Private Eye: Yes, limited partners can become billionaires too

They may not have Midtown Manhattan buildings named after them (a la the Stephen A. Schwarzman Building at the New York Public Library), or own a version of Edvard Munch’s pastel, “The Scream,” acquired four years ago for more than $100 million by Leon Black.

But Alfred Gantner, Marcel Erni and Urs Wietlisbach, co-founders of Zug, Switzerland-based private markets money manager Partners Group, do have something in common with these buyout titans.

They are all billionaires.

The three made their debut on the Forbes billionaires list earlier this year with net worths estimated at $1.3 billion each. What’s especially noteworthy: Partners Group, founded in 1996, in its early years built its business around the management of primary and secondary investments. The firm didn’t make its first direct private equity investment until 1999.

Among the implications, we now know it is possible to become super-rich starting on the limited-partner side of the business — although Partners Group, like many other private-markets asset managers, in recent years has made a big push into direct investments.

It is also possible to scale such a business to significant size. Partners Group, traded on the Swiss stock exchange, had a market capitalization of about $10 billion at year-end, ahead of such diversified giants as Apollo Global Management and Carlyle Group.

In fact, the market capitalization of Partners Group explains the lion’s share of the personal wealth of Gantner, Erni and Wietlisbach. Each holds a bit more than 10 percent of the company’s shares outstanding.

The growth of 20-year-old Partners Group over the past decade, as documented in its 2015 annual report, is remarkable. From 2005 to 2015 the firm’s assets under management climbed to 46 billion euros ($51.8 billion) from 5.5 billion euros; its headcount rose to 840 from 137; its office count around the world grew to 18 from five (and another office outside the United States is on the way); its annual Ebitda moved up to 367 million Swiss francs ($376.4 million) from 67 million Swiss francs; and the number of institutional clients grew by more than 600 to over 850.

David Layton, partner and co-head of private equity at the firm, points to three major growth-phases at Partners Group. The introduction in 1999 of Princess Private Equity Holding inspired one of them, he said, by establishing the firm as an innovator in the European private equity market. The holding company, which eventually held interests in more than 100 funds, issued insured convertible bonds — a form of investment more palatable to many European institutions at the time than LP interests.

The early 2000s saw another boom phase, as the firm benefited from clients raising their target allocations to the asset class, Layton said. Over the past decade Partners Group enjoyed another growth spurt, propelled by the expansion of its investor base in North America and Asia.

Today, said Layton, Partners Group sees itself as an “asset management firm” offering clients “platforms” in private equity, private debt, private real estate and private infrastructure. Its portfolio breaks down into directs (about $5.6 billion invested in 74 transactions in 2015, including $2.6 billion in 48 credits), secondaries ($2.2 billion, 29 transactions) and primary commitments ($1.9 billion, 47 commitments).

The firm presents an “integrated” approach to clients, said Layton, managing not just their investments but their currency exposure, portfolio risk levels and cash flows. In particular, the more liquid strategies, such as private debt and secondary purchases, help clients stay more fully invested than they would through more conventional products.

While it still raises dedicated secondary funds and other niche pools, Partners Group manages much of its client money through separate accounts these days, including a $195 million-plus program for San Bernardino County Employees’ Retirement Association. In recommending an expansion of the program last year, consultant NEPC noted that Partners Group’s infrastructure platform had since inception generated an 18.9 percent IRR.

Looking ahead, Layton said the firm sees more room to expand in the Americas. The firm has settled on Denver for its North American headquarters, and Layton this spring plans to relocate there from New York. Joined by staff relocating from a San Francisco office, Layton expects to have some 30 employees working in in the city by the end of the year. Over the next five years he expects the firm’s headcount in the Americas to grow to 250 from about 150.

Layton also anticipates doing more to attract retail investors, which today account for about 10 percent of AUM.

In December the firm announced its first products aimed at the defined contribution market. A press release noted that the products, which provide “daily liquidity and pricing,” are intended “to be adopted by professionally managed or advised DC plans and incorporated in structures such as target-date funds in the United States, default funds of workplace pension plans in the UK, and retail platforms in Australia.” The firm said it had a US client but did not disclose the name.

The defined contribution products, said Layton, follow in the footsteps of a closed-end fund that Partners Group introduced in the United States for wealthy investors in 2008. Governed by the Investment Company Act of 1940, the fund invested in directs, primaries, secondaries and listed private equity firms. As of last September assets in the funds had grown to more than $1.4 billion.

“We think there’s a lot of upside in [the retail] category,” said Layton.

Action Item: Learn more about the close-end fund holdings here at