Global private markets investment manager Partners Group said it may accept investment opportunities at higher prices as part of its post-COVID-19 strategy.

In its latest report, Private Markets Navigator Outlook 2021, the firm stressed that the nature of investment opportunities that it is pursuing in a post-COVID-19 environment has not changed, but sharpened.

“We continue to look for resilient, high cash-flowing assets with above-average profit margins and growth potential driven by secular trends… in this context, we may accept higher prices if we have a strong conviction about future growth resilience,” the Zig-headquartered firm said.

Partners Group said the global health crisis has not materially altered its investment strategy as it continues to avoid investing in companies whose profitability is subject to the pandemic or macro developments.

“We continue to rigorously apply asset- testing scenarios to build comfort around risks to growth and valuations,” the firm said.

Its approach is evident across all its private market strategies. In private equity, for instance, Partners Group said it continues to build resilient companies in sectors that benefit from structural change by focusing on transformative trends and taking a hands-on approach to value creation.

“We target leading companies in fragmented markets that are in the early stages of consolidation,” it said.

During the pandemic, the firm invested in certain US healthcare service providers, including Confluent Health, an independent US outpatient physical therapy services provider.

It also agreed to acquire agrochemical business Rovensa for a reported €1 billion. The business, Partners Group said, is positioned to supporting growing food demand in an “environmentally balanced” way.

“We remain confident that active sourcing with a theme-oriented approach and a transformational value creation strategy will be key to our success,” the firm said.

“COVID-19 has not materially changed the way we invest. If anything, it has strengthened our investment convictions as our direct investment portfolios continue to perform strongly,” it added.

In the private equity space, Partners Group said PE activity entered a “risk off” mode between the end of February and May 2020. Sales processes were delayed and global buyout volumes in the second quarter plunged by 40 per cent year-on-year.

“The gap in valuations between what buyers were willing to pay and what sellers expected weighted on activity, on top of the physical distance challenges faced when diligencing and closing transactions during lockdown,” the firm stressed.

Its overall portfolio, however, performed as expected, with EBITDA across its PE direct lead investments reverted to positive double-digit year-on-year growth trajectory in June 2020.

“Our thematic investing approach, combined with value creation, has helped steer our direct portfolio companies through the global COVID-19 crisis,” Partners Group said in the report.

For 2021, the firm said it remains positive on the mid-cap sector, focusing on direct investments in market segments that benefit from transformative tailwinds. It will continue to be overweight in healthcare and business services globally.

By contrast, Partners Group remains cautious on industrials in the US because of their cyclical nature, although it is seeing select opportunities in the sector in Europe and Asia that justify a neutral positioning.

In 2019, Partners Group clocked $10.8 billion net growth in its assets under management (AUM). The total AUM amounted to $94 billion, the firm said in a statement. In the year gone by, Partners Group invested half of the funds in North America. It invested another 30 per cent in Europe, while only 17 per cent was deployed into the Asia Pacific region, as well as the rest of the world – primarily as direct investments.

The asset manager’s direct investments in the Asia Pacific region include its commitment to provide a unitranche debt financing to Taiwan’s bubble and milk tea producer Gong Cha Group; the acquisition of majority stake in Chinese retail display solution provider BCR Group; as well as the acquisition of Indian franchisor of Vishal Mega Mart brand and wholesale supplier-Vishal Mega Mart Private Limited (VMM) along with the India-focused PE fund Kedaara Capital Fund II.

During DealStreetAsia’s Asia PE-VC Summit 2020, Cyrus Driver, the firm’s managing director for Private Equity Asia, said Partners Group is now evaluating pure technology investments as part of its strategies given that the global pandemic has thrown up a plethora of opportunities with enormous growth potential.

Source: Deal Street Asia

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