Partners Group Stock

Thank you very much. Good morning, everyone. Thank you for joining us for the 2026 interim results. I'm Dave, the CEO of Partners Group. Joris, our CFO, and Steffen, our Chairman, will also present during the prepared portion of this call. We're hosting this call from our London office and invited some select investors and analysts to our office for this call, welcome. We also have a handful of other executives from the firm, including our incoming co-CEOs, and there could not be a more capable or ready set of executives than 2 of them, and they'll be available for the Q&A portion if needed.

Let me start here with the headlines and the key business updates. This was a strong first half.

Fundraising was solid, $16 billion of new assets. That's up 31% year-on-year. We've been raising private capital now for 30 years, and this was the best H1 from a fundraising perspective that we've ever seen with record client demand. And on that basis and on the pipeline we currently see from across our increasingly diversified client segments, we're reconfirming our full year fundraising guidance. Management income came in at CHF 905 million. That's growing 12% at constant currency. EBITDA margin was solid at 63%. EBITDA was CHF 706 million. This margin highlights the predictability and stability of the underlying business. And on the portfolio, our more recent vintages, in particular, show strong momentum, which is the basis for value creation and performance in the years to come.

Speaking about the last couple of years, I think it's notable that we raised $80 billion since 2023, and again, with a record first half in 2026. Now looking at the bigger picture on the left side, we see that the overall industry fundraising is down about 15% since 2023, and we're up roughly 50%. And that's market share that we have gained during a difficult environment. On the right, you can see what drove it. Those share gains are diversified across asset classes. Private equity has raised $28 billion during this time period and was ramping up its next flagship fundraise. Credit has been strong. Most recently, we had record closing for our direct infrastructure fund, which closed about 50% higher than its predecessor.

Across these more recent fundraises, we've been particularly pleased with a healthy mix of new and existing clients. Again, this is market share that we've taken during challenging fundraising years for the industry, and these have potential to be some strong vintage years, at least they're off to a very strong start. On the next slide. As we mentioned on our last call, H1 was a highly selective period for us for new investments. However, deployment has accelerated into the second half. We've signed $5 billion of additional investments during July and August. Our core investment strategy remains unchanged. We deliver value to clients by identifying assets where we have deep thematic conviction and implement the value creation plan to drive transformation.

Last year, our private equity team screened over 2,000 assets and only transacted on about 1%. We remain highly selective, but are increasingly excited about the opportunities that we're finding. 5 asset classes, 5 distinct strategies and a dynamic set of investment engines supplying content for our clients. Next slide. This slide highlights some of the reasons why we believe that these more recent investment years, again, where we've been taking share with $80 billion raised and a material amount already invested, they have the potential to be strong vintage years. The operational performance of our direct equity portfolio from 2023 onwards is back to double-digit growth. Recent infrastructure and real estate KPIs are also solid. This is value creation and operational success, which ultimately lays the foundation for future performance for our clients.

Next slide. Among our clients, we're known for delivering consistent returns throughout cycles. We had a handful of idiosyncratic topics in the portfolio this period coming out of the 2021 and 2022 time period in particular, but we believe that we're on track to achieve a net TVPI of over 2x in 5 of the last 6 vintage pools. Now returns alone are not the only factor that's important for clients. As an industry, we've been through several periods of limited distributions, and we've received good feedback from clients on our consistency of our distributions.

We're proud to have delivered distribution levels above what investors have typically seen during the last few years. Next slide. It's a similar story for infrastructure, but with even stronger recent vintage performance.

Top quartile performance across a number of key vintage years. And again, here, our net DPI runs ahead of the market for that 2018 to 2020 vintage pool in particular. And these results helped support the recent close of our largest ever direct equity -- direct infrastructure strategy. Next slide.

We remain highly confident in our ability to deliver on our full year fundraising target, which we established at the start of this year. And interestingly, our growth is coming from a much broader base of clients and investment strategies than in the past. Looking at these client segments on the left side, we're more diversified today in our fundraising than we've ever been. We have many different cylinders, helping us to drive our client solutions engine.

Zooming in on just a couple of areas here, looking at consultants, for example. We have really invested into that channel, into those relationships, and this has been important to some of our recent successes. If I look at one of our recent flagship fundraises, for example, we saw an increase of 3x in the number of consultants that advise clients to invest with us, and that helped to drive a very healthy level of demand from new clients into that strategy.

Asia and the Middle East, we've seen a pickup in activity here. In the last 2 periods, we've closed more than 5 Asian mandates. We have a unique value proposition as we're able to construct tailored mandates with a specific geographical allocation for each client. And that's a region that really appreciates this feature of our mandates in particular.

And insurance is increasingly relevant. Let's do a deep dive on insurance on the next slide. Some of you may recall that we've worked to broaden our mandates over the last couple of years and to make these customizable mandates available to an even broader set of clients. We've lowered the minimum size for mandates, and we've broadened the number of client coverage professionals capable of establishing new mandates.

And insurance clients have been some of the most eager adopters of these flexible structures. Insurance clients are some of the most complex in terms of regulation and capital requirements, and traditional fund structures have not been particularly helpful in addressing their needs.

We've seen opportunity across 4 main insurance segments to provide PG-style solutions that are built for purpose for insurance company needs. They often allow insurance clients to dynamically shift allocations to meet their strategic and their tactical objectives period to period. We've also successfully expanded our rated fund offering in the U.S., closing several vehicles that support insurers' needs for greater capital efficiency paired with strong risk-adjusted returns. Our solutions here are sometimes also differentiated because of our ability to deploy meaningful capital at the onset of a rated vehicle investment period, providing near-term efficiency relief and investment return.

We've seen -- we could foresee many of these clients becoming long-term partners, and we have the ambition to quadruple our insurance AUM to $100 billion. That's an incremental $75 billion by 2033, and that will be an increasingly relevant building block to help us achieve our $450 billion AUM target. And with that, let's shift our focus to the financial update. Joris?

Thanks, Dave. Let me now connect the strategic progress you outlined with the financial performance that we delivered in H1 2026. The key message from this slide is that our financial profile remains strong. We showed double-digit management income growth in constant currency. We improved the profitability in our management income. Management income EBITDA grew by 15% year-on-year in constant currency with the margin rising to 63%. Our overall EBITDA margin remained in line with our historical average at 63%. So taken together, our half year results show resilient and high-quality earnings profile, continued growth in management income and profitability and stable overall margins even with lower contribution from performance income and adverse FX impacts.

I will now go through the key drivers in more details, starting with the revenues on the next slide. Now management income represented 81% of our revenues in half year 1 2026. It grew by 12% at constant currency in H1 2026 and 6% as reported, in line with the average AUM growth. Thanks to the successful final closes of our direct infrastructure program and private equity secondaries program in H1, late management fees, which is part of other operating income, came in very strongly and contributed positively to our management income growth.

Let me talk about our management income margin on the next slide. We are a diversified platform. Our management income margin has shown resilience over time in changing markets and despite FX conditions, evolving within our historical bandwidth of 1.18% and 1.33% since the IPO.

Slight variances between years may be driven by the timing of when fees are activated in an investment program or when we realize transaction fees and how our mix in products and asset classes is influencing our recurring management fee. In H1, we again demonstrated that we are within the bandwidth with a stable management income margin at 1.24%.

Let me briefly speak about the FX impact on the next page. As I told you before, we grew our management income by 12% in half year 1 2026 on a constant currency basis. Now looking back further, this is in line with the growth rate we have achieved over the last 5 full years, removing the FX effects. This highlights the consistent growth of our platform's recurring revenue base.

A double-digit management income growth rate at constant currency has been and will be our continued goal for the mid and long term, even though there may be temporary deviations in periods from time to time. Now let me turn to the performance income on the next slide. With the mandatory adoption of the new IFRS 18 standard, our performance income is a combination of performance fees, the main driver, and other performance-oriented income on our assets on the balance sheet that are directly attributable to our private markets business. In H1 2026, we generated CHF 233 million in performance fees, highly diversified across asset classes and strategy, leading to a performance income representing 19% of our overall revenues.

Private equity, as our largest asset class, continued to contribute the most at 48%, while infrastructure accounted for 40%, reflecting the increasing share of infrastructure AUM of our platform. Across both asset classes, performance fees were mainly driven by direct exits from our pipeline. This clearly demonstrates that our own realizations are above the industry overall. We are currently in the sales process of a number of direct assets with some being quite sizable investments. While we expect attractive outcomes for our clients and shareholders, the actual closing of the realizations may slip into next year for some of them. This brings us to guide towards a range of around 20% to 25% for 2026.

Looking at our current exit pipeline of roughly USD 75 billion that we are actively working on, we are confident to generate performance income of 25% to 40% of our revenue over the next 3 years and beyond. Let me now move to operating costs on the next slide. One of the points that as the CFO, I am most happy about was the solid growth of our management income EBITDA and margin. This is a direct result of cost discipline in our management income funded expenses, which are fully in our control. Our performance income-related expenses are variable and are a direct reflection of performance fees during the period with up to 40% of performance fees allocated to employees.

This resulted in CHF 706 million of EBITDA for H1 2026 at a margin of 63%, as shown on the next slide. Our profitability remains strong and best-in-class across the industry. Over the last 5 years, our EBITDA margin has been always above 60%. This is a range I am also very comfortable with going forward. Let us have a look at our profits and balance sheet on my final slide.

In H1 2026, we generated a net profit of CHF 502 million, which was flat year-on-year on a constant currency basis. This translates into a return on equity of 55%. As you have seen, we have generated strong operating cash flows in H1 2026, adding to our overall liquidity of CHF 2.9 billion. Now given our financial profile, we remain confident in our ability to pay dividends that are stable or growing year-by-year. This brings me to the end of the financials update. Let me now hand over to Steffen.

Thank you, David, and Joris. Good morning, everybody, also from my side. So let me finish this presentation part of the session this morning with a couple of high-level perspectives. And let me start maybe with some thoughts on the H1 financials and like the short midterm outlook. Maybe moving to the next slide, please. I think it's important to recognize that the environment still is not straightforward. I mean we have political uncertainty, geopolitical macro uncertainty, big parts of public markets. As you will recognize, they are priced for perfection, which is a little bit hard to reconcile with the environment, to be honest. And against that backdrop, I think we can only conclude that the first 6-month financials show that our business has just become extremely resilient over the last few years.

But maybe more important, if I look at the 4, I would say, key operational dimensions of our business that gives us a lot of confidence for the midterm. So these are, 1, the operational growth in our portfolio, and Dave talked about that. We see for a very big part of our portfolio, especially the younger vintages, we see extremely good growth rates that will produce very good outcomes for clients in the mid- to long term. The second one is the investment pipeline. There wasn't a shortage of investment pipeline for the last 12, 24 months, you know this. But we were clearly cautious in the last 6, 9 months specifically at a time when we had these uncertainties and valuations were high, bid-offer spreads were high.

And here, we clearly see some normalization, some more realism coming in. We've signed only just $5 billion in the last few weeks. We have a good pipeline for the next few quarters. We're quite hopeful to realize on these investment opportunities. And these are great businesses at reasonable, they're not cheap. They're at reasonable prices, but it's businesses we really want to own. We know exactly how we want to develop these businesses. The third one is the exit side of things.

Again, here, I mean, there's no shortage of successful business that we can sell. But also here, we clearly see an environment which makes it easier to advance in these exit processes, and we should see a number of really nice exits in the last -- in the next 6 to 12 months.

As Joris said, if you sign contracts in September, October, there's a good chance that they slip into next year. We'll figure out. But for us, the client results is our first priority. And so we'll optimize these exits in a way to optimize the results for clients. And that will certainly be beneficial for shareholders in the long term. And then maybe as a fourth point, I mean, I really want to stress that it's not just about good fundraising or record fundraising, it's about market share that we win in a very deliberate way in segments that we decided in the last 2, 3 years to strengthen. This is our teams in Asia, in India, for instance, in particular. It is in the Middle East, not only on the client side, also on the investment side that we build up there.

I would say, broadly speaking, with sovereign wealth funds coverage, it's on the insurance side, and Dave did a little bit of deep dive there and on the consultant side. These are the segments that we expect to grow faster than, I would say, the more traditional pension fund sectors in Europe and the U.S. in the next few years, and this is where we think we are really well positioned.

So if I look at the short to midterm outlook, overall, it's fair to say that the activity in our industry is far away from the peak levels that we have seen maybe a number of years ago, okay? We're not back there. And everybody in the industry has their share of topics to work on, including Partners Group, and we have been very transparent about that in our July update.

But clearly, if I look at the 4 dimensions here, we have all the confidence that in the midterm, we actually gain speed, and we are on our track to achieve our 2033 vision that we have laid out to you 1 or 2 years ago. So moving a little bit from the short to midterm to maybe the mid- to long-term outlook -- if I maybe can ask you to maybe change the next slide. Let me talk a bit about the investment strategy and give an update here. So why is it important to talk about that investment strategy and that outlook? This is, again, I want to reiterate that very strongly because our industry will see fundamental changes, okay? We will have a profound economic transformation ahead of us in the next 10 years. There's no doubt about that, okay?

No one knows exactly how the industry and how the world looks like in 10 years. I don't think we ever had that actually in history that looking 10 years ahead, there's such a lack of certainty in the outlook, maybe except for peace or war. But we have a pretty good hypothesis how we should think about this unfolding of that economic transformation to happen and how we should react to it in different asset classes. So I don't want to dwell on that too long. We spoke about that on a Corporate Day. But just to recall, we see there is 3 waves here that will bring this transformation. We are in the middle of the first wave. That's the one which is actually the most irrelevant one. It's about using some of these new technologies to just become more effective, okay?

The second wave is about to happen for a number of sectors. In some sectors, this will probably be out there 3, 4 years from now. This is when we go from support systems to much more autonomous systems and agents, have a much, much more fundamental impact on the businesses. And then we shouldn't forget that there will be a third wave. There has always been a third wave in business model transformation through economic transformation periods. And the third wave is really about these new scientific methods, complete reconfiguration of ecosystems and business models. That's, in most cases, only starting in the 2030s, but that's still within that 10-year period. So think about these 3 waves a bit like the, I would say, intense period of industrialization to 100 years, but essentially happening in 10 years.

So we believe that these 3 waves will give us enormous opportunities, and we have clearly defined key focus areas across the asset classes. And I want to give you a little bit of an update of what we're doing here and how we're preparing for that. If we can maybe move to the next slide here. So if I say these are the immediate focus areas, important to acknowledge that this is not the only thing we're doing in these areas. I mean this is maybe defining 50%, 60%, 70% of the focus. We are nimble, we're opportunistic. So there will be certainly interesting areas also around them. So clearly, the private equity, the main story is that there will be hardly any business that can succeed without business transformation.

It's very different from the private equity industry in the last 20 years when I would argue that 90% of the investors, they were looking actually to buy businesses, do more of the same, slightly more efficient, scale it up and financing it in an attractive way. This is a very different business going forward. How do we respond to that? We have built over the last few quarters, a team of about 150 AI experts internally and externally. We have our existing but similar sized bench of operators internally and externally. What the next few years is about is really marrying the digital transformation capabilities with the operational transformation capabilities. The big difference is going forward, there isn't anything like a digital transformation that is separate from operational value creation.

This is one and the same across the different verticals and dimensions. This is what we're working towards. We have now started to give regular updates on what we do on the portfolio company side, and we'll continue to do so to give you a bit of a sense and make this more tangible. I believe that we will create absolutely a leading effort in that space. On the infrastructure side, if -- again, we look a little bit at the future, of course, we'll still have roads and bridges and I would say the more traditional kind of infrastructure. But a big part of infrastructure investing is not going to happen in these areas. It's going to happen in, I would say, a very interconnected play between power, data, mobility, logistics.

And it's this interconnection that is needed because it's the efficiencies that you need to create between those, a; b, it's the advanced technologies that change year-by-year that you need to use actually to build the best next-generation utilities.

And therefore, the next-generation infrastructure is really a combination of, I would say, traditional project finance. It's private equity, it's infra asset management and it's sort of business development. This is exactly the team we have built up. We have built several of these platforms. We're in the process of buying 2, 3 additional platforms just in the next 6 months. We believe that we have built a team here that is second to none in building these next-generation utilities.

We talked about private equity -- private credit at our Capital Markets Day and actually for quite some time before that. And we forecasted for a while that we will see a major transformation in credit. And I think one of the key statements we made about 3, 4 years ago, the first time is large end of the private credit space is actually not going to be real private credit anymore. It's much more a public market style investment activity that might still happen in a private credit format. You see this with like the forecasted $0.5 trillion that will invest -- to be invested in AI, in data centers and chips next year. That's not traditional private credit.

So what we are focusing on in this world of bifurcation that's coming with this transformation of economy is really PE style entrepreneurial style of credit underwriting. In the extended middle market space, we're building this out in the U.S. We already have a leading team in Europe. We're building it out in Asia, and we add these adjacent relative value strategies around it. That's our focus, and that's why we're growing quite heavily also in private credit. In real estate, I think we see a similar transformation as in infrastructure. It's also real asset class. In real estate, historically, I guess, we had a kind of a horizontal layering of the value creation between the planning and the engineering and the development and the real estate services.

The future will be a complete vertical integration between exactly all these aspects. Why is that? A lot has again to do with data, with technology, with a very dynamic behavior of tenants and buyers of these assets where the time when you build something and is final, these times are completely over. And this is where we decided to buy Empira, our first larger M&A transaction, which is very successful.

It was a modest-sized business, but with an incredible technology platform. This is now really bearing fruit. This is what we're expanding. We're leveraging. That's where the growth is coming from in real estate that we've seen in the last 6, 12 months. And we have a similar effort going on in the industrial sectors platform.

Then on the royalty side, we have also mentioned that for a while. Royalties is a financing tool, first and foremost, like private credit. And I think what we see is similar to private credit 20 years ago, we see that royalties will expand beyond the more traditional areas of focus like IP ownership in pharmaceuticals or in exploration and things like that. Like in private credit, we expect royalties to have applications across all private equity sectors, but also across infrastructure and other real asset sectors. We're building up this heavily, and we clearly want to be a leading institution when it comes to royalties financing. So in the midterm -- mid to long term, I think the world in private markets industry will look very different.

And clearly, there's a lot of uncertainty how the world exactly looks like. But I think we have a very clear hypothesis. We have a clear focus area. We know what assets we want to buy. We have a very clear conviction how we want to develop these assets. And I think we have a real, real good team to do that. And maybe that team is sort of the keyword and the segue here to talk about the last topic. This is our leadership rotation. Now whenever I use that word rotation, I know the reaction sometimes is, I mean, rotation is a strange term when it comes to a successful CEO that is sort of stepping down and not continuing that function because most companies, if that happens, the CEO would, I don't know, go in retirement or competition or whatever.

That's not PG style. We have much more as a tradition or rule than exception that successful key leaders in the firm when they step back from their functions, they usually continue in other functions, other key roles actually in the firm. I'm very happy to announce this kind of rotation again today. So David Layton, after nearly 8 years now as a great CEO, successful CEO, you built with your team that resilience in our business, is going to transition in another role back into the investment side of things and becoming the -- well, I guess, most senior person on the investment side of things as the CIO and Chair of the Investment Committee. Now many of you will know that Dave, before he became co-CEO in 2019, was actually instrumental in building up our private equity franchise over many years.

He led it over many years. So that's why I'm very excited, actually, and the Board is very excited to have Dave in that new role from January 2027. Now importantly, Stephan Schali, our CIO today, Rene Biner, our Chairman of the Investment Committee, again, rotate. So they are not leaving the Investment Committee. They stay in very important key roles on the investment side, spend more time also on the portfolio side, on boards and on sourcing of assets. I'm also very happy to announce that we have great talent to succeed Dave with Juri and Roberto stepping into the role as co-CEOs. Juri, Roberto, you both joined us for more than -- more than 2 decades ago. Maybe starting with Juri. Juri, you started in the credit team.

You were very quickly identified as a key talent there, and you were actually very instrumental in building that credit team. You eventually led that credit team for a number of years before we asked you to take over the infrastructure business. You built that to a very decent size, very successfully. You had that for a while. And when Dave started to spend a little more time in 2024 on the investment side, on M&A, we asked you to become President of the firm and become the wingman of Dave and help on business development side on some of the corporate operational areas. And now you're stepping from that President role in a co-CEO role. And your new wingman is then Roberto.

Roberto, you have spent your time at PG, I guess, I always a bit at the intersection between portfolios, investments and clients. You were very instrumental in building up our portfolio solutions efforts, the team, you eventually led that team for a number of years. So you are certainly one of the key architects of our mandate and evergreen franchise, structured products franchise, which is probably one of the key distinguishing areas of the firm. Both of you, you have been very successful leaders. You have demonstrated great entrepreneurial leadership. You carry really the PG DNA. So with that, we are super happy as a Board to have you as partners of us as co-CEOs in the years to come.

So to conclude that presentational part, we feel very good about the resilience of the business, a; b, we feel very good about the midterm outlook. Yes, we have signaled softer growth in this year and next year in July in the update, but we're very, very confident for the midterm outlook and for the 2033 goals. We're very confident about the investment strategy and how we build our teams and the assets we look for and how we build them.

And we're very confident that with this trio at the helm in this new constellation, we have a great setup in the next years to come. So with that, I conclude this formal part, and I guess we'll open for some questions.

And we'll start with the guests that are here in the room with us in our London office. Shall we start with you?

Thanks, Dave. I'll start with a question for you, if that's okay. I guess, well, congrats on a good stint and also to Roberto and Juri for -- on the new roles. This business has made strong progress strategically in the last years, and that's evidenced by the share gains that you showed. Is there anything you would have done differently? And what do you think Roberto and Juri will benefit from most that is currently, I guess, not visible and that you and the team have laid the groundwork on? That's the first one.

Secondly, for Steffen, on capital management. On the AUM call in mid-July, you were very clear that buybacks are being debated. How do you and the Board weigh the use of cash for capital return versus M&A to support growth, particularly with, I guess, net debt now being at about $1.2 billion?

And then finally, just a question for Dave and Joris on margins. You continue to show very strong cost control. I guess, presumably a low single-digit cost growth rate on fixed costs is below medium-term expectations. So I guess relatedly, your EBITDA margin has dropped despite clearly very strong late management fees. So excluding those late fees, EBITDA margin seems to be around 61%. So should we be thinking about the EBITDA margin going forward at around that 61%, 62% level going forward, please?

Well, I'll start. If I look at the last number of years, I think one thing that we have been focused on and will continue to be focused on, one thing we would have done differently is probably expand the breadth of our investment engines. If you think about the nature of how investment vehicles are evolving, not just for individual investors, but also for institutional investors, they're moving into formats that are more perpetual in nature. And if I look back over that 2021, 2022 time period, we're coming off of years where we had huge levels of realizations during those years that needed to be redeployed.

And you'll see that again in the future, right, where you have very large levels of realizations that need to be redeployed. And we're very focused today on expanding the breadth of our investment engine, adding more strategies that we can pull from to add more diversification into the investment platform. And that's certainly something we would have -- in hindsight, we were too concentrated and certainly are working to build that diversification. I'll continue that work in the new role as Chairman of the Global Investment Committee as well as work with Roberto and Juri on expanding that.

So on the capital management side, I don't think there has been any change over the years or now or in the future. So number one, we want to pay a stable or growing dividend. That's the first priority. That can mean in some years that maybe we go slightly above 100%. We feel absolutely confident to do so. Number two, if there is an M&A transaction that is of interest, I don't think that will by any means impair the dividend policy. That's certainly not our mind.

And now maybe one point number three, to clarify this discussion about share buybacks. So this is a discussion that is really centered around the question that in years where we see and this is upcoming, where we see a lot of carry again, the question is whether maybe the additional carry beyond, I would say, what's sort of like the average levels, whether that is carry we want to use if it's not used for business purposes, whether we want to use that carry for share buybacks. So that's not a discussion for this year, probably not next year, but this is something that is a little bit on our minds. But what we are not suggesting, just to be very clear here, we're not suggesting to replace a dividend payment by a share buyback.

There is one more question for Joris.

Yes. I think if we look at the way that we run our platform, we continue to run it with the same cost management approach going forward as we scale also the platform. So with the range that we're currently running in, that's also what we see in the short term ahead.

It's Hubert Lam from Bank of America. Firstly, again, I'd like to congratulate Dave and wish him all the best in the future. Three questions. Firstly, on the recurring fee margin, I think it fell to about like 109 basis points for the first half. Can you talk about how you think about this margin going forward? And what's driven the lower margin that we saw in the first half?

Second question is on, I guess, the fundraising guidance you've given for the year is $26 billion to $32 billion. You had a strong first half at $16 billion. Now we're almost halfway through the second half of the year. How should we think about where you can end up within that range?

And lastly, on private credit, Steffen, I was intrigued by what you said about how you think there's going to be more differentiation going forward. Within private credit, I know you're relatively small compared to other peers out there. Do you need to bulk up more in that space? And how do you think about going about that?

So maybe I'll start on the recurring fee margin. We have had a very successful period for fundraising, and you saw us particularly successful in infrastructure and in private credit. And sometimes you'll see a mix shift vary based on what the big fundraising periods were, what the big tail-down areas were in a period. We have an upcoming private equity fundraise on the horizon that we're ramping up for that will shift the mix back in due course. But it is mix related as opposed to business related, right? Sometimes it can be mix by asset class. Sometimes it's mix of product within that asset class, but it's a mix-related change. Joris, anything you'd add to that?

Yes. And I think that -- so we've seen this in half year 1. And at the same time, we're still well within our bandwidth of the management income margin of 1.18% to 1.33% and we've demonstrated that we continue to run the firm with -- above 60% of operating leverage. So we can, of course, as I mentioned before, we continue with our cost management and scaling approach that we have in protecting also the overall margin of the firm.

I think there's 2 more questions by Hubert. Well, maybe I'll quickly take those. So yes, we are well into the second half. I would also argue that there have been vacation time weeks actually. So maybe that's true what you're saying, but actually the real business probably starts pretty much now actually. So that's why I would be a bit hesitant to give any further guidance here.

Listen, on your question on private credit, it's a very good question. First, I would tell you that if you look at the large credit players, I mean, they'll probably have today 90% in investment grade, what they call investment-grade private credit in sort of high-yield equivalents in large cap credit. It's a very -- I mean, it's a very different business. It's a bad business. It's just a beta business, a scale business like public market credit. In the middle market credit space, I mean, I would say in Europe, we are clearly one of the top like 3 parties or so. I think also in the U.S., we have come up through the ranks here.

I don't know that we need actually a much larger team here.

I would say, with the exception maybe of the newer regions where we had a smaller team, for instance, Asia, we're clearly building up Asia here. That's very interesting to us. We have incredible track record in Asia in credit. I think in the U.S., to be honest, it's a little bit more becoming more active with clients. We have, I would say, many years back, used credit in many instances as an additional allocation for mandates, for a little more cash flow-oriented mandates, income-oriented, some of the evergreen funds. I mean, I'm not sure whether in the last few years, we made enough of an effort to really tackle large individual accounts on the credit side. It will not happen overnight, but this is clearly on our plan actually in the next few years that we become much, much more active to gain market share there.

Ian White, Autonomous. Two from my side, please. First of all, I noticed the disclosures for PGPE Limited with their 1H update last week, and particularly the portfolio disclosures. So last 12-month EBITDA growth, a bit less than 5%, net debt to EBITDA nearly 7x. Are those metrics representative of the dynamics in the private equity funds more broadly? If so, why has indebtedness risen so significantly in the last couple of years? PGPE, it looks like it's gone from 5x net debt to EBITDA to about 7 in the last 2 years. Has there been a significant increase in debt moving to payment-in-kind structures, for example? That's question one.

Secondly, you talked quite a bit in this presentation about the diversification, maybe a sort of slight shift in strategy from where the business has been previously from wealth management evergreens towards insurance funding, for example. Can you say a bit about sort of how that transition looks internally? And I'm thinking about sort of staffing resourcing. Is there scope for outright cost reduction in areas that maybe now aren't going to be as big as we thought they were going to be a couple of years ago or maybe some churn within the business where you kind of need to pivot to other areas maybe that, like I say, were less prominent a couple of years ago?

Maybe I'll take the PGPE question. PGPE similar to what we have outlined back in the July AUM announcement has an elevated exposure to vintages 2020, 2021, 2022, driven by the distributions that have to be reinvested in such a vehicle. So as such, I would say the broader private equity platform is much more diversified across vintages.

Well, on the diversification side, it's funny that you're one of the few people that ask us to be more effective on cost. I felt actually that the team is doing a pretty good job on the margin side. Well, listen, there is -- this is a constant, I would say, topic where we see certain areas of the firm growing faster than others that we will have people relocating from one to another.

So that's, of course, happening all the time. But I wouldn't expect now like a big -- like additional, I would say, saving or so because of maybe some of these rotations. So assume that the rate, the EBITDA rate at which we run the business is probably also a good forecast for the future.

Yes. And the needs of some of these client segments become more specific. For example, our insurance team needs specialists that understand the insurance clients' needs, and we've had to build up a team of specialists. So you might have fewer generalists, right, but you end up with more specialists -- and so I think we've been able to maintain our cost structure, and that continues to be our ambition.

Arnaud Giblat from BNP Paribas. I've got 3 questions, please. My first question is on the value creation and the topic we're talking about like a minute ago. So on the slides, you were showing that vintages 2020 to 2021, '22 were having 5% EBITDA growth, if I remember well, whereas the next vintages are growing EBITDA at more than 15%. Could you expand a bit more on that. Sort of give us a bit more flavor in terms of industry exposure? Or what is it that is affecting those earlier vintages?

My second question is on the evergreen redemptions. I'm just wondering, given -- well, you're probably seeing redemptions at a 5% rate per quarter, how this is impacting performance? I assume if you've got these large redemptions, your incentive is probably to put the marks at the low end of the potential range.

Does that affect performance across other vehicles? I assume you have to have the same mark for every asset in every vehicle you're holding.

And my third question is what struck me a lot at your Investor Day 18 months ago was I felt a big shift in terms of willingness to do M&A. Over the last 18 months, I mean, I note that there has been a significant pickup in M&A in the environment and you have not partaken. So I'm just wondering why that is. Is it just a case of you being more prudent or not seeing the right opportunities? Do you still have that strong appetite to increase M&A?

So I'll take maybe the first one with regards to the different vintage years and why vintage year has an impact. Part of it has to do with, I think, some evolution. We have really invested significantly into our operational capabilities, into our Boards, into our transformation experts that have been working with us on this most recent set of portfolio companies in particular. But it was also just a less competitive environment.

If I look back over the last couple of years, we had the ability to pick and choose as a firm that is able to take market share and raise capital in a difficult environment, we've been able to invest consistently over the last couple of years, whereas other people have taken maybe more of a pause, and we found it competitive in certain segments.

So we had a lot of thematic research, identifying specific assets, going hard after it, a little bit less competition, a broader bench of operators. I think all of those things contribute to the strong growth that you're seeing in the most recent vintage in particular. Roberto, do you want to talk a little bit about the evergreen redemption dynamic?

Well, with regards to evergreen redemptions, we've outlined very transparently last July, what our expectations there are. There's no change since then. I think very importantly, though, the way how valuations are performed is in accordance with IFRS and is done as an independent process. So it has nothing to do with whether -- what flows on the evergreen side to where the marks on the assets come out. And yes, you're correct. Typically, that would be one price for the same asset across the platform.

Maybe just to add here that we have mentioned that consistently, and I think it's true also for the last 6 months that in average, we sold our assets at about 10% above our marks. And of course, in an ideal world, you would sell at the marks, but that's very hard to achieve, right? I mean there's still, I mean, a bit of like a market element when you sell the assets, but just to mention that. On the M&A side, I mean, look, I don't think anything has changed. We absolutely look at opportunities. Have we been less courageous as you, I guess, imply in your question? Yes, I think that's true. I think we have been less courageous. We see the right price, the right culture. And then, of course, the complementarity in what M&A offers to us is extremely relevant.

And just the third point, I mean, we have a pretty wide offering, right, in the different asset classes. So a number of players out there that have changed hands that, for instance, a pure private equity player that wants to add some credit or a pure private equity player that wants to add some real estate, that's just for us, maybe not necessarily as intriguing because we might already have some of that. So we're probably a little bit more nuanced in the way we think about adding these. But look, let me just repeat one thing that I said before, and I think it is really key. Yes, there has been activity. But I guess what you always see in consolidation. You see these waves.

You see a first wave where some people that are -- I mean, maybe desperate in quotes is a bit strong, but a little bit more convinced that they need to do something, they do something that might work out, it might not work out, we'll figure out. But then there's often a period where you see with less activity and then consolidation, the organic consolidation starts to impact the market, and that's what you see. We just talked actually a small round today before we started here at [indiscernible], market share gains by the listed private market firms, which is phenomenal. And this is where you see some GPs will find it much more difficult in the next 3, 4 years. And so our opinion is that maybe the most interesting opportunities, especially when you want to do M&A in a more nuanced way, they're probably just to come.

Sharath Kumar from Deutsche Bank. Best wishes to Dave, Juri and Roberto for your new roles. Three, please. Firstly, given higher yields have been the flavor of the week or -- so it's been the dominant theme. So how do you view the refinancing environment? What proportion of portfolio comes from meaningful debt maturities in the next 1 to 2 years? Is this something that we need to be worried about? That's first.

Second, I need a bit of help in forecasting the investment income component within your performance fees. It was negative in the first half. So when do you see a turnaround? And similar guidance or any help for forecasting the net financial income would also be helpful.

And lastly, sorry if I've missed this, just wanted to understand where we are in terms of redemption requests in the third quarter so far. In mid-July, you had said something around $2 billion sort of run rate per quarter would be a reasonable expectation for the next several quarters. So any change to this view?

Yes. Maybe on the first, so we do have an active capital markets team that is engaged with our portfolio companies and constantly looking to put the most efficient and up-to-date capital structures on our businesses. We have probably 6 or 7 companies at the current point in time that are going through some sort of a process to refinance. And that's pretty consistent with what we've had over the last couple of years. No significant change in the dynamic there. But a very active capital markets team that's helping us put the right capital structures in place for each of our portfolio companies.

On investment income, Joris, do you want to address that?

Yes. Of course, I think when we look into the second half of the year, our base case assumes a positive income -- investment income contribution in the second half of the year, which will also have an impact on the performance income. Now maybe let me also give the second answer to the net financial income. I think in half year 1, we made the conscious decision to decrease the FX risk on our balance sheet and also on equity. So when we look at this approach, we will continue to run this approach also in the full year of 2026. So you can assume that there is some impact from the hedging cost, but also from the mark-to-market, which we will not know until the very end, of course, of the year, which is then impacting it. But overall, I think a slight improvement is possible.

Regarding your third question, no change with regards to redemption dynamics on the mature evergreen strategies with the private equity focus, but also no change with regards to all the good things happening across the broader evergreen platform, which we mentioned last time.

And just one additional word on the performance of the balance sheet positions, I guess, also connected to your question around PGPE. Now we had -- in the second quarter, we had clearly a couple of idiosyncratic situations in the portfolio, like I think everybody has in the industry. They were actually also in the public. I think there were also financing questions around that. So it's all the same pool of assets. So this was, in our opinion, one-off. So I don't think that's a good guidance for second half. So I think second half should be just more business as normal.

Michael Sanderson, Barclays here. Just a couple for me, please. First of all, obviously, you're giving second half guidance around performance fees and into the second half -- into the future as well. Just interested, the exit environment, the messaging around this is always very hard to read from the outside. When you're talking about a sort of pieces being delayed, et cetera, I understand the long term. But I guess what I'm trying to understand is who are the buyers out there at the moment? Because obviously, rates look like they're going up. There's a lot of people stuck with capital that is struggling to deploy, et cetera, and are they going to get the returns they expect. So interested to know when you're looking at your exit pipeline, where is the real demand coming from that?

Second piece, I guess, slightly more positively, thinking about the partnership side of things. I mean, obviously, you spent a lot of time talking about those in March. And I mean, obviously, the BlackRock tie-up and the products there. I'd be really interested to get some updates around those. I mean, obviously, in your reiterated guidance, and you're making clear messages about developments. But yes, some detail around what's going well in those and where you're seeing the most positive piece. And I guess sort of a bit of add-on, it wouldn't be a results presentation if we didn't ask about the U.S. and the DC 401(k) sort of opportunity and how that is evolving and speed of evolution.

So maybe I'll take the first topic on exits and the environment. And if I look out over the exit paths that we have been successful in completing the last number of years as well as our ongoing processes, it's unbelievably balanced. We've had some IPOs, some exits to strategics. Some of our biggest exits have been actually exits to strategics. And then we've had some sales to financial buyers. And if I look at the current pipeline, we see actually pretty good dynamics across each one of those channels. I wouldn't read much into -- sometimes it could be a little bit more complex today and things can get dragged out a little bit.

I wouldn't read too much into the delay. We have a handful, one in particular, but a handful of processes that we're just not sure if we'll end up closing and getting the cash this year or if it's going to be pushed to next year. And at this point in the year, if you're not already signed and marching towards exit, there's just uncertainty there. And so we've just given ourselves a little bit of a hedge on the guidance there, not being able to predict the specific timing of that one exit. But I wouldn't read much into that. The exit environment, we have found to be quite reasonable actually.

On the partnerships and JVs, we had about $1 billion of contribution from partnerships last year and I told you in March that we anticipated potentially up to 100% growth in that this year. I'm not sure if we'll get quite to 100% growth in some of those JVs. They're built up of, in some cases, building blocks of some of these mature evergreens and some of the slowness that's impacted that has caused for maybe some reformulation or complicated the story in certain cases. So you might see a little bit more slowness there, but you'll certainly see good growth in that, right? Whether that's 100% or not, it doesn't look likely at this point in time that we'll see quite a 2x in that business, but it will be, I think, a strong showing, nonetheless. Those are going really, really well for the most part. Maybe, Steffen, do you want to talk about DC time on that?

Yes. Look, I mean, the reality is there have been big announcements coming out of the U.S. in detail, it's a little bit more tricky. There's very different ideas between different, I would say, parties here at the table, how that is implemented. And the reality is, I don't think we have -- as of today, we have like a clear framework that would allow us to essentially grow massively these 401(k) plans or private market allocations to these plans. It's a little bit -- as you can probably relate to, it's a little bit hard sometimes to predict exactly what's the course of political action, including in the U.S.

And that's why I would be a little bit careful with my forecast. I would tell you that the long-term trend that there is a clear conviction by literally all the parties in the meantime that defined contribution investors should have the same rights as DB plan investors. I think that's pretty much undisputed. So I think it's a bit more a question of time, and I don't think it's a question of if that happens.

Nicolas Payen from Kepler Cheuvreux. Three questions, please. The first one, we discussed quite a lot insurance-related AUM. You want to quadruple them by 2033. Just wanted to know if we can expect any margin evolution from that -- especially that seems that insurance AUM are quite mandate geared. That's the first question.

The second one is coming back just on the hedging cost quickly. Could we expect maybe less FX headwinds going forward because of your hedging strategy, which has been a ramp-up potentially?

And the third one, I think you discussed AI-driven productivity gains within your portfolio companies. Just curious about your own tech stack and how actually AI is potentially helping you within your investment process and whether or not that has an impact on your cost base?

So with regards to the insurance opportunity, one of the reasons why we, in that slide, showed you that we have crafted solutions across the different asset classes for our insurance partners, is because we think that we can, I think, be a more comprehensive partner with a reasonably balanced margin profile within this insurance segment, but it is probably naturally weighted more towards credit and infrastructure as we indicate than some of the other asset classes.

And so the fee base will follow the appropriate mix that comes from that segment. But we have created -- we've shied away from doing the pure play credit mandates oftentimes, and we'll oftentimes blend together multiple asset classes in order to keep a reasonable margin there.

I would probably also add here that there is overall -- at least as of today, and if that changes, we'll tell you, as of today, I don't think there's a bias towards like a change. So I would agree with Dave that on the insurance side, probably that's more infra credit. I mean we certainly try to do a lot of infra there. I would say with the larger business with sovereign wealth funds, it's probably more equity related. We hardly do any credit business with sovereign wealth funds. There's usually not that much appetite there anyway for that type of business.

With the JV partners, especially when we do joint products, so -- Dave talked about a very small category of clients where maybe we have one or the other or just evergreen building blocks. I guess, very often, the product JVs are essentially new products where we bring together the expertise of our JV partners and of our firm. We announced a few of those in the past like with, for instance, PGIM. And this is where often we bring much more the equity side of things than fixed income. So I would say, overall, as of today, I don't see a bias here. If we see suddenly such a phenomenal growth on credit, that's good news anyway then, but that could lead -- I mean if you see very disproportionate growth there in infrastructure and credit, that could lead actually to a more permanent change. So we'll certainly update you if that's happening.

Hedging cost, Joris?

Maybe to give you the background there. I think we've now more prudent in how we run the expected volatility on our equity, and we are protecting the equity much more by doing these hedging efforts.

I'm not sure whether I -- to clarify this. I mean there was a question of whether we see more robustness on the FX side. I mean -- so I guess what we are talking about is hedging balance sheet positions, okay? We're not talking about hedging revenues. I mean just if you try to kind of make a picture of this, if we want to hedge the -- for instance, the U.S. dollar exposure or euro exposure on the revenue side, and we talk about billions of dollars on like 5, 10, 15 years contracts, okay? I mean, you wouldn't like that, I'm sure.

So I mean, we will always have this situation that as long as we show Swiss franc as our main currency and there's no plan to change that, we will have inherently like other Swiss-based firms or at least firms reporting Swiss francs, that kind of bias. That's why I think with actually a lot of your inputs, I guess, in the last 2, 3 years, we make it more of a habit to always show the constant currency next to it just that you get a little bit more an apples-to-apples. But this is not something we can easily change as long as we report in Swiss francs.

With regards to AI transformation, we do have a dedicated effort between business and technology. There's probably more to come from our side. I think it will help us to make us better investors, service our clients better and Partners Group with its vast array of private markets data documentation. I think we're uniquely positioned and at a fantastic starting point to benefit from it.

Maybe just quickly adding to that. I mean -- so if you think about what AI will do to the investment process, there's 1 element where I think you have a level playing field because everybody will do about the same, which is essentially, let's say, using an agent to go to a data room, to do financial due diligence, operational due diligence, all of that. You can do this today. We do this today, right? That's not a big deal actually. It's just helping you. That in itself, I think, is saving time, but I'm not sure whether it's actually super accretive.

So what we are in the process of doing, and we should be pretty close to final product by the end of this year, we build what we call the PGAI fab. So we will use the data. We do secondary business, primary business, co-investments next to our direct control franchise now for 25 years. We have all the data.

Now we have millions of documents and probably arguably more extensive investment documents. I'm not sure whether you've ever seen a PIR, so-called preliminary investment recommendation Partners Group, right? We talk about like 200 pages. There's about 20 pages of Q&A in there. And this is, in our view, super valuable, not only valuable to build the context for the agent approach to actually have the right context to go into these data rooms to look at new transactions, to look at peers and all of that.

But very importantly, and that's maybe the key differentiator, and I'll talk about this relevance of transformation. It's for the transformation to understand how historically what worked on the transformation side, what doesn't work so well, how we should look at different subsectors, all these different dynamics. And this is literally impossible to do this by hand. You cannot, I mean, try to use in a small way 30 million documents and I don't know how many million numbers and try to conclude on a value creation plan. This is where the models are really good at. This is where I think we have a really unique advantage actually with the data we have collected over time.

So I think there's probably time next March or so maybe in the annual numbers when we have a little more time, maybe we should give you a little bit of an update what we're doing there. I think it's pretty exciting.

Any other questions?

And now we're going to take the first question on audio line. Just give us a moment. And the question comes from the line of [indiscernible] from UBS.

I have 3 of them, please. The first one would be a follow-up on the margin discussion. I mean we've clearly seen a bit of a recurring management fee margin erosion. I think, Dave, you clearly said that this is dependent on the mix. I was just wondering, with the ongoing shift from seasoned evergreen products towards the next-gen, perhaps somewhat smaller products, what is the expected margin impact here? Where that recurring fee margin stabilize in your view in the next couple of years? And are there any other forces in play apart from that evergreen transition? That's the first one.

The second one would be on financing conditions. I was just wondering with clearly some upward pressure on rates, how do you see financing conditions affecting transaction activity in the second half of the year? To what extent is that a concern? Could we see perhaps a bit of a rerun of what we saw in '22, '23?

And the last one would be on performance fees. I was wondering what needs to happen in the second half of the year for performance fees to hit the low end of the 20% to 25% contribution range? Is it really about just an additional small number of exits materializing? Or do we need to see a more meaningful pickup in exits?

Good. So on the margin discussion, the transition of kind of mature evergreens transition to younger evergreen, that is 1 of a dozen factors that play into kind of where the management fee margin comes out at any particular point in time. Again, in the first half of this year, we were particularly successful raising capital within infrastructure and within private credit, right? And those bring their own contributions.

In the past, I've tried to give you guys guidance on where the management fee is going. And even told you, we foresee it going down by a basis point or 2 in this period, and it actually ended up being up at the end of that period. It's very hard to foresee where it comes out because there are a dozen factors that come into play here, but the most significant is mix. And that's the one that we watch most closely, trying to project where management fees margin is coming out.

With regards to financing conditions, yes, it's always a reality that whenever the financing environment changes, you see transaction activity change for a period of time as the market digests those new rates and because there is pricing implications that get factored into kind of a new rate environment. At the same time, the transformation case is as important as the financing case today, what you can actually do with the business once you get your hands on it. And so we don't tend to put as much leverage on our transactions as some of our peers, at least we try and stay a notch below the market with regards to how we finance our businesses oftentimes and put extra emphasis on the transformation case that we bring to the table. So yes, it could impact things, but hopefully, we're less impacted than others and can still close on our pipeline. And then performance fees, Joris, do you want to cover that?

Yes. We've given you a range of around 20% to 25%, and that range is really driven by the slices of revenues that we will see as soon as we realize the exits. And that's, again, whether they will be closed in 2026 or shifting into Q1. So there are slices elements of these several exits that we currently have in the pipeline, which will make the difference in the range.

But the biggest is actually one exit where we're close to kind of coming to an agreement on, but we just are a little bit uncertain with regards to when that particular transaction closes. So it's more concentrated and less broad.

And the next question comes from the line of Daniel Regli from Zurcher Kantonalbank.

I have mainly 2 kind of follow-up questions. And the one is just on what we just discussed. So just kind of your performance fee guidance, in my view, has kind of been reduced by about 5 percentage points for 2026, and this is mainly due to this uncertainty about the exit time line you just mentioned, but is then the conclusion correct that we can expect that the expectations for performance fees in 2027 have basically increased by about the same amount, which now the expectations for 2026 have been lowered.

And then the second question is again on the kind of dynamics in the evergreen platform in Q3. And I know you kind of said were many changes. But can you just give us maybe a little bit more color on what is going on both sides, kind of the demand side and the redemptions side?

And what is your kind of the status on the gatings with your more mature evergreen strategies? How many funds have now been gated by now? And what is kind of your expectations for how long these gates will remain in place?

Let me give you the first answer on the performance fees. Yes, you're absolutely right. I think if we have a timing shift, those will then, of course, be realized in the course of half year 1 2027 as soon as they close. Now looking into 2027 and 2028, I think we gave you the overall topic that we are looking at $75 billion of realizations that we are working on. And how then they will, of course, translate into the full year 2027 or 2028, I think that's a topic as we go into next year, we will also have more clarity on. I think -- but the positive message clearly is, yes, it's feeding into 2027 of what we see shifted from this period.

I think when it comes to evergreens, I mentioned before, and there's no change to what we have said back in July. The mature evergreens, this is a dynamic that we will deal with over the next 12 to 18 months. But on the other hand, we've also outlined that we expect evergreen growth with $20 billion to $30 billion expected from the broader platform and the JVs. David has been mentioning before in the presentation.

Maybe -- so but what is exactly the status? How many funds of your mature evergreen strategies have been gates applied now? And what is kind of your expectations for further funds of these mature evergreens, which will have to apply gates?

We don't comment on specific funds. I can only point to the guidance we have given last time.

Just on your question on the liquidity limitations that are enacted by our, I guess, the 3 mature strategies that are enacted by many, many other large funds in the industry by many people, especially on the credit side. I think what's just important to notice here that we often talk about the sizes a little bit being a challenge here. There have been a lot of investors that made a lot of money in these funds, okay? The early investors have made 5x. So that's not like a normal fund where you are happy to make 2, 2.5x. They made 5x.

And clearly, at the time, when there's questions around the outlook, some people maybe like to buy some of the sort of a little more fancy public stocks, some people might diversify in a little more thematic investments. So there's all kind of reasons why people try to harvest some of their returns.

And given the sizes of these funds and the fact that we have a little bit more quiet environment otherwise on the evergreen side, I mean, you will see these limitations on liquidity being enacted for a few quarters, as we pointed out in July. So there's no update on the numbers. We've given pretty precise numbers here and figures.

But it's just important to see a little bit that context. And that's why it's not an issue here on the smaller funds because this is where people have maybe invested 3 years ago, 4 years ago, they're compounding. They're ramping up, right? But that is really for the mature funds. This is a little bit a topic because we have been so early. Many of these funds, they are like out there for 15, 20 years. And with all that compounded upside, there's clearly much more inclination than elsewhere in the industry to harvest some of these returns.

Thank you. And with that, I think we'll wrap up this call. Thank you, guys, for your continued interest in the company. And with that, we'll end the call. Thank you very much.

Good day, and thank you for standing by. Welcome to the Partners Group's announcement of AuM as of 30th June 2026. I would now like to hand the conference over to your first speaker today, David Layton. Please go ahead, sir.

Hello, everyone, and welcome to Partners Group's H1 2026 Business Update and Outlook Call. I'm Dave, CEO of Partners Group. And today, I'll be joined by Juri, President; and Roberto, our Head of Portfolio Solutions; Joris, our CFO; and Danica, will also be available if needed for the Q&A.

Despite a somewhat mixed environment for the industry in H1, we're proud to have delivered numbers that continue to demonstrate that we are a highly differentiated all-weather investment firm. We added a record of $16 billion of total new assets in H1 with solid demand across a variety of asset classes and offerings. The diversification of our platform benefits us in a market like this. The investment side was a bit slower in the period. We deployed $9 billion in H1, new investments are often demanding high valuations, particularly in private equity, and we were unfortunately outbid in a number of opportunities this year, but found good relative value on the portfolio side, and we had a mix tilted towards more portfolio assets. Finally, we generated $9 billion of realizations. We locked in some solid outcomes for clients. We completed a number of exits at the end of last year, which meant that we didn't have as many new exits completed in H1, but we remain pleased with the exit pipeline for H2 and future periods.

Next slide. Now in this update, we're going to cover a number of topics, which we understand are of interest for investors. And some of these are business topics, which are on plan and others are challenges that we're currently working to address. But before we do that, I first wanted to set a context for those business updates. And that is that when we take a step back and look at the broad number of things that we're working on across the platform, we see over 80% of the business is in good shape across investments, across business initiatives, 20%, I would say, is in need of work. Now how does that compare to normal times?

Well, during benign markets, smooth sailing, I would always say it's 90-10. You would usually see 10% programs or portfolio -- portfolios or initiatives that are needing extra attention. And anyone who's ever run a business, much less a portfolio of businesses can tell you that, that's normal. And today, in a more complex environment, it's 20%. And that's not unlike other complex environments that we have navigated in the past. Now some of those areas in need of increased attention include certain portfolio companies with a particular reference to that 2021 time period, which we've talked about in the past. We need to stay close to these investments and focus on hands on value creation, and Roberto will speak to that. Now we're not alone in having made investments during that time period, but we were somewhat alone in having managed more substantial private equity evergreens through that vintage. And we have net outflows in some of those mature evergreens. We take this very seriously. We want to ensure that our clients get what they expect from our programs and investments, and we, therefore, are giving a lot of attention to that topic. But the vast majority of business initiatives and investment programs across the platform continue to go very well.

On Slide 4, now Juri will provide AuM update, including our H1 fundraising and investment figures. This was a strong period for fundraising in particular. And in the second part of the presentation, Roberto will provide a business update on some of these areas of focus on the client side and the investment side.

Juri, over to you for the AuM update.

Thank you, Dave. Now of the $16 billion in H1 '26, we saw strong demand actually across all the offerings. If we look at here on the left side of the pie chart, Bespoke solutions continue to be the largest contributor, about 52%, that constitutes of the evergreens and the mandates. We saw particularly strong demand from institutional investors out of Asia, out of the Middle East. Still staying with that pie chart here regarding traditional funds, $7.5 billion here. If we put that into context, that was in the first half, it's roughly the same amount that we raised in the entire 2025 with traditional funds being 48% of the fundraise in the first half. So very strong first half in terms of traditional funds. The momentum was clearly fueled by some of our infrastructure offerings that had a final close towards the end of this first half, but also successful closing of our latest private equity secondary program.

To provide some further historic context on the next slide here, in H1 '26, we continued the record fundraising dynamics from 2025, raising more than in any other half year period as shown in the bar chart here on the left. Now this strong fundraising was driven by 70% from our equity strategy. So we're slicing and dicing it here on the right by investment strategy. 70% of that coming from private equity, infrastructure and real estate raising over $10 billion. It's probably also fair to say, as you see at the upper right a bit that we've been a bit in an infrastructure fundraising cycle here in the first half, which is about to be followed by a private equity cycle. Now it's not that we timed this exactly quarter-by-quarter, but just directionally, there is that effect that you see here.

I'd likewise like to point out that also credit contributed the quarter of the fundraising. And our fifth asset class royalties raised about $1 billion in the first half, increasing those AUMs in the first half by over 50%. So very strong demand for royalties, our fifth asset class, whereby now we built a 7-year sort of strong track record and see strong client demand for that asset class. So overall, our fundraising continues to be strongly diversified with all asset classes and regions contributing meaningfully.

Now with that, turning to our Evergreen platform, where also here, we continue to see meaningful flows with total demand of $4.2 billion in the first half. Again, putting that into some historic context, it's almost as much as the full year in 2023, as shown by the bar chart here. Maybe one of the key differences to be pointed out, shown by the shaded area here is that 80% of inflows in the first half of this year came from our broader Evergreen platform. Now that represents around 30 diversified offerings with more recent fund launches. So that's a diversified generation of funds, including the royalty evergreens, the next-generation infrastructure, et cetera, that are seeing very strong traction.

However, turning to the right here, we've also seen an increase in redemptions with $3.8 billion in H1. Now these are highly concentrated with select mature evergreens, which have triggered or expected to trigger redemption limits. We currently have over $1 billion of redemption requests in H2. Now that includes already the rolled over ones as well as some received ones for H2. So overall, while the 3 mature strategies saw elevated redemptions, we continue to see strong traction from our broader Evergreen platform.

Now turning to the investment side. Also here, we saw a very, very strong investment activity in 2025 with $27 billion last year. However, in the first half of '26 investing $9 billion, I'd say we had a more cautious approach in an environment that was -- had macroeconomic uncertainty, geopolitical topics, et cetera, especially on the direct side, also some bid-off situations here in the first half. Having said that, in volatile times like this, we've been able to capitalize by our portfolio assets, especially in private equity, but also infrastructure secondary transactions. We saw good relative value and strong diversification for our clients.

Last comment I'd like to make here on this slide is to the investment pipeline. It's a solid investment pipeline. I have seen a pickup from Q1 to Q2 in that investment pipeline, especially within our thematic focus areas, attractive opportunities here. So I'd expect to execute on that pipeline in the quarters to come.

Moving on to realizations. The USD 9 billion in the first half, they were driven across direct as well as portfolio assets, sort of a 60-40 split here. As a reminder, as we had communicated on the last call, the H1 realizations, they had been impacted to some extent by significant exits in late 2025. So we had some significant exits towards the December sort of time frame that slipped into '25 already. But having said that, we have a strong direct equity exit plan that's to be executed over the next 3-year cycle. So those exits you don't exactly plan quarter-by-quarter, but there is a good midterm pipeline ahead.

So with that, let me dive into some examples on the next page. In H1, we've exited investments across infrastructure, private equity and real estate. So on top of the page here regarding infrastructure, for example, we've realized atNorth, that's the Nordic data center that we have built pretty much from scratch to the leading largest Pan-Nordic data center platform, enterprise value around $4 billion, and we monetize that at 2.5x money multiple on behalf of our clients, but also very strong realizations for private equity, where we have continued to sell stakes at Vishal, one of India's largest value retailer for over 8x money multiple. Again, as a reminder, that was the largest IPO in India of the country, frankly speaking, ever, private equity backed to landmark transaction, very good results for our clients over 8x. But also Galderma from our private equity platform, Swiss manufacturer of skin care and dermatology products at over 3.5x money multiple on behalf of our clients.

So on average, we achieved an uplift of over 10% at exit compared to where we held the assets on our books sort of 6 months earlier, I guess, being testament for quality assets on our books and good realizations. Now with that, tying it all together in terms of AuM development, let's take a close look at the AuM bridge. As you're aware, our guidance specifically covers fundraising and taildowns. So in H1, having raised $16 billion, we had taildowns amounting to $6.6 billion. We had provided you with guidance of $10 billion to $13 billion for the full year as the taildown of certain older traditional funds shifted from '25 to '26 as communicated. Now going forward, we expect a slight increase in the coming year.

Moving to redemptions. They came in at $3.8 billion. Now maybe looking at the split here by quarter, we had a USD 1.7 billion in Q1, USD 2.1 billion in Q2 again, providing some level of guidance here, we expect Q2 to be the run rate for the next quarters, as Roberto will explain further. Other effects and FX amounted to minus $4.6 billion, they include NAV developments. Foreign exchange effects had a negative impact mainly due to the euro depreciating against the U.S. dollar. As a reminder, 46% of our AUM is in euro-denominated programs and mandates. So overall, AUM growth in H1 was impacted by taildowns, redemptions and FX, but outweighed by strong client demand.

With that, handing over to Roberto now. Thank you.

Thank you, Juri. Let me start this business update by providing a transparent overview of the current state of our investment portfolio. Based on bottom-up analysis, asset by asset, we see that 85% of our platform is performing at or above plan. However, roughly 15% of our investments are below plan. 2/3 of those assets are within our private equity portfolio. There are some investments we made between 2018 and 2022 before the interest rate hikes, which, therefore, faced valuation adjustments over the past years. But it also includes a few other companies with idiosyncratic issues. The remaining 5% of assets below plan are investments within our real estate portfolio, such as office assets and infrastructure investments or credits in our watch list.

These assets below plan are already reflected in the lower performance of some of our strategies over the past 2 years as well as in our H1 performance. Our investment teams are working closely with these businesses to return to a higher growth path. In a low case, for example, if the environment becomes more volatile or challenging, we estimate that these investments could have an additional $2 billion to $4 billion impact on returns over the midterm. It sounds like a meaningful number but when put into perspective with our net asset value of $124 billion, it represents roughly 2% to 3% of the portfolio. At the same time, if we look at the 85% of the portfolio that is performing in line with our expectations. We see upside potential of $20 billion in the midterm. This is based on cautious assumptions across the portfolio, including exit and operational improvements, which we are actively working on.

But let me dive a bit deeper in the dynamics of our private equity portfolio. When you look at the track record of our private equity direct funds, our first 3 vintages are top quartile funds with net multiples above 2.2x. Our fourth vintage, however, has been investing between 2019 and 2022 and is facing headwinds of those vintages, reflecting entry valuations and slow realizations. The performance of this Fund IV will be lower than previous vintages, but very importantly in line with industry peers. How does this translate to our bespoke solutions? We have spoken in past calls about the impact of these challenging vintages on our evergreen portfolios. But I would like today cover our mandates as well.

When we manage a mandate for an institutional investor, we define the investment pace per year to ensure consistent deployment and vintage diversification. Evergreens are somewhat different because flow dynamics may increase the procyclicalities of deployment. Our mature private equity evergreens had significant inflows in 2020, '21 and '22, and therefore, we have to increase deployment. We put limitations on investor subscriptions at the time to protect existing investors and maintain vintage that mitigated but obviously didn't make it completely go away.

After 2022, distributions within the portfolios of those funds slowed down and redemptions increased, resulting in a 50% lower annual deployment for the mature PE evergreen funds and the vintages thereafter. Due to the significantly higher deployment during the cycle before, evergreen portfolios have a higher concentration to those vintages compared to mandates. Evergreens have 50% to 60% exposure to these vintages while private equity mandates are lower at roughly 40%. As a result, our Evergreen platform has a 50% higher exposure to the industries vintages with headwinds compared to our mandates, but these vintages represent only 20%. So the challenges we face in some of our mature evergreens are the results of industry-wide vintage headwinds and procyclical flow dynamics, but not a reflection of investment capacity.

Moving over to Evergreens and providing an update on looking at our more recent evergreen strategies, we got off to a strong start, building attractive track records across asset classes. And just picking up the topic from the previous slide, the top 2 performing new evergreen strategies actually happened to be private equity focused evergreen funds. On the right, however, you see our infrastructure evergreens, for example, delivering an 18% annualized return since inception and ranking amongst the leading funds in its peer groups. These results continue to support strong client demand and reinforce our strategy of broadening the Evergreen platform. Looking ahead, these strategies will continue to be an important driver of our growth.

Evergreen funds represent 30% of our total AuM. Our mature funds, which are mostly private wealth focused and make up $35 million in assets under management, have seen elevated redemptions over the past quarters and specifically an uptick in Q2 2026. While increased redemptions over the past 12 to 18 months were due to investor rebalancing and competitive dynamics within the evergreen market, the real change from the first quarter to the second quarter this year were the external effects. We faced industry concerns on software, private credit evergreen, liquidity limitations, negative media coverage and high geopolitical volatility. The mix of these factors led to a sharp increase in redemptions from roughly 2% per quarter to over 5% for some of our mature private equity evergreen funds.

We have, therefore, enacted and are likely to enact redemption limits on further vehicles across those 3 mature evergreen strategies. As we have publicly stated on multiple occasions, we believe this protects the interest of all investors and is the right approach from a portfolio and investment perspective. We have sufficient liquidity in those funds, and we'll continue to invest for the ongoing investors, which represent the large majority of the investor base in those funds. We expect these redemption limitations to stay for a number of quarters. In the medium term, we estimate the potential outflows from these funds to be up to $10 billion to $20 billion negative scenario. This will, however, be compensated by growth from the broader Evergreen platform. As a result, we expect a period of more moderate growth in the medium term before returning to our long-term growth rate in Evergreen.

And with that, over to Dave.

Thank you, Roberto. We expect the environment in 2026 to remain complex, but we believe that we have shown that we're well positioned to differentiate ourselves and to navigate that complexity. In terms of 2026 guidance for new assets, we expect to be between $26 million and $32 billion for the full year, reflecting continued strong fundraising momentum. Regarding taildowns, we estimate $10 billion to $13 billion of taildowns in 2026 driven by closed-end traditional funds. And for redemptions, we anticipate that the current redemption dynamics will continue for a few periods, and this could potentially slow our net AUM growth by 1% to 2% during the next 18 months.

Next slide. Turning to our performance income outlook. From 2023 to 2025, we generated CHF 1.7 billion in performance fees. These were highly diversified across asset classes and strategies, and these fees represented 26% of our revenues over those periods. The majority came from private equity but we've seen an increasing contribution from our infrastructure business. Our mandates and traditional programs contributed roughly 2/3 and Evergreens contributed 36%. Performance fees are driven primarily by 2 factors: exits from our portfolio and Evergreens where performance fees are linked to NAV.

We continue to expect performance income for the full year to be around the lower end of the 25% to 40% range for this year. We expect performance fees this year to be weighted towards H2. For H1, we expect performance income to likely be below 20%. Looking further ahead, we have a meaningful exit pipeline over the next 3 years. And as such, we feel confident in our midterm guidance for performance income to continue to account for 25% to 40% of our revenue.

And with that, I'd like to hand over to the operator to open the lines for Q&A.

[Operator Instructions] And now we're going to take our first question, and it comes from line of Nicholas Herman from Citi.

Just 3 from me, please. Firstly, on the inflows. So you've just raised $8 billion per quarter in the first half. The run rate of evergreen and mandate inflows was weaker in the second quarter and appears to run rate at around $14 billion. Could you just talk about what has driven the slowdown in flows in mandates specifically? And how much traditional fundraising do you expect in the second half? So that gives you kind of I guess, confident, I guess more broadly, what gives you that confidence then that you can deliver the $26 billion plus guide for this year?

Then the other one I had, please, was you said in March that you were expected about over $2 billion of inflows from the new strategic joint ventures this year. Could you please give us an update on expectations for this year and how those strategic joint ventures have been progressing?

And then finally, I guess this year has reminded everyone of the volatility and its reactivity of the wealth channel. I know wealth is only 20% of your AUM. But I guess, how have the events of this year made you consider the optimal mix of cap or private market managers by Partners Group.

Thanks. Maybe I'll take topic #2, comment a little bit about topic #3 and then Roberto, I'll hand it over to you to take question 1 and to provide some more color as well. So the strategic JVs continue to develop in a positive way. We raised about $1 billion last year. And I said earlier in the year that we thought that, that could be $2 billion this year. We also communicated that there would be some areas of fundraising that could be impacted by the current redemption dynamics and lead to a little bit of a slowdown. So if it -- we're developing well there. We're at about $800 million for those JVs in the first half of this year and continue to see good momentum in a number of those. Some of them are developing a little bit slower than expected. Some of them are a little bit ahead of plan. So I'm not sure if we'll get quite to the 100% growth rate in JV partnerships, but still a very positive development there.

And with regard to question #3, yes, wealth is 20% of our assets under management. We've been like we have for other segments, but particularly well known for being an innovator within that wealth segment. And we've always been a big proponent of diversification within distribution. We are an institutional -- we think like an institution as it relates to distribution. I think we think about our mandate clients and big institutional clients as being very, very strategic for the firm. We think about the wealth channel as being very important in a number of areas. And we try and build a balanced set of [indiscernible] that cater to different needs. And -- sometimes the market is excited in one area or another. Sometimes institutional investors are chewing on large allocations, and it's kind of slower there. And sometimes the wealth market is rebalancing their portfolios and create some redemption issue, and it creates a lot of noise and -- but we're not a firm that kind of moves in and out of these categories based on that sentiment.

We really believe in building long-term solutions for these channels over the long run. And the development of our platform won't be a straight line. We know that. The development of the industry won't be a straight line, but we do believe that diversified distribution is an asset of the firm, and we anticipate continuing that.

Roberto, do you want to comment on the flow dynamics Q1 versus Q2?

Look, happy to. I think, first of all, I think given I would really base run rates of half year or full year type of fundraising. This is too many things that are moving what happens in a specific 3-month period. Think about some of our mandates start becoming fee-paying as we make investments. So there's different drivers really that will drive what happens in any 3-month period.

If I look at your question around full year guidance and the traditional fundraising contributing to it. We do have on the Evergreen side, a roughly similar run rate in the books for the second half, which correspondingly means you add this up to $10 billion to $16 billion for the second half reconfirming our full year range of [ $26 billion to $32 billion ].

And now we're going to take our next question. And the question comes from the line of Hubert Lam from Bank of America.

I've got 3 of them. Firstly, can you talk a bit about the redemption dynamics you've seen, like which region are you seeing the outflows from? Is it mainly Asia and Europe? Or are you also seeing in the U.S.? And also, are you also seeing redemptions coming from not only retail investors, but also institutional investors as well now? That's the first question.

The second question is on fee margin and the impact of that. So how should we think about recurring fee margin going forward, given that the outflows have mainly come from the Evergreen side, which is higher margin? And as you mentioned, like 25% of your fundraising has been in credit, which is lower fee margin. So how should we think about that going forward?

And lastly, how should we think about potential impact to dividend? If you look at consensus and forecast, we possibly see a potential for this year's dividend. If you assume last year's dividend to be uncovered. Would you think about rebasing your dividend? Or you do everything you can just to keep it?

Roberto, why don't you take the first question on the dynamics. Joris, you take question #2 on fee margin, and then I'll cover the dividend.

Happy to. On the redemption dynamics, I think there's a couple of things to say. First of all, this is largely limited to the 3 mature private equity-heavy strategies that we have been discussing and disclosing before. I think as far as it pertains to the regional split, we do not see any specific patterns. It's pretty much in line where the assets under management are for those 3 strategies. Lastly, when it's about client type, we clearly see this effect mainly playing out on the private wealth side of things, which is the driver of the large majority of those redemptions.

Now looking at the -- your question about the recurring revenue margin. It is a result of several factors. As we repeat, it's our mix in asset classes and the products and the impact from acquisition. And comparing it to what the impact is going to be if the mature evergreens see more redemptions that will be a slightly negative impact. Now if we look at the overall management income margin, especially if we look at half year 1, then we see also that there is an another element which is the onetime fees, which includes late management fees, as an example from the closing of Infra IV, which have a positive element. So overall, I think if we look at half year 1 2026, on the management income margin, we expect to be at similar levels than the full year 2025.

And that infrastructure fund is attractive margin business as well, where you saw meaningful assets coming into replace some of those evergreen assets. Now as it relates to the dividend, look, the dividend is an important factor for us. We continue to target dividend stability and long-term growth, and our approach remains unchanged. And those of you that have followed us for some time know that. To the point that back in 2023, we took a look not only at that year, but also the cash generation from pending exits and our confidence in the positive developments of the platform to have a payout ratio that was even north of 100% in that case. And so this is indeed an area of focus for our leadership team, and we currently don't anticipate any change to our approach or delivery.

One note is that I do expect to debate in our next Board meeting around share buyback versus dividend. And so we do believe that this is an attractive level to buy, but there's nothing to report on there. But we continue to be within our base case expectation for performance fees generated this year and no change to the expectation on dividend.

We're going to take our next question. And it comes from the line of Sharath Kumar from Deutsche Bank.

I have 2, please. First one is on performance fees. You mentioned $20 billion of planned exits for this year, and that ties up with the 25% guidance of performance fees that you expect to generate this year. So how much of the 25% guidance of performance fees will be generated from these exits? In other words, can you provide a proportion of performance fees earned from Evergreen funds? That is my first one.

And the second is you spoke a bit about in the call about the deployment and realization pipeline. So for the $20 billion of planned exits, is it the base case? Or do you kind of want to see some more improvement? So I wanted to understand the deployment and realization pipeline a little bit more detail.

Yes. So maybe I'll start with the second. So with regards to the realization pipeline, this has much more to do with timing than needing and improvement in the market environment or market context. We have quite a process that needs to be gone through in order to sell a private asset and to realize the performance fees associated with it. It can also take months and months. And so with a very strong push towards the end of last year to generate the realizations that came in 2025, it meant that we came into the first part of this year with a little bit of a lower pipeline of transactable assets. But as we look at the full year, we do believe that we're on track to be within that 25% to 40% range, although we continue to believe that we'll probably be at the lower end of that range.

With regards to performance fees, we showed in the presentation the historical mix of performance fees that have come from evergreen programs. We have indeed taken into account some slower developments within those programs, mature programs, in particular as it relates to our updated performance fee guidance. And so we're not providing guidance on exactly how much we're modeling out for H2 from evergreens versus other vehicles, but we have indeed taken into account the changed dynamic with regards to those mature evergreen funds in particular.

Now we are going to take our next question. And it comes line of Arnaud Giblat from BNP Paribas.

Firstly, thank you for the Slide 14, showing the difference in exposure to 2022 vintages for the evergreens versus mandate. My question is, how much can we extrapolate from that data to try and guesstimate what the performance in mandates might be? I mean, I would be thinking still probably an annual return in the high single-digit area. Would that be fair?

And secondly, my second question relates to that. I'm just wondering to what extent the mandate business is being submitted to competitive dynamics. I mean, the flows in this half were at a lower level. I'm just wondering, given that a number of your competitors have gone multi-assets and acquired secondary capabilities. To what extent are you seeing new entrants or new high levels of competition for mandates?

And my final question relates to Slide 16. There we can see mature strategies declining all the way into 2033. So are you basically suggesting that is that your base case that the redemptions continue until then and there's no turnaround? Or is there a case where if performance improves, you could get an improvement sooner?

Roberto, let me pass it over to you for those topics.

So maybe on the first one, on the mandates and the difference in exposure to 2022, it's extremely difficult to bring performance to a single number for the mandates because they vary in terms of scope. But I think it's probably fair to say, if you want a proxy or think about it on the previous slide, we had a chart where we showed our private equity direct strategy and all the funds that were first quartile, but then the Fund IV, which is more in the middle of the pack. So you probably can think of mandates rather as a mix of those than versus using the evergreens as a proxy.

In terms of competitive dynamics, I'm not so sure whether the technology with the single line investment is being broadly adopted in the market, I think that requires quite some setting yourself up in terms of governance, in terms of operational platform to cater to basically split investments across a variety of mandate clients. I do think there's quite some barriers to entry that cannot be easily replicated from one quarter to the other. I will really challenge a bit the notion though that the mandate business has slowed down in the second quarter, maybe it's worthwhile to get a bit deeper into how some of the mechanics work. Many of those mandates have fee bases that make AuM accountable based on investments that we make as opposed to commitments. So if we have a quarter where the investment volume is relatively low, it's quite natural that you would have a lower amount of so-called tail ups that might have influenced that specific 3-month period. But as Dave alluded to, and Juri in their respective parts, it's a conscious decision for us to invest cautiously in the environment we are in.

Maybe last on your observation on the Evergreen. This is on purpose, shown as a conservative case. I'm absolutely with you. There are scenarios where we see a more positive dynamic in those funds as well. We use the slide to depict that even in a more challenging scenario, a lot of the growth actually in the future is going to be carried by a much broader evergreen platform with a variety of different funds, but also strategic partnerships, as opposed to just a few single funds driving the outcome there.

Yes. And just on the mandate -- momentum within mandate, I don't know that there's ever been a period where we've had more active discussions across more geographies with clients as well. You really do see our mandate offering, which historically catered primarily to European clients and some of their specific needs, now broadening out to be a very global set of discussions with our institutional clients. And I think I would not read into any of the numbers or loss of momentum within mandates. I think that would be a misread of the dynamic. You see building momentum within the -- within the mandate segment.

Now we're going to take our next question and it comes from the line of Oliver Carruthers from Goldman Sachs.

Thanks for the comment on the vintage procyclicality. I guess, dynamics that you call out with evergreens. I've always thought of Partners Group is a firm that's kind of been very forward focused on this. If I go back to 2020 and 2021 and how you manage some of the demand there. But I guess what we've seen with the mature programs highlight, I guess, the difficulties of managing, I guess, an uncertain flow and therefore, uncertain deployment outlook. So as you think about scaling up your new evergreen funds in that Slide 16 that you show is there any philosophy or anything that you've changed in terms of how you manage this forward vintage procyclicality point? So that's the first question.

My second question is on the Slide 16, you show the size of the mature evergreen funds falling every year on this $10 billion to $20 billion potential outflows over the medium term. So my question here is really what's reasonable to assume for gross inflows here? Do they fall to zero or said another way, what's the rationale for an investor putting money into an evergreen vehicle where you expect the size of this vehicle to shrink every year out to 2033?

Roberto, do you want to tackle this?

So maybe somewhat philosophical question, but really interesting question, Oliver. I think going forward, you're more likely to see more funds by Partners Group and a broader platform as opposed to a few bigger ones. You're right in pointing out that we do have mechanisms in place. We did have mechanisms in place to manage the growth. Effectively, we need to tighten those going forward, probably be more disciplined in capping funds at certain sizes. Those are certainly thoughts that we have as we evolve the Evergreen platform of the future.

I think as it comes to the mature evergreen funds that falling every year, we did bring that chart as a scenario to show that the growth is really based on a lot of different cylinders as opposed to a few funds. I wouldn't be caught up too much by the moment, for those evergreen -- for those specific evergreen funds. Yes, we had a number of years where the mature vintages had a tough time in terms of relative performance versus the newer investments. We have seen that in the past, 2009, 2010, 2011 as well and then also changing. So I wouldn't take too much here from the picture of the moment. We're working hard on those investments and the performance of those funds, which might as well change that dynamic going forward.

But perhaps to push you on that final point, I guess you -- I appreciate the past dependency in the scenario is uncertainty here, but you're using the language rightsizing these mature evergreen funds. So as we go through this process of rightsizing, do you expect incremental gross inflows on a material way? Or should we be thinking about that $10 billion to $20 billion number as a net number?

I think you should think about that number as a potential effects from those 3 strategies on a net basis.

Now we're going to take our next question. And the question comes from the line of Nicolas Payen from Kepler Cheuvreux.

Just have 2, please. First one would be on your Evergreen platform, and maybe you can give us a sense of your distributor consideration because recently, we have seen a case market where a fund with roughly 60% assets came from one bank, and we saw double-digit redemption in a single quarter when that distributor actually changed the view on the asset class. So maybe you could give us sense of what is the AUM share in your Evergreen vehicle that come from any single wealth distributor platform and whether you have internal caps on this?

And the second question is really -- sorry, a follow-up or a clarification. Just wanted to understand what needs to happen in terms of Evergreen's performance in H2 for you to be able to get to the low end of the 25% to 40% range for the performance fees?

Roberto?

I'll take the first one and then have Juris tackle the second one. Look, I don't think there is a formula, but it has always been our philosophy, and we're also not going to comment on others, but it has always been our philosophy to grow those evergreen funds rather carefully and over time. So you wouldn't have seen a partner's for Evergreen funds building up a multibillion exposure within a couple of years. We've always grown over time, and that naturally also leads to a certain diversification of your client base in any given fund. That is something that we have been looking at, especially for the more mature evergreen funds in order to diversify there also the potential of flows, whether it be on the inflow on the outflow side.

Now if we look at the performance income for the second half of the year to really approach our guidance, I think it's driven by 3 elements, which is, of course, the exits. It's the high watermark fees, and it's the investment income of our own balance sheet positions where we invest alongside our clients.

Now looking at the different scenarios, of course, that we modeled. I think one of them is clearly that we assume that the performance is going to be slightly positive also, which is impacting then, of course, the high watermark fees and the investment income. And then, of course, on the exits, we've modeled some scenarios depending on the timing, whether they were going to be realized in '26 or in 2027. That's why we said about the lower end of the range of the midterm guidance.

And now we're going to take our next question and it comes from the line of Michael Sanderson from Barclays.

Just a couple for me, please. First of all, just to understand. Now that you have these prorating and gating in place, does this have any impact in your broader intermediary distributor relationships to people for the new products, are they asking -- are they requesting different detail as a result of the gating that's been so well publicized. And could this have an impact on the development of these new products in future quarters in comparison to sort of how you're thinking about the scenario at the moment.

And then the second one is just a bit more technical. Just understanding the U.S. and its fund, where did it end up at the gating because I thought there was some technical angle about whether it was at 5% or whether it could go a bit higher. Has that been confirmed yet or is that yet to be determined?

With regards to your first question on the gating and broader intermediaries, I guess it's important to understand that liquidity limitations are a feature of those programs and are being discussed and have been discussed with clients throughout the whole of the last decade and longer. So that's not something that people just pick up now. It probably has been picked up a bit more actively in the press and the broader public. But interestingly, from the client side, it's very much understood that those gatings are an integral part of those offerings. It's actually a good thing to enact them as opposed to some other approaches where you just pay as long as you can.

So here, we have a gating feature that essentially ensures that there is liquidity provided over longer time horizons as well, and that's very well understood by our clients. So in so far, we have not -- we don't see a big surprise in a change. And you can appreciate in a context where liquidity limitations have become quite common across several participants in the private evergreen markets, that's not -- that hasn't been a specific cause of upheaval with clients.

With regards to the second point, the reason why we formulated that as an expectation, and it is, is because it's technically not up to Partners Group, but that has to do with the governments of the fund, but we do expect that liquidity is being limited on that Delaware offering as well in the next couple of weeks.

And now we're going to take our last question on the phone. And it comes form the line of Nicholas Herman from Citi.

Just one last question from my side, please. My understanding is that for the BlackRock joint solution, commitments going to the LLC. Do you have the ability and the capacity to allocate those commitments to the smaller scaling funds where performance is also better? Or is that not possible?

We have the capacity, both us and BlackRock with a range of funds that are part of offering where we can make allocations as part of this joint project.

So they don't just have to go into the LLC is the point?

There is a broader -- that is a broad set of, I believe, 8 funds that are part of that offering.

Now I would like to hand back to the room. Please proceed dear speakers.

Okay. And with that, we'd like to thank you for your interest and participation in the call and look forward to the next update. Thanks again. Bye.

This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.

The next segment our Capital Markets Day, maybe we'll call it a Capital Markets boarding, a quick couple of hours, but I think some important updates from the Capital Markets Day that we held last year. We'll kind of take stock of where we are today. We laid out for you some long-term medium-term objectives that we wanted to achieve. In last year's Capital Markets Day, and I think it's a timely point in the market to come together and talk about where we stand. I'll give you a brief introduction before handing over to some of my colleagues.

I'll start high level. Partners Group is ine of the premier private markets firms in the industry. We have somewhat of a different heritage. We come from Switzerland as opposed to from New York or London, where many of our peers pay. And I think that different heritage shows up in a different type of DNA. We're built differently. And you see that differentiation come through in the way that we build our client portfolio much more custom, much more bespoke. You see that show up in the way that we build companies with a hands-on roll up your sleeves, industrial approach, and you see it show up in the way that we build people. Many of our leadership team that you'll see today, joined us as analysts that have come up through the ranks. We are a client-centered firm. We have long-term approach that we take to take a stewardship across cycles. A little bit more industrial DNA. You'll get a sense for that if you ever visit us in one of our campuses. You get a little bit of a feel for that here in London, but in particular, if you visit us in one of our campuses. We have a one firm, no silo integrated approach. And I'll talk to you in just a minute about why that's so differentiating for our clients.

Here, you see the trajectory of our firm from our IPO in 2006, the first major private markets firm to go public until where we stand today. We have had an uninterrupted pattern of asset growth and of building client solutions. We now have 5 asset classes, 75% of our assets under management are in equity strategies. There has been a lot of discussion in recent years about the scaling credit opportunity. We have a very attractive credit business, but it is our asset base as opposed to the majority of what we do. And out of our $185 billion in assets under management, $125 billion of that, our bespoke solutions. And we'll talk about why that's so important. But first, the way we build companies, we have a transformational approach to building businesses. And that comes down to 2 things. Number one is the way that we research spaces, we have teams that we'll spend oftentimes years scoping out a sector meeting all the management teams, understanding the dynamics at play within that particular space before ever making an investment. We call that our thematic approach to industry research.

We also have a very large network of industry executives that have been there and done that and that help us to navigate the complexities of each subsegment that we're researching. After we take control of the company, we have an entrepreneurial approach to how we run those businesses. We have a standard way that we onboard those businesses. We go up a mountain together oftentimes in Switzerland, and we hold strategy of sites. It's not uncommon for us to spend the first few board meetings not in the numbers, but in the strategic dynamics that are likely to impact that business over the coming years. And we wrestle over the appropriate value creation strategy to establish with each business that we invest into, and then we hold that in all of our future board meetings as the key topic. You will spend a lot less time in a partner with boardroom in numbers and a lot more time in strategic topics. And as a result of that, we tend to have transformational outcomes for our clients.

You see our portfolio show up in 2 main ways. We build platforms. We take a niche space, and we help a platform to grow and to develop and then we take midsize companies and help them to enhance to global leading organizations. That approach has shown up in attractive realized returns for our clients. Within our private equity business, $86 billion of assets today, about 11% CAGR over the last 5 years. We've been able to generate a realized outcome for our clients about 19.8% historically within those businesses. And you start to see many of those platforms emerge from medium-sized companies to really global leaders today. What used to be the mid-market that you found in public markets is now found in our portfolio and then the portfolio of many of our peers. These are businesses, many of which that would have been public companies in a prior era that are now, I think, anchoring the portfolios of many of our clients.

Our private credit business is a $40 billion business. We tend to build portfolios in a very bottom-up way. This has not been a stamp it out, scale it up type of an approach to private credit but rather an asset-by-asset approach that has been able to leverage much of the industry expertise that we have built on some of our equity strategies. Within infrastructure, that has been a business that we have grown organically. We launched that a number of years ago, and now it's $36 billion of assets and has been 1 of our fastest-growing segments with a 5-year CAGR at 18%. And we build next-generation utilities and you've seen that play out in a very attractive way. Returns interestingly that have echoed, that of our private equity business because of the development that's taking place within many of those platforms, and we've never had a realized loss in that segment of the business. And so downside protection with a pretty meaningful upside, an attractive value proposition. And you can see why that asset class is growing disproportionate relative to some of our others.

Our real estate business $22 billion in assets under management. You do see a shift in real estate demand for clients and it's going from broadly diversified real estate allocations to much more niche and much more specific allocations. And so as a result of that, we're acquiring vertical integration in order to help build out that platform. We made an acquisition in 2025 in a vertically integrated platform called Empira. And that's the first of probably a few vertically integrated acquisitions we've made, and we're quite pleased with the impact that, that has had. In addition to that, our royalties business which has scaled very nicely within Partners Group is now $1 billion of assets under management, and we see a tremendous amount of potential, not only on the client side, where you see clients going from maybe a traditional credit allocation towards niche types of allocations, maybe credit-like allocations, alternative credit is what some clients are calling it. But the ability to buy into a revenue stream as opposed to participate in a capital staff, that opportunity is something that many clients find attractive right now, and we believe that we'll be able to continue to scale and grow that business.

In addition to that, looking through our investment committee, topics for royalties, I'm just telling you, it's really interesting stuff. Every single one of those things that we've looked at recently. I said I would invest in that. I would invest in the next one. I would invest in the one after that. It's just interesting, attractive content that our clients tend to agree has a lot of upside. One of the key things that a differentiated partners group, okay, has been our client centricity. The most common approach to growing within private markets is to have a financial product and to go out and to sell that financial product, and try and convince the market why your product is better than their product and better than that other firm's product and people tend to push products within our space, we're different. We sit down with clients, and we try to understand what their objectives are, what solutions they need and we build custom solutions for our clients. And as a result of that, we have been amongst the most innovative firms in our space. And you see here on the screen behind me, the number of firsts that our firm has had.

We have been a firm to launch some of the earliest types of structured products, whether that's evergreen solutions in the U.S. And that's now a broad topic. We were one of the first firms to look at that on the private equity space, in particular, to many of the European structures that we've launched in a very creative way. So the impact of that is twofold. Number one is we have a very loyal client base that we've been able to solve problems a long period of time. And the second is we have amongst the most diversified revenues in the private markets landscape with our revenue spread over 350 different solutions, and that is different than a firm that has flagship funds that they're somewhat dependent on, right? And if you have a flagship fund that has some challenges, it might be tough to raise the next one versus if you have solution building capability of much more diversification within the track record side of things as well.

If we look at the industry that we operate within, we have largely benefited from significant tailwinds, increasing allocations of institutional investors over the last 30 years. Years ago, you saw institutional investors with a 1%, 2%, 3% allocation to private, and that has steadily increased. We're now in a place where many institutions have a mature allocation to private markets and that has presented fundraising challenges for many firms that have more of a traditional fundraising approach. Now there still is structural growth within the private markets. It's actually very attractive. We believe that this industry has the potential to go from $15 trillion today to about $30 trillion in the future. But that growth is coming from new places. It's coming from institutional investors that are looking for more customization like the insurance space, in particular, they have a very different set of needs than maybe a traditional institutional allocator would have.

And it's coming from individual investors and the types of firms that can cater to the needs of individual investors and investors that for customization are different than those were able to meet the needs of institutional investors as those allocations were expanding. And so that's one of the reasons why you see this bifurcation in the industry between the haves and have-nots. And Partners Group is clearly one of the haves in our industry and have been able to grow disproportionate to many of our peers in the recent years. because of how innovative we've been and because of the fact that we have many structures and investment capabilities that cater to the needs of this growing segment of the market, 67% of our assets today in bespoke solutions. And if I think about the must-haves to be able to cater to that segment of the market. You need to have a platform that's global in terms of your reach and in terms of your breadth, you need to have multiple asset class capabilities as opposed to providing an individual fund. You need to be able to provide solutions. You need to have portfolio management capabilities and the ability to navigate complex needs of clients and to be able to provide liquidity as a part of the offering as opposed to structures that just tie [indiscernible] capital. You need to be able to create bespoke mandates. You need to be able to solve private wealth needs and you need to be a platform.

And I think partners do check all of those boxes. One of the keys to how we manage is by having a portfolio management team that sits at the center of our business. We have investment content manufacturing on this side, right, of the house. We have our client and structuring teams on this side of the house, and we have a portfolio management team that sits at the center of our organization and helps to serve as the CPU steering traffic across these 2 segments of the business. And so as it relates to our ability to build these private market allocations. We have access to individual single-line transactions, which is highly differentiated. The building [ box ] for many within our space as they think about mandates are limited partnerships. The limited partnerships are structures that are very hard to steer, 15 years in some cases. capital will be locked into a single trajectory versus if you're using single-line allocations, you have the ability to steer portfolios on a much more dynamic basis. We have a client that we recently set up a secondary mandate for.

And I remember talking to their CIO, and they said in the past, when we wanted to do add secondary content I would make a decision, right, get that ratified by the Board, we instruct our team. Our team would spend 6 months or 9 months meeting secondary managers. They make a proposal that secondary manager would finish fundraising 9 months later or 12 months later or whatever it was, and that capital will be called down gradually over 4 years. And that position that they made a strategic decision to get built would happen sometimes 4 years, 5 years after the decision by the Board to invest into that topic versus with the Partners Group mandate, we have the ability to ramp clients the next week. They can be on the next allocation sheet the next week. So that access to single-line banding is really, really important. And that gives us the ability to build these custom portfolios in a way that's highly differentiated.

We also have a risk management approach that can be overlaid because of having portfolio management at the center in a way that's differentiated. And we see time and time again when you have these topics that creep up within the industry, there is a difference between a disparate set of teams that are out there stamping out investment content on their own versus a partner's group more centralized approach to a centralized risk management, centralized investment committee, we tend to get much less exposed to these hot topics that tend to ramp very quickly, but also have a downside risk. And so you see that with software more recently where we had the opportunity to scale in software in years past, but from a risk management and portfolio management perspective and in consultation with our clients, we chose not to do that.

Here's a little bit of an illustration of what this means in practical perspective for us as an organization. Most of our peers are set up around funds. You will have a fund and even though you might look at that organization and say, okay, they've got similar asset classes that they play in. They've got similar geographies that they operate across. The organizations itself look completely different if you're organized around funds versus if you're under organized as a single platform. And so we don't have any of our investment professionals that are tied to a specific fund. Our investment professionals work for our clients collectively. And that gives us the ability to feed through portfolio management, all of these different structures. We have 350 vehicles running right now, as we talked about, we can add 351, 352, 353 without a lot of drama because of the way we're set up, we don't need a new team to manage those because we slice our investment content up and distribute it to our clients' pro rata. And so with that approach, we have the ability to build these custom solutions.

We've actually taken our mandate capabilities where you used to have to have a $500 million account with Partners Group in order to have a separate account and we pushed that minimum down to $350 million. And then we push it down to $200 million, and then we push it down to $100 million. And now we're building separate accounts at $50 million and below, and we can do that because of the way that we're set up. Many of our peers would struggle to do that because they need to hire a new team for each new product that they bring online. And our ability to slice and dice investment content is highly differentiated. Now given some of the dynamics that we talked about in terms of the changing landscape, the changing fundraising environment, you had for years and years and years, this dynamic where institutional investors we're constantly increasing their exposure to private markets. And now those allocations are more mature, but you have thousands and thousands and thousands of firms that had emerged to meet the needs of those institutional investors.

And so we have entered a phase of structural consolidation within our space, and we talked about that a little bit last year. And we have 2 means of growing in the current environment. One of those is through strategic initiatives and one of those is through developing, let's call it, organic initiatives. Now on the strategic initiative side, we have some topics that we categorize under consolidation and that can be consolidation of clients or that could be consolidation -- physical consolidation of investment content or investment manufacturing. And then we have the opportunity to do de novo launches. I'll focus just a little bit on the consolidation side of things. As we as a leadership team and reflected on where to prioritize resources this last year. We have thought a lot about consolidation of manufacturing content because that is naturally going to happen where you have our market previously serviced by all of these independent investment engines. We have had people knocking on our door constantly over the last year, saying that you guys have differentiated access to this wealth channel that I can't get, let's line forces. And I have some differentiated manufacturing capabilities you have differentiated distribution capabilities, let's put those 2 forces together, and we've thought hard about that.

We've also had opportunities to build partnerships all the distribution side of things. We have many partnerships that we form. And in fact, that has been, we think, the most timely area to spend time on this last year is partnerships on the distribution side of things. Why? Because that is -- you only have a set number of distribution partners that you can partner with. And once those partnerships are performed, you're pretty well locked in. And so over this last year as we spent time really on where to focus, we think that the opportunity to consolidate manufacturing is one that's going to exist for a very long period of time. You have thousands and thousands of firms that exist out there. And we have done one acquisition this last year and we think that, that opportunity continues to exist. But the very most strategic and timely topic that we could focus on as leadership team is forming strategic partnerships on the distribution side of things. And indeed, out of the 30 or so partnerships that you have seen announced within our space, we've had, I think, 1/3 of those that we have got been a part of.

And I think that speaks to the fact that we have been very, very focused on securing distribution partnerships this past year and that has been a much more pressing topic for us than acquiring manufacturing. And both strategic both very relevant. Both we'll see play out over the next decade. But I think once those distribution partnerships are secured, there's not going to be an opportunity to get into those again many, many years. And so that's where we spent our time. Now as we think about the agenda for today, we're going to talk a little bit about some of these new strategies. We're growing our infrastructure business with the new income strategy, and we're developing our private equity yield strategy. We're launching special opportunity strategy. On the investment side of things, we've been very, very active on some of these de novo launches scaling up new initiatives within the existing platform. And then for our existing strategy, we're talking about how we vertically integrate within real estate, how we roll out our multisector royalties portfolio and how we're advancing structured credit and our secondary strategies.

On the client side of things, these strategic relationships are really, really key to how we take Partners Group investment content to a broader segment of the market. And we're going to spend some time helping you guys to understand those partnerships and the impact that they could have on our distribution capabilities over the coming years. We're talking about how we're scaling our mandate offering across our client base, how we're growing in some of the regions where we're currently underrepresented Asia Pacific and the Middle East being two of note and using traditional funds to capture new clients. You actually saw a meaningful increase in North America traditional fundraising force this last year, and that was very deliberate. Because with many of them were underrepresented within North America, and we've been using traditional funds to build new relationships and deform first-time engagements with some clients there. On the private wealth side, we'll talk about some of our strategic JVs for wealth management, DC in particular, and then expanding distribution with our Evergreen platform. So some of -- those are some of the key topics that we want to talk about in today's Capital Markets Day. And with that, I'll hand over to our Executive Chairman, Stefan Mike talk about some of the winning investment strategies for the current environment.

Thanks Dave. So good morning, everybody, first of all, also from my side. It's a privilege to have you here in London or call in different regions of the world. It's fantastic to have the second Capital Markets Day here. Actually, talking about that, I know that some of you asked that question. You guys -- I mean, didn't do a Capital Markets Day for like 20 years or so. Now it's a second role is there. And I can just give you my personal opinion here.

I think we're currently seeing probably more change in the last 2, 3 years than we saw actually 10, 15 years prior to these last 2 years. And Dave due to some of those, I mean, we see the client environment changing with, I would say, more stagnation in certain pockets, but then there's an amazing opportunity set in new pockets in institutions, insurance companies, D.C., but the whole wealth, retail, which we only started to actually cover, we see some wealth funds that grow very significantly with different kind of relationships. But also on the investment side, we have a very different environment. I mean we had 10, 15 years that we're in a little bit more of the same.

And now after COVID, we had inflation coming up, growth questions, rates. Now we have this wave of AI technology-driven change. So that produces a very, very different environment. And also that had, of course, an impact on our industry, and Dave talked about the consolidation industry. So all of these things, I think, mean that the environment ahead of us is very different from the last 10, 15 years. And this is where I think we feel we need to give you a good sense of what we're doing. And sometimes it's about the nuances to understand them. I can say from my side, I mean, you see probably maybe more excited about the next 10 years than ever before in the last 10, 15 years. I think the setup that we have is so differentiated on the client side and on the investment side in a way that it will have a massive positive impact in the next 5 to 10 years. So we talked a bit about the fundraising side, and we'll go a little more into details and Roberta or later on.

Last year, we talked about this 2033 strategy. complete on track, maybe even slightly ahead of track here in achieving that. So whatever I do is maybe today is talk a bit about the investment environment and so on. have a little bit of postie here, winning investment strategies in the AI tech-enabled transformation. But there's a lot of talk right about this new environment, people talk a lot about software and other things. And so I want to just take a step back and give you a bit of a sense how we look at that, why we are, again, quite excited about this environment. So the starting point is something that we have told you for years, right? It's not new for us. We talked since years about our hypothesis that there is a very significant transformation of the economy ahead of us. It's driven by 3 waves. And the first wave that is essentially technology enabling these, let's say, support systems that help us on processes. It's not a big deal yet. That's very important to clarify.

The second one is probably a few years out, we start to see certain efforts, but probably 3, 5 centimeters out. This is really towards more autonomy in certain business systems. That's a much, much bigger deal because if you change end-to-end processes, you really need to think about transformation. And then maybe 10 years plus, that's typical in economy transformation, you'll probably see certain business models collapse and others opening up with tremendous opportunities, okay? So this is little bit of starting point of our thinking here. So what I want to do is just go a little bit through like, I would say, one main topic per asset class that we see as something that is really, really fundamental that's guiding our investment activities, our thinking and where we see tremendous opportunities. But of course, also in areas where we want to be very, very mindful about because of that significant change that is ahead of us. So let me start with private equity. And I would say, in private equity, the story is quite simple. The story is the following: business transformation wins full-stop. And especially the companies in all the ecosystems, it's not only by technology, not at all actually, right? In all the ecosystems, the companies that are better than others in using AI and technology in a smart way, better than other people. They will outperform.

Data strategy is absolutely fundamental, okay, for every business, for every ecosystem. So there's 3 reasons why we have that hypothesis. And I think the 3, I would say, pillars to that. One is the acceleration of pace also something we talked about for a while. I think a very easy way to make that realized is by looking at what happened to the digital backbone for businesses, business services, but also for many factoring for instance. In the last 10 years, if you look at slide here, we have come out, I would say, in a situation where we use the data in a relatively integrated way, there were sometimes be unstructured. But it was a relatively good integration quarter along the lines of the processes and the systems. Today, I would say, in many cases, we have a bit more cleaning up data, will be more structured, needs not to use these pilots. But if you are very honest about it, I don't think that for most businesses, we have seen this fundamental transformation. So the last 10 years, to some extent, we're much more about incremental wins. If you take our hypothesis basis, there has a good chance in the next 5 years, there will be much more need for transformation because you see now the start of these more autonomous systems, end-to-end processes that get replaced in certain instances that you cannot do with incremental changes. It doesn't work. You really have to work on that business.

The second point is a little bit connected to this, and we see this already today in numbers. There was actually a Pricewaterhouse study on this, which I found interesting. They measure the impact of transformation work. And so what they look at Sensile, they have these quintiles and they look at how much effort have you done and what's the outcome? And what that chart says in simple terms is if you do a little bit of transformation you get not much upside. You do a little more, it doesn't give you much more upside. If you go all in, if you really think about changing your company in a way that makes it much more effective in the long term, this is where you get the upside. So this is what we call this win it takes a lot dynamics and platform transformation. By the way, that's exactly what we have seen with many of our most successful exits. PCI last year, ISP is exactly key study for that kind of transformation, where you don't grow like 15%, 20%, but you get these extraordinary IRRs.

But the third one is also a very relevant one. transformation past was seen a little bit like, okay, I mean I have a turnaround situation, things go reveal so I need to do some transformation or I want to be to go all for the upside. I don't think we have any of that anymore today. It's offense, it's defense. And this is other Pricewaterhouse [indiscernible] I think it's independent actually. It's not the only use price move because they're all delayed here. They have this interesting survey they do for many years actually, right? To add a survey CEOs on a nonpublic basis about how they look at their businesses going forward. Look at this number here, [indiscernible] was shocking. So nearly half of the CEOs, they will probably not tell you publicly the same. Nearly half the CEOs essentially say we really worried about our business essentially being tossed in 10 years from now, we just don't know. Technology disruption, but also the macro environment, the economy disruption as reasons. So there is much, much more of that thinking like, okay, we have to do something either way. There's nothing like defensiveness or resilience just because we have a good business. That's the thing of the past.

So how do we invest, I mean, in that period of winning business transformation, I think we do actually employ our normal approach and [indiscernible] talks about that later on. We have done transformation investing for many years. Now honestly, in the last 10, 15 years in a bull market, where the tide is coming in, all the boats are lifted, I think it's actually much less differentiating than what we'll see in the next 10 years. Selectively, growth capital investing. Sometimes we see these ecosystems and informatic approach, we see businesses that are just an ecosystem that is so new. For instance, we have a network simulation systems for utilities, a company called [ Nira, ] very, very successful growth business. We have businesses in other AI applied deals of legal services, for instance, that have more growth capital. This is probably something that could become more relevant. And then on the secondary side, we'll also hear about that. That's very important. I mean we have this value creation based secondary approach. We're not going for the biggest sizes. I mean, we have a pretty good business. I mean the size of the is about $10 billion to $15 billion equivalent program size, but we're not going for the largest transactions. We're really going for those where we have a bottom-up direct style underwriting of the assets that are consistent with our thinking about the themes.

Let me talk about infrastructure also here. Infrastructure, you will hear from Esso growing massively, incredible needs, governments don't have the money. So in itself, that's a great start, right? There's a lot of tailwind, which is helpful. But there's one area that will probably be at amazing new opportunity for the next few years. We call this the next-generation utility opportunity. So what this is about is often about platforms we built centered around some form of energy power production. And of course, again, that is a lot related to this economic transformation because of the need of technology and computation power, but the electrification of manufacturing and the nearshoring, which changes how these manufacturing sites work, all of that leads to an amazing demand for reliable, affordable energy. The good news is we have now the technology to actually address the [indiscernible] because the outlook is, I mean, much higher than 2 years ago with renewables. We got a home storage, batteries, transportation, distribution, but also management with energy efficiency, very AI actually based is much, much more efficient.

And the question you might ask yourself is, I mean that's all nice, but we have utilities. So why are you so excited about it? I mean, utilities will probably take that part of the meal. Well, the thing is the following. The utilities that we have that's both in Europe and the U.S., also to a good extent in Asia. They are set up in a different way. They're very extensive. They service oriented. They have limited CapEx in most cases, actually. They're very country kind of set up so they don't really integrated. And that's exactly not a set of the work. So the setup of the private markets platform of the PT platform, and we've done a couple of those already in smaller size and we'll grow them now. All these highly integrated platforms, you combine all these technologies for production, for management storage and for distribution in a high effective way. What you do with that is you essentially bring down the cost from $0.08 [indiscernible] on the kilowatt hour. That's how you create efficiencies, okay? And this is exactly what we're doing. And if you look at some of the math that's somewhat simplifying here, and I can tell you that that's quite an arbitrage Actually, you build these platforms for around 10x free cash flow with the nucleus, with some add-ons and you exited something that is much more core or core plus. So super interesting, something that really excites us and is probably from a size perspective, something that can really bring out infrastructure business to a very different size in the next 5 to 10 years.

So how do we invest? We create these platforms. They've talked about that. We buy core. Sometimes it's actually ground-up development, but increasingly, especially with -- next to utilities, we will also buy more developed assets where the new CapEx less than 50% of the total size, maybe 30%, 40%. There will be more income-oriented, the grade for insurance businesses for DC for these kind of investors. So that's an initiative we're working on as having tremendous upside. Partnership side, based on multiprivate equity. If we do a secondary, this is really with the direct style underwriting. We avoid these diversified funds where there might be all kinds of things in there that might not work well in new environment. Let's move to real estate. With that transformation that we've seen for a while that is ahead of us, real estate in itself, the industry is undergoing a massive very profound transformation. And the reasons are the following: it's mostly driven by demand. Demand by tenants or by owners have listed, and it goes feedback of like new working styles, which has, of course, a lot to do with digitalization. It has to do with decarbonization, electrification has to do with digital services AI. It has to do with a generation rent, which looks for different setups in Unico I could probably add a couple of others in logistics and so forth.

So what they asked in common, that's maybe the more relevant material. It really changes the way you have to think about real estate because the operational intensity of real estate assets, the dynamic demand of what they look for in student housing, in active adults in the young generation renters in the cities. It's super dynamic okay. And the old system where you had a real estate, a long process between someone that created some ideas, we are planning and then there was going to be some engineering coming in and a developer and eventually what taking care of a property asset manager, an overall asset manager, that just doesn't quite work anymore. It's this dynamic change to the operational intensity, which makes it very, very hard. So this next-generation model that we are so, so excited about its vertically integrated by essentially this single platform in-house services, and was very important is you have one data stack. You can only apply technology. There's a lot of technology actually for real estate, but often it's not used it effectively because you don't have that one data stack. You need to have data flowing through from the planning sort of property asset management, then becomes very, very active.

So you address all these concerns. And if you think about what that means, how these real estate platforms look like, essential businesses instead of R&D does development of acquisition development and they have one part is manufacturing production. We call this construction project management and service customer support is property and asset management. And this is exactly the reason why we bought MPA as the backbone as the platform to build our living and some of the office activities on it because they have exactly the integrated set up, very strong technology and in data. So what do we offer on the real estate side, and we'll hear about that essentially 2 main verticalized approaches that is to living. So that's residential, that's student homes, that's active adult, is hospitality, but then also industrial platforms. And also on the secondary side, it's way to diversify this portfolio in a more global way. But again, we have a very, very strong focus on these underlying themes rather than buying just [indiscernible] here.

So let's talk about credit. Credit pads, clearly, its headlines in the last few weeks, there was no shortage of that. My sense is that some people have not fully understood, I mean, what the whole transformation is about, what it means to credit, the selected credit headlines around software there was a lot of talk talking about that. There was a lot of talk about some of the technical topics like this more payment in kind and things like that. I'm not sure whether they really address the topic. So the real topic in our view is that we are the beginning of an incredible [indiscernible] of private credit outcomes, okay? And that actually for probably the first time since 10, 15 years, a real alpha election-oriented approach really performs and you might be surprised to hear that, but the reality was between '23 and '21 or so, maybe starting off COVID, the loss rates are broad. I mean across the industry was so low frankly, it didn't matter so much, right? I mean, maybe we had with our very loss -- low loss rates are extremely low. Maybe we have an outperformance of 50 basis points, but it's not something that was actually so visible. And we think that will change.

So what's happening in credit? I want to give you here quickly 2 or 3 pieces of thinking in the big picture. So the first one is there's something happening at the large end that we just need to be aware of. This is essentially some form of convergence of public and private market style credit transactions, okay? BS and direct lending income together in these very large transactions, and we've seen many, many more of these large transactions than in the past 10, 15 years. So there is a spread difference that is maybe 100 basis points. There's hardly any difference in terms -- and there's a lot of funding actually coming from insurance business, traditional asset management business. So we just have to be aware of that, okay? So that makes that part of the space a bit more committed. I want to be just careful. The second aspect here is probably the one that is really key. This is this transformation that drives credit bifurcation. And this is actually a very simple thing to understand. It's nothing complicated. So what happens if there is rapid economic change. And you've seen that in industrialization in the last 25 years, that's not new.

What happens is that the distribution of outcomes think of some forms normalized distribution, okay? Will essentially cut just longer tails, okay? That is what disruption means. It's dispersion of outcomes. More winners, but probably more loss and some winners do extremely well, but some will test the shown quite quickly. which for the equity strategies in itself is not that much of an issue because if you have a portfolio, when you win off it enough with outsized returns, you can probably cope with the fact that maybe on some of the bad ones, you lose your shirt. The problem in credit is if you have a great asset, you're kept in terms of upside at the rate. The worst case, the asset is so good. It gets refinanced after 18 months or 24 months, we call it the negative convexity. So you have actually a lower return and then if it goes the other way around, I mean, you're essentially hanging it there. So that means that credit will probably see different outcomes. That in itself is not yet a pro. It simply means that it's a good chance that the default rates go up. We expect it will probably about double. That's what our team believes. The recoveries might also come down, but arguably, we should also expect the spreads go up somewhat.

So the only thing that it does. What's really important is it does really require you to focus again on very hard work, direct style credit underwriting. Because what happens if you buy these beta portfolios, we have seen many, many of these portfolios in the market in the last 10, 15 years. You look at the right-hand side of this chart, in the past 10 years, let's say, an average large portfolio was 300 to 400 bps above the short-term rates. Because there were very, very long before rate loss rates. If you take away about 100 or 200 basis points to cope with the fact that you see that dispersion of at comes, you see that negative convexity, you end up with something that is just not that effective something in the world, but it's just not that attractive to the bps and it was very fundamentals. In the past world, I mean, all these structures were highly levered. But if you end up with something like 200 bps over you want to be careful how you want to leverage that because the leverage will cost you actually as much, if not even more than the spread you have. So we believe, and of course, simply buying here credit is more complicated than 3 slides here. But what we are clearly seeing is that there is a change how you have to go about producer. [indiscernible] credit is not bad at all. We think actually [indiscernible] going up, especially in the wide and middle market we can create very attractive returns. But it is a little bit different investment discipline going forward. It will be a little bit more equity like in terms of how you have to approach credit in this environment. S

So we approached this with our direct middle market lending strategy with extreme low loan loss rates. So we think that that's a very good set up for this environment. We will launch a new strategy and [indiscernible] will talk about that or the credit team special opportunities. It's very obvious to lose that in this environment, this version of outcomes, big refinancing wall in the markets ahead of us in the next 3, 4, 5 years. and actually very limited specialty situation capital for these that this is trends opportunity. And then adjacent opportunities when we speak to our clients about more diversified plays. We will commend to do this in different homes with, for instance, structured credits, low tranches where there's more relative value, credit secondaries has more relative value and the same for NAV financing.

So as the last asset class, our youngest asset class, the team has done it for 5, 6 years now, very successfully with strongest growth and I believe, personally, this will be the asset class with the strongest growth for many years to come. So let me explain our hypothesis -- what we believe what will happening. We call royalty financing revolution. It's about an unprecedented opportunity because royalties is only an asset class, so important. It's not only an asset class. It's also a financing technology. So let me explain that. So what we see here is 3 things happening. The first one is what we call this rise of the intangible economy. In simple words, just means that if you look at businesses you look at balance sheet, there's just not so many hard assets anymore, okay? The intangible assets, IP is just growing massively, right? I mean if you think, for instance, about pharma services or pharma businesses, it's growing like at 20% or so much, much faster than our assets. And that means that very often, you don't have a traditional hard asset to finance. And in the absence of doing something against the P&L risk, I mean, the only way to get, I mean, reasonable financing is actually by doing essentially a royalty financing, right? So you have someone that is buying your IP effectively, giving it back to operationalize and getting a share of the revenues, right? That's what the structure is about.

But think of it -- it's a little bit as maybe what happened in the sale and leaseback market maybe 40 years ago. So I mean this is something that doesn't only apply actually to these typical situations today like pharma, for instance, or natural resources. This is a much broader application. And this brings me to the second point, which is, we see in this environment, a lot of businesses that have much more quickly than ever before, very solid revenues. -- but the P&L visibility is just not good enough. So it will be very for many of them to get traditional bank financing or private credit financing. However, what they can do is they can give the revenues as a collateral, so they can get financing and a share of the revenue. So effectively using that royalty technology I'm not in a traditional IP format, but essentially for other businesses with strong revenue scasibility. And very similarly and as a third category here, these are businesses will come the businesses in some form of transformation and you will see that very over the next 5 to 7 years.

In some businesses that need to spend quite significant CapEx to make change to go and achieve that transformation that will make it very difficult for traditional financing because you don't have the visibility of free cash flow. And again here, this is where royalty financing will come is a wonderful tool because you're not actually focused or worried about the net cash flow line, you actually only worried about the revenue visibility that in many, many of these businesses you will have. So that will, in our view, means that there is a tremendous opportunity in the next few years. Dave talked about that. I mean we see amazing transactions and that's just not so much capital in that space. There's some specialized pockets, but there aren't a lot of generalist players that play this relative value across the sectors as we do it. So is the traditional royalties that the existing business or national resources, pharmaceutical IP, things like that, that's growing at like 20% or more. But then increasingly, we use the same technology, as I said before, to create synthetic royalties or have like what we call the royalty-backed demands, right, all the back nodes for us. And then also here, I mean, there's an integrated way of paying it.

So if you want to have access to certain niche strategies, if you're going to have more [indiscernible] we use the secondaries. So overall, a lot of change ahead of us. This change in many ways will be total for part the economy. I mean, will not always be easy for business to address that change. We believe that with the right approach, having -- there's an enormous potential, there's an amazing opportunity ahead of us. I'm super excited about these different areas. And we'll hear a little bit from [indiscernible] and the colleagues, I mean, more specifically, how they go about it, but also then talk, of course, about the challenges problems. As I said, it's not easy at all. But let me just leave here at the stage with this one comment I made before. This is a very complex environment. And it would not be the first time that partners would have in a very complex environment has massively outperformed. It was the first time in 2001, and in 2008, '09 through the European currency crisis 2013, and COVID . I think that is an extended period ahead of us where this differentiated approach, I think, will serve us extremely well. Very excited about that. Thank you for being with us. And with that, handing over to Wolf.

Thank you, Steffen. Good morning, ladies and gentlemen. So let me kick off this investment section here with private equity. And actually, 2025 was a year of headwinds. We have the tariffs, we had macroeconomic or geopolitical topics, but our teams, they stayed with a thematic research and stay disciplined. And actually, we invested $11.2 billion in private equity in those areas, direct partnerships almost at the same level. actually even stronger were our realizations or exits last year. And the industry was talking about exits a lot. And you see we had realizations of $13.4 billion. which was actually for private equity, one of the best tiers we had. So if you look at the performance on the right side here, we had 44% uptick in investments and $46 million in realizations to previous year, whereas the industry was more flat.

And how do we do that? Our investment strategy consists of these 2 pillars. Thematic Sourcing, they've talked already a little bit about that. Our teams go into 40, 50 sectors very deep 2, 3 years trying to understand every detail creating conviction and finding the right assets. For example, right now, we're going into the future of mono manufacturing. There's so much change in manufacturing going on. And we try to identify the second and the third mine that provides to that future success and invest there. For example, physical and digital security or robotics, but not in robotics will be a huge field of growth, but it's pretty crowded in the first line but look at robotics parts, for example, and how they are connected, those technologies. That is an example of what we do. And then once we own the companies, the second pillar comes into place the Entrepreneurial Ownership. And it starts in the onboarding that we have a strong team. Our Boards with industry experts because we always say, yes, we have studied the sector deep. But however, there are people that have worked in it for 20, 30 years. And those are our Board members that we bring to these businesses, combined with a strong management and our investment team, what we call the triangle and we deploy the partner school business system. What is that? It's kind of a framework how we onboard companies and how we manage value creation in the course of our ownership period. It's just a framework because every business is different, but it's our playbook.

We measure the progress with a bespoken software solution that is unique in the industry. it's PG Alpha. PG Alpha doesn't have only financials. It has a strategy on KPIs. So we can monitor its actually for the management and the Board, but also for us, we can monitor the progress of the strategic initiatives. And it all comes together in the transformation and ownership review, where we oversee the whole portfolio monitor and also give hands how to progress. And that led in the course of the last 10 years to an average of 13% increase year-on-year in EBITDA on our portfolio. And that represents an almost 20% IRR in the course of these years. And importantly, it was mainly driven by operational value creation. So how do we transform and technology comes into place. And I said earlier, let's first look at technology in our portfolio. And actually, what you see here on the left side is that we were always underexposed for software. And you see that last year, we even deemphasized software. And it is due to our strong AI know-how that we have internally as Partnes Group that we went that way, and you see on the graph where the industry went.

However, AI and technology is for us the main driver right now to transform our companies to take it into the core of their business models, as Steffen said, and transform them with technology. 90% of our companies have deployed AI in their core business models. And the industry standard is more 30%, 35% right now. So how do we do that? We thought 3 years ago, and there was a time when Chat GPT 3 came out. We formed an AI in-house team, expert the cap from the industry. [indiscernible] Partners Group and for our portfolio companies. And then after they kicked it off, we hired an external Board of advisers of 5 people that come from AI that have done that all their life. And as Steffen mentioned, we start with the data there and then how to weave into the vertical, the software. And what we see on the top layer, the user interface, will be totally disrupted by AI. But the differentiator is in the lower levels, and that's how we build that.

Now let me show you an example. Our company, International Schools Partnership was built from scratch in the last 12 years. Today, it's 100,000 students, 111 schools in 25 countries, very successful company that you see on the numbers here. Actually, we partially sold it last year and also reinvested because we are so convinced of the business model we have created. The value creation in the last years was basically quality of schooling. We invested into that and that brought the confidence of parents to bring their students to our schools. But in the last 2 years, we invested into an AI platform at tech. Actually, 93% of our teachers already use an AI platform to actually plan the whole curriculum, to plan their next day, their next week based on the curriculum that we actually put in centrally from ISP corporate according to the country. The students have now an individual learning module to every student is by AI trained individually. So in the morning, you are on the school, get the lesson. In the afternoon, you can practice and the AI doesn't give you the answer. It ask your questions, actually, yes. And you can imagine, we gather tons of data of that.

Schools love it. And why do we see huge growth for ISP in the future? Think about an individual school, they cannot afford such a system. Only such a company like ISP, can program, an AI engine. So we believe we can collect even progressively more schools to join that ISP network in the years to come. Let's talk about the secondaries market. The partnerships actually was a record year with almost $230 billion invested in the industry. Partners Group invested $4 billion. And we took the same approach as in direct. So we went deep on the businesses. I wanted to understand the value creation plans inside the portfolios that we bought of each company. and went deep actually with our research, $4 billion invested. And you see we screened $208 million, ended due to diligence of $37 billion and we invested into $4 billion, which represents 1.9% of investment grade. So very thorough, deep based on our playbook investing, and that leads to these results on revenue and on the EBITDA, you see an overproportional growth to the Russell 2000 benchmark. And if you look at the middle chart here, it is mainly based on net value creation or performance-driven and only to a very small portion based on discounts, [indiscernible] lucration.

And on the right side, you see that are very, very experienced and one of the largest private partnerships teams in the industry outperformed the market in the course of the last years. So overall private equity direct here on the left and secondaries on the right, we have a strong, strong record, and we continue to build on that using thematic research, more technology, more AI into that, as I've shown, as well as very thorough investigations of secondaries with the same methodology. So with that, I would like to hand it over to my colleague, Esther for infrastructure. Esther?

Thank you, [indiscernible] , I'm responsible for Partners Group's infrastructure business. 2025 has been a year that you might call exceptional, yet we call it consistent. So how does it hang together. In infrastructure, what matters not only is the ability to drive outsized returns. What matters at the same is to deliver to clients portfolios a stable and reliably performing portfolio no matter how complex or volatile the market environments are. And we're particularly proud that in 2025, as in prior years, we've been able to fully fulfill those expectations from our clients in our activities.

On the investment side, we've invested $7 billion into very interesting very well priced from a buyer's perspective for assets that will continue to drive performance over the next 5 to 7 years. We've also been able to realize around about the same amount of capital, so just about $6 billion on behalf of our clients. Again, looking at both the direct and our portfolio investments, standout outcomes did underpin what is 1 of the strongest track records in the industry. And last but not least, a quick word on the industry. Those results on the deployment are stronger than what the industry has delivered and on the realizations are particularly strong. That matters and it margins today more than potentially over the last 10, 15, 20 years, where infrastructure has always been something clients have added to in their portfolios.

Today, they're in a world where they need to make choices. And even an asset class like infrastructure where a lot of portfolios are still magnet growing, our clients are becoming more selective, which manager they trust and which managed they continue to work with intensify their working relationships with. And we want to be one of that small chosen group order right. Looking at the infrastructure market overall, it is a very, very deep market, over $100 trillion of investments to come up. So a lot of space for managers to grow and develop. But I think importantly, selectivity and the ability to identify the right risk return and grow and scale within that market will become absolutely essential to help us fulfill our ambition to be one of the leading players in the market in the years to come and to help underpin the $100 billion plus AUM ambition that you heard us talk about in last year's Capital Markets Day. And as I look bottom up at the transaction activity, the fundraising activity, the conversations we have with key strategic lines on the one hand and our ability to put infrastructure content into dedicated evergreens and make those available to a more diversified client base on the other side. All of those conversations give me great confidence that we're on a wonderful path to reach or hopefully outperform that goal.

What helps there is the fact that we're a generalist, very deeply resourced across deployed, not just from a presence, infrastructure after all is a local investment work, but also from a broader thematic perspective, which helps our team really navigate different sectors and subsectors, identify opportunity early, meaning with conviction, but then also pull back and take a more cautious approach when capital starts crowding it. That's helped underpin the results on our direct control strategies and our secondary strategies and that would also underpin our newly launched active income strategy, which should grow quite strongly over the years to come. Let me take you through an example of what that means in practice. Data centers. I couldn't possibly talk about infrastructure without talking about data centers. Now importantly, that is a market that is classified by some thin infrastructure investors in principle like a lot, which are really, really big CapEx plans, and they keep growing. But then on the other hand, I think one of the biggest questions, and we certainly have seen quite a bit of market volatility around that is a question of, will the revenue come that will allow for that CapEx to earn a profitable return, and how fast will they come?

And whilst one might think in the first instance, the data center operator is somewhat insulated from that question because they get the benefit of long-term leases from bid creditworthy counterparts. We have learned in the last 2 to 3 decades in infrastructure, the one has to ask a second and third derivative question in addition to make sure that the underlying business models are sustainable, but there is ultimately also credit risk you take on the offtake side. So not any asset will help underpin great performance. You have to find a specific assets to specific platforms that will also in volatile environments, environments where there is more of a risk of overbuild will continue to perform. Our thematic journey on the data center space has been informed by our thinking and has actually been power let. So we were thinking in megawatts, 98% of the industry was thinking in square meters or square footage and that really mattered for us in making some of the very distinct and conviction investments we've made around the globe. In Atnorth in the Nordics, in EdgeCore in the U.S. and more recently in Asia Pacific through in Australia and the Southeast Asian platform. That is a portfolio today that really helps deliver one of the aspects that Dave talked about earlier in his part. And that is assets that are scaled, assets that are profitable, but assets had also enjoy the benefit of a large buyer in us because you need to be able to modify financial investors, strategic investors in order to get the best outcomes for your clients.

There's also another aspect by which we can address [indiscernible] interesting returns in the data center space, it's maybe not so obvious to everyone. And it's through our activities on the secondary market because the secondary markets allow us to be very, very selective bottom-up in the type of exposures we want. And when you look at the relative pricing by which you access those opportunities, it tends to be at a discount to the transaction, the direct transaction levels in the market. And that's really been a tool that we've been using very, very selectively. And I really want to underscore that because data centers when a director in secondary is probably the easiest infrastructure asset you can acquire in today's market. And now we have the benefit with all of the relationships and the [indiscernible] that we have that we can really pick and choose out of that very large investment universe and make sure that what we back also directly are the best positioned assets at very, very attractive prices. And I think the final point that is always proof of the pudding. Of course, it's beyond the identification and the thinking that we're putting in during the origination phase and the value we're creating during our ownership. And we didn't also able to monetize on behalf of our clients according and I'd like to cover 1 of our most recent exits atnorth, technically not a 2025 event, but I think we can confidently look forward as that being a good example of what's to come, and that's the Nordic data center [indiscernible] acquired by a consortium of CPPIB and Equinix. So probably one of the largest infrastructure investors globally teaming up with one of the very, very large listed data center operators in the world. Competitive process remain competitive even though it also coincided with big AI and neo-cloud -- so I used to attract the credit default swaps of the core risk of this world on a daily basis.

But I think what is important for atnorth really, again, looking back at the underlying business foundation -- fundamentals on the intrinsic value, and that really allowed us to run a competitive process and deliver a great result for our clients despite the surrounding complexity. And it's really around the ability to take a small platform and help us scale very, very fast. We knew the Nordics is going to matter in a global data center world because you've got relatively cheaper power, you've got relatively more power and a fact of many people don't realize so much. It is structurally cooler than in Continental Europe, which means you need less energy. And that means if I'm applying to a data center operator, I can operate much, much more economically in the Nordics. And if I care about the sustainability of the sourcing of my power, I could do get the added advantage a very low carbon power in that region. So for us to is really around identifying the right business, the right team, the right initial set of assets, we did that in atnorth and then we went to scale it very, very quickly. So moving from about $20 million of recurring EBITDA at the time of acquisition to north of $200 million at the time of exit. Quite a capital-intensive growth process. We also tapped the debt capital markets on a regular fashion raising way over $1 billion worth of financing in the interim.

And then I think importantly, we also diversified the client base and we've materially lengthened the customer relationships with atnorth was able to attain. And then last but not least, and this is, I think, what CPP and Equinix is hugely excited about. So we're a number of the unsuccessful bidders with a lot of further runway to grow by way of having secured power and land and the ability to allow the incoming consortium to now choose how fast they want to accelerate on the capital deployment to access that $25 billion contract value pipeline. And all of that comes together to ultimately deliver what I think is a standout result for our clients and one that we will look to repeat as we look to monetize some of the other platforms we have in the portfolio, whether the data is in specific or broader energy or infrastructure platforms. Taking a quick step back to the overall portfolio, about 40 investments globally. On the direct control side, well diversified across sectors and geographies. And that does matter on an infrastructure portfolio as well because infrastructure will be exposed to local regulatory changes, policy shifts macroeconomic headwinds.

So for us, it's really important to continue a global approach and one that is focused dominated by developed economy sort of investment focus. That again gives the blueprint for the portfolio will continue to build. I think on the control value-add side, it will be around those dose 40 to 50 assets that we're looking to build out, and then we will add through the active income strategy while a lot of additional depth to that portfolio. And very excited, therefore, to grow and develop the team and I think a lockstep with what Bob said on the infrastructure side, we're also quite active users of artificial intelligence, and that can really help drive on the infrastructure side, fantastic incremental margins that will ultimately translate across the portfolio to our clients. Without maybe a quick word just finally on track record.

And as I said, track record, it would underpin our ability to grow our business in a much faster and accelerated fashion compared to the market. We do have a top quartile track record across our control and secondary strategies across multiple vintages of funds. We have delivered on the realized side, north of 2x net TVPI and over 20% net returns to our clients. Importantly, it's a very stable distribution, which is skewed towards society wanted to be skewed at towards the right side of outcomes. And then importantly, on the secondary side, we've also been able to maintain that same exceptional track record of performance against our peers, really around both a very attractive 1.6x net multiple and 18% net IRR those figures will help underpin what I believe will be a fantastic decade for infrastructure to build one of the largest infrastructure platforms in the world. Thank you.

Good morning, everybody. So my name is Chris Bode, and I head up our private credit business in Europe and Asia. And I have the pleasure to talk to you a little bit about what I think is the most exciting business area we have. Yes. So in the last for 3 months or 6 months. It's been rather noisiest period for private credit. Indeed, most days, as I come in on the trade from the world, I see something on the papers or some sort of were such as contagion and insects and bubbles of all sorts of things being used in the same context as private credit. So it's sort of a pleasure in here to talk about what we see through our rights, what is it we think about the market at this point in time. And in short, we believe that all other risks that are described in the market today are oversimplified.

And I just want to spend a moment just to describe what we mean by that. Now a lot of the headlines have talked about defaults, defaults. And I think it's fair to say that defaults indeed have risen recently particularly on the July debt side and particularly in some more cyclical sectors. I want to comment first of all that [indiscernible] Partners Group is much, much lower than the market, 10x lower. But again, default, I don't think it's the main topic. There's been a lot of discussion around more sort of KPIs or technical issues, things like pick elections, valuations, protection. Let me spend a moment on each of these. Pick on the sort of nonpay, noncash pay element of loads, taking a lot of the headlines the moment. If you look at some of the BDCs in the U.S., what we see is about 7% of the income in general is now being picked. Just to put that in context, the pick was in 2020 around 10%. So it's not at abnormally high levels, although we acknowledge that it is higher than the long-term average.

The pick in our portfolios between 30% and 50% lower than the market average, around about 4% or so points to our strong selectivity, which I'll come to in a moment. I think inconsistent valuation is another fee that has emerged in the media, -- and certainly, we do observe some inconsistent valuations in portfolios. I think our approach to valuation is very important here. We have an independent external valuer who values bottom up all our lines, line by line, and they don't do it quarterly, they do it monthly, very important. And we've done that for our funds for decades and more than a decade or so on open-ended green funds. Loss of protection. I think Steffen mentioned about it before, certainly at the upper end of the market, a large [indiscernible] has been a learning of the lines between the BSL market and the direct lending market. Some of the protections, which you might associate with a low with a debt instrument, have been eroded away. I think what's important here to recognize is that we target predominantly the middle market, the core middle market where the protections are much better. In particular, 90% of all our loans last year in Europe benefited from a leverage banking covenants numbers that 80% in the U.S. still a very strong number. It's much higher than the broader market, by the way.

Go back to the slide. Steffen talked about this earlier. I actually nicked the slide from him. So I hope he's still here, he will certainly challenge to be later. But it's a very important slide, right? What we see is that return outcomes in the credit market in the last 10 years have actually been in quite a narrow range. Really, you could go back to 2017, '18, '19 and defaults and losses in the markets. have been rather benign. Interest rates in Europe were around 0 or even negative sometimes in some jurisdictions. But we see that's going to change. We are seeing it live changing. And our view is that default rates are actually going to double in the coming years. And probably even more importantly, but yes, depressed is that recovery rates, the amount of recovery on those default people fall to around 40% compared to an equity important measure. And what that leads to ultimately is you're going to have winners and losers in the credit market. And Steffen described it very well with the bell-shaped curve. And it simply is the case in credit that you're going to see that. All that means is that you're just going to be more selective and you've got to be more careful. There is no upside in invested in private credit. If I get it right, everybody calls me congratulate me. If I get it wrong, I get the call, right? So I need to make sure that it's right. I need to make sure that the credit is all firm.

Now let me touch on software and AI. It's a topic that is, of course, touching many parts of the media and broader industries. Our view in the private credit side part group is consistent with what we're doing across the platform. of talked about it and on the equity side and a part we run a very integrated platform. very benefit from some of the thematic thinking, some of the research they do and they decide to ensure that when we think about private products. When we think about investing in inventory low, we're benefiting from that. And that means that we can very thought on about some of the risks and as well as some opportunities as well, but I worry more about the risks in the various sectors and industries that we touch and that we look at. And what does that mean? Well, we look at over 3,000 companies in the last 5 years or so, 600 or so per year. We invested about 10% of those is a 90% decline rate. The majority of what we look like, the last majority we declined. That's very important. And it comes down to what we call internally our private equity style mind set. The view is we're not investing in a debt instrument. I'm not investing in a loan, I'm investing in our company. I'm an investing year management team. I'm an investing business model. And that's ultimately the way we think about investing on the private credit side as well. And that what we believe is very important, particularly going forward.

So taking a step back, what we have here at the Partners Group. Well, we have a $40 billion AUM split rather evenly between direct and the liquid side of our business. We also have a very evenly split AUM by region, roughly in North America, Europe, 50-50, a little bit in Asia Pacific. We run a very diversified portfolio. It's our largest flagship brand bonds at a 0.5% average concentration very diversified over hundreds of names there. And that delivers what we lease are very proud of our returns, 6.7% return, and that includes of a loss rate of 0.8%, which is market leading. Now it looks about -- we think about the growth of the business, wherever we confident what we're doing. It's important to recognize that we've grown our credit business organically. At we started a liquid love business 15 years or so. Today, we run that at $22 billion. It's a very fast-growing business line. Last year, we started our credit secondaries business, been a partnership with General. We also have launched a NAS financing or a fund finance initiative, it's also proving to be very successful. And I also want to pass it now finally to my colleague, Joshua, who is now experiencing our latest initiative on the special opportunity side.

Thanks, Cris. So Special opportunities come in lots of things to lots of different people and, obviously, in the press recently, it's getting a lot of attention. So I thought today, I'd just take a few minutes to describe what it's going to mean to us, our Partners Group. So first of all, if you take a step back and we looked at our pipeline over the last several years and the opportunities we're able to really execute on. There was a segment of risk/reward that was really attractive, but we just didn't have the dedicated capital to really take advantage of . So for us, their dedicated capital pool is going to be special opportunities. It's going to be strategically lined capital at its core -- focused on downside protection and really participating in any upside.

So what we've talked about here, particularly Chris has talked about sort of not getting it right and not being able to capture any of that upside -- we're going to do the underwriting, you really try to take advantage of that as well. So it's going to be a downside retake the credit. We're going to look to with upside more than credit has beforehand, and it's going to have a deal velocity somewhere in between the 2 strategies. What that's going to do is going to create a narrower return profile with underlying downside protection similar to private credit, but really a return profile that gets closer to prime equity. So why now? Well, we've talked about the increases in the demand for [indiscernible] Capital. The economic transformation that's going on is really going to require bespoke capital to help fund this transition. Talk a little bit about the maturity wall coming. So if you think about the growth of private credit over the last 5 years, down in a very low interest rate environment, that's now coming to maturity wall. And we're going to refinance that at a vastly different technology period.

Do you think about what solutions are in market today? But from what we've seen, we think only about $300 billion of opportunistic capital has been raised, and that's far smaller than what the opportunity set is going to be. So we think there's really ideal environment to us to investing do anything about a little bit of white partners grow. Well, we talked about the mid-market platform, and it's a great mid-market platform here at Partners Group with access, great credit risk. But overall, the opportunistic sector, the capital that has been raised as we raise it much higher bulls bracket rate. So we think it's really underserved that we can take advantage of. If we think about the broad platform at Wolfe talked about a real understanding of thematic trends. We're going to take that to and use that to focus on areas where we want to invest. But importantly, we're differentiated through our 350 key relationships with which were a capital that we think is getting much more aligned with our stakeholders. And finally, being able to leverage the valuation playbook and really active stakeholder, that doesn't exist in the mid-market space for special opportunities.

So we think that really differentiates us and gives us an edge to win with our stakeholders. So a little bit of how we're going to invest our Partners Group. Well, we have 3 appetites we're going to focus on. We got capital solutions, where it's really great companies with short-term constraints, this can be deleveraging. Well, this could be providing capital for other [indiscernible] So here, I've got just a few examples as you try to really bring that home. So we're working with -- there's examples in our pipeline right now, so. And we're working with a renewable energy asset with long-term contracted cash flows. We're going to help fund the new projects. Our growth solutions and really the work alongside founders and sponsors alike, to help them take that next step and expand their platforms. So right now, we're working with a really fast-growing quick-service restaurant chain to fund the new rollout strategy. And in Asset Solutions, we're really focused on sort of assets, companies or real assets with deep underlying value. And here, we're going to use that due diligence on the underlying value to lenders.

But really, what makes this different is our ability -- and different from me and really excited about it. It's our ability to pull the whole platform in. So when I think about capital solutions and what we're looking at, I get to work directly with the infrastructure team. So everybody got a vast understanding of renewables, till we underwrite that asset. In the growth solutions, I can work with PE and really understand their rollout strategy and asset solutions, well, we have a real estate team that helps you really understand the line of sight to construction and the value of the [indiscernible] . In short, what we're going to do is, I think we've got the ability to create a really differentiated product at a time where the market needs it most. So with that, I'll hand it to Mike.

Thank you. I'm Mike Brian, Co-Head of Real Estate. I really want to pick up on the topic that both Steffen and Dave talked about the changing real estate business model, the fact you need vertical integration to manage that changing world. I've been in the real estate industry over 35 years. I think one of the key things that I felt in the last 3 to 5 years is an increase in operational intensity. And I want to sort of talk about what that means. What it means in practice? There's a lot of data to support why real estate is operationally more intense -- leases are shorter. There's more leases, more [indiscernible] tenants. Some more demanding whether it's about, I mean, it's whether a service, whether it's about energy performance. And technology needs to be managed and real estate is not doing a great job, a lot of different systems that don't talk to each other -- to real estate has become operationally more intense.

And as you've heard already, we believe very clearly the vertical integration to manage that operational intensity. What does it mean vertical integration? I think you for missing, it's about boots on the ground, local capabilities, strong local relationships and we see real benefits for our clients in terms of investment performance. It means it can go faster because you've got those relationships faster to lease to build to get new permits. It's a lower leakage and we think about interiors boots on the ground, what are they 270 people in the German market focused on the living sector all stages of the real estate life cycle from sourcing to building, to leasing, to selling to managing. So our strategy is very clear. We want to gain that vertical integration and the operational capabilities, both in-house and through M&A. I think we've talked a lot about already how good we're feeling about the Empira acquisition. We know what we bring to the table, those great client relationships, these bespoke solutions. And we know what Empira brings in terms of its track record, its focus and its vertical integration. And thus far, things are going really well. I've been in client meetings. It really resonates when you talk about what Empira can deliver, and I think the trajectory to grow their AUM and more than double in the next 4, 5 years is very, very attainable.

So what is the investment content that's getting clients excited? Here's the one of the key strategies, which is German transition to green. It's a very simple thesis 75% of residential stock in Germany needs energy retrofits. These are stranded assets. And what do I mean by that? There's regulation coming that will at some point say that you cannot operate these assets unless you improve them. And they're unloved by the current owners who don't have the capabilities to execute the business plans so they can be bought at very attractive prices. And if you've got the capabilities to execute the business plan that boots on the ground, you can get good rental uplifts on the green CapEx. So this is a market where rents are regulated. But you need boots on the ground and sourcing capabilities and execution capabilities. And going a level deeper on what is the operational value creation. Very simple houses have energy performance certificates. This is an A to F rating. A is good, F is bad. Typically, they're buying assets with a derating through life of ownership, you take it to a B rating, so you improve it.

So what are they doing to deliver that? It's about changing the heating systems. It sounds simple. It's complicated it's about CapEx to improve installation of the roof, the facade, the windows. You do it with the tenants, it sits you. And so you need good technology to talk to German government is very supportive of the initiative. So there's a lot of green financing to help you get there. So pulling it all together, I think you've heard it, and I'm going to repeat it because I think it's really relevant the winners of the next real estate cycle will be vertically integrated. It's what matters. It's what matters to deliver, to have those boots on the ground, that sectoral focus, deliver on the value creation. And I think it is a contrast to the past where perhaps managers was more about horizontal diversification. It was about risk spreading. It was about financial engineering in a low interest rate environment and a more static ownership and I think the data in the middle column here really proves it out. I think LPs are already telling us what they want. You can see the vertically integrated managers are getting more growth in their AUM. So LPs know what they want, and they're voting with their feet for the vertically integrated managers.

So what does it mean for us? Comes down to the 3 platform offerings that Steffen talked about earlier on, living platforms. We know that there's a structural undersupply of houses globally. Empira obviously, is our key platform for the living. It's not the only platform, but it is our key platform. Industrial platforms, we have a great track record on urban logistics in North America and Europe, and we're building out our vertical depth in those strategies. And it's about secondaries as well. But across all of these offerings, when you look at the -- actually how we're managing the real estate, you will see vertical integration because that's what we think is relevant and important. Thank you. And I'll now hand you over to Steven to talk about royalties.

Hi. Good morning. This time last year, I actually introduced you to the royalty strategy at Partners Group. I'm delighted to say that over the last 12 months, we've had huge success launching royalties as the fifth new asset class of Partners Group. Firstly, we built out a dedicated investment team to royalties and secondly, we've integrated seamlessly into the broader Partners Group platform in 2 ways. One, we've leveraged the expertise of the other asset classes in the sectors that we invest in. And number two, we've adopted the core PT DNA in terms of relative value dynamic asset allocation. And very importantly, for the first time, global investors can now invest into royalties through our dedicated evergreen offerings.

So to give you some numbers, this time last year, we were around 15 people in the team. We nearly doubled the team size. We've gone from $ 200 million of AUM to over $1 billion of I can't give you updated numbers, but it's fair to say that the $1 billion is in the rearview mirror of the car. On the investment side, we've made 17 new investments. We deployed over $500 million and similarly, we are very excited about the pipeline that sits before us today. In terms of some notable investments we made in 2025, we invested into the Warner Bros. music from film and TV catalog which is very timely given what is going on with Paramount and Netflix at the moment. We also invested into the weekend and the number of high-quality direct investments. As you can see from the page, our investors come into immediate diversification across the core sectors that we invested, so life sciences, entertainment and energy transition. And just as importantly, they're also diversified across the way that we invest. So diversified across buying royalties, lending against royalties, creating royalties and the royalty fund investments that we have made.

Now our strategy is built to be resilient through market volatility and how is that? Well, number one, we're focused on producing derisked assets that we're not coming into development assets. Secondly, we are focused on products which have clear U.S. peaks, high stand-alone in that market. Number three, and this is very important, we underwrite everything on a yield basis. For us, exits are an upside. They are not a requirement to hit our base case returns target. And last but not least, we have a lot of diversification in our portfolio to reduce down idiosyncratic risk. So we look to make 20 to 30 new investments a year into our Evergreen portfolios. In addition, unsurprisingly in royalties, the legal and the IP side of things is a huge concern and risk you have to spend a lot of time we have built dedicated teams of lawyers with IP and royalties experience to really dig down into those key focus areas. And as you can see on the page, it means that our direct and our royalties portfolio are trending above the target return. So we underwrite to a 12% to 14% return, we're actually outperforming those metrics.

Now 2025 was very important for us as a strategy because if you think about the thesis of royalties, it is to have low correlation, not be impacted by market volatility, be very consistent, stable and deliver the uncorrelated yield and returns to our investors. Our target return for our global institutional fund is a 10% to 12% net return for 2025, we were very close to that 12% net return. So notwithstanding everything that was going on in the market around Trump and tariffs and market volatility. Our royalties portfolio continues to perform as expected. In addition, we made a number of high-quality investments. I don't know if any of you in the room use the EpiPen or know somebody who uses the Epipen for anaphylactic shock. We bought a royalty on a product with the Weekend which we believe will replace the [indiscernible] every time the Weekend sold, we get 6.5% of the revenue. asset is performing very well today. Secondly, we invested into the Weekend, the #1 artist globally on Spotify to give you some stats. Two reasons, one, because it's a bit of fun. Two, because it actually continues to make my mind goggle less than 0.01% of all sums on Spotify, achieved 1 billion streams, TVs and references, Michael Jackson, Madonna, Elton John, in their entire career.

Each of them have less than 5 songs with 1 billion streams. Anybody brave enough to guess how many the Weekend has in terms of number of songs with 1 billion streams and I guess there's no bad guess unless you say 0 because I won't be asking the question, if you say the [indiscernible] So we have 10 -- so the weekend has just under 30. No other artists on the planet has 20 avatar. So he has 29. It's whether you like it's music or not, no 1 can dispute that has built the most diversified high-quality IP in the music space. This is just 1 of 20 investments that went into our portfolio on an LTM basis. Now very timely, and this often gets overlooked as people think it's the boring part of our portfolio. We also invest in energy transition to U.S. natural gas, scarce commodity, very topical at the moment given Russia and Ukraine, the Middle East, what is power in data centers, which is often overlooked. We now own royalties of more than 3,000 producing gas wells in the U.S. It's so diversified. There's very low volatility in the volumes. We hedge out a lot of the gas price exposure. It sits in the portfolio. People see it as being boring, but it just generates a very attractive yield to our investors. If any of you in this room can find a correlation between how much people use of Epi, how much people listen to the weekend and how much people consume Henry Health gas price.

I will buy you a drink. There is no correlation between the sectors that we invest in, which is what helps to generate the low volatility that we see at the fund level. Last but not least, Steven has already touched upon it. We're very excited about this strategy because we see this as a $2 trillion market and growing. That is not just the sectors that are expanding and new ones coming in. It's also the structural way that you can invest into royalties. As mentioned before, we view this as a $30 billion-plus AUM target. And each day that goes by and the pipeline that continues to build, we are more and more confident of delivering that scale. So with that, I will hand it over to the next presenter, Juri.

Thank you. So far, we mainly discussed the investment platform investment activities. We're going to shift gears now to the client side of our activities. I see a lot of familiar faces here. So most of you, I think, have visited us last year in Switzerland at our headquarter. So in other words, we're moving from the factory. That was the building on the right side at our capitas, this investment factory we're moving over to the foundry being where the client activities do happen where we create those bespoke solutions. That's why we have forementioned structuring team, client solutions teams, et cetera. So excited to discuss with you our momentum that we see in the fundraising side.

In other words, these 300 client solution colleagues, you see behind me the Pharmacies world map to sit in those offices. So the colleges speak the languages and to understand verity understanding of what the clients actually want and need. That's the starting point to listen. And then out of that originates on had light,200 institutional clients. It's typically more on the mandate side of things. You see the pie chart at the upper right. So we're talking here some wealth clients, pension funds, insurance clients. And then there's also very well diversified 65,000 evergreen type of clients. Again, back to the pie chart, those are mainly private wealth distribution type of clients, just to give you the footprint as a starting point here. Now another perspective of -- I wouldn't want to call it the packaging, but sort of the access to the investor content. You see it's about 1/3, 1/3, 1/3. So we're talking 30% evergreens, but let's zoom into the institutional clients as a starting point here. And where we clearly see the highest growth is for mandates, also a mix shift. We see over the last 10 years, we started with 22%, and that has increased to 37% exposure. Now that's good news because those are the most sticky clients, the most sticky cash flows from a shareholder perspective that one can generate. For the traditional funds, again, diversified across 100 traditional farmers 100-plus funds and for traditional funds, in 2000, slides move.

In 2025, we have raised $7.5 billion. So there was a strong fundraising year for traditional funds. I would sort of look at it with 2 headlines. One being established strategies. These are long-term track records. This is, for example, the direct infrastructure funded as we mentioned, fund #4, we are expecting the final dose towards the end of Q2. The private equity secondary fund, for example, getting established, proven tested strategy. We enrolment, 25-plus years track record on the infrastructure secondary fund as well. great market opportunities in this market environment, again, 20-plus years track record. So this were the lion's share of the fundraising happens, proven in tested reliable strategies and then putting my business development head on. On the right-hand side, it's about expanding into strategies, like the De Novo strategy of royalties that we heard about. By the way, I'm wholeheartedly convinced that this will be $30 million by 2023. And possibly even earlier than that. We have tremendous traction in a great risk to offering here with our fifth asset class. Then talking about the credit side of the house, expanding that into secondary is. Again, a strong industrial logic. We've done it for 25-plus years for private equity, then the next sort of market cycle happen in infrastructure.

When I say cycle, I'm talking probably 2 cycles last 10 years. and now in the credit markets, you sort of capitalize on the current market volatility, but you also have a credit secondary market that will be doubling, tripling over the next 5 to 10 years. So I think here, again, with our joint venture partner, Generali, I think, a compelling offering to further expand the platform with traditional funds. Regarding royalties, I give you some additional color of the $2 billion -- sorry, not royalties real estate of the $2 billion that was raised last year in 2025, the lion's share came to cross-selling of the Empira distinct platform type of strategies, and there's more to come into 2026, again, expanding our footprint and our strategies. With that, I'd like to move on to the most exciting part of the Capital Markets Day. It's the mandate strategy and the mandate growth and give you some additional color why it is such a superior offering and why it's a wide win-win for our clients, but also from a shareholder perspective.

So again, last year, a record year, $9.4 billion raised. You see here some context where we come from. So I gave you the percentages. We have the absolute numbers and again, broadly diversified across our asset classes. Now to give you some additional context here, Dave spoke about, let's call it, the friendly competitors that typically use the fund technology. I want to do some compare and contrast here. When you're -- I would say by market standards sort of by industry norm when you're in a typical SMA, that would put you 2, 3, 4 funds, call it, a mandate, but the fact you're in 2, 3, 4 close-end funds. And then you're on road to 10, 15 years, like there is no dynamic allocation whatsoever. It's a mini funder fund. That's what it typically is. What does they do to you? You go J-curve over or J-curve, fund by fund if you keep up with your exposure? With our, what we call line-by-line technology with is open architecture, where the clients come in pro rata and they can get going immediately and implement the strategies. What that does is you have a compounding effect within your mandate to the NAV level steering. And that's not really key because over 5, 10, 15 years, you compound more value than going J curve over J curve, why you can react to those market dynamics.

So it's clearly a superior strategy that we've built and technology and operations over 20 years that cannot be copied that easily. Frankly speaking, oftentimes, is not even allowed in those existing LPS, we have build it their way to offer [indiscernible] allocations, just as a starting point, letting alone, the hundreds of resources that alittakes to manage the cash flows to have the FX hedging in place, the risk management deployment, et cetera. So clearly, a superior and much more sticky offering for our clients from a shareholder perspective. If we put the side, the slide to the side, maybe for a second. In other words, if you think about it, it's almost praising as an industry to go back to your clients in a traditional format every 3 years and sort of ask the pitch again? Do you want the RO-free?Or do you want to have a look at the other competitor or the other one. If you would be a mobile phone operator, wouldn't go back every 3 years and go, are you really sure you don't want to maybe change to Vodafone. Maybe they have a low price, maybe there's something else.

So that just illustrates you the more sticky nature of the assets. If you have a superior offering we outperform and where you have a very, very, very low single digit, if at all, generate with that stack of capital. Sorry to go a little long, but I felt I want to illustrate that properly and maybe another way to illustrate this to work with mid examples to make it tangible for you what that exactly means by asset class. So let's first start with sort of, let's call it, a part of the Chinese menu. [indiscernible] pick a decline by asset class to build up the desired exposure. Then in the middle of the slide, you might add in some diversification that helps you to diversify, but also to address market cycles, there could be direct. The second, there is some primaries if desired. And then you want to be specific, especially in this market environment, I'm about the geographical exposures, the sector exposures, et cetera. I think Steffen outlined it so well, it's changed market environment, it's transforming. So you want to be as a client dynamic to face those changing market environments. And I'm telling you spending a lot of time in Asia these days. And there are some Asian clients, maybe some Danish clients, maybe some Canadian clients. They have a view of the world where the geographical exposure should be these days and that they have tools to manage towards certain allocations. So that gives you a part of the Chinese menu.

Now in the following, let's bring it alive by real world examples. The first one is a private equity example that started in 2008, the pension fund. It's an all-weather private equity strategy, meaning the clients started with 1 billion NAV target, and let's go with direct and secondary, so we can adapt to market environments. What the bar charts show you is that we started in 2008 with a 13% exposure through secondaries, then came the global financial crisis in consultation with our mandate clients. We [indiscernible] up secondary 2009 left at 66% and captured highly discounted secondaries in the market environment. Thereafter, the rates came down, benign environment to capture the value creation for direct exposures. So you'll see the direct exposure has been dialed up for a number of years, capitalizing that environment in the more recent years for the volatility that we have seen, we have increased the secondary allocation again. That's just one way to look at relative value in the mandates with the dynamic steering that only this technology allows for. Another perspective, moving on to an infrastructure line and the insurance client. Here, the target was very clearly. It's a German insurer, isn't sure you've got the next generation coming. They want let want to green.

So the ask was, can we define 50% clean energy as part of the portfolio. We want to have the global, maybe 40% U.S., the rest are on the back of our global platform, there was literally it is 0 competition there for tailor-making a very bespoke solution to that insurance company for infrastructure, clean energy with those diversifications and specifications. That was the ask and that's what we delivered. So a very strong competitive edge and bespoke solution here. Moving on to some credit examples, maybe twofold. One the left, it's an example that originated out of a private equity mandate, it's a pension fund. We had a target of 8% to 10% net for the client. We've been outperforming the target. So the discussion went into can we take down the risk profile a little bit? Could we add some credit, some cash yield? I think it was about 70 credits. They wanted to have nicely diversified. And balance out the portfolio to some extent. That's what happened here. On the right side, credit focused mandate, by the way, we have out of the 180 mandates, 30 of them are credit focus, 20 of them are insurance focused on the right side, where you can address capital charge topics, et cetera, for insurance is, again, very bespoke offerings. The right side of the insurance company said, we need to ramp this up within 12 months. So

We used our [indiscernible] syndicated on capabilities. The next ask was leverage between 4% to 6%. So no excessive leverage was sort of mid-market exposures, less than 1% per loan. So we, over the years, split up exactly to those specifications a broadly diversified credit portfolio, 80% of power is downside protected, what we're known for low loss rates, bottom map analysis, covenant-heavy portfolio with senior loans. Last example here is the diversification of royalties. I was just wondering why the right side of the slide doesn't show. It doesn't matter, I'll talk you through it. So for royalties, similar to what you've seen with credits, it's a diversification into existing private markets exposures, clearly, low correlation, barely correlated to sort of GDP or inflation type of swings and/or royalty-only mandates, there we have it, magic -- thank you, or a focus on income, sort of an alternative income yield, which especially in this market environment, rents well, is typically a cash yield of 6% to 8% to the royalty stream with an equity upside in very long-term cash flows, so also works well for some of those insurance type of clients. So with that, I hope we brought it a bit light real examples, the different perspectives and why it is so differentiated, why it is so bespoke, why it is built so differently and what it leads into is a sixfold growth rate over the last 10 years.

It's growth that in my book will further be fueled by accessing additional madate clients. What does that mean? So far, until about 12, 18 months ago, we have been targeting mandate clients from $100 million to few billion upwards. Let's not forget it takes a lot of technology, a lot of operations, a lot of resources. So we had to cut it at a reasonable level where it makes sense for the clients, what makes sense for us. Now we have increased our technological capabilities, our operational capabilities. So over the last 12 months, we have started to access clients between 50 in $100 million as well. You can imagine the pyramid goes a bit like this. So there is a whole new field where we have got over 10 clients $100 million over the last 12 months, and that's the digital client segment that we will go for. So with that, we covered the institutional side of our activities, the mandates, the traditional funds and I'll hand over to Robert to dive into the evergreens. Thank you.

Thank you so much, Juri. Good morning also from my side. Seems I'm one of the last major milestones to pass between us and lunch. So I'll try to keep it concise. Now over to the private wealth side of things, we've been one of the early movers, as you know, in private well amend a market that has been consistently growing, delivering us more than 20% of growth in the last 10 years. And more recently, we've seen a lot of new entrants coming into the industry, leading to an acceleration of the overall growth. A lot of that growth was driven by private credit.

As a matter of fact, 70%. The U.S. private wealth assets under management are private credit driven. While Partners Group, and I say this with the highest respect for [indiscernible] one and the credit business, we're an equity investor at hard, but it's private equity infrastructure royalties, but also within private credit, we underwrite with our private equity mindset. So for us, 85% is actually in equity-related strategies, to be clear, there's no private equity only that covers private markets, proven royalties as well. Now the, obviously, we've been benefiting from that positive market dynamic. We've concluded 2025 with a record year in fundraising. And I think the notable point around this is that today, we've broadened the platform achieving this success to more than 30 different evergreen vehicles. And most importantly, those newer evergreen vehicles, the broader agri platform has actually been responsible for almost 60% of the fundraising in 2025.

The other element was mentioned before, the industry is 80% U.S. and 20% non-U.S. Partners Group, and in many cases, you would have in the space, people having 1, 2, maybe 3 very big funds and mainly focusing on the U.S. are scope is much more than that. We're global. We're going into so numerous countries across the globe to familiarize ourselves with the regulation, how you tap the market. We have client teams on the ground structuring teams that help creating evergreen at work in specific markets. And it's us to have about 40% in the U.S., while 60% of our private wealth business actually outside the U.S. And Hubert had a question before for the 2025 fundraising that spread is rather similar. 35% was in the U.S. and 65% was non-U.S. Now the key to build the Evergreen business and to grow it consistently is building a long-term track record. And by track record, we really focus a lot about consistency. And what you see here is the track record of our U.S. Evergreen fund that's 11% per annum since inception in 2009 and notably without a single down year, so all positive years. And that compounding feature is something that our clients value a lot and leads to tremendous multiples. So here we are at the 5.5 multiple that the initial investor who came into the fund in 2009 will have experienced.

And the real difference also if you think about all the new entrants, 81% of this track record is realized. So that's not about valuations in private markets. It's actually based on what we have invested, held, made better and then realized again in the space, we're very unique in that sense because that needs time to build track record. If you look at the industry, it's actually the other way around only 23% is realized and the majority is based on unrealized business valuations. So what can you really tell about the track record after 2, 3 years? You can't tell a lot. You have a good start, you have a ticket for around 2 to continue, but you can't really charge the performance over time yet after such a short time. And what's the key element in building Evergreen portfolios, is that you always create a balanced mix across vintages. So you need to have some assets that are in the mid of value creation driving your performance just because partners go buy the business and owns it doesn't mean it magically starts growing faster. There's actually, hopefully, this morning, my colleagues on the investment side were able to illustrate to you how you actually need to do things to make companies grow better.

So it's after a couple of years that you drive performance. So the new investments you make are typically driving performance in the future. The ones you made a couple of years ago are driving performance in the now and the more mature investments create upside through exits but also liquidity, so you can reinvest in and keep a balance portfolio over time. And then as I mentioned, you have to be very careful about when you run private equity in private markets, private infrastructure offerings, it's less relevant for the e-com for the private debt space. Now that's the point where I want to quickly comment on redemptions. Dave made some remarks before. The first statement I want to make is that we have seen an improvement in the fourth quarter on redemptions. The dynamics that we've seen in the private equity space or very different ones from the private credit space. Dave has outlined in the past couple of updates that we gave that there was a rebalancing. There were new entrants last summer that came into the market. They took some market share, so we have that rebalancing, having a peak in our redemptions, somewhere around September since we have seen a drop in the fourth quarter and a further drop in the first quarter of this year. That's very, very different from the dynamic that you observed in the private credit space. It happens to be somewhat an overlapping times, but it's a very different dynamic.

When you look at private credit and private wealth, Partners Group, simply spoken, it's a nonevent, only 10% of our Evergreen AUM are in private credits, reprivate credit funds and of those 3 funds, 90% are institutional investors. So you're literally talking about 1% of our private wealth AUM that are in credit evergreens. And by the way, those funds all have positive flows, inflows vastly outsizing outflows, and that has been the case for every single quarter last year. So it's simply something that doesn't affect us. Now let's move to the new funds. The new funds that we've been talking about a couple of times in the last few updates, have you to confirm they continue to start with a very strong performance on a single out infrastructure one, which specifically has been leading the pack in its segment and also had quite some commercial success. But I think maybe that's the point where we should take a step back and have a deeper look at private market evergreen performance. Yes, we see those fantastic numbers, but what is really the potential? What is really the long-term return? How do we think about Evergreen returns through the cycles. And for that, I start from the closed end of the world, traditional funds, as you know them, white space, 15% to 20% IRR or numbers were familiar with. Oftentimes, that ends up at a multiple after 10 years for investors

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Those are single lines, very much like the managed technology that U described before, but in an ever bring context to deliver to a client with the additional repo with evergreen funds around it, allowing to have the comfort and is to subscribe and redeem and make adjustments in their portfolios. The second approach is a building block approach. Here you use Partners Group Evergreen, but you might also use content of funds from your strategic partner, providing in-house content and therefore, teaming up providing a successful mix covering private and sometimes even semiprivate or public asset classes. Here, the portfolio is structured by an umbrella and clients have their way to individually subscribe portfolio of funds. And let me make a couple of examples. Some of those you have heard about already in the various updates before, but the BlackRock one is obviously, one that is very interesting, a first of its kind. Here you take the fund selection job the leading to deal with picking individual funds of the adviser of the client by offering different mixes of underlying evergreens from growth to balance to income and doing that all with one subscription cement. So that's what you're used to from the public side. You wouldn't want to pick managers with a lot of idiosyncratic risk, but you want to get good exposure to the asset class with high-quality managers. And you've heard our announcement throughout the first quarter. This 1 has been starting in the -- in this quarter after a good preparation time last year around.

Moving on to Europe, Deutsche Bank. We created a one-stop solution across private markets that's also a first of its kind because it uses health structures which make a fluent client eligible for investing this. Partners Group is not only being appointed here to measure a good part of the investments, but also to be the overall portfolio liquidity and risk manager of the construct, then that includes third-party Evergreens that we're managing here because of our leading track record, especially in managing evergreen structures with semi liquid features. This one went live last year. We announced that the first commercial success was more than $500 million in funds raised in 2025. This allows us to put access a client potential of 20 million clients across Europe. So it's something we're very excited about.

The partnership with Prudential with PGM is, I would say, is a bit different kind in so far that you have 2 managers with asset management capabilities that are very comprehensive partners go on the private equity and private infra side, mainly Prudential on the various parts of the credit spectrum on the other side than the liquid strategies so that allows us to offer an integrated portfolio of one sub solution here again in the form of an interval fund to access broader potential client bases, then the more restricted qualified purchaser targeted funds. That's something we're very excited and we believe will deliver a good multi-asset risk-adjusted return. Not every strategic partnership, though, is about creating bespoke portfolio mixes. In some instances, it's launching dedicated funds, launching dedicated programs with partners that can help us on certain client channels by the insurance channel, for example, here with income, all on certain regions and segments with end markets like Mediobanca in Italy at reacts the client segment that before we didn't have a way to get into.

Now summarizing the strategic joint ventures. We've got 7 in 2025. That raised about $1 billion. We've announced that before. We expect this to grow considerably. We expect more than $2 billion of contribution from those JVs in 2026. Needless to say, the number of those JVs is also going to grow. If you think about the white space, it's quite enormous. -- there's 5 asset classes. There's 3, 4 different client segments per country. That's not a thing that focuses on the U.S. and Europe only. Think about Asia, a very heterogeneous market. very different market microstructure in Australia and Japan, the Middle East and the like. And all of those really have the potential for being a good contributor to the next stage of growth in our private growth strategy. With that, I'm coming to the end of my section, 2026 and onwards. A lot of excitement in the private wealth space and a lot of things to do handing back to Dave to wrap it up for today

Thanks, Roberto. So in summary, we have what we believe is a conservatively constructive platform that is somewhat apart from the current headlines that see so much attention on today, you should have gotten quite a sense from our credit activities that we have a very different platform that many that are out there. And with regards to technology, I think, our thematic approach and the fact that our clients have largely been steering and dictating to us the exposures that they want has kept us out of some of the software risk that exists out there.

Second, as markets remain complex, people tend to move from traditional types of solutions into solutions that are more custom built for them. That's one of the reasons why I think we've been able to outperform the industry in 2025. And I think we see that continuing into 2026. And then number three, as we think about strategic initiatives, you'll probably see us continue to focus in the near term more on distribution than on manufacturing. We think that, that is the key priority right now and the opportunity to consolidate manufacturing will be a long-term opportunity without a lot of time pressure but there is indeed time pressure to secure these partnerships that Roberto spoke to. And so with that, we'll conclude the prepared sections, and we'll move to Q&A.

Steffen, why don't you join me on stage actually and the Partners Group colleagues that presented, why don't we actually just have them sit just to hang out his [indiscernible] poster, why do we have them sit on the couches here? The various presenters and then all quarter back and take it's questions to the different colleagues. And with that, we'll open up the floor for questions. it, do you want to circulate the microphone.

It's Hubert Lam from Bank of America. I've got 3 questions. Firstly, I know you talked about the focus near term is on distribution rather than acquisitions on the manufacturing side. We've recently seen quite a few deals in the space. Just wondering what your thoughts are on the market environment or potential for opportunities, I guess, in the near term.

Second question is on BlackRock. I know you just, I guess, starting the partnership. Just wondering what the current -- what the feedback has been so far a traction, what response you're getting from clients initially? And I guess last question, I think there's been some recent press around how some factors are giving more fees to the distributors even on the performance side. Just wondering what your thoughts are around that and whether or not something you would do as well.

Why don't I take the first one and then Roberto, why don't I toss it to you and talk about the BlackRock partnership and then the fees to distributors. So first of all, on the M&A side of things, there is no shortage of conversations to be had right now. We have people that approach us on a very regular basis. We've had our own outreaches to managers that we think particularly capable and complementary to the investment capabilities that we build.

Our industry for a long period of time was governed by the amount of investment capacity that a firm could generate. And you saw a tremendous amount of investment into investment resources and organizations building up large investment teams and constantly investing into it. For the last number of years, we've operated with excess capacity. If you look at our collective investment engines as an industry versus capital formation side of things, which has been the governor for growth more recently. And so we do think that this is going to be a market that is poised to consolidate and you will see leading investment talents operating underneath consolidated platforms. We do believe that. But again, I'll just reiterate that our priority is, we think about how to allocate our time right now in 2026. It's more on the distribution side of things than it is on the manufacturing side of things. there's no shortage of conversations to be had there.

Maybe if I quickly answer that. I mean, the challenge of these things is that people kind of try to generalize, right? I mean like is M&A good as bad or whatever? I mean just take a step back, think about financial or in the last 40 years. By the way, this was an average not too successful, as we all know. The problem is at the end of the day, I mean, you have to ask yourself a very simple question, does this particular opportunity make you better with clients? And there could be some reasons why it could do so. It could be that there are very strong relationships. It could be that there's so amazing content that we don't have in our platform. It could be that it adds in a way that we need to combine, we show better portfolios, all of that. And that's exactly the work we do. I think there's a little bit of a sense in the capital areas. I hope there's one thing wrong way here that it's looked a little bit mechanical, right? I mean, like, okay, there was M&A.

And so now they have 2 companies, they have more AUM now in total. That is not the approach we have. I mean, of course, I mean, it's nice to be bigger, but it is nice to be bigger if you are actually more successful with 11 is 3 or more than that. And that is something where, honestly, we had on discussions and we kind of didn't to that conclusion. I mean, there was a question on price, some of it was a question of that we felt we will do all the work essentially with these distribution partners and pans and all of that. And so that's why I think we saw a little bit slower. And as Dave said, I mean, the rates at the moment. We just have to be clear about that. The race is on raising side. It's not just only on the wealth management side, where a number of these institutions, like in the first step, they want to have to staff on their shelves. And so we had our product there and other people came in, but not as second generation, right? I mean that investors or institutions they want to have their product this is where we want to get it more very early because they will not have 5 products. They want pun, maybe 2 coducts. But even with some of the large insurance, some well thoughts they're cutting back the lines.

They want to have some people that -- I mean, provide solutions in a much more comprehensive way. So this is where we spend more time maybe not enough time on some of the other stuff, but I don't think -- I mean you said like there's thousands of these firms. So I do think these opportunities on the engine side, they will not completely go away and maybe let me add a last point here. We talked about all the change in investment violent. So it's not too bad to maybe observe a little bit of what's the outcomes of these portfolios and how will they weather actually the next 12 to 18 months to have a good sense, what are the engines that are future-proofing this environment? Roberto?

Maybe with regards to fees first. Look, I think there's a couple of things. I think, first of all, the trend is clearly going towards fee models where the distributors fee is charged on top for a mandate, for example, rather than in the form of retrocession, depends large in jurisdiction, but certainly something that we clearly observe as a trend. I think one thing that we always look at whenever we set those type of relationships is what is the total fee load on all levels, and investor making sure that what results on the bottom line is something that we believe is an attractive risk return.

There was a black question, but here. Yes, maybe just quickly on the backlog relationship. It reminds me a little bit of what we have seen in 2009. 2009, 28, we started with this project fund in the U.S. wirehouse industry and people essentially said, this is amazing, but it took quite a bit of time. And my sense, maybe Robert, you can talk to it more completely. But my sense is we actually experienced a little bit of that kind of situation. This is a very new way of approaching vessels with pro markets, which allows us also to go much lower than I would say, the traditional ultra high net worth and I would say brokerage kind of channels into much, much more retail-oriented allocations. But this idea of essentially taken to some extent, away the decision to make the locations is something totally new for wealth management in par markets. And so I think it will take some time. The feedback is very good that we get. I mean, they have -- I mean, every day, they have the mid-time meetings between Black of Long Stanley platform.

But I think the typical SME discussion, a bit like, by the way, on the institutional side is something that is a much longer discussion than a typical fund investment where we acquire being 1 hour to make decision. So I think it will take some time. But from what we see at the moment, I think the feedback is very positive. I think there's a very good chance we see a real paradigm shift for these SMA allocations in retail.

Does that have the potential to be our largest Partnership, right, of all the things that we went through, yes, it probably does have that potential. But there'll be a ramp associated with it. Anything you want to add, Roberto? Next question.

[indiscernible] from Goldman Sachs. 3 questions from my side. First, I know we've touched upon it at various points in the presentation, but could you just address the topic of the pickup and redemption that we've seen in the traded BDC space in the U.S. And really, it sounds like you're seeing kind of very little kind of direct recourse really cross to your business. I think Robert, you actually talked to a step down in redemptions you're seeing for Q1. But can you just maybe big picture, how is it shaping? How your distribution partners think about the wealth space at all? That's the first question.

The second question, specifically on private credit. I think in Chris's presentation, he talked about over the next decade, a doubling of the ports and a falling of the recovery rates, really kind of 2 parts. Number one, what what's driving those assumptions? It would be helpful to get some color there. And then really, are you seeing what kind of level of pickup of that are you seeing in the here and now at the moment? If you could talk to kind of the current backdrop as we move into those new assumptions, yes, so 3 questions there.

Maybe for the first one with regards to redemptions, you have a couple of things that are happening at once. Number one is you did see in the middle of last year, almost all of the larger incumbent funds as we were dealing with more competition, new products coming online, we all had a quite similar level of redemption activity, and that came from having more options on the shelf, a competitive dynamic that was evolving and changing. And you saw whether it was an equity fund or a credit fund, everybody dealing with a similar dynamic and everybody dealing with a similar level of redemption activity. We have seen that change with the more recent quarters. And it does look like the private credit funds have seen a pickup in redemptions and we have had a decline in redemption activity from that Q3 time period headed into Q4, and we're projecting a further decline into Q1.

And so I do think that some of the things that were I think, facing or that competitive dynamic are similar, but then there are some specific topics related to private credit that is not impacting people's allocation. Usually, when somebody makes an allocation to a multi-asset strategy or to a private equity allocation, they think about that as a long-term allocation to private markets in a way that you might not think about in some other asset types.

I think that's the key. And I think also if you have seen how fast some of those credit funds have been growing, that points to people having shifted allocation quite dramatically. We've been building our large private equity evergreens literally over 15, 20 years. So there's a lot of people that have been long-term investors. And I haven't never heard that someone would tactically park money in a private equity-focused evergreen to then move it elsewhere afterwards. So I think there is much less tactical, much less speculation in spaces like royalties, infrastructure, private equity, I think because people understand the underlying is a long-term investment you need to make.

Chris, do you want to speak to some of the assumptions that you went through?

So I think the question number one was around assumptions regarding the default rates looking forward. And then I think second of all, regarding what are we seeing today live in the market concretely. I think about default rates, I think we do take a sort of a longer-term perspective. So we have data going back 10, 15, 20 years or so when we can see also by industry what the default rates. And today, we are running at around 2% to 4% at the range. So it is increasing in the market we observed, but it is within what we say a normalized level today. We do think that will increase going back. We looked at previous sort of liquidity crisis, '08, '09, we have seen the time we modeled that out what we think will happen.

I think the recovery rate is actually pointed before is also very important recovery rate book that on a default, how much actually will be recovered. We think recovery to be lower today, in particular because we think that some of those assets that will default probably in the industries more impacted by AI and the like, we'll see more disruption or a higher level of disruption and a lower recovery rate as a result. So more binary outcomes for sure. I think the second topic is what we're seeing today. If we look at our watch list as a data point, we do observe that, that has remained static actually in the last few quarters, last recent quarters. We don't see an uptick in our watch list. We do think -- we haven't seen any sort of core data that points to -- or correlates much with the noise is around software and AI. Our view is actually more simply that the AI and the technology will actually impact other aspects of the real economy more than say, the software. We've not seen it in our software portfolio.

Maybe just to add quickly on that first point. I mean, the reality is, I mean, there's always some assumptions behind that. There will be a lot of other external factors that will have an impact on is now, is it doubling? Is it 250%, 150%? I'm not sure where that matters so much. I think what's important is that we understand that credit is just much more directly impacted by a wider dispersion of outcomes. I think that's the key thing. That means spreads have to go up and you have to be much more selective. And it's probably the first time that it really takes off to have these super low loss rates that we have in our portfolio.

And it's just a little bit of different environment. I think we'll be nearly a little bit different investment discipline in the next 10 years or so. One other -- just follow quickly on the wealth management side on the credit side. I mean, one reason why I was asked actually in the interview this morning, I mean, why haven't you focused more on the wealth side of your credit business? And I guess the answer was at that time, when we looked at our credit portfolios and the way we run credit portfolios a little more conservative with less leverage, if any leverage actually, so it's really a little more addressing, I would say, conservative insurance portfolios, high single-digit returns. That's very different from what you find in the wealth space.

So often these wealth products, I mean, they have more junior in there. They are quite leveraged. They try to achieve something like more like 9%, 10%, 11%, 12% net-net with all the fees, that's probably more like 12%, 13% asset level. And I think that's where also there's a debate. I mean, in this environment, I mean, until at least 3 weeks ago or so people thought that rates will come down even further. So there was a question mark, right, can you actually achieve these? Because I don't know that wealth management clients will invest in a private credit product that gives you on a net basis, 6% or 7%. I don't think that's a big sale. So that's why I think also equity might be a little more insulated from some of these dynamics.

Sorry I thought there was some for me. Nicholas Herman from Citi. Thank you for the update. A lot to dig into for sure. Three questions as well, please. It seems to be quite typical. So maybe just take one at a time and then...

We won't take the floor from you until we're...

So the first one, just coming back to the Blackrock offering. So I appreciate that the portfolio solution offering is super unique, very differentiated. It looks very attractive in theory. I mean -- but I guess you also need the performance you need I guess, the demand as well. Can you talk about the initial feedback since as of like, I guess, a month since the launch? But a part of that, are there other advisers who have shown reservations to commit capital based on current returns or if a component fund within the solution becomes gated or what have you? I guess I'd be interested in anything you can say on that, please.

Yes. I would say, again, when someone makes an allocation to a multi-asset strategy, they're making a long-term commitment. Actually, if I look at the Blackrock fund that was recently gated, I mean, they've had positive flows, $800-plus million of inflows in that same period that they did receive a pickup in outflows. We've done work on that fund. We think it's a very attractive fund. You have 92% of investors that are staying with that fund. I per se don't have a problem allocating out of the broad multi-asset strategy to that credit fund. And I don't think that private clients will either if they're looking at the allocation appropriately, we'll test that out. I mean it's obviously a brand-new topic, but we have not received any feedback from investors in the short time since that news has come out, they would think differently than how we're thinking about it.

I think there's sort of, I think, a positive perspective on there, but certainly also a bit of a negative. I mean I do think that -- I mean, just broadly speaking, the more we see headlines on that space open-ended credit or not, I mean, it will clearly lead to longer discussions with some of these advisers, with the end clients and the conversion will take more time. I don't think it changes the end game of it, but I do think it can take more time. I do see though also a positive element here. And we've been voicing that concern for a while that you have to know how to run these open-ended funds and how to construct these portfolios.

And I think with what's happening, I think it's the first time at San that we can have that discussion and say, look, we do this since now 25 years for the first one, Roberto, our first open-end product in Switzerland, I guess, back in 2001. Well, the institutional product was 2001. And I think we learned quite a bit. I mean, how we do this. I mean it's not completely trivial how to manage liquidity and foreign exchange and all of that. And so in that sense, I think it might be one of these periods where you take a bit more time. It is a bit of a more comprehensive discussion. In the bull market that will just buy something, okay? I don't think that's happening now. I think people are reflective on these things. But I really believe that is for the long term, this is the time to differentiate to explain why they should probably go with those managers that have done it for a while that have like Blackrock certainly has incredible operations to run this because it's pretty tricky actually on the technical side. So I see this in the mid- to long term as a positive actually.

The second one on the strategic partnerships and Evergreen outlook. So just could you confirm how the blended fee rate from the strategic partnerships in '25 compared to the group blended average and the expectation for those going forward? And I guess just more broadly, it seems like you are highly constructive on the Evergreen growth given the growth runway with the strategic partnerships. So are we still talking at least 15% Evergreen annual growth from the Evergreen business going forward?

Roberto?

Yes. The strategic partnerships are one element of it that wouldn't alter the overall growth rate that we project. I think with regards to pricing levels, this is very much like the relationships we have before. I wouldn't make a difference there on our content on our part, this will be like-for-like.

And you've seen that mix shift take place gradually over time, right? You've seen a mix shift towards mandates and a mix shift towards evergreen solutions without an impact on -- broad impact on management fee margin. And I think that's expected to continue.

And the follow-up question I had, I don't know if this is for you guys or for Will. But so on the private equity portfolio, the EBITDA growth on that portfolio has averaged about 10% over the last 10 years -- sorry, 13% over the last 10 years, I think it's about 10% over the last 4 years. But its current levels looks to be around 6-ish. I mean, how do you see the outlook for the EBITDA growth for the private equity portfolio, I guess, particularly in the context of a more challenging macro outlook? And how does that play into your expectations for returns that you can deliver to your clients in the coming years?

Well, 2025 certainly had some elements where multiples in some sectors came a bit down. Also the headwinds from some markets that gave kind of a new base. So for 2026, we are looking in the companies very intensively right now with the budgets, and we see that we have a good opportunity for a rebound.

Daniel?

Daniel Regli from ZKB. One question I had is on the fundraising for 2026. You're guiding for DKK 26 billion to DKK 32 billion. I just wondered whether you could give me some color what do you expect to come from evergreens and what kind of moving impacts you're having or seeing '26 versus '25, for example, if I already asked this once, I think, kind of recovery a bit from the traditional channel, but maybe also the Blackrock partnership coming on top and everything. And then also maybe putting the fundraising guidance in relation to assets under management compared to the long-term history, it still looks rather conservative. So maybe could you kind of discuss a bit what are the challenges in this year for the fundraising?

I guess the answer that I'm going to have on this is actually quite boring. But it's because we went through and did our business plan. So it's actually across the 3 segments. It's across private wealth where we see growth, where we believe that strategic partnerships will play a bigger role. It's for the mandates where we see an increasing momentum and increasing need for clients to build out their private markets allocation after a few years where many clients were overinvested because the distributions weren't there. So there is a pickup there as well.

And then last but not least, on the more traditional side, we do have the infrastructure fund, which heads into its final close, which is having great momentum, and we're also launching our private equity VI strategy, which will contribute so that we will also expect a pickup. Maybe the one nuance I can give is that similarly to the second half of last year, probably private credit will be a slightly smaller part of the mix, which certainly has benefited over the last 2 years in an outsized way.

And if you drill down not just in category, but also in geography, there's some interesting dynamics at play. So in Europe, for example, this was a very strong year for us from a private wealth perspective. We saw a very meaningful pickup in activity for wealth within Europe in particular. Within the U.S., that's a market where we're not as penetrated as some of our peers from a client perspective. And so we use traditional funds in order to start new relationships. It's easier for them to make a commitment to one of our limited partnerships than it is to have a comprehensive mandate.

And so we had quite a pickup leveraging the strong track records that we have in secondaries and infrastructure, in particular, to start new relationships with institutions in the U.S. and you had quite a meaningful pickup in traditional funds in North America and then in Asia, where the geopolitical dynamic has really shifted people's perspective on where they want to invest from a geographical perspective. We had about a 3x increase in mandates in Asia this last year. And so it's not just each category grows in a straight line. But every year, we have the ability to cater to the needs of individual segments of the market, leveraging the different tools that we have. So even though it seems like, okay, every year, it's just the same thing, kind of a greater mix shift of mandates, it's actually very dynamic.

Maybe just on the growth. I mean, the times when we had -- when we kind of the IPO had these growth rates of 30%, 40% a year, of course, over, okay? That's just not the way the industry grows, and it's just the industry is too large and too mature for that. I think this target that we announced last year, we said we want to have about 10% -- more than 10% organic growth, and there might be some M&A will pick up here and there. I think that's very realistic in the long term. Let's just not forget that last year, this year so far, looking at the industry, it was pretty bad actually, right?

I mean the industry is massively below 21 where it was. We are above '21. I think also this year, we're looking at a goal that will be quite a bit above '21, which was the absolute record fundraising in the industry. My sense is the industry again will be massively below '21 fundraising. So I think there was a market share gain in '23 or so might be 60% or something. I think we'll continue on that trajectory. But I do think that low double digit in average over the period and hopefully, there will be some bar years again. I think that's a realistic assumption.

And you saw that medium-term objective that we've outlined, we -- we achieved more than the expected amount in 2025. So as opposed to that 10%, 11% organic growth with some acquisition activity on top of it, we outperformed the kind of straight-line assumption for 2025 with the results that we just presented.

Maybe just quickly follow up. Can you give me a little bit what kind of needs to happen to kind of you just reaching the lower end of this guidance and what needs to happen for you to reach the upper end of the guidance? Or what are kind of the headwinds you're still seeing, which could you make only '26?

Well, I think it's a bit a question of momentum and environment. I mean, look, at the end of the day, I mean, we are not insulated from like the sentiment of pension fund managers or insurance company managers and some of these headlines. So on the assumption that we have a somewhat benign environment, we don't expect like an incredible gold market, not at all. But I would say with a somewhat benign environment, we should easily achieve the goal that we have given ourselves for 2023. If you continue to see, I mean, 10 years ahead of us, like in the last 2, 3, 4 weeks, I mean, I think there's a good risk that we don't achieve that. I mean I hope that's not the case.

I mean, but there's very clearly a momentum. I'm -- so I give you a little bit of an answer that's more connected to the market. Why do I do this? I really believe that purely from a content perspective and from the solutions that we offer I'm not so worried. I'm absolutely convinced. I mean, we have the differentiation. We have the right strategies for private equity. We have the right strategies in credit where I mean the low loss rates now actually play a real role in the next 10 years. I mean royalties is an incredible instrument in this environment with low correlation. You want to have these infrastructure investments and also these new real estate platforms. So I think that content is perfect for the next 10 years. I think the solutions are perfect. But at the end of the day, I mean, this will be lifted more firmly or not so firmly based on your low sentiment environment for sure.

Arnaud?

Arnaud Giblat, BNP Paribas. Two questions, please. Firstly, can I ask about mandates. Over the last 5, 10 years, we've seen a lot of your large peers go multi-assets, consolidate a lot, and they've woken up to the opportunity in private wealth and went in big and have had some success in the U.S. I'm just wondering, are you worried about them thinking the same thing about mandates as a big opportunity set and then going there? And what are the moats around that?

So the mandate opportunity, if you think about the entire private markets landscape is single-digit market share opportunity. And it would require many of our peers to completely reengineer their business models, their setups, their incentive systems, the way that they run carry plans. It is not as simple as just waking up to the opportunity. In order to go from allocating investment content from originator to fund to originator to portfolio management to a distributed set of products is a major transformation. And I think our setup is quite unique to us because of the heritage that we have coming from an organization that's always been innovative in terms of structures. It had more of a portfolio building heritage than a deal doing heritage. Again, they might look similar from the types of asset classes that they cover or the types of geographies that they invest into. But from a business model perspective, they are quite different.

The private wealth opportunity is a huge segment of the market. That's going to become, over time, a major segment of the market. It is today a major segment of growth. And so firms are willing to reengineer how they do things to address that segment of the market. For a more niche segment of the market, the work, the transformation that would have to take place at those organizations in order for them to go after that, we just haven't seen it. Instead, what they're doing is they're taking their products, their limited partnerships, they're assembling them together under a common investment access vehicle. They're throwing in some free co-investment and they're saying, here's our mandate, right, and we compete with them. And so we do have competition certainly from peers that have mandates that are attractive more or less to different clients, but they are not the same as a line-by-line dynamically steered mandate towards clients and NAV portfolios. We have not seen pressure from competitors moving into that space.

If you think about our business, there's really kind of 2 businesses in PG. I mean there is the typical GP business, which is our investment engine and our sales force, okay? That's in terms of staff, that's a little bit less than half of the overall global workforce, so a little bit less than 1,000 people. But there's another part of the business that is pretty unique. I mean you don't have that in most other setups that is really this operational backbone. It's more than 1,000 people. It's a much smaller part actually of the cost. It costs us probably around a little more than 10 basis points of our revenues, but that's an engine. That is essentially comprising the platform side, the portfolio solutions, the structuring. There's a lot of technology around it and operations.

Dave in your slide, the structure overview that shows how we actually invest, which is by direct investments in single assets. That's very unique in the industry, right? It's a huge operational engine behind it to essentially take these small pieces in individual underlying investments and allocate them to about 300 funds or whatever. So this is something that wasn't built overnight. I mean this was essentially built since about 25 years when we started with these mandates with insurance companies, they suddenly said, well, you need to have IFRS IAS 39 valuation. At that time, no one in private equity had an idea what that was. So we started to build up that valuation team. And it's just continued in a way that we build up more and more for these open-end funds for these mandates, technology. We had insurance companies, they were looking for ratings of individual loan tranches, and we built up that team.

And so in a way, this is always a bit of a hassle for us, right, to be able to actually address all these topics. In hindsight, it was a blessing because we build up operations, and I think it means very effective from a cost perspective that really carry all these activities. So I don't think that it is something we'll be exclusive on. I mean other world say they will mandate some of the investors in funds, -- some might invest in single asset when it comes to credit. But I do think that there is still a bit of differentiation for a while to come. By the way, there was one large firm that had a big effort internally to build up the operations to run something similar. And we know that some of the senior leadership team of that team actually left about 6 weeks ago because the company finally decided it was just too complicated.

My second question was on M&A. Clearly, your priority right now is on partnerships and maybe down the line I mean from the M&A you've done and from the M&A we've generally seen in the industry, a lot of the upside has come from distribution. So I'm just wondering, rather than go and acquire a private equity manager, leave what they do, is it invisible to have a distribution deal rather than just outright M&A?

Well, one of the things that is interesting is given the heritage that we have, the clients that we serve, the more European-centric client base that we have, if we look at many of the more traditional funds, we actually don't have a lot of overlap with regards to clients versus some of the other firms that are out there. So there is a significant distribution cross-sell opportunity even with more traditional firms that are out there. And a lot of the distribution deals that you're talking about or distribution opportunities, you don't need to mingle equity in order to achieve. That's one of the reasons why you see so many joint ventures.

You can have complementary organizations with complementary distribution and complementary investment engines that have a common joint venture that they establish in order to address a market segment that can be very attractive for both parties that can be incremental for both parties, but you don't have the complexity and noise that comes from trying to merge 2 organizations together. And I think that's primarily where you'll see us focus on the distribution side of things is on those type of ventures where we don't have to mingle equity, but we can link arms and address the market opportunity.

Sharath?

Sharath from Deutsche Bank. I have 3 questions. Firstly, thank you for the detail on the software exposures. But can I have an idea of the diversification for the other 86% of your private equity portfolio in terms of the sectors? Or what more can you say about...

So the areas that we've invested in. So if you look across, it's pretty broad across services, industrial, health care, it's a very broadly diversified set of portfolios. Wolf, anything of note that you want to share with regards to the rest of the portfolio outside of software?

For example, very strong asset is Rosen, an inspection company for pipelines that's kind of industrial and services or we have sometimes simple businesses like hygiene papers, you could also say toilet papers and the transformational story is there that we just grow this company that has an excellent operations engine. They are just outperforming their competitors in being better in cost, and we just scale them across Europe. So in health and life, we have quite a fascinating CRO company that is doing drug discovery. And actually, they have invented a new opportunity, also AI-based to reduce drug discovery from -- hopefully, we are not yet fully there, but that's the ambition from 10 years to 3 years.

And that is then sold to big pharma actually. So those are newer investments. Another one in our goods and products area, it's cat food and luxury cat food. And that company is tremendously growing this year, also outperforming. So you see it is a very, very broad portfolio across these 4 sectors, health and life, goods and products. Goods and products is very vast, goes from industry to bridling watches, then technology and services. So you see we cover in these 4 areas, 40 themes actually that the teams are working on. So diverse portfolio.

There's no concentration that I would note, though, across that. It's pretty diverse.

Second one is on royalties. You previously set out a target of reaching $30 billion AUM by 2033. We are currently at $1 billion. So how should we think about the phasing of this growth? What sort of growth expectations are baked in near term? And also if you could comment on margins for the strategy?

Yes. So in terms of the ramp curve, Stephen, do you want to comment on that?

So in terms of where we are today, how open can I be in terms of numbers?

Very transparent.

So we have been open, I think numbers anyway.

So we're already over $1.5 billion. So we've seen a lot of growth in the last couple of months. I think by this time next year, we would aim to be somewhere between $2.5 billion to $3 billion. We think we can then ramp to about $4 billion to $5 billion of fundraising and towards the end of the decade, be raising somewhere between $8 billion to $10 billion. So we actually think we'll get to the $30 billion target before 2033.

And my last question is on operating leverage. I just want to square your comment. You said that you have excess capacity in your investment teams and versus maintaining flat guidance or maybe even as a downgrade now that IFRS 18 is implemented and the portfolio would be in the numerator. So I just wanted your clarification on that aspect.

On leverage within the team?

Yes, you're having excess capacity in your investment teams, but not getting reflected in your guidance for EBITDA margins.

Well, we have indeed operated at higher levels of investment volume in the past. If we go back to peak investment levels, we have run our engine deploying $30 billion in the past are not yet back to those levels. And so that's what I mean by excess capacity. In addition to that, from peak levels, we've added meaningful resources. If I look at the operating resources and the investment talent that we've added to the platform from where we were 5, 6, 7 years ago, we do think that we have a meaningful opportunity.

But what I was talking about before was excess capacity for the industry, right? Our entire industry, not just Partners Group. But if you think about all the platforms out there that we're investing aggressively into investment talent, all of which are running somewhere below peak levels to varying degrees, we have an industry that has quite a bit of slack in it from a capacity perspective and ability to generate investment volume. And on the topic of the performance fee, that's been in [indiscernible] models now for however long, in projecting that transition was going to take place. So for us, it's not a change. It's just you're moving it from this spot to that spot. But as we think about the 20% to 40% guidance over the long run as we thought about the need to update that guidance, that was one of the factors that informed us in our change.

We wouldn't give that guidance if you would think of it as being 25% for 3 years. So 25% to 40% means 25% to 40%, and that range is given for reason. Let me just make one comment here. This is actually complement paying to the DX team. DX team is always completely underpromising on cost. If you think about the foreign exchange development of Swiss franc in the last few years, I mean we are today about 63% roughly today on EBITDA margin with a constant FX over the last 10, 15 years, we'll probably be at like 70% or something.

And I do think our investment team is actually well staffed. Maybe on royalties, I guess there's a couple of people are looking for. But I would say, by and large, I mean we can do much more. We will need much more because there are more fundraising. I think on the operations side, you guys are really effective and save cost every year. So when you -- I think you said today that we'll run it at another 60%. Well, I think we haven't run at 60%. We probably run it at 65% or whatever against the FX that changed in the last time. So I think the company is actually keeping efficiencies quite well also going forward.

Mate?

This is Mate from UBS. I have 2 questions, please. The first one would be on distributor fees. Anecdotally, distributors are clearly pushing for higher distributor fees. And I think it's fair to say that some sector peers are also willing to offer that. Could you talk a little bit about to what extent that can be a limiting factor for growth through those channels? And also to what extent that might pose a risk to recurring fee margins at some point? That's the first question.

And the second question is a fairly short one, I'll squeeze it in, if you don't mind. And that's on real estate. I think it's very clear the direction of travel is vertical real estate, made clear. Is there any regional focus in M&A efforts in real estate? And here is a good example for Germany, which other geographies are of interest?

So first of all, on distributor fees, I'll hand it over to you. I do think that given the fact that we have been in that space, and had existing relationships with distributors for decades now and are not the new kid on the block does mean that there's a slightly different dynamic with the Partners Group versus if you're coming new into the private wealth space, and they already have 200 products on the shelf, and you want to be product #201, there's a slightly different dynamic for the new kid on the block. But Roberto, do you want to speak to.

No, no. I agree, obviously, we weren't the ones who needed to buy a seat at the table because we had it much longer. I do think personally, we have experienced those new entrants. In my personal view, this is a couple of years back, but that probably peaked, I think since it has been subsiding. And a bit along the lines what I mentioned before, I also think what we've been seeing more recently is that any incentives start a new fund or the like is shifting more to the benefit of underlying investors as opposed to the distributors. And especially in the U.S., there seems to be an increasing standardization, a bit like what you've seen on the long-only side, how those -- how the market works and better pricing of those funds and their respective incentives are. So I think it's been probably subsiding in the last year or so, but we acknowledge recent coverage.

Yes. And it's -- some of those fees are kind of out in the media now and create a little bit of a buzz, but some of that is not a new dynamic, right? Some of that's a 5-year-old topic that's just now getting some tension because of the private wealth space gaining more prominence. And with regards to additional potential acquisition activity on the real estate side as we look to build further integration, I mean, the U.S. is an obvious spot for us, and we do have a couple of interesting things that we're looking at. But probably more than geographical focus is the focus on the vertical in which they operate. And you're going to see probably some additional focus for us on multifamily and on industrial. Those are 2 spaces that we're zooming in on right now.

My name is Carmela from PEI. Just 2 things from me. One is on the Middle East. I know you've put out a press release on it recently. And I appreciate, Dave, you've talked about how we live in a complex world where this is a new world right now of more geopolitical risk. We're hearing from advisers at least for the near term, that Middle East investors are more or less taking a pause on commitments to some of their managers. Wondering to what extent you're hearing or seeing that as well? And maybe if you could talk about the implications of the conflict near term and long term across exposure to private markets for at least your Middle East clients.

So first of all, just to create a little bit of a context, that region represents only about 3% of our client mix today and has more upside than downside for us as we think about the activity there. We have invested significantly in the region. Stefan, how can you go in there every 6 weeks? Every 6 weeks, much more active there than we have been in the past. And we just had an e-mail bouncing around. We had a new mandate got signed this morning, right, out of that region. And so it's not been our experience that people have paused or stopped activity. I can't speak more broadly what's happening. All I can say is our own experience is that the trains are still moving.

I think what's happening -- so people might mix up 2 things here. So one is a broader topic amongst the largest investors in the region for maybe 2 or 3 years, they're really trying to redefine how to go about private market investing. And so some of them actually, for instance, deposits sent us this morning actually signatures on a large mandate. They have, for instance, decided to cut back from about 45 counterparties to 15 counterparties. And this is the view that they want to have a fewer a smaller group of players that will be much closer in the relationship.

They want to work together on transactions. So it's much more like a partnership also. So I think that's why also the mandates, I think, play a very fundamental role in that region going forward. And so I think sometimes you might hear people saying this is pausing. I'm not sure it's pausing. I think it's a little bit of a reconfiguration of the investment approach, and there will be a number of managers that will maybe not get the same kind of capital from the region. The region itself is growing. And for sure, the current dynamics now, I mean, this one party, I mean, clearly came to the office in a very normal way and signed documents, but I'm sure there's others that maybe pause a little bit for a week or 2 or 3 weeks. No one knows how exactly that situation will develop.

But my sense is that overall, the region, I mean, will be a very, very large investor. It will grow massively. The allocations will go faster, higher. They will have an interest in becoming more of a partner with GPs. They will also have an interest because often the sovereigns are quite closely related to the leadership in these regions. So they want to have also a partnership where they feel that they bring something back to the region. We have, for instance, a number of portfolio companies that are very active there like the school partnership. So I think it's just the relationships, I think, with many of the some wealth funds, it's not only the Middle East. I think they will -- again, they become much more tailored partnership like. And I think there will be a smaller number of GPs that I personally believe will benefit from that. I think we're part of that. And there will be maybe more traditional GPs that have in the past just gone there every 3 years for the fundraising that might find a little bit tougher going forward.

Go for that. So I've got one more, if that's all right. For steel royalties, please. I appreciate you've talked about the guidance there in terms of how much you expect to raise in the next few years. If you could talk me through -- over here very short. The pipeline of opportunities there in terms of maybe sectors because I know you've done pharma, natural gas and then entertainment. Maybe that's one part of the question. The second one would be the types of LPs who are actually coming to you and are attracted to the strategy, that would be very helpful.

So I'm going to start with the second question first. I mean we've obviously been fundraising this for 2-plus years now. And what becomes apparent is that 99% of global investors currently have a 0 allocation to royalties. And that's across all types of investors. So that's from the largest sovereign wealth funds, pension funds, insurance clients. That's all the way down to private wealth clients. So by the end of this year, we'll have 4, maybe 5 evergreens into the market. We are seeing demand across the board. It's actually quite consistent across the different types of investors.

The question people really ask is where do they put in their portfolio. Everybody sees the merits and the rationale of including royalties, particularly because the sectors we invest in are very countercyclical, resilient yielding investments, pretty long dated, but we front-end load the cash flow as well. So there's a yield element, which is very attractive to people. And so we actually see the fundraising as being relatively consistent across the different types of investors. On the first question, we actually invest in close to 10 sectors in the underlying funds. So we have life sciences, obviously, then we invest in entertainment. Everybody assumes that it's just music. It's much more than just music. It's film and TV. It's music from film and TV, it's book royalties, its IP, YouTube royalties, sports royalties, brands royalties.

And then we also invest in energy transition, so U.S. natural gas, green metals, carbon, water, and we also own royalties on lobster to give you a very different example, right? So it's a very big space, which people just aren't aware of how large it is. I mean this isn't just about raise as much capital as you can. This is about maintaining the investment quality for our clients and our future clients. And so a lot of work is going on to ensure we understand the size of the market. We actually view this as an asset class, not today, not in 2 years' time, but maybe early 2030s, where we can be deploying $10 billion a year into royalties and still be taking less than 10% to 15% of market share. And that's if markets don't grow from where they are today.

And that's not just buying royalties. That's also doing what we did with the weekend, which is taking a product out to IP owners actually lending against the IP and providing them a different alternative than simply selling their work. It's what Steffen was mentioning earlier around going to companies and creating royalties over their assets. which gets accounted for as non-debt and is nondilutive. So very interesting to people. That area in health care alone is expected to grow 10x over the next 5 years. So we see huge growth potential, and we actually think we're just scratching how big an opportunity set royalties is for Partners Group.

Questions one on the secondary. Unlike the other peers in your industry, you don't have an asset class per se in the secondaries. It's split in the different strategies. So I wanted to know how much it accounts in terms of the different strategies and how do you see growth going forward on that one? That's the first question. And the second one is in terms of trends, we see a lot of your peers going which is quite a very trendy topic these days. So I wanted to have your views.

So first, with regards to secondaries, the secondary market has emerged from $100 billion opportunity years ago to over a $200 billion opportunity today. We deployed $5 billion into secondaries last year across topics, about $4 billion in private equity and then the other $1 billion across infrastructure and some of the other strategies that we have. And that was up close to 20% from where it was the year before. So indeed, we have been active. We have been growing within the secondary market. But we don't have it broken out into a separate area because we see the benefits of having a secondary team that can leverage the insights and know-how of our vertical research. And so when someone is pricing a secondary, it's not uncommon for them to walk over to get insight from the vertical team about how they see this particular space or this particular asset.

We're going to talk about some of the risks associated with this business to compare and contrast that with what we're seeing in the direct side of the business. And we really like to be able to leverage the insights from a sector perspective from across vertical teams and to have that bleed over into the secondary modeling and secondary pricing. And so that's the reason why we have kept our secondary strategies embedded within our overall asset classes. And it's a different approach. It's probably an approach that's less focused on scale, and it's a little bit more focused on track record, and we do have one of the strongest track records in the space. Second question, [ all ] maybe defense.

So actually, defense in the last 18 months due to the happenings, we got more and more interest from our clients, our mandate clients in this sector and specifically when it's defense and offense. Now you might say the space is already a little bit crowded. I mean you have seen public markets rising. So what we actually are doing is one of our themes that we go very deep right now. And what we look is at the second and third line of opportunities that kind of are serving that space. So the first line, the defense industry is probably overhyped. But who are the suppliers, who are technologies in the background, services in the background. That's what we are looking at with a good team.

And that, by the way, is not an uncommon for us -- a way for us to invest. And so if you think about like the broader AI trend, we do have some very targeted data center investments that we've made, but we also have a number of areas where derivative strategies. We have 4 different platforms that we've invested in, in the heating, ventilation and air conditioning space that kind of tie into the broader topic of cooling and energy efficiency and things like that, not as a direct exposure to the space, but as a, let's call it, derivative exposure.

Miguel [indiscernible] from Lighthouse. Just one question on the infra space. The returns that you have achieved are very, very impressive. But if we look at the makeup of the infra universe, there is quite a large chunk in which you are subject to regulation and regulated returns. Do you think it's sustainable to maintain that very impressive IRR?

Esther, do you want to speak to the return profile?

Thank you. A couple of comments there. I think infrastructure, as you look at the evolution of the asset class, it's moved from traditionally 20, 25 years ago being regulated assets and then a private financing model coming in to take over a public duty to build, enhance and operate the asset to today's world, which is much more complex and more diversified when you look at the income streams you generate off an infrastructure asset and also has a number of, I guess, broader risks on the one hand and an opportunities to earn a return on the other hand. And if you really pare back to sort of infrastructure market from a risk profile, then traditionally, the most risk-averse part of the market has sought to maximize its exposure to regulated cash flow stream.

So when you hear people talk about core infrastructure investments, you will typically see them back in directly regulated returns. The way we've looked at that space, also a bit the base of the research and the thinking we're doing, we actually saw comparatively more risk in that part of the overall investment universe than the market consensus or to suggest because ultimately, regulation will need to always balance between a ride of an asset owner to make a profit and the ability of the society to pay for it. And that's why historically, our portfolio was relatively low on directly regulated exposures. And where we have taken them, one good example is a distributed heating platform we have in the Baltics and the Nordics that we've expanded into U.K. That has a regulated asset base as a primary sort of foundational aspect.

But then we've used the cash flows from the regulated base to enhance and diversify that business into industrial offtake as well. So basically long-term contracts with industrial counterparties to expand into new geographies and to tag on existing additional regulated assets in quite an efficient manner. And that way, you can move from a regulated return that caps your overall return on the assets, say, 7% or 8% and then through an appropriate capital structure, you uplift that to maybe a low double-digit equity return through adding all these additional components onto the infrastructure asset, you can generate sort of a profitability return on the capital you're employing that's more commensurate in the sort of 14%, 15%, 16%, 17% return range.

And then you look at the types of buyers that would like to own these assets going forward. And they're willing to pay an additional premium for the right to continue to tapping into these interesting unit economics, the diversified asset base and the diversified business model. And that helps drive an extra premium on top of those returns. And I do think that thinking going forward will remain essential for the infrastructure universe, not just part of the overall industry as well because the world where you can make money on the back of outperforming significantly to a regulated allowable return without delivering industrial bottom-up value to the assets themselves, I think those are well over. And we saw that, for example, here in the U.K. with the water industry, right, where there's actually been a consecutive number of trades between different equity holders and increasing premium to the regulated asset base, but the operations are somewhat challenged. I mean there will be a point where the regulator steps in and needs to take, I think, corrective measures. So those are the types of exposures that I think going forward to be well advised to avoid. So in short, we're striving to continue to perform in that way whilst also maintaining an appropriate social license to operate.

I must admit you're very patient. You must be hungry. This is amazing. Should we have a last question or should we....

I don't want to stop. I thought...

Anyone not hungry enough and still wanting more information on PG? And I think we can close it here and welcome everyone for lunch upstairs.

Okay. We'd like to thank you for your attention and time. This is indeed a very interesting market opportunity, one that does have its volatility, right, but one that also presents significant opportunities. And hopefully, we've been able to frame how we're looking at those opportunities for you today. We'll wrap up the Q&A portion, and then we'll move upstairs for lunch. Thank you very much.

Thank you for the time.

Thank you for this.

[Audio Gap]

Transformation taking place within those platforms from the time that we invested in them. I think really are case studies of Partners Group's value creation efforts at work. Here's a snapshot of the performance fees that we've been able to generate CHF 819 million in performance fees. Most of that came from our private equity business, where you saw most of the most significant exits that take place, but also infrastructure came in for 27% of the mix. Private credit accounted for 13% of our performance fees generated. You also had good diversification across evergreen programs and mandates and traditional programs. So 75% of the performance fees that were generated were generated by our mandates and our traditional programs.

One of the things that's notable is that we have one of the most diversified investment programs that's out there, about 350 live investment vehicles running right now. And we had 80 different products that contributed to our performance fee generation in 2025. I think that level of diversification is one of the things that allows us to, I think, navigate the current environment and to continue to generate consistent performance fees is the fact that we don't have all of our eggs in one big fund basket. We have a very diversified set of programs and that has really helped us. We also see that opportunity to generate performance fees increasing over the last number of years. And many of you who have followed us for a long period of time know that years ago, we affected a mix shift from more indirect investments to more direct investments.

And the assets that are in realization right now are the start of a broader trend towards more direct investments that are coming up to harvest, and we believe will lead to a meaningful increase in performance fee potential over the coming years. And so we have increased the range of performance fees and performance income that we expect to generate in the coming years. We've increased that from 20% to 30%, where it's spent historically, the 25% to 40% where we expect it to be in the coming years and I believe that we're well on track for that.

You see here from a fundraising perspective, we are a highly differentiated firm from a new asset raising perspective. Our mandate business is a gem, and you've seen that business emerge from a much smaller segment years ago to today, a $69 billion asset base for us. And when we go and see clients, when we sit down with them, we are not selling them a fund alongside other people. We're solving problems that they have, and we're building solutions that are specifically built for that institution. We're managing oftentimes towards their NAV targets as opposed to putting them in traditional drawdown structures, highly differentiated. You saw 72% of our assets come into those programs.

Much of our evergreen business -- or sorry, much of our mandate business is also evergreen in nature, which means that the asset base is there compound as opposed to tail down over time. And I think this is a highly attractive mix. You've seen those bespoke solutions increase from 39% of our assets years ago to 67% of our assets today and there's a lot of continued potential for both the mandate segment as well as the evergreen segment to continue to grow.

Now there's a couple of topics that are out there weighing on the industry that I want to address as the CEO before moving on to the financials. The first is with regards to the private credit sector. There's been a lot of noise around redemption levels within the private credit space where a firm that does have a quite significant amount of evergreen assets. But interestingly, we have grown our Evergreen business in a quite differentiated way versus the industry. You have seen a big spike in private credit, evergreens, the last number of years, the vast majority of our Evergreen assets are equity in nature.

Private credit evergreens is only 10% of our Evergreen business. So we have 33 evergreens today, only 3 of them are focused on private credit. Out of those, the vast majority of clients in those segments interestingly are institutional in nature. We have not levered those funds the way that some of our peers have been a little bit less aggressive, how we've gone after that market. And so we've had 5x more inflows than outflows within our private credit evergreen segment of our business. So some of the noise that's weighing on, I think the space is misdirected at Partners Group. The vast majority of assets that we have in that evergreen business are equity in nature. And there is somewhat of a different dynamic taking place within that business. We actually see improving dynamics from a redemption perspective within some of our large evergreen funds Q3 to Q4, and then we expect further improvement Q4 into Q1.

If you look at the software exposure, software has been a topic that's been weighing on the space for some time. Again, most of our clients that we're sitting down with, we're building custom portfolios for them. And one of the things that they always tell us is that they are overexposed to technology themes within the public market segment of their portfolios, and they're looking for private markets to be a diversifier for them. And so when we sit down with our large clients to construct their portfolios oftentimes, they're telling us that they're looking for exposure to the real economy, not for a doubling up of the exposures that they're getting in the public market.

And so as we've constructed these portfolios for our clients, we have done so in a way that deliberately underweights technology exposure. And so if you look at our software exposure for our private equity business, 3.8% of our private equity NAV is software direct lead assets. Now we also purchased portfolios in the secondary market and things like that. And so you will get some exposure that's a little bit more typical to the industry as you're buying portfolios of other managers. But still there, it's only about 9.9% of our private equity exposure or partnership investments with the software asset classification.

And then within our private credit portfolio, about 3.3% of our private credit portfolio is direct lending. And then you have about 6.6% of that portfolio that's liquid software. And when you translate that into a percentage of our total AUM, only 1.8% of our assets under management are direct lead software investments and again, less than 2% of our overall assets under management are credit-related software investments.

And so even if you expect complete carnage within the software space, you're talking about basis points of return erosion, assuming that, that carnage is spread over multiple years in terms of how it would impact our client portfolios. We think that this risk as it relates to Partners Group is wildly overdone and has weighed on the space kind of equally across all the different players, and you haven't seen, I think, sufficient attention on where the exposure actually lies. In a Partners Group, we have been underweight technology as opposed to doubling down on our clients exposures.

And so with that, I'll hand over to Joris, who will talk more about the financials.

Thank you, Dave. It's a pleasure to be here with all of you, and let me walk you through the financials of Partners Group's 2025 financial results.

I will start with our assets under management. As you have heard, these are diversified across asset classes and regions. In U.S. dollar, our AUM grew 21% year-over-year. In average AUM in Swiss francs, this translated to a growth of 8%. Total revenues increased 20% to CHF 2.56 billion. Performance fees contributed meaningfully, increasing 60% year-over-year and representing 32% of total revenues, in line with our guidance. EBITDA followed revenues, increasing 19% at a margin of 62.8%. Our EBITDA margin remained stable and in line with the 5-year average of 63%. We proposed a CHF 46 dividend per share. This corresponds to a 10% increase in Swiss franc and the 19% increase if you look at it in U.S. dollars. Proposal reiterates the Board's confidence in the strength of our business and the solidity of our balance sheet.

Now let's have a look at our revenues in more detail. We have 2 sources of revenues. We have management fees and performance fees. I will start with management fees. Management fees represent most of our revenues and are recurring in nature. Management fees grew by 12% at constant currency in 2025 and 7% as reported, in line with our average AUM growth in Swiss franc. Other operating income positively contributed to management fee growth in 2025. A strong driver of other operating income was treasury services rendered to our products.

Let me talk about our management fee margin on the next slide. Again, in 2025, our management fee margin was stable at 1.24%. This is well within our historical bandwidth of 1.18% and 1.33% since IPO. Slight variances between years may be driven by the timing of when fees are activated in investment program or when we realize transactional fees, both being an element of our one-time fees and how our asset classes mix is influencing our recurring management fee. So we expect this stable development to continue also in 2026.

On the next slide, I will discuss our performance fee. 2025 saw strong realizations and value creation throughout the year, bringing performance fees to the 32% of revenues. Private equity was the largest contributor to performance fees with several exits driving the increase of 45% compared to the previous year's period.

Infrastructure contributed CHF 219 million, increasing 82% year-on-year and performance fees from private credit increased by 112%, a result of our consistent approach and diversified portfolio and low default rates. Performance fees from real estate increased 73%, but were the lowest contributor to performance fees as the industry continues to be in a state of transition.

Let me turn to the next slide for our outlook on performance fees. From 2023 to 2025, we generated CHF 1.7 billion in performance fees, highly diversified across asset classes and strategy, representing 26% of our overall revenues. While the majority came from private equity with 56%, we have seen an increasing contribution from infrastructure with 31%. From a strategy perspective, our mandates and traditional programs contributed 64%, while our evergreens contributed 36%.

Our performance fees are therefore driven by these 2 factors. Firstly, evergreens where the asset value is linked directly to performance fees. So with the growing asset base and positive performance, we steadily generate high performance fees. And secondly, the exits from our portfolio. Today, we see a dynamic pipeline of mature assets, which we plan to exit over the next 3 years and beyond, both private equity and infrastructure. So based on this bottom-up analysis of this current exit pipeline, we expect performance fees and income to account for 25% to 40% of our revenue going forward. As mentioned in our interim results call and our January business update call, we expect to be in the lower part of the range for 2026 due to the already mentioned pull-forward effect from 2025. So basically, we confirm the outlook on performance fees that we've given in the January call.

Let's move to operating costs on the next slide. Let me give you more details on the development of our total operating costs. 86% of our operating costs are personnel expenses. As you can see, the increase in performance fee revenues also triggered an equal increase of variable performance fee funded personnel expenses. This is because we allocate a fixed proportion of up to 40% to our employees. Regular personnel expenses increased 10% and other operating expenses increased 14%. In 2025, we maintained our strong cost discipline, and these increases were both entirely driven by the Empira acquisition. This resulted in CHF 1.61 billion of EBITDA for 2025, an increase of 19% over 2024.

Now let's move to the next slide. Profitability remains strong with an EBITDA margin of 63%. Over the last year -- over the last years, our EBITDA margin has been stable at around 63%. And we continue to invest into our future growth at an operating margin of around 60% for newly generated management fees and performance fees, assuming also stable foreign exchange rates.

Now speaking about exchange rates, if we go to the next slide, we are a global business reporting in Swiss francs. However, most of our revenue comes from U.S. dollar and euro-denominated funds. So the strengthening of the Swiss franc created a negative translation effect on our EBITDA margin of approximately 0.5 percent point in margin.

If we look on the next slide at our financials, balance sheet and liquidity. As mentioned before, our EBITDA in 2025 increased by 19% -- as mentioned before, our EBITDA in 2025 increased by 19% to CHF 1.6 billion. Deducting depreciation and amortization, financial results and taxes coming in at 18%, well within our guidance of 18% to 19%, net profit was at CHF 1.26 billion, an increase of 12% compared to 2024. This translates into a return on equity of 55%. And at year-end, we held CHF 3.7 billion of available liquidity.

Last Friday, we got our second credit rating confirmed. We have now a Moody's rating for our firm with A3 and the Fitch rating with A-, both with a stable outlook. The investment-grade ratings, we have received from both agencies, underline the financial stability of our firm. With 2 public ratings, we have increased the flexibility in funding our growth.

Let's move to the last slide. The Board proposes a dividend of CHF 46, representing an increase of 10%. It bases the proposal on the solid development of the business and its confidence in the sustainability of the firm's growth. Following this dividend, Partners Group will have generated a dividend growth of 16% per annum since our IPO and will have paid back 5.8x the price of its IPO share price in the form of dividends. Now treasury shares are an important instrument to use for our long-term oriented compensation. We have been buying shares for this reason in the past, as you have seen, and we'll continue to do so going forward. With our stock trading yesterday at a dividend yield of really attractive 5.7%, this allows us to create immediate value.

This brings me to the end of our presentation. I would like to hand over to Dave to quickly sum up the main points.

And my understanding is we had a little bit of a blip in the microphone during the first slide. So let me just kind of go back and recap the key message there. And that is that this was a year where you saw significant outperformance from Partners Group versus the industry, whether that's from a fundraising perspective, whether that's from an investing perspective or from a realization perspective. And all of those factors, I think, came through to translate to a highly differentiated year for the firm with management fees up 12% year-over-year on a constant currency basis. Performance fees at 32% of revenue, a meaningful step-up from where they were in the past. EBITDA, 19% growth year-over-year and a very solid dividend that continues that long-term trajectory of dividend growth that you have seen from our firm. And so maybe any other topics that were missed on the phone, AB?

No, I think you've summarized it well. I think we can open up for questions.

Given we have the CMD afterwards, please focus your question on the financial part. We'll try to answer a lot of questions on business strategy in the CMD. Let's start with Oliver or maybe M t . Sorry, mic is there. You'll be second.

Máté Nemes from UBS. I have 2 questions, please, just on results. The first one would be on the FX hedging and interest and expenses last year, which amounted to CHF 85 million, and there was quite a material negative drop from H1 to H2. If you could talk a little bit about what drove that and what we can expect from that line going forward when it comes to FX and hedges? That's the first one.

The second question would be on the performance fee guidance. You reconfirmed the 25%, 40% contribution to total revenues, but you also adopted or adopting IFRS 18 and you will include investment income to contribute towards that range. Can you elaborate a little bit on that? Does that mean that in effect, you are slightly downgrading the performance fee guidance? Or we should be thinking of a like-for-like increase in the expectations?

Can you take the first one, and I'll take a crack in the second one.

Yes. You've rightly seen I think also what we communicated, we have slightly changed our approach of hedging with our FX. So we have had an FX impact in the second half of the year. And we will also see continuing going forward a little bit more of either hedges or some interest costs by naturally hedging through pulling our financing.

And IFRS 18 has been a topic that's been in the works for years. And so as we had set our ranges and expectations over the coming years, it took IFRS 18 into account. So this is not a new development. This is a development that's been in the works for a number of years.

Okay. So the second question is from Oliver.

Oliver Carruthers from Goldman Sachs. Two questions. One, a follow-up on the investment income. I guess, elevating into revenue, you're raising the prominence of this line item. Maybe just would be helpful if you could just level set what the best way to think about the parameters of modeling here? So I think you did CHF 75 million of investment income in FY '25 on about a 5% net investment rate return on your balance sheet. So what would a normal year look like for Partners Group? And how should we be thinking about that, particularly in the context of this 25% to 40% range?

And then the second question, Joris, I appreciate the comments on the overall management fee margin being stable outlook from here. If I strip out late fees and look at the recurring management fee margin, I think it was about 1.13% for the second half. So any commentary as to how to think about the moving parts from that into '26 would be helpful.

Should I take both? And I think if we look at the investment, so the fair value changes on investment income, I think it's a mandatory change. So we need to bring it to the revenue stream. So that's not a choice that we have. I think as you rightly said, I think it's dependent on the returns that we expect on our investments that we do alongside our clients. So you can take a range of typically what you've seen over the last years in the finance income. And I think going up a little bit more than what we've seen last year is a fair assumption as we today, are positioned where we are.

Now if we look at the management fee margin and the recurring management fee margin that you're referring to, I think this is also going to be fairly stable as we see it today because it really depends on product mix. And within the product mix, you've seen that we had more fundraising private credit in the beginning of half year 1 and then a lower share in the second half of the year of 2025, depending on how we can really collect the fundraise that also, of course, has an impact. So it's a product mix.

And then in the products, of course, you also see an impact that we might have from how we close the products. For example, if we see Infra IV closing in half year 1, that also might have an impact. And then, of course, last year, you've seen M&A also positively contributing with Empira, which shows quite a strong headline having a positive impact. So we have many drivers, and that's also why we assume today that it's going to be fairly stable also going forward.

It's Arnaud Giblat from BNP. If I can have another crack at the change in guidance. I understood your answer on performance fees. And the other impact on guidance, I think, is if you move up finance income to revenues, of course, that enhances EBITDA margin. I think roughly it would have had 110 basis points positive impact on the EBITDA margin had you done it this year. So looking forward, your guidance of 60%, I think that's just on new business. So it doesn't really impact EBITDA margin as it is. So we should effectively expect a step-up in EBITDA margin, if I understand well, but new business being written at 60% margin.

I think, yes, you correctly assume because on the investment income, we will not have variable personnel costs allocated to. So that means, of course, that this is going to be directly impact the overall EBITDA. Now on the management fee EBITDA and also our net result, we will see no change, of course, because it's just costs which have today and income which has been below EBIT now income moving above into the revenues. And so this is basically what we're going to expect.

0 impact on the way we run our business and the way we raise assets and the way we pay our people, it's just accounting.

And how we also underwrite the business is continuing to be with the 60% operating margin that we aspire for.

My second question is without going -- I mean, Capital Markets Day coming up, but could you talk a bit about the outlook on investments, divestments given the volatility? I appreciate you've got very little exposure to software. So do things remain the same? Are you pretty -- do you have a pretty active pipeline?

Yes. So this is the new normal, guys. I mean last year was tariffs and everybody expected transaction activity to completely fall off of the cliff. And this year, it's the release, the software concern. I think we live in a complex world, and we need to, I think, be prepared to navigate that. I think our firm is a firm that is built to solve client problems through any environment. And indeed, as the world becomes more complex, people get out of their standard allocations to traditional funds and they get into more custom solutions that can help steer towards their portfolios.

So I think the complexity that you see today is something that we're very comfortable operating within. You saw even with all the complexity we saw last year, us able to navigate that very, very well to make new investments, to divest on a very successful basis. And we're off to a good start already this year. So if I look at our divestment activity that we've already publicly announced, for example, [indiscernible] coming in quite a bit ahead of where we had expected to be on that particular divestiture. We're very pleased with that outcome.

We also announced some further liquidity on [indiscernible] pretty meaningful amount of liquidity coming off of that. So in 2026, so far, we've been able to continue, I think, that solid trajectory of transaction activity that we were able to demonstrate last year as well. I think the segment of the markets that we operate within, a little bit less tech exposed, more traditional assets help us to navigate this environment. Also the size of companies that we invest in, I think we have a range of options. Out of the dozens of assets that we have that we believe that we're going to move towards exit over the coming years, we only have 3 to 5 of them that have IPO as a likely scenario for exit.

The vast majority of them are either strategic, financial, we're developing a pipeline of buyers for those that we cultivate over multiple years. And so we're not surprising the market when we come. But only it's probably 3 to 5 assets where we're dependent on, let's call it, IPO windows for us to be able to exit those. The vast majority of companies that we're looking to exit, we think we'll have a range of options for those businesses. And so just like we've been able to navigate this year, we're quite confident that we'll be able to navigate in 2026 as well.

One question from Hubert.

It's Hubert Lam from Bank of America. I've got 3 questions. Firstly, can you give us an update on performance of your evergreen funds, particularly the large 3 legacy large evergreen funds that you have?

Second question is on potential redemptions. I know you highlighted that the risk is within the private wealth channel within credit, even though it's pretty small. Do you see any spillover to the institutional side, just given that if they're concerned about private credit, I would assume that institution institutions are also thinking possibly redeeming.

And lastly, can you give us any breakdown in terms of your Evergreen AUM? How much of it is from the U.S.? How much is from rest of world? And are you seeing any differences in terms of redemptions from different geographies?

Yes. So I'll take that. Within our Evergreen products, we'll actually talk about that more this afternoon. And so I'll maybe park the performance topic because we go into quite a bit of detail on that in the coming Capital Markets Day session. But it is safe to say that those products are, I think, navigating this environment in a reasonably attractive way. High single-digit returns for the big evergreen funds. And we've been able to hold on to clients there, I think, in a way that's differentiated versus what you see in some segments.

We do indeed have an improving redemption dynamic within our equity funds Q3 to Q4 and then again, Q4 into Q1 as opposed to a different dynamic that you see in some other segments of the market. There is indeed a difference in the dynamic in Europe versus the U.S. We have spent a lot of time this past year developing the European business, in particular. And it's somewhat of a different structure in some of these markets versus the U.S. market.

In the U.S. market, you tend to have products on the shelf. You have products that line up alongside each other, and you're trying to compete for the FA's attention and time. And in the European market, oftentimes, they have lower ambitions. They don't want to have 200 products on the shelf. They want a house solution. Oftentimes, we co-brand that solution with the institution that we're developing that product in partnership with. And it is the house solution that they're taking to their clients with a very different dynamic.

So we believe that, that has a potential to be stickier because it's not 1 of 200 products on the shelf and people moving back and forth between topics. And when people make an allocation to equities or to a comprehensive portfolio solution, they're making a conscious choice to make a long-term investment. Sometimes within private credit, the way that, that's sold is somewhat of a cash replacement sale, right? And you don't have that dynamic when someone is allocating to a diversified multi-asset private markets solution. It's a long-term investment. And I think the differentiation and maybe redemption patterns reflects that.

Sorry. And roughly how much of your Evergreen is Europe versus U.S.?

So I can just say -- for this year, we had more fundraising in Europe than we did in the U.S. I'd have to go back and -- we'll give you the breakdown in the afternoon, Hubert, on the overall mix. But this year, it was about, I'd say, 20% more out of Europe than we had in the U.S. in terms of fundraising.

It's Nicholas Herman from Citi. A couple of questions from my side as well, please. Just on the performance guide, just for the avoidance of doubt, so can I just confirm the performance fees are still expected to comprise at least 25% of revenues, and therefore, performance income will be a couple of percentage points higher, so at least 27%, 28%. Is that the right understanding of the new guidance?

So when we said that 25% to 40%, it was with the knowledge that, that was going to be combined with performance income. So this is not a new development. This is something that has been in the works to be implemented for -- I think it said 4 years, Joris, 3 years, 4 years, something like that. So this is not an incremental guidance. It's just the accounting takes that into account. So this is not a change to what we have previously communicated.

The other 2 questions I had, one on costs and one on the returns on the scale, Evergreens. On costs, I think on the management fee side, costs grew by 11% year-on-year, but that included Empira as well. So am I right the underlying management fee cost growth was low to mid-single digit? And how -- I guess, presumably that's not sustainable. So how should we be thinking about cost growth on the management fee side from here?

And then the final question I had was, you previously said that you expect scaled Evergreen -- the scaled Evergreen funds to inch towards the target returns. I guess how should we be thinking about the time frame to get there given what's been going on, is it fair to say that, that inching could be even more inching, maybe a slightly slower process in terms of getting to those target returns? Or how are you thinking about that, please?

Maybe to give you the first answer. I think, yes, as you rightly listen to and read, I think you see the management fee cost growth was really driven by the acquisition. So overall, otherwise, it would have been stable. So we were really implementing a lot of efficiency measures. And we also continue to simplify to increase with automation, but also deploying AI also on the platform in order to manage also our cost. And if we look into 2026 based on also at the constant currency level and going forward with the initiatives that we see, we just -- we're going to be able to manage the margin as we've shown it in the past. It's a little bit more growth, but on the other side, also more automation, more simplification, more AI, which we try to absorb at constant currency levels, the cost growth on management fee EBITDA.

And when Evergreens are operating at a small scale, you can have a variety of factors that influence the return dynamic, right? You can buy assets and discount, right? And that can accelerate unrealized returns and other things. But as those evergreen scale, the thing that drives performance is realizations, right, and transaction activity. And so as you see continued realization activity from us, and indeed, we do have quite a robust pipeline of exits coming up. That is probably the most significant topic for driving performance within those funds. And so we do believe that we've been able to demonstrate a return to a more normal type of realization pattern in 2025 and believe that we can continue to drive that in 2026.

Okay. One last question from Daniel. Just one.

Okay, then difficult to decide. This is Daniel Regli from Zürcher KB. One question I would ask is can you maybe talk a little bit more about the vintages coming into realization now and kind of eventual challenges coming from entry multiples you have seen or maybe other kind of impacts coming from contagion effects from the industry, which might have a little bit more troubles given having higher software exposures than you have. I mean you said the share of direct is increasing, but how about returns and multiples?

Yes. So if you look at the exit pipeline that we have coming up, they will be sold at a market price at today's market price. There's no way getting around that dynamic. One of the things about having as high of a percentage in evergreen structures as we have is we have a very robust process to mark those portfolios to market. And so we're prepared to sell those businesses at the mark that is reflected in the current market environment. And indeed, as we have done that in 2025, you've actually seen a pickup in the transacted value versus the book value.

It was about 10%, 11% increase in the largest 10 exits that we had more recently versus where they were in the books 6 months prior. And so that's the dynamic that we're operating within. And again, I just want to reiterate, even if you believe that software, it will be a complete disaster, right? With the level of exposure that we have, we're talking about an impact on client portfolios that's basis points in terms of returns. And if I look at the impact that, that topic has had on market caps across the sector, including ours versus the actual impact that it's likely to have on our, I think it's way overdone phenomenon for Partners Group in particular.

Again, software as a percentage of our total assets, our direct lead assets where we're in control of those businesses, that's where we differentiate is a very small percentage of the portfolio. We do have another segment of the portfolio that's diversified, right, our portfolio investments in there, you see a normal reflection. But there's almost not a scenario I can think of where we don't outperform the broader market based on the exposures that we have.

And so even if it does have a couple of basis points impact on returns, it's almost certainly going to outperform the typical experience that investors have within the broader industry and should continue to drive outperformance for Partners Group clients. And so look, we feel fine about the software exposure that we have. Indeed, many of those businesses, we think, are going to be able to benefit from tailwinds. It's an area that we've been focused on for a long period of time. And so we're quite flabbergasted as a leadership team and how strong the market has latched on to that topic. And we believe that we're really well positioned.

Thank you very much, Dave and Joris. We'll close the Q&A session now. The online questions have been covered by the questions discussed here. For online participants, please connect a separate capital markets link. So disconnect from here, connect to the separate link. And we now have a 15-minute break and start off -- continue at 9:30 for the Capital Markets Day. Thank you very much.

Thank you.

Good day, and thank you for standing by. Welcome to the Partners Group's announcement of AuM as of the 31st of December 2025 Webcast and Conference Call. I would now like to turn the conference over to your first speaker today, David Layton. Please go ahead, sir.

Hello, everyone, and welcome to Partners Group's 2025 Business Update and Outlook Call. I'm Dave, CEO of Partners Group. And today, I'll be joined by Juri, our President; Roberto, our Head of Portfolio Solutions; AP will be present for the Q&A.

2025 was a mixed environment for the industry, marked by macroeconomic uncertainty and geopolitical instability. Despite this backdrop, we have again shown that we are a highly differentiated all-weather investment firm. We've successfully navigated this complex environment and delivered on our objectives, growing our assets under management by 21% overall this year. We added $30.2 billion of total new assets this -- last year at the upper end of our $26 billion to $31 billion guidance. We had $26 billion in fundraising during 2025, which represents our highest year for new client demand in our 30-year history. That's an increase in fundraising activity of 22% from last year. This organic contribution was supplemented by $4 billion from M&A. Our bespoke solutions contributed 72% of inflows with both mandates and evergreens also recording their strongest years ever. Our positioning quite simply is as the leading provider of portfolio solutions in the private markets.

On the investment side, the transaction environment is gradually improving and investment activity remains robust. We deployed $27 billion in 2025, representing a 26% increase year-over-year. Finally, 2025 was a reasonably strong year for realizations. Those were up 47%. Our realizations were most commonly from our pre-2022 vintages. And when looking at the needle mover exits, we managed to generate a premium at exit on average from where these assets were booked 6 months prior to the event, which highlights the strength and the remaining upside of our investment portfolio.

The next slide shows our outperformance versus the broader industry. And this is a mixed market. This is an industry that continues to operate below peak levels. This is an industry that's increasingly bifurcated between the haves and the have nots. Partners Group is built differently, and we're taking share across these key dimensions. Our $26 billion in fundraising last year exceeded our previous peak from 2021. The industry remains well below peak levels. our tailored solutions in our evergreen platform differentiate us and have allowed us to quickly rebuild this momentum. We also observed a meaningful outperformance on investment activity and realizations versus the broader industry. This performance underscores the strength of our investment model and our ability to navigate through complexity. I think this resilience, this ability to buck industry trends and to meaningfully differentiate positions us well for 2026, which in our estimation, will remain a highly complex environment.

Next slide. A little deeper dive on realizations here. These $26 billion in realizations were driven primarily by direct assets, which accounted for 73% of the mix. Notably, direct equity realizations were up 54% year-over-year. Our portfolio assets contributed close to $7 billion and highlights a high level of diversification on the platform. Our transformational investing approach has continued to deliver strong outcomes for our clients. These gains from these realizations also helped to drive performance fees for our dedicated hard-working professionals and for our shareholders alike. And I'll talk about that after this next case study.

Next page. We acquired PCI Pharma Services in 2016. And at the time, PCI was a regional moderate growth pharma packaging company. 90% of its revenue at that time came from more traditional pharma packaging segments. However, 10% of its revenues were from clinical trial packaging. Through our thematic work, we had identified this segment as having outsized growth potential and our strategy was, therefore, to harvest the cash flows from the legacy business and to reinvest into high-growth areas like clinical trial services, complex injectables and biologics.

Next slide. In the first stage, we focus on the business' product expansion, moving from basic commercial packaging to more advanced solutions. We leverage PCI's capabilities to specialize in injectables, an area with high barriers to entry and strong profitability, and the result was that PCI accelerated, from a single-digit grower to a solid double-digit grower consistently. And EBITDA margins expanded from the high teens to the mid-20s. In 2020, we partially exited at a high teens multiple but stayed invested as a meaningful shareholder to support PCI's continued evolution. We helped to drive the digital strategy of PCI. And by the end of these technology investments, we had a proprietary digital platform that gave clients real-time visibility into production and supply chain operations. And over 8 years, PCI evolved from a midsized platform into a global leader with over $1 billion in revenue. And this journey exemplifies our investment philosophy, deep industry research, hands-on transformation and a focus on long-term value creation. Now this is a business update call and not a financials call. However, I told you in September on our last financial call that if certain transactions, including PCI which we had at one point in time forecasted for generating performance fees in 2026, closed in calendar year 2025 that it would result in performance fees being pulled forward into 2025. And the performance fees as a percentage of 2025 revenue would likely increase to above 30%. That was a catalyst for us also to pull forward our new performance fee range as we believe that there was an increasing probability for us to exceed our 20% to 30% previous guidance for 2025. PCI did indeed close in 2025. We, therefore, foresee performance fees of somewhere around $150 million to be pulled forward. We believe that for 2025, this pull-forward effect will likely put us above the 30% level in terms of performance fees as a percentage of revenue. And for 2026, we recommend commensurately lowering performance fee expectations. We expect again to be within the new range of 25% to 40% of revenues coming from performance fees. But with this pull-forward effect, our starting expectation for the year is probably in the lower part of that range. It's somewhat a natural for us to start the year with the directional guidance for the year, but we have clear visibility on this pull-forward effect and it's too early in the year to have as clear visibility on outsized realizations that would offset this effect. We have a very solid pipeline of mature assets. We have some of the most diversified performance fees out there. We're confident in our ability to generate performance fees on a consistent basis, and we'll keep you updated on exits as the year progresses.

I'll now hand over to Juri to talk about new investments.

Thank you, Dave. Now 2025 marked a strong year in terms of investment activity. We invested $27 billion, which marks a 26% increase to prior years. Deployment was robust across all asset classes with 65% of investments in direct assets are not too different to prior years where also the lion's share was focusing on direct assets. Throughout the last 12 months, we saw attractive opportunistic transactions. This was driven by less capital raise in the industry as we saw previously, therefore, less competition and better transaction dynamics. Whereas a few years ago, you would have seen first [ round, it's up ] to 20 NBOs, there was still less competition and better transaction dynamics. We also benefited from a strong thematic pipeline that we executed on, especially in infrastructure, with thematic growth in digitization and energy transition platforms. Both themes have structural double-digit tailwinds and a strong investment need. So we increased our investment volumes for infrastructure by 46%, amounting to $7 billion in 2025.

Now let me dive into some recent investment examples on the next page. One such recent private equity direct investment on the left-hand side of the slide was investment in India. And in Infinity Fincorp Solutions, the company offers customized secured loans. Now we like the sector and the theme. We have many thematic tailwinds here, many on the bank towns, economic growth, growing government support and a rapid digitization. So other than the thematic tailwinds, we'll transform the asset, we will create value by rolling out branches, expanding the size of the asset as well as investing in technology to enhance the customer experience, enhancing the quality of the company.

On the infrastructure side, energy transition continues to be a structural growth theme. We invested in the U.S. in Life Cycle Power, a leading provider of mobile power generation solutions. Again, the business benefits from thematic tailwind, including an increased data center power demand, the expansion of domestic industrial facilities in the U.S. And also here, we will transform the assets, creating value by increasing the contract lengths, extending the fleet capacity and by enhancing the data center offerings. So again, expanding the platform, increasing the size and the quality of the assets.

Now finally, our royalties business executed on another landmark transaction. A Royalty Backed Note for The Weeknd now that's an artist who has the highest number of monthly listeners on Spotify, over 29 hits with over 1 billion listeners, truly top of the box, leading to broadly diversified cash flows, investing royalties in music, TV, but also pharma and infrastructure going forward across the sectors. So more to come. Now these investment highlights are demonstrating our sourcing capabilities but we also have very strong value creation capabilities across the investment platform, leading to an industry-leading track record. Now Partners Group having 30th anniversary, on the following slide, we're looking at investment volumes worth $261 billion since inception. We're looking at track records that are net cash on cash back to investors fully realized. So for private equity direct and infrastructure, we generated north of 20% net IRRs. In the middle of the slide, our $40 billion credit platform generated 6.9% net IRR, clearly with a focus on senior secured debt on the base of a very low loss rate. And in 2025, we successfully added Empira to our real estate platform, strengthening our vertical depth. On the right-hand side, our royalties business were off to a strong start with our fifth asset class. As a result of our investment capabilities, we raised $26 billion in 2025 driven by investor demand for customization. This record fundraising has been driven by our equity asset classes. Private equity and infrastructure that accounted for 53% of the total inflows. These inflows were supported by record demand for mandates and private wealth offerings. Private credit was likewise a major contributor with 36% of fundraising driven by mandates and insurance demand. Our real estate business turned the corner and was back on the growth path, contributing 8% with client demand for Empira offerings contributing significantly. Royalties saw $0.5 billion inflows surpassing the $1 billion mark at the end of the year. So Tying it all together in terms of fundraising strategies, it's 72% of inflows that were driven by our bespoke solutions, i.e., both mandates and evergreens had the strongest fundraising years ever. So let me dive into the mandate slide to provide additional color. While it's been the strongest ever year for mandates, we see by now a sixfold increase of mandate AuM over the last 10 years to $69 billion. So it's clearly not the new toy. It's a proven and tested, long-term strong and sustainable growth driver that addresses the complexities of today's market environment. Today, mandates represent 37% of our asset base. mandate solutions can solve structural issues that insurance companies face with close-ended funds. As such, we successfully converted several insurance mandates in 2025. We customize line-by-line mandates with a very high degree of customization. We give our clients direct access to single lines across all asset classes. As such, we do apply a dynamic portfolio steering, meaning we can shift allocations in line with market opportunities, particularly valuable in today's volatile environment.

So let me now hand over to Roberto to provide an update on our evergreen platform.

Thank you, Juri. 2025 was a record year for our private wealth fund raising, driven by the strength of our broad evergreen platform. Inflows increased 12% year-on-year, reaching $9.4 billion. But it's not just about hitting that fundraising record. What's really significant is that the majority of flows came from our broad evergreen platform. Let me put this into perspective. Historically, our evergreen business was carried by our 3 most mature and largest funds. This has now changed. While these mature funds contributed more than 3/4 of our flows 10 years ago, they now contributed 41%. The majority of our inflows in 2025 came from our broad platform with 59% of total inflows. We have seen strong inflows across the board from the new evergreen funds, but also strategic partnerships started to contribute. These broad inflows are a result of the increased customization within the wealth space. Private wealth individuals are building more diversified private markets portfolios and our diversified offering benefits from this development. We're catering to these increased needs of the clients. Our evergreen platform today consists of more than 30 vehicles launched over the past 20 years. Beyond our known evergreen funds, some of these vehicles are white-labeled funds or dedicated funds for our strategic partnerships, which I will explain in a second. This evolution really underscores our ability to deliver flexible, long-term solutions that meet the changing needs of our clients. Now while I've been talking about recent inflows, let me also address the other side of the equation, outflows and the topic of redemptions. Historically, in the initial phase of the private wealth markets, redemption levels range between 6% and 8% from 2015 to 2022. Over the past couple of years, as more participants entered the market, the market starts to mature, and we increasingly observe people switching between different offerings. Different dynamics are at play, such as rebalancing across evergreen funds as private individuals build out their diversified private markets portfolios. Due to these dynamics, the redemption levels have been increasing. Across our platform, redemption levels were 10% in the past 2 years and reached 11% in 2025. This is, in our view, consistent with the maturing market as we expect some more mature funds in the industry, which even reach structurally higher redemption levels for mature evergreens. It's also important to note that redemptions are expected to be offset by NAV growth through performance over the mid- to long term.

Let me dive deeper into the performance of evergreen funds. Next slide, please. As the evergreen market matures, and we see more funds entering the space, there's naturally more comparison and benchmarking happening. But here's something really important to keep in mind. Just like you can't compare closed-ended funds from different vintages, we also can't compare evergreen funds launched in different years, at least not in the short to medium term. Vintage year exposure is hugely influential in driving returns. Evergreen funds launched in different years have completed different vintage exposures in their underlying portfolios. Funds launched after 2022 are not exposed to the same valuations when building up their portfolios and funds launched before that period. While funds pre-2022 have built more diversified portfolios. They also have invested before the interest rate hike and therefore, faced valuation adjustments over the past years. Such vintage year effects can impact performance for a few years, especially when markets see more substantial changes in environment such as 2008 and 2022. You can see this playing out in our own private equity registered strategy. While the strategy has achieved double-digit annualized returns over the long term, in line with the performance target of 10% to 12%. It has faced some headwinds recently. But we're seeing the situation improve and we expect to inch towards our long-term return target in the coming years.

On the flip side, our recently launched evergreen funds are benefiting from positive vintage year performance since inception with returns above 15% for most strategies, which is above the long-term target. Again, it is important to highlight that our evergreen platform is highly diversified and these strong results across our strategies really reinforce our platform's strength.

Next slide, please. As private markets become increasingly mainstream, many large public asset managers are seeking to incorporate them into their product shelves through selective partnership with leading private markets managers. Our ambition is to position Partners Group to secure scalable strategic partnerships with leading asset managers during this period with the goal of launching multiple funds with different strategic partners to access different investor pools. What is key for us is that we partner with institutions to build portfolio solutions together that typically become their house flagship products. We do not push our products on their shelves, but develop solutions together instead, this approach creates long-term relationships, improving flow stability and reducing rebalancing pressures. Our recently announced strategic partnership with Deutsche Bank is a perfect example. The collaboration with Deutsche Bank will represent the main private markets offering on their private wealth platforms of more than 20 million clients. It is designed as an evergreen ELTIF fund of funds and will allow their clients to have a one-stop solution with direct and secondary investments from Partners Group as well as some allocations to third-party managers. Deutsche bank chose us, given our investment track record and our experience in not only managing evergreens, but specifically because they wanted an alive structure, and we are the first to have launched such a structure in the market. But this is only one of many. We have highlighted select partnerships entered across different asset classes for multi-asset offerings or more focused offerings, such as within our newest royalties asset class. Our global partnerships strengthen our ability to deliver tailored portfolio solutions and expand fundraising potential. They will drive inflows into listing evergreen programs and support the launch of new vehicles. We will continue to evaluate opportunities.

Next slide. Now let's switch gears and take a closer look at our AuM bridge for the year. As you are aware, our guidance specifically covers fundraising and tail downs. In 2025, we raised $26.2 billion and had an underwritten contribution of $4 billion from M&A, bringing our total new assets to $30.2 billion. Our tail-downs, which are largely formula-based, amounting to $8.7 billion. We had provided you with guidance of $9 billion to $10 billion, but tail-downs were lower as the tail-down of certain older traditional funds has shifted from 2025 to 2026. We therefore expect higher tail-downs in 2026.

Moving to redemptions. They came in at $6 billion, corresponding to a redemption rate of about 11% of our evergreen AuM as shown before. Performance-related effects amounted to positive $7.6 billion. They include contributions from a select group of products where AuM tracks their NAV development. We continue to believe that redemptions from evergreen programs are often netted out by performance effect in a normalized environment. Last but not least, foreign exchange effects had a positive impact of $9.5 billion mainly due to the strengthening of the euro against the U.S. dollar. As a reminder, 40% of our AuM is in euro-denominated programs and mandates. Overall, we achieved a 14.1% growth rate on guided metrics and an 11.5% net organic growth rate before M&A and FX. Handing it back to Dave now.

Thanks, Roberto. As mentioned at the beginning, we expect the environment in 2026 to remain complex, but we believe that we have shown that we are well positioned to differentiate ourselves and to navigate complexity. Our focus for this year on the institutional side will be to build out strategic relationships, large institutions to scale our mandate offering across our client base, to capture growing opportunities in Asia and the Middle East and to use traditional funds to capture new client segments.

On the private wealth side, we'll continue to build strategic partnerships with leading financial institutions that give us leverage in the wealth and defined contribution space. And we'll continue expanding the breadth of our increasingly diversified evergreen platform. In terms of 2026 guidance for new client demand, we expect between $26 million and $32 billion of new assets, reflecting strong fundraising momentum. Regarding tail-downs, as explained by Roberto due to lower tail-downs in 2025, we estimate $10 billion to $13 billion of tail-downs in 2026 driven by close-ended traditional funds. And for redemptions, these are anticipated to be offset by performance and other effects over time. We are very well positioned as an organization to deliver sustainable growth and to capitalize on evolving market opportunities in 2026. Before wrapping up and kicking the Q&A session off, I want to just quickly mention our upcoming Capital Markets Day. Invitations were sent out in December or March 10. We're excited to host some of you in person in our London office.

And with that, I'll pass to AP, who will quarterback the Q&A.

[Operator Instructions] And your first phone question today comes from the line of Nicholas Herman from Citi.

3 for me, please. So you've outlined the expectation for $26 million to $32 billion of inflows this year. Could you please talk about the mix of flows between the 3 strategies? I'm just curious if there's anything lumpy, particularly on the traditional programs. I know that you're going to -- you have been raising for your direct infrastructure strategy, for example?

And second question is on evergreens. You've obviously done a lot in the past year or even half year to build out distribution there. Could you give us a sense, please, as well of the bridge on evergreen flows from last year to this year? And I guess how that kind of -- that might -- I guess you might be benefiting from scaling strategies from strategic partners that you outlined, I guess, the BlackRock offering, which will be launched this year, assuming that all plays into that. So just kind of curious on the moving parts there.

And then finally, you mentioned that CMD for March, I guess, without asking you to front run too much. Just what will be the purpose of the event, I guess, especially as you gave such a detailed update last year.

Maybe I'll take number 1 and 3, and then Roberto, you can take question number 2. With regards to the $32 billion in inflow, up to $32 billion in inflows next year, anything lumpy? I don't think so. We have a very diversified business. And we do see different trends based on different geographies even, right? In the Americas this past year, close-ended strategies were a highlight for us. We saw a meaningful uplift in terms of new clients that we were able to bring on board with some of our closed-ended offerings. And I think that makes sense because that's a geography where we're not as large and deep as some of our peers. And so we're focused on establishing new relationships with some of those more traditional offerings. In Europe, wealth and open-ended structures were a real highlight, and we saw an uplift there. In Asia, our mandate offering was particularly strong this year. We saw a 3x increase in the need for customization from our Asian clients this past year for mandates. And so I think the breadth of the business, the diversification of the business is really the theme there, and there's nothing really lumpy that I would highlight as a part of the fundraising mix for next year. We are wrapping up the infrastructure fund, but that was meaningfully represented in this year, a little bit of a spillover into next year but nothing to highlight in particular.

With regards to Capital Markets Day, look, I think many of our topics will be updates on what we talked about last year. The world has changed meaningfully, right, from that Capital Markets Day. And we have a number of, I think, solid developments since then, and it's worth refreshing on some of those topics. So we do have a couple of new topics and some refresh topics from what we talked about last year. Roberto?

With regards to your second question on the bridge, on the evergreen flows, and there's 2 main drivers of the increase, on one hand, the new evergreen funds backed by new distribution partner relationships, very significant part of the increase. And on the other hand, we have seen contribution from strategic partnerships already spread really across the U.S. and Europe.

That's very helpful. If I could just come back as well, please, on the mix for this year? On -- as previously, you've given us a rough guide on the mix of flows percentage-wise between evergreens, mandates and traditionals. Would you also give us a similar mix for this year as well, please.

Yes, it's similar. So you've seen a gradual shift towards bespoke solutions over the last number of years. I would assume that, that trajectory holds.

And the next question comes from the line of Hubert Lam from Bank of America.

I also got 3 questions. Firstly, around the fundraising guidance of $26 billion to $32 billion. Can you discuss like what are the assumptions driving the bottom end of the range as well as the top end of the range?

Second question is on the mix of fundraising, which is geared, as you said, the majority of it this year in '25, higher and with the majority coming from private equity infrastructure. So what does this mean for fee margin? Should we expect the fee margin to be held at the current level? And how do you expect the mix of the asset classes to change and what it means for the fee margin going forward?

And lastly, in terms of also the fundraising guidance, how much of it do you expect to come from the new partnerships like BlackRock and PGIM? Or also like do you expect it to be more second half weighted as these types of products come on board early on? Or do you expect fundraising to be more equally weighted in the first half, second half for this year?

Thank you. So we expect for 2026 to be a continuation of 2025, meaning in 2025, we're back on the double-digit growth as we've shown. So going from there, let's say there's upside potential from improved evergreen performance, expanded distribution platforms, strategic partnerships and strong mandate opportunities in Asia, but also in the Middle East. Looking into next year as a continuation, I probably guided to the middle of the range of $26 million to $32 million, which again brings us into a double-digit growth path of new client demand.

With regards to management fee margin, we have a couple of factors that can influence things there. Number one, with regards to mix. Credit as a percentage of the mix can influence that equation. And we did see fundraising within credit at 33% in 2024, moved to 36% in -- for the full year. It was dramatically lower in H2 than it was in H1. So I think that's one thing to note. In addition to kind of mix, you have the type of offerings that are closed. We had our infrastructure fund, traditional fund raise, pretty good margins. We had a number of smaller mandates closed as a part of our mandate or our strategy to expand the number of clients that are using our mandate to solutions, good margins there. And so there's drama from management fee level. We expect stable management fees, that's our outlook.

And with regards to new partnerships, how much can they contribute. Look, we probably had about $1 billion, right, in contribution from these partnerships that are at a relatively early stage. Do we think they have the potential to scale? Yes, we do. Therefore, we'll probably be more weighted towards the second half of the year, the contribution? Yes, I do think that, that's a fair characteristic. But we already see in 2025, maybe even a little ahead of schedule from what we had expected, meaningful contributions from some of these partnerships.

And the question comes from the line of Gregory Simpson from BNP Paribas.

A few on my end as well. Firstly, on the evergreen inflows, the $9.4 billion. Can you split that between U.S. and non-U.S. and how much the regions differ?

Second question is on the realization backdrop heading into 2026. I hear what you say about PCI shifting between the years. But when you talk about the lower end performance fees? What kind of exit and backdrop are you kind of factoring in? How do you see the current health in terms of processes you've got underway?

And then thirdly, you did have quite strong performance contribution to AuM growth in H2. I think it was over $5 billion. Just wanted to check in what drove that? And what's the right base for thinking about performance effects going forward? Is it just evergreen AuM? Or do you have mandation there, too?

Roberto?

I guess with regards to the first question about the private wealth split in terms of how much comes from the Americas versus -- the other regions is probably around 40% to 50% on the Americas.

Maybe taking your third question before then giving a last one to Dave regarding the $7.6 billion. It's a mix of performance effects and other effects, such as management fee mechanism. So performance has a positive effect, mainly on evergreen funds, but also a good part of the mandate work in a similar way. Then in addition, for some vehicles, the AuM count switches from committed capital to investment exposure after 5 years. Now as those programs had strong performance over those 5 years, this represents an increase in the fee basis, which is now higher. So you can think of it like a delayed performance effect on our fee basis from performance.

And with regards to realizations, this is a strong year for realizations and therefore, would be a strong year from a performance fee perspective. I expect this to be one of the strongest years in history from a performance fee perspective. And there was a certain pull for effect from transactions that were originally scheduled to take place there. This is a message that we're reiterating from our prior call. To be honest, we didn't see consensus really move based on that message. And so we're just being more explicit here in how we're guiding, that giving you a more clear number that we see getting pulled forward. that's the purpose of that communication.

And the next question comes from the line of Mate Nemes from UBS.

2 questions, please. The first one would be on partnerships and specifically BlackRock. Could you comment on the timing of that one and when you could expect meaningful inflows starting to show up. That's the first one.

And the second question would be a quick follow on the performance fee guidance. It's very clear what you're saying on a pull-forward effect. But I was just wondering, if you could talk a little bit about what sort of market conditions you have in mind when saying that this could be in the lower part of the 25% to 40% guidance range? Does that require any further improvement in market conditions? Or what you are seeing or what you saw in Q4 transaction activity is very much sufficient. Also, are there larger, lumpier potential realizations that can sway quite materially those performance fees in 2026?

With regards to the partnership with BlackRock, I think it's progressing very well. I think we've -- we have a strong relationship and believe that their attributes, combined with our attributes make a very strong offering here. We expect for that partnership to launch in Q1. And I would expect additional insight in the coming weeks and months with regards to who we're partnering and that's likely to take place. But yes, more to come in the coming weeks on that. I do expect for that to have the potential to generate meaningful inflows, but we haven't given any specific guidance on that.

With regards to market conditions for exits, we never assume an improving market environment. We believe that the current environment will remain. Now if you had asked me 18 months ago, would I expect to see $10 billion enterprise transactions taking place, I would have said probably not, right? So from my perspective, we've already seen marked improvements in exit conditions and this is a market environment that we feel very comfortable transacting in, operating within. And so no, there's no dramatic changes that need to take place. This is simply a normalization of exit activity between 2025 and 2026. There's no change in environment that's assumed for that.

Thank you. I will now hand the call back to the room for the web questions.

We have some online questions from Daniel Regli from ZKB. I think, Dan, on your first question on the BlackRock partnership we have covered, so I'll go to the second question, which is time line for inflows from US 401(k) and how large we expect this opportunity to be? That's question one. And question 2 is exit environment in 2025, how we expect this to impact fundraising in 2026.

Maybe I start with the question regarding the 401(k) plans. I can report that there is a good dynamic in the market. We're in discussions with partners to create solutions. Keep in mind though that those solutions are complex in terms of building them, setting them up. So I would expect a gradual increase throughout 2026 as opposed to a jump.

And with regards to how the positive exit I guess, momentum that we have built in 2025 is expected to increase or improve fundraising. I think clients always love getting capital back. I think that's clearly the case. And so it's obviously easier to sit down with a client that you just send a lot of money back to than it is to sit down with the client that is starved for liquidity. And so I do think it can improve the sentiment. But please do keep in mind that many of our clients today are in structures where we're steering towards their NAV targets, right. Custom mandates, custom solutions, the traditional fund side of our business where they need to get capital back in order to commit to the next structure is a relatively small part of our overarching business today. And so that phenomenon that you might hear about from others that are more traditional players. It's present clearly across the industry, but it's probably a little bit less present in the Partners Group client base than you might find in other places.

And with that, it looks like there are no more questions, we'd like to thank you all for your participation. Thank you for your interest in our company, and we look forward to hosting some of you in our London office in March. Thank you very much.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Partners Group Interim Financial Results as of 30th of June 2025 Webcast and Conference Call.

I would now like to hand the conference over to your first speaker today, David Layton. Please go ahead, sir.

Thank you very much, and welcome to our H1 2025 results call. My name is Dave. I'm the CEO. I'm joined by Joris, our CFO; and Roberto, our Head of Portfolio Solutions. I also have a couple of other colleagues present for Q&A should that be necessary. We're actually presenting today from our London office, where we're joined by several members of the analyst community here based in London as well as a number of you on the phone.

I'll start on Page 2. Our platform delivered what we believe is solid results for the first half of this year from a fundraising perspective, $12 billion in new assets raised. That's about 10% growth year-on-year. We had steady client demand from our bespoke solutions category, in particular, that made up about 74% of the inflows during the period. And we've reconfirmed our guidance for full year fundraising of $22 billion to $27 billion.

In terms of management fee, we had a stable management fee margin at 1.23%, which resulted in management fees of CHF 854 million. That development is broadly in line with our average assets under management in Swiss francs. And that management fee margin is also kind of within the historical range that it's been at for some time.

Performance fees saw quite an uplift during H1, 94% growth year-over-year. They came in about 27% of revenue. On the back of that activity as well as some of the additional exits that we have signed, but not yet closed, where we have visibility on the closing time lines in H2, we have increased the expected range for this year to be consistent with the 2026 guidance that we had previously given of performance fees making up between 25% and 40% of revenues for the full year.

Earnings came in at CHF 733 million, up about 17% year-over-year. We had growth that was more or less in line with revenues, a little bit of margin impact from M&A and from currency, but nothing significant. We continue to have a strong hand on the wheel as it relates to steering from a cost perspective.

On the next slide, just digging a little bit deeper into our asset flows. Again, this speaks to the long-term trend that we have been driving in our business away from products towards bespoke solutions. We do think that the future of private markets is portfolio solutions that solve more comprehensive needs of clients. And you've seen that consistent shift in our asset mix over time. And indeed, that was continued with 74% of H1 inflows into these bespoke solutions.

On the mandate side of things, private credit was a highlight for this period, building solutions for insurance companies in particular. And with our evergreen business, private equity was the largest contributor to that particular segment. If you look over the past decade, you've seen bespoke solutions increase as a percentage of our total assets from 39% a decade ago to roughly 68% of our asset mix today.

Roberto, do you want to dig a little deeper into mandates and evergreens.

Thank you, Dave. We continue to drive tailorization and democratization across our client segments. Tailorization is what we mainly reflect we set for mandates. It's the largest client segment nowadays with 38%. And the reasons for a mandate can be almost as many as we have mandate clients. Oftentimes, it relates to investment-related allocation focuses, a specific region, a specific segment. It can also go to the opposite, be as broad as possible so we can play the relative value and benefit from tactical asset allocation shifts across private markets. And there is a big, big number of reasons that simply relates to regulation, relates to efficient capital deployment in case of insurances, for example, or simply wanting to start a mandate at a time when there is no closed-ended fund starting in our offering.

And one of the changes you have seen here over the years, we've been increasingly able to offer mandates from smaller and smaller starting sizes. And today, you can get a separate account at Partners Group starting from $50 million. The other big area, often summarized under buzzword democratization is the whole evergreen and private wealth space. That's the segment of our business that has grown more strongly over the last 5 years. And while it used to be a very limited number of products and partners, today, you talk about more than 20 programs. We've been talking a lot in July also about the new offerings that we've been bringing to market over the last 2 years specifically, but it's a trend that's been going on for the last several years.

And similarly, on the client side, we've seen a substantial increase in partners geographically both and by sources investing with us in this segment. We've added 40 distribution partners over the last 12 months. Some of those will be more typical distribution partners, can be smaller in scope. Some of those are more strategic, like names you will see below there. We will announce a few more over the next couple of months. And I think just to pick out a couple of examples, you can go all the way from highly branded efforts together like here on the left side of the chart. Well, let me pick out 2 examples here in Asia Pacific, where we create white label products for local banks in Japan and in Taiwan, which is something that we're providing the engine under the bonnet, but we're not necessarily out there with our name riding the vehicle.

Last but not least, I think a link to the strategic partnership. Nowadays, also in the evergreen space, we're moving more and more from product to solution. So the beauty of many of those partnerships is that you create something together, you create something bespoke, which typically is a much more lasting and long-lasting partnership and it can be in the case of a single product. That's not too dissimilar to what we have been observing on the institutional space over the last decade. Back to you, Dave.

On the next slide, I think this really highlights the diversification that exists within the business. You'll find some periods where certain geographies are more challenging, other times when other geographies are more attractive. I think the diversification within the Partners Group business gives us a lot of stability as it relates to building solutions for a clientele that is truly global in terms of its needs, in terms of solutions that they require. Also, if you look at the type of client that we service, it is not a one-trick pony. We are indeed building solutions for a wide range of institutional investors as well as individual and families.

And on the back of that diversified network of clients, we have built a bottom-up pipeline that gives us pretty good visibility into new assets raised. And so as you're aware, we anticipate $26 billion to $31 billion in new assets this year, $4 billion coming from M&A and $22 billion to $27 billion coming from fundraising. And indeed, we are on track to achieve within that range of expected outcomes from a client flow perspective.

On the next slide, it speaks to the investment activity that we saw in the first half of this year. We have seen activity picking up, and that's reflected in the reality that we had about $9 billion in investments that were closed in the first half of this year, and we have an incremental $8 billion signed but not yet closed as of August. And so we do see investment activity picking up. We have an extensive long-term pipeline. And again, it's not just in one category. That's across private equity, where we had a number of buyouts close and pipeline assets progress in the first part of this year as well as infrastructure. Infrastructure is actually having quite a strong year with regards to converting on its pipeline.

A couple of interesting growth investment opportunities, which we're quite pleased with. And then the royalties business, which is a newer initiative, I think it's made 10 new investments this year in some really attractive spaces and is helping us to build out a seed portfolio in that asset class that we're able to take to market and we have the belief that 2025 has the potential to be actually quite a good vintage year. And so we are staying active and working hard. It is hard work, though. It's not just one type of investments, not just direct investments either, like our portfolio team has also had a pretty strong year. Our secondary business, for example, was very, very active. They screened $102 billion of opportunities this past year and invested in just the top 2% of things that came across our desk.

You do see the secondary market becoming a more regular tool that's used, and we have the flexibility to invest across the spectrum. Sometimes they're $20 million solutions that we're buying an individual position in an individual fund and sometimes they're $1 billion solutions that we're bringing to the table for a large institutional seller. And our ability to work across the spectrum, I think, does give us a leg up in that regard.

Performance fees, obviously, a topic in H1. When the tariff drama unfolded earlier this year, I think there was a lot of skepticism that performance fees were going to be able to be generated within the industry more broadly. And I think the fact that we have had performance fees in this period that are consistent with the performance fee levels that we've been able to generate over the past number of years, I think it speaks to the strength and the diversification of the platform. If you think about where these came from, we had about 37% of those performance fees that came from our evergreen vehicles. The balance came from our mandates and traditional programs. We have performance fees that were generated across all 4 asset classes.

Obviously, most of that came from private equity and infrastructure, but about 10% of those performance fees came from credit and real estate combined. The direct portfolio made up the majority of those performance fees, but we had over 40% contribution from our portfolio assets to that performance fee number, which speaks to the diversified nature and the fact that our secondary investments are indeed generating strong returns as demonstrated by the diversified infrastructure portfolio, which is highlighted on this page, $1.5 billion in distributions, 2.4x on the 4 exits that have been generated out of that portfolio to date. And you also see 90 different investment programs that contributed to those performance fees, okay? So this is, again, not a one-trick pony, and they came from multiple sources. So over 27% of the performance fees that we generated were generated from selling down existing public positions and the balance came from new exits or new developments within the existing program.

So indeed, we have a number of sources. And that even includes the reversal of the tech and performance fee, which we had talked about where that contract needed to be restructured. We expect for those performance fees to be reinstated as soon as that contract closes probably in the second half of this year, we'll see.

We have pulled forward our guidance for performance fee expectations. We have been working within a 20% to 30% guidance range for a number of years now. And I think that was appropriate for the investments that were being realized during that period of time. But just to jog everyone's memory, over the last decade, 1.5 decades, we have affected quite a significant mix shift within our investment portfolio, not only investing on behalf of more and more clients and deploying more and more dollars, but also having a more significant deployment within direct investments. And those direct investments are the most significant source of performance fees for most managers, Partners Group included. And so as you see the primary realizations coming from this era of higher direct investments and higher volume, performance fees will continue to come through on a larger and larger basis. And we feel very good about our ability to at least create performance fees as a percentage of revenue consistent with what we've done in H1. And indeed, if our signed pipeline continues to progress according to the schedules that we see, you could very well see performance fees in the 30%-plus range for this year, hence, the need to update the guidance.

And with that, Joris, I'll hand it over to you to review some of the financials.

Thanks, Dave. It's a pleasure to be here with you, all of you today. I would like to walk you through the 2025 interim results. So let me start with our assets under management. As you have heard, these are diversified across asset classes and regions in U.S. dollar. They grew 17% year-over-year. AUM growth in U.S. dollar was positively impacted by FX and the addition of USD 4 billion in underwritten contribution from Empira.

In average AUM in Swiss franc, this translated into growth of 8% following the strong appreciation of the Swiss franc against the U.S. dollar. Total revenues increased 20% to CHF 1.17 billion. Performance fees contributed meaningfully and represented 27% of total revenues, in line with our guidance given in the AUM call in July and up 17% from last year. EBITDA grew in line with revenues increasing 17% year-over-year.

So let's move to the next slide where we see our revenues in more detail. We have 2 sources of revenue, management fees and performance fees. Management fees represent most of our revenues and are recurring in nature. Management fees grew by 5% in the first half of 2025, following the growth in average AUM in Swiss franc of 8% year-on-year. However, FX and lower other revenues and other operating income had a negative impact on management fee development. Looking at FX, we saw a negative impact of 3% on management fee growth. Other revenues and other operating income decreased 36% year-on-year, largely due to modestly lower late management fees and a decrease in income related to treasury management services.

Let me talk about the management fee margin on the next slide. Our management fee margin stood at 1.23% in half year 1 2025. This is well within our historical bandwidth of 1.18% and 1.33% since IPO. If we look at the recurring portion of this margin, it was at 1.16% for half year 1 2025. This is a slightly positive development from our 2025 recurring margin, which was at 1.14%.

As I mentioned in the AUM call, our management fee margin is driven by several factors. First is the product mix, which in half year 1 contributed negatively with a higher share of credit. Second, we saw the positive impact from products now showing the full effects of the fee clock being activated late last year, including Direct Infra IV. In addition to that, our new evergreen vehicles contribute with a solid margin.

Finally, next to a few other items having smaller impact like FX, we were able to profit from the impact of the additional management fees from the acquisition recognized in the first half year 2025. We expect also in the future to see slight variances between the years driven by the timing of the fees and the mix of our asset classes. Our revenue margin increased to 1.69%, supported by strong performance fee growth in half year 1.

Let's look at the performance fees on the next slide. In half year 1 2025, performance fees represented 27% of our total revenues, well within the prior range of 20% to 30% of total revenues that we have guided for. We're proud of these developments. And as Dave mentioned earlier, it underlines the strength of our diversified platform. As you will remember, we previously communicated that as of 2026, we expect performance fees to account for 25% to 40% of total revenues. When we look today at our exit pipeline, we see a continued strong momentum. If the currently signed pipeline closes already this year, with PCI as an example, and a continued consistent performance of our high watermark programs, we can very well pass into the range above 30%.

And thus, it's requisite to update the previously issued guidance, and we decided to pull forward the new range and now expect performance fees to account for 25% to 40% of total revenues already in 2025. A portion of this added performance fee in 2025, we originally expected to realize in half year 1 2026.

Let us move to operating costs on the next page. Profitability remained strong with an EBITDA growth rate of 70% at an EBITDA margin of around 63% or 62.7% to be precise. While Empira is accretive to our overall management fee margin, it operates at a lower EBITDA margin than Partners Group as is usual for vertically integrated real estate platforms. Total operating costs increased by 25%. As you can see, personnel expenses accounted for 86% of our operating costs, and I would like to go more in depth into those. Performance fee-related personnel expenses increased 91%, in line with the increase in performance fees, which were up 94% in half year 1. These 2 categories typically move in tandem as we allocate a fixed proportion of up to 40% of performance fees to our employees.

Management fee-funded employee personnel expenses, on the other hand, typically grow in line with average FTE growth. In half year 1, we added 256 average FTEs, increasing our average FTEs by 7% over the period. This is driven by the M&A activity, which we completed in half year 1. Management fee-funded personnel expenses followed this and increased by 9%. Other operating expenses increased to CHF 60 million because of the inclusion of Empira in half year 1. Excluding acquisition, our cost discipline ensured other operating expenses at the level of the prior year.

Let's move to the next slide. We are a global business reporting in Swiss francs. However, most of our revenue comes from U.S. dollar and euro-denominated funds. Unsurprisingly, as the Swiss franc strengthened, this created a negative translation effect on our EBITDA margin of approximately 0.4 percentage points.

Let us move to the next and final slide. We invest around CHF 1.4 billion alongside our clients across various programs. In the first half of 2025, these investments generated a positive performance of CHF 38 million. The net financial income translated into CHF 13 million as impacts from foreign exchange, hedging and interest expenses were at the previous year's level. Our tax rate amounted to 18% in half year 1 2025, within our previous guidance. Just to recap, we anticipate the tax rate to be within the range of 18% to 19% looking ahead. This leaves us with a profit of CHF 578 million, up 14% year-on-year.

Looking at our available liquidity, we increased the level to CHF 2.9 billion. We believe this gives us substantial room and flexibility to continue growing our business as we look at the coming years.

With that, I would like to hand over back to the operator and to open the Q&A.

[Operator Instructions]

I will now hand the call back to the room for live questions first.

We'll start here in the room, any questions?

Yes. It's Nicholas Herman from Citi. I've got three questions, please. I guess a big picture question on alternatives demonetization and then two questions for Joris. So on alternatives democratization, I guess since we last spoke, we've had the U.S. President issue an executive order to democratize private assets. So I guess, are you now increasingly confident that we will get a safe harbor provision issued? And I guess at an industry level, how long do you think it will take before we start to get more retirement plan providers following Empower and offering private assets to plan members?

The two more technical questions. The first on performance fees. In March, you talked about $19 billion of NAV to be exited over 2 to 3 years. I appreciate that, that $19 billion will grow and continue to grow. But just broadly, based on the new performance fee guidance, what proportion of that $19 billion will you have exited by the end of this year?

And then the final question is you've now got $1.2 billion of net debt today. I guess you've made some fairly sizable seed investments in the past couple of years. When do you expect those seed investments to start -- [indiscernible] be able to realize some of those seed investments and generating cash from that so that you can start to kind of push up your cash position rather than being a headwind to that.

Maybe I'll take 1 and 2 and Joris, you can take -- or maybe Roberto, who oversees many of those seed positions can take number 3. So with regards to democratization, we're very encouraged by the actions taken by the Trump administration to continue to support the democratization of private markets. And this is a trend that we have been hoping to see for some time. 401(k) is a substantial potential client for the private markets. A lot of people have thought about private assets as being mostly applicable to large institutional investors. But there is a matter of fairness in that the largest investors in the world have had access to investment types that are maybe not as accessible to everyday investors.

And indeed, that move pushes the industry -- or pushes, I think, investors globally towards more fairness of options and allowing everybody to have access. It primarily, I think, helps to protect against litigation, not perfectly so, but it helps with that overall trend. And litigation has been one of the gating items that has kept plans from participating.

Indeed, Empower, the second largest 401(k) provider in the U.S. was an early mover and went ahead of that announcement by just a little bit to announce that they're including private markets as a part of some of the solutions that they're going to be providing, and we welcome that and are pleased to be participating in that announcement. And there is a lot of other work that's being done right now by other plan providers to get ready for adoption.

I would anticipate this next 18 months are active with regards to laying the groundwork for a number of participants. But then you're going to see an adoption curve that is probably similar to what you saw in wealth, right, where you had some early adopters that move first, right, some pioneers that kind of help to create the solutions that work for them. And then you'll see an adoption curve that kind of gradually comes over probably a decade in all reality and then starts to steepen pretty materially after that. That would be my best hypothesis of how long it takes to see that really play out.

With regards to the pipeline that we shared, indeed, we have had in March, $19 billion of assets where we had investment teams assigned to drive liquidity in those. Our team has been hard at work. You saw a portion of those assets get realized as a part of our H1 efforts. And then you also have had other teams that have been assigned to other assets. So that pipeline has gone up, not quite by 2x, but approaching that. We do have a quite sizable portfolio of assets that has matured and is ready.

Now I wouldn't read too much into that. We were kind of giving you some insight into what our teams are assigned. Oftentimes, you'll have a team that will explore a particular topic, come to a conclusion, it's not the right time. But I'm just saying we have a real portfolio of assets where we've developed them over a long period of time that's reflected in the fact that we have all of those direct positions that we shared earlier.

And again, keep in mind that the values that you see in those circle charts with regards to the direct investments that were made, that was the cost that was invested. That cost has also appreciated and adds to a pretty substantial continued pipeline of opportunities. I would just keep in mind, though, and Joris mentioned it, there's probably $100 million or so of performance fees that we had anticipated for 2026, where the closing time lines currently place that revenues most likely falling into H2. So there is a little bit of pull forward that you need to take into account. But that doesn't take anything away from the fact that we have a very robust pipeline of assets. Joris, anything to add to that?

No, I think that's summing it up well. So then I just go to the next question, which is about the seed investments. As you're well aware, I think last year, we were quite active in launching all the new evergreens and the multitude, which were also performing quite nicely. And with this, we also allocate the seed investment, which is typically -- it's available for sale. So it's expected to be due in roughly 12 months. And of course, depending on when we launch these, they can also move in and out. So I'm not that much concerned about that position as it just will basically translate at the beginning into a higher balance sheet position. And then as soon as the fund is growing, it will then translate back into the cash position.

[Audio Gap] JPMorgan. Three questions from me as well, please. If I can just first follow up on private wealth. When you gave us the update in July for the H1 fundraising, we saw that private wealth fundraising or evergreen fund raising, I should better call it, was actually better than what we expected or what the market expected at the time. Having said that, obviously, April was quite volatile and probably the second quarter was a bit more difficult than the first quarter. What do you see at the moment with regards to the third quarter? What have you seen over the summer? And what is your outlook in terms of fundraising in the private wealth/evergreen channel for the rest of this year?

Then second question, just to come back to the management fee margin. You mentioned that the margin, excluding other income, stands at 1.16%, which is 2 basis points better than last year. Is that sustainable going forward? And what is the outlook for the management fee margin in the second half and also sort of '26, '27? You did mention that we should expect to see some variance as we have seen in the past. But in most of the years, really, the margin has been above 1.23%, including other income. So I just want to understand if the 1.23% is kind of like a new base and whether we could move lower consistently from that level just because I think if I'm not mistaken, some of the new evergreens at are lower margins than the older evergreens, you are now perhaps doing a bit more credit. So just the dynamics there.

And then just a last question on the performance fees for the second half. Is it fair to assume that they could be higher than the $314 million that we saw in the first half of this year?

Maybe I'll take the first one, private wealth question first. On the fundraising in private wealth, I do think -- and I mentioned that in -- there's no change in that sense from July. We have seen a relatively good result. There's probably still worthwhile mentioning that under the bonnet, there is a dynamic where on a relative basis, new funds have been coming online, not just structurally, but also adopting broader distribution throughout H1. We expect that to continue into H2. When it comes to the more mature evergreen funds, we have seen a pickup in performance that I was referring to in July. At the same time, we're also aware there's a certain dynamic at work where with the new entrants in the market, there is a higher diversification that our clients go for and therefore, a smaller share of wallet that remains with overall Partners Group versus a few years ago. And we certainly believe this will continue for another few quarters the same way like the effects of a stronger performance typically manifesting themselves with a bit of a lag in terms of client flows. So in terms of guidance, we stick with what Dave had mentioned at the call last time.

Let's maybe go to the management fee margin. Again, I'm sorry to repeat that there are multiple factors, of course, driving the management fee margin, which are also for us, I think where we need to think in scenarios. So when we assume, of course, that the mix in the asset classes remains the same and also the levels remain roughly the same, I think you can also take an assumption that you can write this forward at least for the next period in time. Having said this, of course, at some point in time, when we definitely will see how the fundraise comes in during Q3 and Q4 and when the fee clocks will be activated, and that can of course also start changing slightly.

So I hope I've given you a...

You could see a little bit of a reversion to kind of where it was last year, like without any real surprise on our side. At the same time, you've got a number of new relatively high-margin funds that are expected to hold closings in the second half of this year. So you have a couple of factors there. But I think we're in a reasonably stable and consistent place today with regards to where that is.

With regards to performance fees and if we expect higher performance fees in H2 versus H1. We would not have updated our range unless we had reasonable visibility on getting into the 30s for an average for the year. So indeed, that does imply H2 having quite a bit of activity potentially in it. Now we've got a good line of sight on to that. And again, Joris, just to repeat one of Joris' messages, that is dependent on a couple of things. Number one is the environment staying reasonably stable because a portion of our performance fees do come from vehicles with a high watermark structure where you need kind of performance to contribute a certain percentage of that. And number two is closing of already signed transactions, PCI being one of those, where according to the current closing schedules, we do anticipate that to happen in H2, but there could always be drama that could turn that around.

I'd say a good floor would probably be that 27% where we were in H1 and maybe into the 30s somewhere should the market stay where it's at today and should the pipeline close.

It's Greg Simpson from BNP Paribas Exane. Two questions from my side. Firstly, on the secondaries market, it feels like it's become quite attractive for evergreen -- with the evergreen market in terms of the accounting around secondaries. So could you talk about how you're seeing secondaries in terms of pricing, the attractiveness to deploy, get the returns you want at this point in time?

And then second question, just on M&A. Any comments on how Empira has gone so far since closing and your kind of outlook around further M&A coming through and time horizon discussions?

Yes. I'll take maybe both of those. So if you think about the secondaries market, indeed, if you have a single investor in a fund that's seeking liquidity on their position, they oftentimes have to take a discount in order to get out. And there's been a lot of attention that's been placed on that. But it is very normal. Like if you think about if you went into business with 3 friends and bought a summerhouse, put some money in, fixed it up and rented it out, you guys wanted to do that for 10 years.

And 1 of those 3 friends wanted to get out 5 years in and the other 2 wanted to stay, you would need to find an individual that's willing to step into a very specific arrangement and they might indeed need to take a discount in order to find a buyer who's willing to do that. That doesn't have any bearing on the neighborhood that, that house is in. It doesn't have any bearing on the value of the home itself. But indeed, there is a discount for somebody that needs to find liquidity on a very specific arrangement they're stepping into. And there is some opportunity there to capture value.

Now that has never been a big part of our specific secondary strategy, however. If you look at our secondary business, we are multiple of money focused, which means we're buying assets earlier in their life cycle. So if you look at our returns for our mature secondary vehicles, we have about a 1.83x return that we've been able to generate for our clients in the secondary business, which is relatively high. Now as you analyze where that return has come from, we have about 0.09x that has come from capturing discount, and about 0.74x of that gain that has come from positive development of the underlying assets.

So 90% of the gains that we have booked in our secondary activities has come from identifying assets with upside and getting in front of those specific assets. That's not everybody's play. Some people do buy tail-end assets of complex assets where you can get a big discount and capture a big discount. And indeed, those can be used to provide an immediate uplift within certain structures, but that's not a huge part of what you'll find within the Partners Group portfolio.

Indeed, when you look at our returns that we've generated through our secondary investments, some of our best returns are actually assets we paid a premium for and actually had to take our immediate write-down, making that investment. Those have been some of the most attractive secondaries that we've ever done because we're buying assets where we have a fundamental belief in the development.

And so yes, you'll see reasonable secondary activity from us. We do think that it's an attractive place to play, but we have kind of our own corner of the market that we've carved out and not as much heavy discount activity from the partnership team.

With regards to M&A, we're quite pleased with the acquisition that was announced in Q4 of last year and closed in H1 of this year. We continue to believe that the real estate business will move in a direction of vertical integration. The days of kind of asset allocation strategies, are going to be more challenged. And the future of real estate are vertically integrated experts that have a particular area that they're very, very deep in. And you could well see us pursue another couple of acquisitions related to that specific theme. In terms of broader M&A activity, we continue to believe that we are in a position to consolidate our unique corner of the market, but there's nothing to speak to at the current point in time.

Charles Bendit from Rothschild & Co Redburn. Two questions, if I can, on private wealth. Firstly, can you comment on the net flow dynamics within your USP evergreen funds? Are we seeing a steady pattern? Or is there evidence of larger gross inflows and outflows potentially reflecting a combination of increased demand from high net worth clients, but also some rebalancing from advisers now that there are more products available across the wirehouse platforms?

And then secondly, could you just update us on private wealth dynamics outside the U.S. and how you're positioned vis-a-vis the competition in those markets where distribution is perhaps more fragmented?

Roberto, do you want to...

Taking the U.S. question first, kind of relating to what I mentioned before. There is a certain rebalancing dynamic that has been going on. At the same time, we have been adding new distribution partners from traditional private wealth segment, but there's also a number of sources that relate to defined contribution that feed into the registered funds. I think overall, and you know this is all public and the bottom line is we're roughly flat. I think net flows in H1 were about minus 1%. So we don't see the growth that we'd like to see, but we see the underlying drivers in place for that to change back to a growth path in the future.

Regarding the dynamics outside the U.S., I would say it's probably a bit more fragmented when it's about the product mix, but also somewhat the asset class mix. So we do see a picture that includes infrastructure, that includes royalties in the private wealth segment.

And yes, I think you're right, being more fragmented means also effectively that from our sales force perspective, we have built a team that literally is present on the ground across all of those countries where we deem there is potential solutions that we work on, I mentioned Thailand white label, that's all very specific. So it's probably at the margin, a bit more structuring required and a bit more bespokeness in how you set up those partnerships or distribution arrangements, which vary market by market.

Sharath from Deutsche Bank. Three questions from me, please. First is on the management fee-related earnings margins. We saw a compression of more than 200 basis points in the first half. I suspect the combination of FX and Empira. So if you could split it, I think that would be helpful.

EBITDA margin.

Yes, the fee-related -- management fee-related EBITDA margin, not the one outside of the performance fees. So do you think the current level of around 62%, would that be a fair expectation given what you have seen in the FX? That's the first one. And it would be helpful if you could provide the EBITDA contribution of Empira separately just to understand this impact.

Second, any guidance on operating costs would be helpful. Would say, low double digits be a reasonable expectation going forward, broadly in line with AUM. And finally, on your BlackRock partnership, any updates there? And any update would be helpful.

Joris, do you want to...

Yes. I think If you look at the -- I mean, we told you that we had an FX impact on the EBITDA margin of negative 0.4%. So translating this backwards, if you compare it, that also means that the rest of the platform was relatively stable in the margin. And the other impact might have been or must have been acquisition related. Of course, you also see that the -- I mean, Empira, we also -- you see this in the details. I think that added also revenues of CHF 41.5 million. The EBITDA margin is coming in lower than the overall like-for-like PG platform margin, previous margin.

Now if we look at the future, we still expect that -- when we look at new business coming in of the group, I think we can still expect to stay within the 60% of operational margin that we also guided even though we added now an acquisition.

And with regards to timing around new portfolio solution launch for private wealth in partnership with BlackRock, no update to the expected timing there. It continues to be kind of a Q1 next year anticipated launch.

Anything else from the room? If not, we'll turn to the operator to field questions from the phone call.

Your first question from the phone comes from the line of Daniel Regli from Zürcher Kantonalbank.

One question is on the performance fee contribution from evergreen funds. And can you give us a little bit of a feeling how this has developed over the past couple of semesters and remind us about important factors we should keep in mind for H2? Is there any kind of high watermark dynamics to keep in mind for H2? Or can it be assumed to be largely proportional to the performance of the Evergreen structures?

And then secondly, a follow-up question on the recurring fee margin. And obviously, this one has been up to 1.16%, as you said. And can you maybe give us a little bit of sense about how much of this increase was driven by the Empira acquisition? And further, maybe also on the management fee margin, there has been some press articles from larger newspapers towards the end of August about private equity firms being struggling to raise money and giving enticements or discounts to attract new investor money. Obviously, this seems to contradict what you have just presented. Can you maybe elaborate on this? Is this just something which is not affecting Partners Group? Or was this article just outright wrong?

I'll maybe take the first couple of questions and then Roberto and Joris, you can fill in where I have gaps. So from a performance fee perspective, I would assume that performance fees develop roughly in line with the -- over the long run with the percentage of assets that they contribute. We have had evergreens in the mix for a long period of time. There are some people that treat evergreen assets like management fees. Indeed, we have seen periods where they contribute and periods where they don't contribute over the last 15 years that they've had. And so for the type of management fees that we want to provide being sticky and contractual and consistent, that's not our approach. We keep these as performance fees because there is a variable nature to them. One of them is indeed the high watermark features that they often have, but there's no drama with regards to those high watermarks that I would point you towards at the current point in time.

Indeed, if you continue to see appreciation within the underlying portfolios consistent with what we saw in H1, you should expect to see contribution consistent with that in H2. No particular drama that I would point you towards there.

In terms of the recurring fee margin, Empira was one of the factors that was on the positive side of the scale, as Joris mentioned. We had our asset mix, which was credit heavy, which was kind of on the negative side. We had some new funds that we closed on that were higher margin as well as some Empira funds that we closed on that were higher margin that were on the positive side of that average. And so the Empira acquisition probably contributed -- I don't know exactly what it was, but it did contribute probably a basis point to that result.

With regards to fundraising for private equity specifically, indeed, it is a more challenging environment in the private equity segment of the market, which is the segment of the market that we are primarily in. If you look at where most of the, let's call it, most of the easy money is being raised right now. It's with credit-related solutions, total balance sheet type solutions for insurance, et cetera. And being a firm that's primarily equity-oriented, we probably don't have as much of that, let's call it, credit solutions that you see as being raised out there.

At the same time, we are an investment firm first. We really do think of ourselves as much more of a business builder than as an asset manager that just raises money based on where it is. You do see a pickup in demand for credit solutions. And indeed, I think the -- while it's not a total balance sheet solution that we provide, many of the mandate solutions that we're building for insurance companies that are having to raise their game on the investment side of their portfolio, informed by some of the captively owned insurance companies out there and them having to compete with them has been a driver of growth for us. But that's in the higher margin, higher value segments of the market by and large. We do not want to chase commodity business.

With the evolution that you see happening within the private markets today, you have thousands and thousands and thousands of firms that have historically raised traditional funds, limited partnerships. Institutional investors have a relatively mature allocation to private markets, and that has not been growing at the same rate that we have seen historically. And so you do indeed see a lot of competition for traditional private equity funds that are having to battle with each other over who stays in their existing slots and who gets replaced by consolidating investment allocations from those traditional allocators.

Partners Group differentiates itself with a lot of factors, with the fact that we build a more comprehensive solution for our clients. Oftentimes, we'll own the entire clients' private markets allocation. Oftentimes, we'll build a mandate solution where we're steering towards net asset values as opposed to just having traditional drawdown funds. So we have a lot of means of, I think, differentiating ourselves other than just being another limited partnership that has to compete and give discounts. So we are very disciplined. And it does, at times, limit our growth, how disciplined we are because we are a firm that holds the line. And we will indeed sacrifice a couple of points of growth for the stability of the platform at times. But it is a phenomenon that is not a false news report. It is an absolute dogfight for a traditional private equity fund to get raised right now.

Okay. Just one quick follow-up question. Can you kind of remind me about the late management fee development recently? Obviously, this has been subdued over a period of time. Can we expect this to recover soon? Or will this just take another couple of quarters until we see late management fees to recover?

Joris?

I think if we look at this year, I think I would just stick a little bit to what we've seen until it's then going to recover going forward.

Your next question comes from the line of Oliver Carruthers from Goldman Sachs.

Oliver Carruthers from Goldman Sachs. I just have one follow-up left from Charles' question on the U.S. evergreen business. Roberto, I think you said that the underlying drivers here are now in place to get back to a growth phase. If we look specifically at the master fund, the $17 billion fund, which is the bulk of your AUM in the U.S. evergreen business, it looks like the performance side of this is really improving, is inflecting, was strong in July, as you mentioned. But I guess on the other hand, we saw an acceleration of net outflows in the second quarter. If we marry up these dynamics and take your comment, Roberto, is it reasonable to assume that Q2 was probably the trough here? Or is it too early to draw that kind of conclusion yet?

I'd be always careful to make point estimates about how exactly a dynamic for a specific fund is moving quarter-by-quarter. I do agree with you, though, that the underlying drivers that we've known to have been good indicators of how future fundraising develops or net flows develop have been pointing in the right direction since our June AUM update call.

Thank you. There are currently no further phone questions. I will hand the call back to David for closing remarks.

Okay. Thank you for your participation in this results call and for your ongoing interest in our company. We're pleased to now wrap this call up and look forward to speaking again soon. Thank you very much.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.