Urs Wietlisbach, founding Partner and current Executive Vice Chairman of Partners Group, spoke with LAVCA about the firm’s experience in Latin America and its investment outlook for 2010 and beyond.
LAVCA: Please give some background on Partners Group. What are your assets under management? What is your diversification strategy, by asset class and geography?
Wietlisbach: Partners Group, listed on the SIX Swiss Exchange, is a global private markets asset management firm with over USD 25 billion in investment programs under management in private equity, private debt, private real estate and private infrastructure, employing over 360 people. We manage a broad range of funds and customized portfolios for an international clientele of institutional investors and are headquartered in Zug, Switzerland with a total of ten offices worldwide. As a globally integrated asset manager, we are capable of deploying all instruments including directs, secondaries and primaries in all private markets segments around the globe for the benefit of our clients.
LAVCA: Roughly what percentage of your portfolio do you generally allocate to emerging markets private equity and to Latin America specifically?
Wietlisbach: We have a strong focus on emerging markets, and allocate approximately 20% of our portfolio to the segment as a whole. Within emerging markets, we are particularly active in Asia and Latin America, given the attractive growth profiles of these regions. In Latin America we have for several years been a very active direct investor, as well as investing in secondary opportunities as well as the top tier funds in the region.
LAVCA: Will this change moving forward?
Wietlisbach: Looking ahead, we expect to continue to be highly committed to Latin America, with increased levels of investment through directs, secondaries and primaries. We believe that Latin America presents a very attractive opportunity given its growing consumer class and infrastructure needs, and will continue to engage actively with top tier companies and managers within the region to reach a portfolio allocation in the range of 30% going forward.
LAVCA: What would be a typical size of an investment that you make? Does Latin America differ from other emerging markets?
Wietlisbach: Globally, Partners Group typically invests USD 20m to USD 50m in directs, either through equity or private debt; for secondary transactions the typical investment size ranges from USD 2m up to several hundred million, and our regional primary fund investments range from USD 5m to USD 30m. We do not specifically limit the investment size depending on the country or region, but rather adjust it on a case by case basis, depending on the opportunity and its fit within a specific portfolio.
LAVCA: What markets in Latin America are the most interesting to Partners Group right now? Why?
Wietlisbach: Currently, we view Brazil as the largest and most mature market in the region, but are also very active in several other countries, such as Chile and Mexico. In each of these, we pursue direct investments as well as fund relationships. Additionally, we have investments in several pan-regional companies and funds, which can capitalize on opportunities in more than one market.
LAVCA: Are there markets you’re watching for possible investments in the future? Why?
Wietlisbach: We believe that Peru and Colombia will become increasingly important markets for private equity in Latin America going forward. While they are smaller than the markets mentioned above, the macroeconomic foundation is already there, there is a large number of interesting businesses that can be acquired at attractive valuations, and several private equity players are currently building out attractive track records in these countries.
LAVCA: How many investments are you currently completing within Latin America?
Wietlisbach: In addition to several very successful direct investments we have made in the region, we are also investing with more than a handful of primary funds which we believe are the top tier managers in Latin America. While we have met with dozens of teams, our approach is to be very selective and pursue opportunities only with established teams with proven track records. As private equity in the region continues to mature, we expect the number of such players to increase as well.
LAVCA: How do you go about finding and selecting the best investment partners?
Wietlisbach: Partners Group believes in local presence within all of our key markets, and we therefore travel very frequently to the various countries in the region in order to meet with the main players in each market. In looking for the best investment partners for a direct or fund investment, we consider local presence, quality and cohesiveness of the team, quality of track record, and general strategic approach. While we only invest with the most established top tier general partners, we also make an effort to regularly meet with all of the newer up-and-coming managers as well.
LAVCA: Do you plan on making new investments in 2010? If so, how many do you expect to make?
Wietlisbach: We certainly do intend to continue investing in the region throughout 2010 through both direct investments and fund commitments, and are in fact about to close on several opportunities. While we have set general portfolio construction guidelines for the year, the specific number of investments will largely depend on the opportunities present and on the overall market.
LAVCA: Do you invest in any secondary opportunities? Under what circumstances?
Wietlisbach: Over the past 10 years Partners Group has invested more than USD 5 billion in secondary transactions on a global basis. Utilizing a network of over 360 employees located in 10 offices worldwide, the firm sources and executes secondaries with specific focus on high quality assets with proven managers. The firm’s secondary practice derives deep insights into assets and managers by virtue of its integration with Partners Group’s well-established direct and primary investment businesses. Despite the difficult environment in which to close privately negotiated transactions post crisis, Partners Group has, in the last 15 months alone, closed over USD 1 billion in dozens of secondary transactions at attractive discounts to net asset value. The firm continues to see attractive secondary opportunities from around the world, including increasingly from Latin America and other emerging economies, where Partners Group has successfully underwritten transactions in the past and aims to expand further in the near future.
LAVCA: You’ve been active in Latin America since 2001. What have been the most significant changes in the industry you’ve witnessed and what do you see as having the greatest impact in the future? How does this affect your investment strategy?
Wietlisbach: The main changes we have witnessed are the political stabilization and incredible consumption driven economic growth that has occurred in most of the region over the past few years. Both of these factors have contributed (and will further contribute) to the growth we expect to continue to see in the private equity industry in Latin America. Additionally, as the industry continues to mature, general partners have become more accustomed to working on direct investments with us, and to make use of the Partners Group global network to add value to and potentially even exit their portfolio companies. Taking all of these factors together, we expect our interest in the region to remain very strong, and our presence and investment levels to continue to grow.