Transcript
Speaker: Welcome to Uncovering Trust, the Edison Group podcast where we explore some of the most interesting investment trusts on the market. I'm your host, Neil Shah, market strategist at Edison Group, and today we're diving into the world of private equity, a space that offers investors access to high-quality companies not available through the public markets. Joining me is Miloš Paps, Director of Investment Company Content at Edison. Miloš, great to have you with us again.
Speaker: Thanks, Neil. It's great to be here and I'm pleased to be discussing Partners Group Private Equity Limited today. Okay, so this is, I think, the first time we've featured Partners Group Private Equity in our podcast series. So let's start with an introduction to the trust.
Speaker: Of course, ah Partners Group Private Equity Limited is a UK-listed investment holding company domiciled in Guernsey that provides equity capital to private companies, primarily in the middle and upper middle market.
Speaker: The company has a history dating back to 1999 and has been listed on the London Stock Exchange since 2007 under the ticker PEY for Euro-denominated shares. with the sterling quotes added in 2017 to broaden investor access.
Speaker: ah Since September 2025, PEY is also a constituent of the FTSE 250 index. ah What makes PEY distinctive is its focus on direct investments in private companies, which now make up more than 99% of the portfolio.
Speaker: ah The Trust aims to provide shareholders with long-term capital growth and an attractive dividend yield by investing in companies across what its manager calls foundational sectors of the real economy.
Speaker: ah These are businesses operating in areas with um strong structural demand drivers and so transformative trends. You mentioned the manager. Who's responsible for running this portfolio?
Speaker: PEY is managed by Partners Group, which is one of the largest firms in the global private markets industry. um As of the end of 2025, Partners Group has $185 billion dollars in assets under management, of which around $86 billion is in private equity.
Speaker: The firm has around 2,000 employees across 25 offices globally and has over 500 investment professionals who seek to identify attractive investment opportunities across sectors and geographies.
Speaker: um Partners Group leverages what they call an entrepreneurial governance approach in seeking to develop portfolio companies into market leaders, providing um you know hands-on support to drive value creation.
Speaker: This means that PEY benefits from Partners Group's extensive deal flow, sector expertise, and active approach to improving portfolio company performance. Wow, that's ah some impressive scale. So ah how does PAY's investment strategy actually work in practice?
Speaker: um PEY offers balanced exposure across private developed markets via via direct investments. At the end of December 2025, the portfolio had Europe at 45% and North America at 43%, complemented by smaller allocations to Asia Pacific and the rest of the world.
Speaker: ah The portfolio is well diversified across sectors. At the end of September 2025, healthcare and industrial businesses each represent 25% of the portfolio.
Speaker: This is followed by consumer discretionary at 16%, information technology at 13%, and so financials at 6% with ah smaller positions in um in other sectors.
Speaker: More than half of PUA's portfolio is invested in what Partners Group classifies as small and mid-camp buyouts, which um I believe have several advantages. um Many of these acquired companies haven't been owned by private equity before, so they are low-hanging fruit in terms of value creation. And so portfolio exits are also less dependent on the IPO market with more trade sale and sponsor-to-sponsor opportunities available.
Speaker: Okay, I want to dig into that a little bit more. So give us an example of how this investment approach actually works in practice. Absolutely. um a great example is PCA Pharma Services, a pharmaceuticals company that has been transformed from um you know a regional commercial packaging organization into a global CDMO over a decade of partners groups ownership with a corresponding 14% compound annual growth rate in revenues over that period.
Speaker: A partners group acquired PCY in 2016, repositioning it into higher growth, higher value capabilities, including a greater focus on patented molecules, augmenting um clinical trial service capabilities, and expanding into advanced development and manufacturing.
Speaker: In 2020, Partners Group sold a majority stake in the company to new investors, retaining a significant minority stake. ah During this next phase of ownership, pcu ah PCI expanded into um advanced drug delivery services, development and manufacturing of biologics, and sterile fill-finish services, becoming one of the leading global biologic CDMOs.
Speaker: PCI was sold in 2025, generating significant returns for partners groups' clients. ah PUI reinvested in the business as part of this transaction, maintaining exposure to its um continued growth.
Speaker: but Okay, that that is a fantastic ah case study. um I understand that you also want to focus but in this episode on realizations, investments and distributions to shareholders. So let's start with exits. What have you seen in 2025?
Speaker: Yes, so this is one of the most encouraging aspects of PUI's story right now. um The trust received, um the company received more than 200 million euros of realization proceeds, which represent around 19% of opening NAV.
Speaker: This is broadly in line with the historical average of 21% of opening NAV per year. um Partners Group expects a similar realization level in 2026.
Speaker: Okay. so So like the sort of previous question, I guess I want to dig into that a little bit in a little bit more detail. What were the major realizations completed by the company last year? You've already discussed the disposal of PCI pharma services, which I believe closed in October last year. What other exits were announced in 2025?
Speaker: Yes, so in June the company received 22 million euros from a block trade in Vishal Megamart, a retailer for middle and lower middle income consumers in India. um That partners group floated in December 2024.
Speaker: Then in July, PY announced that the consortium led by Partners Group will invest in the next growth phase of Techem, an international provider of digitally enabled solutions for the building ecosystem, such as smart metering solutions.
Speaker: The business was one of PY's top 10 holdings at the time. um The transaction value the company's stake in Techem at around 39 million euros and implied net proceeds of 21 million euros for PY.
Speaker: The company also continued to the gradual selling down of its stake in Galderma, which was floated in 2024. Other transactions completed in 2025 included the partial sale of Essentia, a developer, owner, and operator of midstream natural gas infrastructure in Mexico, in conjunction with its IPO.
Speaker: Apex Logistics, where the minority stake was sold to majority shareholder Kuhn and Nagel. International Schools partnerships Partnership, which was a partial sale of a 20% stake to CVC strategic opportunities.
Speaker: ah There were also disposals of Park Place Technologies, a US headquartered third-party maintenance provider of post-warranty data center maintenance services, Global Blue, a tourism shopping tax refund company, and Avas, an Indian housing loan finance company.
Speaker: ah Finally, ah two transactions were announced in 2025 but are expected to close in 2026, including Clario, a contract research organization sold to a strategic investor, Thermo Fisher Scientific, and Convex Group, a specialty property and casualty insurer and reinsurer.
Speaker: Okay, so there's significant liquidity coming through. How does this actually translate into benefits for shareholders? Yes, so the board under the Chairman Peter McKellar, um who joined in November 2023, has been very active in enhancing the trusts ah the company's proposition. one um One of the most important initiatives was introducing a well-structured capital allocation framework back in 2024. PY pays an attractive dividend of 5% of the previous closing NAV distributed in semi-annual payments.
Speaker: The last declared interim dividend of €0.375 per share currently implies an annualized yield of around 7.8% based on the current share price. ah The company has successfully delivered this dividend policy since 2011 with few exceptions, providing shareholders with a reliable income stream.
Speaker: But on top of this, the board introduced a framework for NAV accretive share buybacks. If PUI shares traded a discount to NAV of 30% or more, the trust will allocate 75% of its free cash flow to share repurchases.
Speaker: At a discount between 20% and 30%, it will use 50% of free cash flow. Okay, so given the significant exit proceeds generated in 2025, has the company done any buybacks lately?
Speaker: The company has already carried out its first buybacks under this framework last year. It announced an up to 15 million euro buyback fifteen million eu buybet program on the 8th of October, which initially was implemented over the period to end January 2026, but recently got extended to the end of April 2026.
Speaker: as So over the 28th of January, half of the amount earmarked for buybacks was deployed to repurchase around 1% of its shares outstanding at the end of September 2025. I would note that the volume of the above-pension buyback was higher than what the company's marginally positive free cash flow as of the end of September 2025 of around 5.4 million euros would imply.
Speaker: Okay, so I'm i'm assuming that um the company's free cash flow is modest last year because apart from distributing dividends, the company was actually active in new investments.
Speaker: Yes, your assumption is correct when looking at the entire year. While the company generated significant exit proceeds, it also reinvested part of these proceeds into three existing companies and seized new investment opportunities in 2025.
Speaker: ah Moreover, it utilized some of the realization proceeds to repay the drawn amount of its revolving credit facility, which at the end of 2025 was therefore fully undrawn.
Speaker: ah I would note that the company recently announced an early renewal of the facility at a lower commitment fee, 80 basis points versus 100 basis points previously, and a lower margin on drawn amounts, which is 270 basis points versus between points previously. The new facility matures in November 2029 and it was also slightly upsized from 140 million euros to 150 million euros.
Speaker: but Okay, so so tell me about the new investments the company made last year.
Speaker: In the first nine months of 2025, the company was quite selective and invested only 41.6 million euros, of which around half was deployed in Q3, mostly into six new investments, including MPM Products, a global premium pet food company, and Restore 3D, a med tech company providing ah patient-specific 3D printed musculoskeletal implants. um Then the investment pace picked up in Q4 2025 with around 61 million deployed, including reinvestments in TechEm, PCA Pharma Services and International Schools Partnership um following the previously announced sales.
Speaker: Major new investments included an undisclosed US healthcare provider, um Infinity FinCorp Solutions, an Indian non-bank lender serving underbanked small business owners, and OMI, a provider of cloud-based ERP software solutions for SMEs in Brazil.
Speaker: and As a result, the company's free cash flow was neutral in 2025. Overall, Partners Group believes that the current investment pipeline should allow the company to reach an investment pace closer to the historical 10 to 15% of NAV per yeah That's an excellent summary, Milosz, as always. Thank you for taking us through the recent developments and terms of investments and realizations at Partners Group Private Equity Limited in such detail.
Speaker: You've been listening to Uncovering Trust, a podcast by Edison Group. For more information on Partners Group Private Equity and other investment companies we cover, please visit our website, www.edisongroup.com.
Speaker: Thank you.
