone keypad now. We've received another question. It comes from Damian Siegrist of AWP. Please go ahead. Your line is now open.
Can you hear me?
Yes.
Coming back to the employees, do you have a target how many employees you want to hire at the end of this year?
There's not a hard target. Of course, we have open positions. If you would go on our website, you'd see roughly 100 open positions. In general, this is the way how we steer the growth of Partners Group, is we hire in line with AUM growth. When we give you the guidance of EUR 11 billion-EUR 14 billion gross new assets, we give you guidance about tail downs and redemptions, there's a net figure coming out, this allows us or actually gives us the budget, about how much people we can hire in order to have our costs under control. If you assume now taking the midpoint of the guidance we have given, the growth is somewhere between 11%-14%, and there you see our people are now 1,000.
We started the year with roughly 1,000 plus 11%-14%, we have roughly 100-150 people, I would say, capacity and budget to onboard over the year.
Thank you.
Thank you.
Go ahead.
We have a next question. Do you want to take it?
Yeah.
It comes from Thomas Gerlach of Baader Helvea. Your line is now open. Please go ahead.
Yes. Good morning, everyone. Thank you for taking my question. I have just one. Could you maybe once again re-highlight the differences that you would expect in the fundraising dynamic? The differences that could be between H1, H2. Is there anything specific we should be aware of? Thank you.
Well, thanks for the question. Again, we reconfirm the guidance of EUR 11 billion-EUR 14 billion. We see strong client interest. With six months to go, I don't believe we should refine the guidance. EUR 11 billion-EUR 14 billion it is. Nothing particular that I would need to highlight.
Okay, thank you.
Thank you. The next question is from Jan-Henrik Foerster of Bloomberg. Please go ahead. Your line is now open. Mr. Foerster, you can ask your question now. Maybe you are on mute.
Oh, sorry. I unmuted myself. Thanks for taking my question. Sorry to bang on this, but just on the EUR 11 billion-EUR 14 billion, could you maybe explain again in a nutshell what makes you confident to reach the guidance? Also in the light of a possibly escalating trade war. There could be redemptions ahead as well.
Well, actually, the confidence that we have in our EUR 11 billion-EUR 14 billion is really based on the visibility that we have and the discussions that we have with clients and prospects all across the globe. We have 25+ programs and mandates. We're in discussion at any point in time with thousands and hundreds of prospects and clients. Just like the signal we receive or the feedback that we receive, the interest by clients in the asset class, that literally remains unchanged. Why is that? Assets do increase. Institutional assets grow. Private markets in many client portfolios still have an under-allocation, and allocations on average, I expect to increase. I also do see a certain consolidation in the market. The structural growth or the structural tailwind that we have as an industry, I see that continue, remain to be the case.
With Partners Group's strong position and brand, already very strong in Europe, strongly growing in Asia and the Americas, I see that client demand will continue to be very strong also in the second half, and then for 2019. There's no change that will be driven by short-term volatility in the market or by news that cause uncertainty. Structurally, private markets we see is going to be an important pillar in the portfolios of institutional investors there globally.
Okay. Thank you very much.
Thank you. The next question is from Robin Maxwell of Baader Helvea. Please go ahead, your line is now open.
Hey, good morning, gentlemen. I just wanted to just ask a quick question about the impact, if any, that the new volatility in equity markets has had in the first half of the year on multiples being achieved on the purchase side. I obviously have one eye on the VAT Group, price correction looks like a well-timed exit from Partners on that. Obviously, we've seen weakness in technology, we've seen weakness in automotive, and I just wonder whether multiples being paid have improved at all in the first half.
Thanks for that question. In general, valuations remain quite high across the spectrum. The focus on mid-markets has truly helped us to probably stay a little bit ahead of the curve. The large cap space, as was shown on the previous slide, is the most heated part of the market, where we do not really actively play. Most of our transactions tend to get done roughly plus or minus at 10x EV to EBITDA. There will be continuous volatility in the market, and as I tried to explain, we hope that the disruption on the equities side will probably actually lower the valuations to some extent. For the moment, there's not much apparent out of that. VAT clearly was a successful exit. We would have, in certain ways, have wished to prolong the story.
It's a very great asset, to build on those category leaders, the franchises that are winners, is absolutely a good strategy to have.
I hear that. Thank you. Thanks a lot.
Thank you. As there are no further questions, I will hand back to you.
We have one online from Serge Monera from Octavian. He asks, given that we grow our private debt so quickly, if this has an impact on performance fees in the mid-term? Actually, not. Private debt is a lower paying performance fee asset class. We will talk about that in September in greater detail about fees. In general, we also grow our equity portion quite significantly. In the blend, the outlook on performance fee should not change because if we raise more debt. What should be clear is that debt pays just from a pure absolute perspective, lower or less management fees for the volume which is deployed. There is a second one, question online I just see is from Sofia Karadima, who asks, "Are you seeing more client demand on ESG friendly investments?" Maybe André can handle this.
Well, that's a superb question, and it's important for us to highlight that Partners Group is not an investment manager who focuses on ESG for certain of our investments, but we focus on ESG for all of our investments. Yes, clients do increasingly ask, for example, in in-house due diligence visits or RFPs, they ask about how Partners Group thinks and acts in terms of ESG. That's literally something that we have done already for many years. ESG at Partners Group is part of our industry value creation effort.
We see all environmental social governance efforts as an integral part of value creation. I believe clients appreciate that at Partners Group this is not a tick the box exercise, but it's something that we really underline with concrete and specific action plans in those portfolio companies where we see need either to cement the great ESG practice already in place or where we see potential to improve in terms of ESG by way of taking specific action. In general, clients also do take comfort in Partners Group's rating that we receive. Like the UN PRI rating of A+ that we have just received for the fourth consecutive year. That is something that gives clients confidence about Partners Group being a highly professional and determined player on that front.
Thank you.
That seems to be
Apparently there is. Are there any questions on the line?
No, there are no further questions via the telephone lines.
Okay. With this.
Well, thank you for interest, for your time on the call, and we wish everyone a successful Thursday and a good week. Thank you.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.