Dear, ladies and gentlemen, welcome to the conference call of Patna's group. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions via the telephone lines. During the presentation, you may type your questions May I now hand you over to the management team of Partners Group.
Philip Sauer will now start the conference. Please go ahead.
Good morning, everybody.
It is my pleasure to welcome you all here in our office in London and to present our 2017 senior annual results. And my name is Philip Lauer. I'm together here with Andre Frei, Co CEO and Doctor. Cyril Lippley in his new role as co head portfolio management. And with us on my right side is not with us here in the room, but in Singapore via video conference is Christophe Ruhle, who joins us from our Singapore office.
It is my pleasure today to start with the financials of Partners Group. Andre will follow and talk about client activities. Cyril will then take over and talk about portfolio management. And Christoph will conclude to give you an update about the investment environment and the investment activities in general. And let me start with a small snapshot of our financials, which we published this morning at 7 You see that our on Page 3, you see that our average AUM increased by 20%.
Our revenues increased by 25% and actually grew more than our AUM. This is mainly due to our late management fees, which I will elaborate on later in the presentation. As revenues have increased faster than costs, our EBITDA went up 37%. And below EBITDA, we have a financial result, which typically positively contributes to our earnings. And this financial result was growing faster than depreciation or amortization and taxes.
This is why our IFRS profit at the end grew 42%. But it is also worthwhile to note that if you compare the 42% against the last semester, so H2 2016, you will see that the growth of profitability was more moderate and only around 18%. These numbers are indeed strong, but we are well aware that a fair share of these numbers are due to this investment environment we are just operating in. After 8 years of riding the bull market, it couldn't be better for Partners Group, in particular, on the fundraising side and on the realizations. However, it is more and more challenging to get money invested.
If you go to Page 4, you will see that the combined growth of management fees, which were up 30% and performance fees, which were up 12%, brought overall revenues to $565,000,000 in the first half of twenty seventeen and marked a new record. Performance fees remained at a solid level as expected and were due to the consistent performance we have with our mature client portfolios. Performance fees typically can be earned 6 to 9 years after the initiation of a program and only if this program is successful. As you can see as well, the EBITDA margin increased by 6 percentage points, which might be slightly surprising to you, but I will elaborate on that later in the presentation. The financial results increased to 30,000,000 dollars And as you know, Partners Group typically invests about 1% of its money alongside clients.
And these investments or the changes in value of these investments contribute to our earnings. And this year, it was that was the dominant part of our financial earnings. Income tax expenses increased further with profitability, but it is more important to look at our income tax on a full year basis because we believe that our taxes will grow from here onwards because due to our international expansion. If you look at more deeper in revenues on Slide 5, you can see that revenues basically consist of management fees and performance fees. Management fees are contractually recurring and based on long term client contracts.
In fact, 85% of our assets under management are captured in such long term structures, which are locked in initially from up to 12 years. And this time horizon enables us to take a very long view when making investment decisions. In H1 2017, recurring management fees increased by 22%, which is somewhat in line with our overall AUM growth. But if you look at the total management fee growth, it was even stronger and grew at 30%, and this was mainly due to a lift in late management fees and other income, which is basically more than twice as much as we had in the last period, so $56,000,000 The main reason for this increase in late management fee and other income was our fundraising success in the first half of this year. You may remember that we have announced several fund closings in the first half of this year, and there were mature programs, which triggered these late management fee payments.
And I would like to explain you on the next page what late management fees are to remind how they come and how they will look like going forward. So late management fees often occur in closed ended structures, so in normal products, but they do not occur on mandate structures or separate accounts. And these structures are typically running between 10 to 12 years. So basically, when we start setting up a fund, we also start investing with this fund. So if a client comes in at a later stage of the fundraising, this client has the opportunity to actually buy into the portfolio at cost.
And because he can buy into at cost, this client needs to catch up on the management fee payments when the program has started to invest. You need to pay backwards management fees when the program was started. Why do we do this? We do this because at the end of the day when the product is closed, every client in that product is treated equally. So any management fee payments, which relates to a prior accounting period, are called late management fees.
And if you have a period like we had in H1 2017 where you close a number of products, then you have more late management fees. And as we do not expect to close more products or more older products in the second half of this year, we expect these late management fees to be very much tilted towards the first half of this year. Now moving on to performance fees. On Slide 7, you see the development of our AUM and performance fees since 2010 and 2005, respectively. We currently manage over 200 products and invest in separate accounts across various stages in their life cycle.
So in H1, more than 40 products contributed to the performance fees, what we generated out of the $147,000,000 And when we talk about performance fees at Partners Group, we talk basically about 2 effects. One effect is the basis effect, which comes typically with a time lag of 6 to 9 years. To put it in simple words, when AUM increases, we actually work on building out our platform, so that means our investment activity increases. So when we increase our investment activities about 6 to 9 years later, this should crystallize or transform into performance fees. Because it takes just time to make investments, to create value, to sell these investments and distribute ultimately back clients capital back to clients.
The other effect is the catch up effect. So there was strong performance fees generation from Partners Group in the last 18 months, and this was mainly due to a shift in timing because of the financial crisis. If you have pre crisis vintage years like funds which were launched pre crisis, they have typically a very long term holding period of their assets, more than average. If you launch products directly after a crisis, they have typically a shorter holding period of assets. And we had an effect that both vintage years, both categories came together and paid performance fees, which drove performance fees overall.
So if we look now going forward how does this might look like for 2017 and onwards, I would like to switch on Page 8. We are, as partners group, very aware that this environment is strongly supporting performance fee generation. But irrespective of the environment, we also expect to generate performance fees over the years to come because we think our underlying portfolios will mature and pay performance fees. And the expected bandwidth of performance fees as a proportion of total revenues is around 20% to 30%. We expect that these performance fees paid in a supportive environment.
And why do I say supportive? It's because we first base our performance fees calculation on actual realizations. And second, we have a very prudent way on how to account for performance fees. So we do not show you any unrealized NAV gains, but only when it's almost impossible to lose performance fees through any potential market correction. But this means, and don't get me wrong, if you run into a crisis like 2,008 or 2,009, that performance fees will be continued to be solid.
This means also that performance fees will be lower because we reduce our exit activities. But in a normal environment, there shouldn't be a reason why performance fees shouldn't be solid also going forward. But it is also important to remind you that at the end of the day, the majority of our business is management fee driven, and management fees make up 70% to 80% of our old revenue streams and are actually based on long term client contracts and are very stable, which you can see on Slide 9 when you look at the revenue margin. On this slide, you see actually a revenue margin development since our IPO, and the dark blue bar shows you our management fee margin. And the management fee margin has historically been at around 120 to 130 basis points.
If you look at H1 figures, you see that this margin has increased to 136 basis points. So basically higher than what we have seen in the past. And this is mainly due to the late management fee I elaborated on and that we raised higher margin products. But we expect this to normalize again into the range of 120 basis points to 130 basis points. The total revenue margin ends at 184 basis points and includes performance fees.
So we will continue to build up our direct platform, and that means also we think we can maintain the stability of a margin going forward. With that, I would like to shed some light on costs on Slide 10. As you can see, our operational expenses, they grew 16%, and this is broadly in line with AUM. AUM grew by 20%. These costs represent about 15% of the total costs of Partners Group.
The biggest cost driver, however, is personnel. And these costs were temporarily subdued in H1 2017, and I would like to explain you why on the next slide. On the left hand side, on Slide 11, you see the development of manage of recurring management fees and number of employees. There you see that our hiring activities are pretty much follow suit this recurring management fee development. And this is what we also expect going forward.
On the right hand side, you see the development of our total revenues and the total personal expenses throughout several different semesters. The numbers are indexed to provide a better comparability. So when you ask me how I would steer the costs, theoretically, I would love to have these bars to be the same all the time. But as we are a growth company and hire all over and throughout the year, you cannot match all the time revenues with hiring and that means with costs. So there is certain differences.
And but if you look at this over the last 6 years, we managed to get it very close. But for instance, H1 2017 was a semester where this match was not really pronounced. And this is also the reason why our EBITDA margin went up because our hiring activities were just lower or we just hired not as many people as our revenues increased. Nonetheless, you will see on Page 12 that we have reconfirmed our EBITDA margin target of 60%. And this holds true for all new management fees generated and also for performance fees.
And we do this despite we have shown this morning our EBITDA margin of 66% because we believe this situation is only temporary. And in order to be more concrete and provide you with more guidance going forward, we do also not expect that this margin, the 66% goes down to the target margin by end of year. We think that over several semesters to go, our margin will go closer or be more aligned with our long term target. But this all what I said is holding true if FX rates remain constant because we have a certain FX exposure on our EBITDA margin. On Slide 13, you see our IFRS profit growth of 42%, strong.
And as said in the beginning, if you compare this with H2 numbers 2016, the growth was only 18%. On the right hand side, you see some balance sheet items and where you can see that our equity shareholders' equity is now CHF 1,500,000,000 We have a net liquidity of CHF 700,000,000 and this is by the way after our CHF 400,000,000 dividend payment in May. And this helped us to generate a 48% return on equity. If you go to the last slide, and this concludes my presentation, this is a summary of what Partners Group's business model or by summary
of that what I just said.
If you have growing AUM and you multiply this times a stable revenue margin, you will have growing revenues. We have a target EBITDA margin of 60%. This should provide you with EBITDA. And historically, Partners Group's EBITDA has been very close to net profit. And with this, I would like to conclude my presentation.
Thank you for being here and handing over to Andre.
Thank you, Philippe. It's my pleasure to give you an update about our platform in general, but then also our client activities more specifically. Let me start off by sharing a few corporate highlights in the first half of twenty seventeen. You can see in terms of international footprint and build out that we continue our strategy of covering the globe. We have 20 offices around the globe.
We are building up and we are having 3 hubs. So the current build out happens in the United States, where the Denver hub is really taking shape currently below 100 employees. But over the next 2, 3, 4 years, we expect this Hub to cover or actually be also about 200 to 300 people in size and thereby serving as the hub for the United States. Similar efforts happening in Asia. We have the Singapore hub, we have the Zug hub and those in Asia, we're building out the Manila office, which will play an important role in our corporate setup.
In terms of hiring talent, Philippe has already alluded to that. We do continue hiring, and it's not important to perfectly match on a whole yearly basis, but we're strongly committed to building out to higher talent, both on a lateral level, but then also on the more junior side, I'm very proud of the associates, the financial analyst program that we are maintaining to feed the platform with additional talent. In terms of fundraising, it has been an interesting first half, €6,900,000,000 raised and about 40% of this asset inflow did stem from the flagship offerings. That is not that is pronounced right. It's not surprising, but it's pleasing to see that especially also the flagship offerings on the direct entity, direct infrastructure on the direct debt side have seen so strong traction.
And Dino, we have had a slight corporate reorganization about 3 months back. That is something I would like to quickly explain on Slide 17. So basically, as per July 1, we have amended our corporate organization. There was a press release in June 2017, and this chart actually shows how the corporate is organized from an organizational perspective. So what have we changed?
As you guys simply reduced the size of the executive committee from 12 members to 7 members, there's not been a change on board members or on the composition of the Board of Directors. And the signal that we wanted to send to our organization is really that Ed Partners Group contribution and career are not linked to corporate committees and corporate governance. Actually, the goal of this reorganization was to free up several long standing accomplished leaders of the company. For example, Sarah Whitfield is now going to be the co head of portfolio management, but many more leaders to spend more time on clients and investment related activities. So that is what we have done.
And I believe it's really energizing, and it keeps up the high intensity, the passionate culture of partners groups that we want to be an investment and client focused firm. So I'm happy about this organizational change that we have triggered. So that the senior leaders of our company are now available for clients in the investment related functions. And that is a chart that I want to share with you on Slide 18. Slide 18 features the investment covenant structure of Partners Group.
It's one of those slides that we share with all clients, and they want to know about Partners Group and how we set up. But it's a slide that we have not previously kind of like included in shareholder presentation. So what you see is really how we are organized on the investment side. And when I think of Partners Group, I always refer to us as an asset manager, but also as a manager of assets. As an asset manager, we need to get the top down investment allocations right, and that is something that is top down as it relates to portfolio construction and the respective committees you see on the left hand side of this chart.
So here we talk about the Global Portfolio Committee, which focuses on asset allocation and portfolio implementation, but then also the Relative Value Committee, which defines macroeconomic scenarios and assesses the most attractive themes in private markets. So that's the asset management angle that is important to our business. At the same time, Partners Group is a manager of assets. And here it's really about both the MOP investment decision. It's about sourcing.
It's about the diligent thing. It's about creating value on an asset by asset level. And you see the committees involved here are the specialist ICs. These are the regional and the asset class experts, for example, on the infrastructure or the real estate that they criticize. But in the diligence and the selection of assets, it's also important that more generalist type of questions and considerations are pursued.
That's why on top of the specialist ICF Partners Group, we have a global investment committee in place, which is responsible for the final lease election as well as the respective investment recommendation sign offs. And this committee is overseen by the Investment Oversight Committee. So what we have done is basically free up senior leaders across the firm from the executive committee, for example, but also on a department level to focus on investment and client related matters. So as people move out of corporate committee and move into investment and client related committees, and I'm very happy about this change we have triggered. It's a sign to us one thing and actually starting to be an entrepreneurial institution.
I believe this organization has been serving that purpose well.
On Slide 18, I would like to
quickly talk about the investments into our platform and how we are committed to further invest into our platform. Actually, platform growth and build out is not something totally new. And to refresh our memory, what we have done here is we have taken a that we shared with you and shareholders in March 2013. In March 2013, and you see that on the left hand side of the slide, you see how Partners Group had an investment capacity of about $5,000,000,000 to $6,000,000,000 And in March 2013, we had been quite transparent that we want to increase the investment capacity further. So what we have communicated back then is that over the next 5 years, we would like to increase the capacity from $5,000,000,000 plus to a magnitude of about $10,000,000,000 to be invested on an annual basis.
And I believe it's fair to say that in 2017, we can conclude that this goal of 10,000,000,000 dollars annual investment capacity has been largely achieved. So we have, to be more specific, invested $9,800,000,000 in 2015. We have invested $11,700,000,000 in 20 16. And the current investment pace, which I would expect to again surpass the $10,000,000,000 that leads to the conclusion that actually we have built the $10,000,000,000 capacity. But of course, we're not rest.
So on the right hand side, you see a few of the focus points on the investment side and corporate side. What we're going to do is we're going to not fundamentally change the company, but we're going to continue to build out of the platform. So we will hire through the financial analyst and the associate program, but we're also committed to further organic growth through let's through hiring. On the client side, I want to broaden and deepen the team to ensure that we are really close to the clients all around the globe. And on the corporate side, of course, we want to remain an innovative firm.
We have talked about defined contributions about 2 to 3 years ago. Digitization is a topic at this point in time. So a lot of effort and also capital will flow into the build out of the platform in deers.com. On Slide 20, you see a few of the key markets, key private market client trends. And they don't it's really these client trends that make us confident and convinced that we should build out our platform further.
The client side, we know that institutional assets under management are growing with a rate of, let's say, 5% to 6% per annum. Pensions on, for example, grow as population grows and people age. So institutional assets under management increase. We see an increasing allocation to private markets. And on top, we observe a consolidation of private market managers in the past, but also we expect that to happen going forward.
So this is really I call this structural growth drivers. Which we also call it the fundamental tailwinds that we have in our industry. And then if you look at the survey that we quote on the right hand side, I think that's really comforting. 80%, 90% of institutional investors say that they want to maintain or even increase their allocations to private markets. So that's a really positive sign.
The industry is more mature. Clients are more experienced about private markets. And we believe that will lead to a further growth of the industry, but also growth for partners groups. On Slide 21, you see how this industry growth should actually translate into Partners Group growth over time. What we illustrate here is how assets under management, but also employees have developed over the past decade or so.
So why do we show this chart? I mean, it shows how we have developed in the past, but I guess it's more of a slide to illustrate that we are committed to further building out the platform of Partners Group. So now we are not striving for operating leverage to increase the margin. In contrast, we are committed to deepen and broaden the investing platform by hiring people and just do everything even better than we do today in order to create investment capacity and continue to build our strong investment track record. And I can assure you that Partners Group will remain on private markets.
So we have equity debt, real estate and infrastructure. We cover it from a direct angle, but we also include secondaries and primaries. And this private market focus, this integrated platform is going to be very much at the center of what partners are going to do going forward. In terms of client base on Slide 22, you see that private equity is at 54% of assets under management, but the other asset classes, private debt, real estate and the infrastructure have strongly contributed to growth and now represents a large share of assets under management. And private equity is slightly below 50% in terms of inflows in 2017 first half.
I consider this a positive signal. I like to see that the private equity real estate infrastructure asset classes, which are a few years younger than private equity, have seen so strong interest by clients all across the globe. And personally and Fede will talk about this. I guess, personally, it's most exciting when investors do not look at these 4 asset classes in isolation, but start to combine them and create portfolio. On the right hand side of Slide 22, you see that we continue to grow with our clients and our clients continue to grow with Partners Group.
The top 10% of our clients represent about 17% of our assets under management, so I consider our client base to be well diversified. And this takes me to Slide 23, the 2nd last slide of my short update. So how are our assets under management diversified across regions and types of clients? You see that Europe remains the strongest representative of asset inflows and assets under management. About 35% stems from Germanic speaking Europe and also Germany.
About 37% stems from English speaking countries like the United Kingdom and the United States. And I guess this thing also once more that partners who have deep relations and a strong brand in Europe, where we have been active for 2 decades plus, but also with increasing inflows in Asia or in the United States, we see our brands becoming stronger and thereby attracting client demand. On the right hand side, you see that pension funds are the majority of our assets under management still, about 55% of assets under management. So that's been a very steady contributor of asset inflows in the past. 2017, I would like to quickly highlight maybe the distribution partners.
There has been strong interest in our semi liquid or open ended structures that we maintain as a company. Partner Group has created the possibility also for high net worth individuals and institutional that maybe have a different time horizon or a different capital available to invest like the institutional investors do. And we're happy that the distribution partners have raised significant investments in our semi liquid and open ended structures. And this takes me to my last slide about the client demand outlook. As you know, we have started into the year at €54,200,000,000 We appraised €6,900,000,000 in the first half.
And basically, the full year figures have not been changed. There's no change in guidance or communication. We still assume that we're going to raise €10,000,000,000 to €12,000,000,000 for the first half. That would mean there's a tilt to the first half. But we do see a strong pipeline in product demand and mandate demand also for the second half.
And that is something if I talk mandates, that's always involving portfolio management. And I believe that's the perfect segue to hand over to Cyril Witzley, who's going to talk about portfolio management.
Yes. Good morning also from my side, Cyril Ritzley. In good old Partners Group style, where long term continuity and thorough handovers to the next generation of leaders is actually very important. We decided that I participate for the last time actually on this first half twenty seventeen financials roadshow, but that actually also can say goodbye to shareholders in Zano since 11 years and there's one of those phases. So, it's growth initiation research report and partners group, for example, but also gives me actually the time, the chance to actually talk about my new exciting role as the Co Head Portfolio Management.
So why did we actually decided to strengthen the portfolio management team? About 20 years ago, I mean, our clients used to buy only products from Partners Group, where they're buying to one portfolio. There's only one strategy being implemented there, so everybody ends up having the same portfolio. So it's a one size fits all approach. But this has changed.
This has shifted over the last 10 years. I mean, more and more of our clients actually demand mandates, which are tailor made to specific client needs. But this means that portfolio management actually has become more fundamentally and important due to the professionalism demands also for our client side going up every year. And as you know, we always have 3 pillars. The partners group, we have the investments, we have the clients, and we have the services.
And portfolio management sits actually right in the middle of them. I mean, we talk to the clients, we understand their client needs, we understand their risk return profile, and then we actually build the portfolios, choosing those investments, which actually those investments from our platform, which our platform offers, which fits best to the individual client's needs. So, Page 26 of the presentation, you see that works in practice that the local investment teams in our 19 offices worldwide, they source the best investments they find in their specific region. And then the specialist ICs select the best of the best to be proposed to the Global Investment Committee. And then the Global Investment Committee then approves only those investments which offer the best relative value across the globe and across the respective asset classes.
But then portfolio management allocates those investments to the various clients in the most fair way possible, of course, but also with the goal to reach all objectives by the client. And our global value approach is not just a linear process, which ends up being in the private market publication, for example, but it's a never ending circle of the bottom input by the local investment teams and then the top down view of the relative value committee, which then again feeds into the sourcing strategy of the bottom up deal flow. If we look at the next page, Page 27, that shows the relative value at Partners Group, which happens at several levels. So, at the first hand, on the left hand side, we start with the definition of the expected returns per asset class, which is based on our base case macro scenario. This builds the starting point for portfolio management for integrated mandates.
Then in the middle, yes, the estimate of relative value of regions, instruments and sectors per asset class are summarized in our boxes as presented in the private markets Navigator, our publication. And for example, private equity second reason, 2,009 have been very attractive because you could buy at a discount to NAV. Now today in 2017, you have to pay a premium to net asset value. So that has changed. And then on the right hand side, investment themes, the identification of particularly interesting subsectors and also transformational themes in various sectors is very important.
Regarding the expected return framework of Partners Group, at Partners Group, we calculate expected returns according to a proprietary framework, which splits the return expectation into 3 parts. We talk about income, which is basically dividends or interest payments. Then you have return from growth that is value creation, conducted by our specialized industry value creation team. And then you have return from valuation changes. So we make an assessment of the expected valuation level changes during the holding period of the investments typically 4 to 6 years, which can be positive, but we can also see a negative contribution, which probably over the next 7 years is going to be a negative contribution.
But don't forget the big difference between you as a public market investor and us as a private market investor. In the public market world, you're used to also do that top down analysis. You look at the different sectors. And for example, then you say financial sectors might be interesting at one point in time, and then you analyze the financial sectors and then hopefully you come to the conclusion that Partners Group might be an attractive company to buy. And then you call up your execution desk who calls up the broker and next day you actually own Partners Group in your portfolio.
Whereas in private markets, actually we also have to do that work. Have to find the assets. But then once you actually have identified the assets, then you have to approach the seller and actually convince the seller that A, you should sell the assets and B, you should sell the asset to you and not to someone else. So there is one additional step involved in private markets, which is not the case in public markets. So, on Page 28, you see that on a semi annual basis, we write down our current early value assessment in a publication called the Private Navigator and we make it accessible to our clients, which ultimately is successful for shareholders in case you're interested.
And in 2010, for example, just after the financial crisis, we advocated that buying quality assets at trough earnings is attractive. In 2012, we said proactive ownership is pivotal. Then we forecasted the asset inflation will lose some steam and that means we search for transformative growth opportunities. And then in the actual just published Private Market Navigator for the second half of this year, we described our search for platform building opportunities. So, a little bit simplified, this just means that at the beginning of the cycle, just after the financial crisis, it was sufficient to find high quality assets, which you could then hopefully sell at a higher price, basically buy low, sell high later.
But then with increasing elevations, that last year is not good enough. You actually have to, A, find the high quality asset, but then, B, also create the value, which we've done with our industry value creation teams. You see even higher elevations also that was not enough. So you had to find a high quality asset, create the value, but also you have to get top down pick right, but actually from a relative value point of view, you're in the correct sectors in the industry. But we can even higher elevations also that is not enough.
So we have to nowadays we have to find the assets, create the value, pick the best relative value, but then also find additional assets, similar assets which you can add
to your
platform. On Page 29, when we look at our expected returns of a single investment opportunity, but more importantly of a whole portfolio for our clients, then we, of course, look at different scenarios. Look, for example, at one scenario we call the continued stock market rally. Another scenario is the faster rate hike cycle in the U. S.
Or a mild recession scenario. But in the end, we're not the manager now the clients pay us to have an opinion, so of course, we also have a base case. And currently, our base case assumes low but steady GDP growth, about 2% to 3% per annum, slightly faster Fed rate increases in U. S, about 200 to 2 50 bps, and then once currently priced in by the market, partially as a result of higher inflation expectation on our cycle, let's say, 2% in the U. S, but also in real terms.
So when I advise our loss of clients and actually we dive into much more detail and then I spend an hour only on the expected term framework, but I'll spare you the details now in this presentation. But if you like, actually, the last four pages of the Private Markets Navigator are a little bit describing our expected return framework. But on Page 13, you see that mandates are more and more important for our clients. Currently 40% of our assets are in the management are in mandates. There's a role of portfolio management to build portfolios which are in line with what the clients want.
So some clients want low risk yield oriented portfolios, so we add more private infrastructure, private debt. And all the clients are the opposite and strive for high return oriented portfolios, so we have more private equity. So finally, some clients desire more balanced, which could turn the profile of their portfolio. So maybe to you as a public market investor, you laugh and say, yes, give me a break. I mean, having a portfolio of more stocks and having a portfolio of more bonds, I mean, this is a daily business in public markets world.
But believe me, in private markets, that's actually state of the art. So, I would not know any of the manager worldwide, which actually incredibly say that they can across all four asset classes, private equity, equity, equity, across all instruments, as we call them, direct, secondaries, primaries across the globe actually build such portfolios that I believe we're uniquely positioned to do this because you actually need 1,000 people in 19 offices with a 20 year experience track record. You need
to have this in order to
offer this to clients credit. So, Page 31, you show some of the dimensions how clients look at their strategic asset allocation. So, of course, they look at return, they look at risk, they look at duration, they look at yield, cash flows, look at liquidity, diversification, ramp up time, investment level steering and more and more also ESG matters. So more and more of our clients require us to do responsible investments and Christoph will touch on this also. It's crucial that the portfolio manager understands the client needs very well and I'm thrilled to advise our largest client worldwide in the mining role.
But portfolio management ensures that the customized portfolio develops in line with what the client actually was asking before. And you can see that on Page 32, you just see an illustrative example of the splits of direct and regulated primaries, private equity, debts, real estate, English, Lobster, North America, Western Europe, Asia, vintage year diversification, NAV development, targeted terms, etcetera. Or in other words, we need to ensure that portfolio management meets client expectations. So some clients, they have just increased their asset allocation in private markets, and it's very important for them to ramp up fast through their target asset allocation. So they want to invest fast over the next 2 years, for example, to reach their target.
Altus have started that over as earlier and they are more concerned about higher valuations and so they want to invest slower, let's say, over the next 5 years because they're actually hoping that in 3, 4, 5 years from now they buy at a cheaper valuations than they buy today. Some clients have a strong view on asset class or reach. And so maybe they don't like real estate or they don't like China. Some other clients, they would like to diversify across all asset classes and they like to diversify across the globe. Some clients need yield.
Some clients like actually capital gains or payment in kind. Some clients prefer highly concentrated portfolio and they like to have, for example, 6 or 9 lines of €50,000,000 each. Also to have not so many capital costs and distributions, Some other clients lost diversification and want to have 100 assets of $3,000,000 each in their portfolio. Some clients prefer direct investments in order to minimize their total expense ratio, but some other clients, they lost the diversification benefits of primaries. So this is all very important because we actually calculated that we managed in the past to have an outperformance of about 2% to 3% of initial performance every year because of relative value and smart portfolio management asset allocation decisions.
But mainly for U. S. Shareholders, the most important slide is actually my last slide, so Slide 33 of the presentation, which shows that to get the commitment planning right with the client is actually key. So our private market industry actually thinks in commitment into fund. So every fund manager in the private market industry, every 3 years or so, goes out fundraising and raises its successor fund.
But actually clients, they don't think in commitments. They think in NEB, they want to have X percent of their overall assets invested into private markets. So for example, Page 33 shows such an illustrative example of a portfolio NEB developing over time as a result of capital calls on the online side, NEV gains and distributions, which need to be reinvested on the other side. So if you take, for example, a $10,000,000,000 pension plan, dollars 10,000,000,000 in size, once you invest 3% into private markets, then it is a $300,000,000 commitment which that client typically does. And now the problem is if you only commit $300,000,000 probably at this point in time, that client is only committed to invested 200,000,000 dollars So $100,000,000 is still uncommitted.
Usually these unfunded commitments lie around in cash at the client side. So if you want to be invested $300,000,000 probably should commit $400,000,000 So this client already should commit $100,000,000 as of today just to reach the current investment level. But many of our clients actually they grow in size. So let's say they grow by 5% per annum just because of inflows of the pension plans also because of performance. So that $10,000,000,000 pension plan becomes a $12,000,000,000 pension plan in 5 years from now.
And if you take that growth into consideration, even if the asset allocation stays where it is, that client needs to invest €300,000,000 actually over the next 5 years. This is the left hand side of the picture. Now if you move to the right hand side of the picture, let's assume this client has a consultant, a pension plan consultant, which advise the pension plan that actually 3% allocated to private markets is not enough. They should actually increase their allocation to 5% public markets. Now 5% of $12,000,000,000 is actually $600,000,000 But if you want to be invested $600,000,000 you probably have to commit $800,000,000 So there's some reason there is a gap because you're $300,000,000 committed, but you need to be $800,000,000 committed.
So it's actually $500,000,000 gap. So this client needs to actually commit $500,000,000 And now it's the job of portfolio management to sit down together with that client and to discuss how we can achieve that. For example, by every 3 years, invest 175,000,000 dollars every year, dollars 175,000,000 per annum until you have reached new goal because we cannot accept just the $500,000,000 at once because we backed investment capacity to do so if all our clients immediately at once want to increase their asset allocation. Because we need to do this long term investment planning with our clients because it's our investment most scarce resource. So this is a win win not only for clients and for Partners Group, but it's actually also a win for shareholders because you will like this too.
Because this long term commitment planning that our clients actually increases our visibility and future fundraising even more. And with this, I would like to hand over to Christoph, who will talk about our investments.
For the analysts, shareholders and representatives of the press, kind greetings from Singapore. It's my pleasure to briefly summarize the investment activities for the first half of twenty seventeen. And turning to Page 35, where you see that across the Partnership platform, US5.6 billion dollars of new investments have closed. This is an increase of for the US4.9 billion dollars that we have invested in 2016 in the first half. You can also see that SEK 33,200,000,000 or 57 percent were invested there directly where we are sourced in the range in our Solesence transaction, €1,000,000 or 18 percent was on the secondary side and €1,400,000,000 were invested into best in class private market bonds.
So I can see that the aggregate volume as well as the split by style is in line with our medium term business plan. We seek about 50%, 60% of Directs. We seek about roughly 20% each for secondaries and primaries. We've also benefited, as Felix Auer has already alluded to, from the liquid and highly priced market environment. We generate SEK 4,300,000,000 of existing distributions at very gratifying levels.
The number of employees now stands slightly roughly 950 that will continue to grow as Andre Frey has already exhibited, in line with the growth of the assets under management, strengthened the investment teams, but it's also the service engine of the FURU. Turning to Page 36, where we illustrate our deal flow. I will not go into details, but you can see that each of the dimensions, each of the key figures, each of the metrics is a healthy notch above the last same period last year. And we have stayed disciplined, having roughly 2% of the success rate across the platform. So again, a highly disciplined approach that we maintain with the underwriting standards at a high level.
Turning to Page 37, where we show on one hand the regional split and on the other hand the split by style. You see that we have shifted a slight bit and have done more investments in Europe compared to the same period last year. That is obviously something that swings a little bit with the relative value that Cyril has alluded to. The closure of deals like Cerba Health Care in France or so shifted the attention a little bit towards Europe. Resulting that the direct ZTE team has been able to deploy quite a significant number of transactions in the European time zone that is over weighted for the time being the European market.
Over the medium term, 40% Europe, 40% U. S, roughly 20% other time zones is a healthy mix in our view.
On the right hand side,
you can see that the secondary business has contracted a slight bit with about SEK 1,000,000,000 of transactions closed versus SEK 1,200,000,000 in the previous period in 2016. I will now briefly go into each of the 4 business divisions. And given the time and to allow you for questions, I will keep the examples quite short, but briefly summarize what are the investment strategies that we pursue in each of these divisions. On the private equity side, Page 38, the industry has seen robust inflows of fronts. The investors continue to increase the private market allocations.
So the dry powder for buyers, for instance, has increased to roughly $540,000,000,000 Valuations continue, therefore, to be high, and the debt markets remain very liquid and also very borrower friendly. On 39, we show briefly what we do in this highly priced market environment. SEDAR has already alluded to platform investments, which is something we see many of our transactions. And we're also on the second side looking for demographic shifts or technology changes that create what we so called the transformative growth niches. We look for leading companies in these niches.
We buy into the leading firm, but they're usually in fragmented industries, so they can also grow the way of M and A. In the middle of the page, as we said about healthcare, the French transaction, which suits our definition ideally. It is by far the largest firm in this diagnostics business in France, but continues to do a lot of M and A add on acquisitions besides the organic growth. There's also the dimension of international growth that is potentially available to us. Turning to Page 40, private debt.
The private debt markets have continued to see high levels of demand, demand driven liquidity. So the issuance of all types of leverage loans and debt instruments has remained very, very strong. We also see at the bottom right hand side that the spreads continue to have tightened. And we also note that the equity cushions remain at very comfortable levels between 40% 50%. Typically, that instruments offers 200 basis points or more of outperformance versus the liquid spectrum.
There's still very good relative value in the private debt markets. What do we do strategy wise is shown on Page 41. Again, it's very similar to the Private Equity division. We benefit from those transformative growth trends, and we also target industry segments, which are not so actively serviced by the banks, like quick service restaurants. The big example here is Checkers at the bottom left, which is a U.
S.-based quick service restaurant chain that develops very nicely stable cash flows. I'll turn to Private Real Estate on Page 4b2. Investment activity and decline in appetite continues to be strong and the capitalization rates have remained at very low levels. We again see very transformative trends here by other demographic shifts that impact the residential and the office market. Organization, live, work, play lifestyles, we also see shifts in consumer demands due to the e commerce and the changing retail logistics.
Each of them is fueling the real estate market with investment opportunities. Page 43 would then show you how we implement this. This is essentially buying office towers in the locations. You see, for instance, the example of Atlanta. In the U.
S, you have destinations like Atlanta, Austin, Texas Denver, which are really benefiting from a shift in the relocation of technology companies off the U. S. West Coast, and that is obviously having positive impacts on the office segment here. Or the other example on the right hand side is Brisbane that continues to benefit from relocations of mainly Chinese buyers, but also other billion buyers across Asia, and we have been able to finance this residential tower at very, very attractive returns. Lastly, we come to infrastructure.
This is shown on Page 44. Generically, again, volumes have grown and on a per annum basis are now approaching gradually €500,000,000,000 So the asset class has become much more mature and also of size. Cost transactions continue to be very, very pricey. And therefore, many of the buyers also show very aggressive business assumptions to sort of justify the pricing levels. At the bottom right, you see what we do is try to sort of shift towards niches, which offer you higher relative value.
For instance, Australia shows you much better PPP returns than Europe. The fiber networks show you lower entry valuations compared to telecom towers. Or in the solar space, Taiwan offers you much better returns compared to Europe. So we identify these niches and tend to implement them. Three examples on Page 45, which again very often have the characteristics of a platform.
Take for instance Sapphire Wind Farm, an Australian based asset. It's a 2 70 megawatt wind project in the new South Wales territory. But with the operator that we currently have teamed up, we have identified $1,000,000,000 of potential additional equity investments in wind farms across the Australian market. So again, the idea of the platform here very much applies.
With this,
I will come to what drives private market performance. We have touched on this in previous presentations, so I'll keep this brief. But in this high priced environment, the only way to go is to really add value at the operational level to the companies. So this industry value creation team is a strategic important to us, and you can see the results of those ongoing value creation initiatives. Strong revenue growth was 14% across the portfolio in 2016, a slightly higher growth of the EBITDA even.
And in a solid environment of growth, we also created a lot of new jobs, roughly 10,000 new jobs created across the portfolio. So very healthy solid performance numbers, which are really derived on the back of this very hands on style of pacing the companies and having this operational value creation come through. I will finish by Page 47 by talking about the responsible investments, which are very dear to many of our clients. They are expecting us to be in compliance with the U. S.
Standards for responsible investments and to conduct a best in class ESG program. Here we are proud to note that for the 3rd time we have received an A plus which is the highest mark for strategy and governance as well as an A plus for the Private Equity segment. But also our debt in the Real Estate segment received high marks with an A plus The average shareholders and representatives of the press, you can see that we navigate with discipline in this high priced environment and we continue to maintain our high underwriting standards. Despite this challenging investment environment, we look to the future with confidence. With this, I conclude the formal part of our presentation and would open for Q and A.
We would probably start with questions here in the London office first and then we'll go to the conference. Is there any questions in the group? What are you seeing with the competitive landscape? How is it more difficult to generate? Are you seeing potential competitors being away from this market to cable Okay.
First of all, if we maybe this was for Christoph. The first question is in terms of competitiveness in the market is what do we see or what do you see, Christoph, in terms of our competitors pulling out of the market because of pricing and pressure to generate returns? Or how do competitors position themselves in this more challenging market environment? The second question was on the EBITDA margin, which I will elaborate after Chris' answer.
Well, on valuations, clearly, they have edged up and continue to be at high levels. We don't see barring any political sort of diversion, any change in the foreseeable future. I don't think the competitive behavior has changed. I don't think people have left the market yet. Everybody has raised significant amounts of money, so it's got to be deployed somehow.
So I think the question probably is more how do we differentiate, how do we position to still win business and to be actually a preferred investor from a management team's perspective and from a vendor's perspective. I think from the vendor's perspective, I guess it's the credibility, the discipline in closing, the speed of being able to close and also the predictability of the offer. But if you announce 100, you don't renegotiate way or so, but you actually keep your word, you keep honest over the process, I think that is not important. So this reputation we have gained in front around the world, that truly helps. But probably more importantly for management teams, the global platform, the operational added value and the investment experience it can bring to bear from an industry value creation point of view is very often seen as very, very attractive.
And therefore, we for many of the teams over the last years have been the partner of choice. And that's really what we try to do, to appeal to those management early to hopefully even prevent a competitive process and to be able to win a transaction despite a certain element of competition going on. I don't think the market dynamics will probably change greatly, but you can see also in the metrics of the money deployed that we have done reasonably well over the last year despite having lost many transactions in the price.
With regards to the EBITDA margin, yes, and, Gucci, I think you are absolutely right. There will it's not possible actually to reduce that, especially maybe the changes in the FX rate already. So we have this 60% EBITDA margin target confirmed. In the short term, we will not meet this short term as a year or 2 out. Medium term is probably 3 to 5 years.
We will slightly head towards that 60% over time. So but this is our goal and this is the way how we will steer our budgets certainly in a healthy manner because it is also important for us. At the end of the day, personal costs are our biggest cost driver that we hire the right people. So we just not open the gates and just let people in. We want to hire the right talent, and that takes time.
You need to find those talents, and that goes a bit hand in hand over maybe now couple of semesters to
go.
Indeed. So private debt is the lowest margin business we have. It's also strongly growing. This has obviously impact if you add on business with a lower margin, which is coming in at slightly lower margin. But also within that, you need to separate.
There are several instruments which have different margins. Not all debt instruments are necessarily cheap. There are also more higher yielding instruments, which come also with higher margin. But indeed, so that's not pressure on the margin. If you would call it, yes, on average, you might see it drag it down.
But on the other hand, we raise or we build out our business activities on the direct side quite massively, and these margins are the highest. So with that, I think we assume also internally with an increase in that business that we maintain our margin at least for the couple of years. Should it be the case that, that really goes through the roof, then you will see a certain impact on margin. But don't forget, that is a much more scalable business than equity. So at the end of the day, and we as partners, we try to maximize the net profit.
And from that perspective is, yes, you can compromise on a certain margin because you want to rate that. But if at the end of the day, earnings increase, then it's beneficial for us.
If I may add, the that team, together with senior management, has developed a business plan, which actually shows that over the years, the debt business in itself will be actually very much in line with the rest of the Partners Group business. There's an initial ramp up period that's been obsessed, but over the next 2, 3 years, there's no reason why the Z business should not generate a similar margin due to the rest of the platform.
So the second question was about the impact of the current market and maybe political environment in the United Kingdom on this under management. Well, as you see, we have we manage significant assets for U. K. Pension funds, currencies and joint companies, etcetera. And so far, actually, there's been basically no impact as a result of politics or economic considerations.
And I believe that the simple reason is that private market investment decisions always have to be made with a long term mindset. I believe that one of the biggest mistakes is not to diversify private markets properly, be it not to diversify over calendar and vintage years, be it to have too much venture capital in your portfolio. Whatever portfolio construction area you make in private markets, it's really tough. So at least the UK institutional investors have reacted really reasonably, realizing that private market allocations are long term investment decisions. They, of course, are on a capital call, but also continue to commit to private markets in order to achieve the long term targets that Cyrille has mentioned.
And in terms of currency, I guess my simple answer is that it pays off for every institutional investor to strive for a global portfolio. So U. K. Is 1 country. It's going to impact Europe.
It's going to impact the world. But if the U. K. Investor, no matter what's going to happen precisely, I think it does pay off to build up a diversified portfolio that mitigates some of the risks that otherwise would be inherent in the portfolio. So I believe what happens on my client relationship side, but also on the portfolio management side is as we just continue our trajectory, and we want to build up sound private market portfolios that help both of the United Kingdom clients to build up a sound private market exposure.
Tom Mills?
Christoph, I'm going to repeat the question. The first question was how much client demand do we see from single liquid products? I think Andre will elaborate on that. The second question was on dry powder. And due to the massive dry powder in the market, do we see any problems deploying this?
Or is the competition so high? Is the competition very high? How does this impact our industry? And secondly, is there any idea or thinking behind this potentially giving back some commitments because we cannot deploy. And maybe you can comment on the general level of dry powder in the industry as well.
So in terms of semi liquid jobs, to answer the first question first, Barnes Group has raised, let's say, 20% in these type of offerings. I think that's about the ratio that I would expect also for the 40 years to come. And simply that we want to grow these programs in a measured and proper way. So we want to diversify them properly over the winter years. So kind of growing products can benefit from diversifying the portfolio.
And at the same time, we don't want to grow these programs too quickly because that might result in dilution to the investors that are already in the program. And that's something that Partners Group has really now been doing for almost 10 years. So we have the semi open ended structures in the market actually for 10 years plus and we should continue the trajectory. So we carefully plan with institutional investors. We carefully plan with distribution partners how much inflow into these offerings is digestible.
And so far, that collaboration and process has also really well. So I'm happy as a COSIO, as an executive committee member that we are able to grow these programs because I believe bigger programs are better than smaller programs in this space. At the same time, we don't want to grow them at a pace that will not be sustainable and not to the benefit of the investors in these offerings.
For instance, maybe quickly also to add on that, many of these open ended products have a have a queue at this point in time. So we really, as Andre mentioned, the budget for several distribution partners is already at the limit, and we will not increase further or let further inflows into this program at this point. So about dry powder?
Dry powder, I think you're right, Inseam. It's probably one of the relevant questions for us on the investment side. How does it affect us and what will we do to the market over the medium term? Yes, dry powder has gone up, as I mentioned. On the other hand, I think mostly private equity firms are calculating with the same underwriting standards.
The gaps are there, but they're not significant. If we've been losing businesses with big gaps, it's traditionally been industrial buyers, which might have a different PE ratio or a different strategic logic, but ultimately you lose the transaction on very, very different metrics. If I look at the financial space, however, I noticed that on average, the industry has today roughly 3 years of investment capacity on the sidelines. That actually means that the current stock will probably last for 3 years of investment, which is on the somewhat comfortable side. It's probably a lot of money to deploy.
Partners Group has over the last years been much more disciplined to try to keep this balance between funds invested and funds raised very much in balance. We have, on average, had roughly a year, maybe 1.3 years of investment capacity as dry powder. Now there is a slight shift towards probably bringing that to 1.5, 1.6 because we believe we might benefit from this in a downturn. We want to be in a good position to snap up assets when they become available if the market is correct, but we also don't want to overshoot it. And I would note that certain of the large cap competitors have probably ratios that go up to 5, 6 years of dry powder.
That, in our view, is very excessive. So I think if you keep in balance the funds raised and the funds invested as we have done over the last years, There's also no reason why we should give monies back to clients. We didn't see that. But the picture is actually very dissimilar across the investment platform. There are certain styles where it's more difficult to deploy today than in others.
Take direct the direct secondary business, for instance, in private equity, That's turned out to be the most competitive end of the market. We've also seen that the core infrastructure side, for instance, is a market which is very, very difficult to deploy, especially in Europe, where you have to go to Taiwan, where you have to go to Australia, we develop niches elsewhere. It's a very fragmented picture across our platform. We believe therefore, in aggregate, we're going to be still be able to deploy the amount that we have promised our clients. However, it will shift across those different buckets, across those different styles and also across the different time zones.
In terms of several questions. One is in relation to deal flow pricing of open end structures and the development of the defined contribution guide. Maybe Philippe can talk about the hiring side, how we go about like in terms of organic versus like team hiring. So on the semi open ended side or structured side, these programs have a different structure, but they are not outliers in terms of how in relation to deal flow or pricing or portfolio construction. So it's just a different type of structure that is tailored so that you meet all the regulatory requirements.
But any structure, whether it's defined contribution or it's open ended or it's a mandate or it's a flagship offering, all these deals, all these products are priced and they are constructed in a very similar way. So that is important to the Executive Committee that we do not start to create products or offerings that would significantly tweak the deal flow that Chris probably on the investment side has to generate. So basically, these are the structured offerings or the defined contribution offerings. It's just different structure, but everything else remains as it is. In terms of defined contribution, when we talked about it for the first time in September 2015, I believe it was, we said that this is a strategic move and that's a long term move.
Actually, as a matter of fact, I'm not surprised that the defined contribution buildup happened slowly, and I'm actually even happy that it will happen slowly. So my answer in previous calls remains intact. At this point in time, defined contribution is marginal in terms of assets under management. And the IF unit will take quite a few more years before in terms of absolute numbers and relative numbers, a defined contribution is going to be a material share of our assets under management. So at this point in time, we have 3 offerings.
We have 1 in the United States, 1 in the United Kingdom and 1 in Australia. Especially in Australia and in the United Kingdom, we see real tangible demand in these offerings. So, where we're at at this point in time is really not only educating the respective investors, but we're just discussing with the investors and the platforms and the administrators how to onboard, how to bring private markets very specifically into these institutional portfolios. So I believe I see strong traction, but in terms of that, I mentioned, it's going to take a while before that is going to be material from a shareholder perspective. Maybe last comment.
I'm really happy about us moving into the design contribution space because it does force us to build an even better company from a structure and services and compliance perspective. The partners group has always tried to add another layer, not just of complexity, but service excellence or benefit to the platform. The defined contribution is tough. Defined contribution means that you hire a lot of people, you install a lot of additional procedures and processes, but ultimately, it's going to build a stronger platform on our side, and it's going to really deliver a product to the defined contribution investors that allows them to close the return bridge between defined benefit type of investors and defined contribution.
And with regards to hiring, it is actually organically. So far, that's the plan, but we are very opportunistic. So in the case, a good team would come where we see potential need for investment capacity. We're always open for discussion. However, if you say now what team specifically, I think Bartons Group, and you know us since the IPO, has grown very steadily across all departments and across all business areas.
And this is exactly what it is. It could be as well as our largest team is the we
are
we are pretty much agnostic about this. But at this point in time, to answer your question, it's more 1 by 1 hiring.
If I just may add to this, I think the experience has shown that organic growth is probably the most sustainable. Teams often knock on your door. But I think for us, it's also very important that we maintain what has made us strong, and that is our culture. At the end of the day, if you don't maintain this culture, the integrity, the focus on integration, this is actually very, very difficult. And that has actually many of those discussions in the past not led to a positive outcome in a team discussion.
And therefore, I think the priority will be on select lateral hiring where senior people are needed and organic growth with the associate program, through the analyst program and just through the ranks taking people off to university and then growing them through the system. Obviously, we look at those team opportunities, but reality is in the past, it has shown that it's not the easiest one to implement.
No. Sorry. And your question was, is there a difference in more expensive hiring because of the different strategies, what we rate? And no, I think in a private real estate investment professional or private equity investment professional, if they are both in equity, that's
the same.
Maybe a question from the
Any questions on the telephone lines?
Currently, there are no questions via phone. We received one question on the phone. The first question comes from Mr. Tom. Your line is now open.
Please go ahead. Your line is now open. You can ask your question.
Yeah. Go ahead. Yeah.
Okay. Sorry. Song from AWP.
Yes, we can hear you.
Okay, sorry. Song from AWP. I have just one question also regarding new professionals. Can you maybe say how many employees do you have as of today? You said in the end of June, 973.
3. And how many employees do you expect in the end of second half? Because on Slide 11, it says that there is it correct that you expect more than 1,000 employees already in the end of 2013? And also, do you expect the growth of the personnel in the second half more in line with growth of revenues and overall in the full year? And can you maybe also say a few words on do you have some kind of problems with finding and having you already mentioned that you want to do that it challenges?
Yes. I think you have liked to hire more people in the first half. And maybe you can say what are the most challenges? Thank you.
In terms of employee growth, Partners Group at the end of the year, I believe it's going to be at about 1,000 employees. So I said in summary that it's going to be in the quarters to come. And let's not count individual employees, but at least it could be at about 1,000 employees at the end of the year. So currently, midyear, it was 973, and we continue to build out the platform. In terms of hiring, pace and focus, I would like to double off what Christoph had just replied before.
I don't think at this point in time it's about ramping it up as quickly as we can because the financials would allow for it, but really build a platform that is strong in terms of culture and depth and it's just really as an integrated platform. So while we are determined to grow the platform, we have the privilege that we can grow it further. Onboarding of professionals and maintaining the culture in the individual teams and as a corporate, for the executive committee plays a more important role than whether we are at 1,000 or 10.25 or 9.75 at the end of the year. So I guess as an executive committee, we want to spend significant time on strengthening, deepening, broadening the platform, but we want to do so in a clever rather than in a rushed manner. So difficulties, I wouldn't call it difficulties, it's just a focus.
Yes, we do focus as a company to hire great talent that is committed to our purpose. And the purpose of Parsons Group is to generate attractive returns on behalf of our beneficiaries and to create positive lasting impact in the private market investments we do. And with that sense, let's not rush, but continue to hire people that are really just the right people and talent for our company.
Thank you.
Thank you. There are currently no further questions on the phone.
Just following on from the previous question about
So the question is about consolidation in the marketplace. And maybe Christoph will also talk about consolidation, so basically M and A amongst private market investment managers, and I answered the consolidation question more from a client perspective. So when we do refer to consolidation in private market from a client perspective, then what we refer to is that clients do not wish to widen the portfolio and engage even more GPs. If you build up the private market portfolio on your own, you can start you can pick the 1st GP or the 1st fund and you can pick a second fund. But once you have 20 funds or 50 or 100, then it becomes a real operational nightmare.
So what we see from a client perspective in terms of consolidation is the clients that strive to have a larger exposure with the trusted investment managers as opposed to continue diversifying the private market portfolio. And that is what you see in terms of consolidation. If clients not spreading further, not engaging with more TCs, but consolidating and allocating additional dollars to be invested amongst the proven managers that have a good track record and good service excellence and actually a good service and client relationship more generally. Christoph, any comments from your side?
Yes. Just to add on the investment side, I think the key conclusion, I guess, is that fewer funds are raising larger sort of vehicles. So there is a or they cover a broader space as we have essentially extended from equity into debt, into infrastructure, into real estate. That, I guess, is a trend that we see around the globe that fewer firms are dominating a larger part of the cake. And that is probably something which will not stop because our clients, as Andre has explained and as also Cyril Lipri has explained, they're looking for fewer for managers that can cover them with broader investment opportunity set, and that is a trend which I think will last.
We see M and A or sort of industry consolidation by way of acquisitions in our space is relatively rare because it is, again, from a cultural point of view, not the most obvious. Most of the teams have set up because they want to be independent. If they're successful, they probably stay independent. In that sense, I would not expect a lot of M and A activity in our space. I mean as Philippe has alluded to before and as I have mentioned, it's not for lack of trying.
We have had a lot of M and A discussions, but there's just not easy to implement given this cultural element and the integrity that we wish to preserve in having the platform operate the way we want it to dig.
Are there any so there are no further questions. And with this, I would like to conclude this presentation. Thank you all for being here, being on the phone, listening to our semi annual results update. And of course, we are available and hopefully looking forward to seeing most of you soon on the road in a couple of days, weeks to come. Thank you very much.