Partners Group today publishes its H2 2017 Private Markets Navigator report, which shares the firm’s mid-term outlook and investment preferences for all private markets asset classes.

Introducing the report, Steffen Meister, Partner, Delegate of the Board of Directors, and Chairman of the Relative Value Committee at Partners Group, says: “We continue to believe in a base case macroeconomic projection of sustained low but steady growth. However, after nearly a decade of rising markets, and with a shift away from extremely loose monetary policy, there is the risk of a deviation from our base case. Identifying anchor assets with platform-building potential in above-average growth segments and testing their resilience to adverse economic scenarios is key to outperformance in this environment.”

A short summary of the views presented in the H2 2017 Private Markets Navigator:

Private equity: the prospect of different potential macroeconomic outcomes paired with high valuations makes for a challenging investment environment. To continue to generate sustainable returns, we focus on ‘platform investments’ through which we can develop resilient market leaders at a reasonable price. Next to platform investments, we maintain two additional major investment strategies: we aim to find ‘category winners’, which are leaders in terms of market share or growth potential in sub-sectors benefiting from trend-based tailwinds, and seek out ‘niche leaders’ with strong defensive capabilities. A recent example of our ability to capture a category winner is our acquisition of Cerba HealthCare, a leading European operator of clinical pathology laboratories.

Private real estate: an uncertain market environment has prompted us to take a more measured investment approach. We seek properties and locations benefiting from social, demographic and technological trends and remain focused on identifying assets with value creation potential. To crystallize value, we buy assets in rebounding markets below replacement cost, we ‘buy, fix, and sell’ older properties in great locations that are in need of active asset management and we selectively develop core. The European office market, for instance, offers opportunities to buy properties below replacement cost and upgrade their design to cater to the changing ways in which people live and work. One such opportunity is represented by our acquisition of CB16 Tower in La Défense, Paris.

Private debt: while many market participants have been willing to pursue more aggressive structures with even lower pricing, we favor more conservatively structured investment opportunities which we source and negotiate outside of traditional syndicated loan markets. We continue to focus on supporting successful sponsors and management teams in their buy-and-build strategies, on offering creative structures that support companies’ specific cash flow profiles and working capital needs, and on targeting niche industries where we have the depth of experience and confidence in underlying growth fundamentals. For example, based on our long track record of investment in the restaurant industry, we recently invested in Checkers, a quick service restaurant chain in the US.

Private infrastructure: as infrastructure asset valuations continue on their steady upward trajectory, especially in the core space, our investment focus remains firmly on assets that offer value creation potential, with platform-building being our preferred strategy. We consider platform investments in all sectors of the infrastructure market and currently see the most attractive opportunities within the communications and energy infrastructure spaces. Proactively building core assets instead of buying them continues to be our preferred strategy for renewable power generation assets, particularly in Europe and the Asia-Pacific region. One example is our investment in Sapphire Wind Farm, a 270MW onshore wind project in Australia.

To request a copy of the report, please contact Milevka Grceva: milevka.grceva@partnersgroup.com