Partners Group: A Conviction Buy in a Sector Rotation Setup

The core investment case for Partners Group is built on a stark contrast: exceptional firm-level execution against a structurally challenged industry backdrop. While the broader private markets sector grapples with a severe fundraising drought and tepid dealmaking, Partners Group has delivered robust, quality-driven growth. This divergence is the essence of a conviction buy in a sector rotation setup.

The firm's asset base expanded by 21% to $185 billion in 2025, a performance that defies the industry's general malaise. This growth occurred in a market where fundraising across all asset classes fell to its lowest level since 2016. The ability to attract capital under these conditions is a primary indicator of operational strength and client trust. Partners Group's success was not driven by a single channel but by a diversified, client-centric approach, with bespoke solutions dominating its $30 billion in new assets.

More telling is the quality of its earnings model. Performance fees, the ultimate measure of value creation, surged 94% year-on-year to CHF 314 million in the first half of 2025. This boom propelled performance fees to account for 27% of total revenues, a significant structural shift that underscores an incentive-aligned business. In a weak sector where fee growth is typically pressured, Partners Group's model is accelerating, signaling that its portfolio companies are generating outsized returns.

This outperformance is all the more impressive given the context. The industry is navigating a period of uncertainty, with dealmaking remaining tepid and investor caution persisting.

Partners Group's ability to not only grow its assets but also to realize a record $26 billion in capital and commit $27 billion to new investments demonstrates a high-quality, resilient platform. For institutional allocators, this is the definition of a quality factor play: generating superior returns and fee income when the sector as a whole is under pressure.

Portfolio Construction Implications: Capital Allocation and Liquidity

For institutional allocators, the strategic positioning of Partners Group translates directly into a superior risk-adjusted return profile. The firm's ability to efficiently convert client demand into deployed capital, while maintaining exceptional operating discipline, creates a powerful engine for sustainable value creation.

The foundation of this profile is its robust and diversified capital inflow. In 2025, Partners Group attracted a record $30.2 billion of total new assets, exceeding its guidance and marking its highest year for new client demand. This surge was driven by a 22% organic increase in fundraising, supplemented by $4 billion from M&A. Critically, the demand was concentrated in the firm's highest-quality, fee-generating channels: bespoke solutions contributed 72% of capital raised, with both mandates and evergreens recording their strongest years ever. This client mix is a key structural advantage, as it provides a stable, high-margin revenue stream less exposed to the volatility of traditional fund launches.

The efficiency of capital deployment is equally impressive. The firm committed $27 billion to new investments while simultaneously realizing $26 billion in capital from its portfolio. This near-perfect balance-deploying almost as much as it realizes-demonstrates a disciplined, opportunistic approach to capital allocation. It allows Partners Group to continuously recycle capital into new opportunities without overextending, a crucial skill in a market where liquidity can dry up quickly. This operational leverage is further evidenced by its stellar profitability. In the first half of 2025, the firm achieved an EBITDA margin of 62.7%, a figure that underscores exceptional cost discipline and the high operating leverage inherent in its asset-light, fee-based model.

Viewed together, these metrics paint a picture of a firm that is not just growing, but growing efficiently. The high-quality client demand fuels a capital deployment cycle that is both active and balanced, while the operating model ensures that each dollar of revenue generates substantial profit. For a portfolio, this combination is a rare find: it suggests a platform capable of generating strong, predictable cash flows even as it scales, thereby enhancing its overall risk-adjusted return profile in a rotation setup.

Valuation and Risk-Adjusted Return Profile

The investment case for Partners Group now hinges on a clear trade-off: a durable growth runway against a known, structural headwind. The forward-looking guidance provides the visibility that justifies a conviction buy, while the firm's financial resilience offers a margin of safety.

Management has set a clear target for 2026, anticipating $26-32 billion in gross new client demand. This guidance, which exceeds its 2025 result, signals confidence in the firm's client franchise and platform strength. It provides a tangible, multi-year growth runway that is independent of the broader industry's fundraising drought. This visibility is a critical factor for institutional investors, allowing for more accurate portfolio construction and capital allocation planning.

Yet the path to that growth is not without friction. The firm faces a significant "tail-down" effect from its mature closed-ended programs, estimated at $9-10 billion. This represents a direct, recurring pressure on future fee income as these programs wind down. For the portfolio, this introduces a degree of fee volatility that must be managed. The key question for allocators is whether the firm's high-quality, fee-generating channels can fully offset this headwind.

Here, the firm's financial model proves its worth. The exceptional operating leverage is captured in its EBITDA margin of 62.7% for the first half of 2025. This high-profitability engine is the critical factor that allows Partners Group to maintain robust earnings even as fee income faces pressure from the tail-down effect. It provides the cash flow stability needed to fund growth initiatives and shareholder returns, effectively insulating the bottom line from sector-wide margin compression.

The bottom line is one of managed risk. The firm is navigating a classic institutional setup: a quality platform with a clear growth trajectory facing a known structural headwind. Its high margins and diversified client demand provide the resilience to absorb the fee pressure. For a portfolio, this combination-visible growth backed by a fortress balance sheet-creates a compelling risk-adjusted return profile. It is a setup where the firm's operational excellence is being rewarded, and the market's skepticism toward the broader sector is being leveraged to the firm's advantage.

Catalysts and Risks to Monitor

The path to sustained outperformance for Partners Group is now defined by a series of near-term tests and structural pressures. The firm's conviction buy thesis rests on its ability to execute flawlessly against its ambitious 2026 guidance while navigating a persistent industry headwind.

The primary catalyst is execution against the $26-32 billion in expected gross new client demand for full year 2026. This target, which exceeds its record 2025 result, is the ultimate test of its client franchise and investment pipeline. Success here would validate the firm's leadership in bespoke solutions and evergreens, demonstrating that its high-quality client mix can continue to drive growth even as the broader sector struggles. Failure to meet this range would signal a potential saturation point or weakening demand, directly challenging the growth runway that justifies its premium.

The key risk is the persistence of weak public market liquidity. As highlighted in the industry report, fundraising across all asset classes fell to its lowest level since 2016. If this drought continues, it will prolong the pressure on fee multiples and compress the valuation premium for private markets managers. For Partners Group, this environment increases the competitive intensity for capital and could force a re-pricing of its fee-generating assets, undermining the risk-adjusted return profile that makes it attractive to institutional allocators.

Finally, the firm must manage the $9-10 billion 'tail-down' effect from its closed-ended programs without sacrificing deployment pace or returns. This recurring headwind directly pressures future fee income. The firm's high-margin model provides a buffer, but the capital it needs to recycle into new investments must come from its portfolio realizations and new client demand. Any slowdown in deployment or a decline in the quality of new investments to offset this loss would erode the operational leverage that has powered its exceptional profitability.

In summary, the setup is one of managed execution risk. The firm has the platform and guidance to grow, but its ability to do so in a weak sector is the central question. For institutional investors, monitoring these three factors-the 2026 demand execution, the public market liquidity backdrop, and the tail-down management-will be critical to assessing whether the current outperformance is sustainable or a temporary anomaly.