Goldman Sachs downgrades Partners Group on earnings risks, cuts price target

Investing.com -- Goldman Sachs downgraded Partners Group (SIX:PGHN) to “neutral” from “buy,” citing 2025 earnings risks and valuation concerns.

Shares of the private equity firm was down 3.4% at 05:00 ET (09:00 GMT). 

Consensus performance fee estimates for 2025 have dropped about 25% year-to-date, but Goldman Sachs warned further cuts may be needed. 

The analysts flagged delays in deal completions, including an about CHF 35 million reversal in 2025 related to the stalled sale of Techem. 

This could push Partners Group’s dividend payout ratio above 100% for 2025, challenging the sustainability of its dividend growth.

Management fee growth also faces pressure. Around 45% of the firm’s assets under management (AuM) and fees are denominated in U.S. dollars, exposing revenues to recent dollar weakness against the Swiss franc. Goldman Sachs believes consensus models underestimate this currency impact. 

Additionally, private wealth inflows, which generate about one-third of management fees, are softening. 

The U.S. Master Evergreen Fund reported record quarterly redemptions in Q1 2025, with expectations for further increases in Q2.

Competition in the private wealth segment is intensifying as new entrants expand private equity and diversified private market products. 

Partners Group reaffirmed its 2025 gross inflows target of $22 billion to $27 billion, but management indicated results will likely land at the lower end. Goldman Sachs forecasts $23 billion, below the $24 billion consensus.

Valuation remains a key concern. Partners Group trades at a premium to European peers on implied fee-related earnings multiples. 

Goldman Sachs projects a 7% compound annual growth rate (CAGR) for FRE from 2024 to 2027, below the 8% European peer average and far behind the 17% U.S. peer average. 

This lower growth outlook justifies a valuation discount relative to U.S. peers, despite the premium within Europe.

Since being added to Goldman Sachs’ Buy List in April 2022, Partners Group shares have declined 8.6%, while the FTSE World Europe Index gained 10.4% over the same period. 

This underperformance reflects weaker fundraising, slowing FRE growth, and industry-wide challenges for performance fees.

Goldman Sachs lowered its 2025 management fee estimates by 1% and adjusted net income forecasts by 2% on average. 

Its 12-month price target was reduced to CHF 1,150 from CHF 1,250, based on a lower target multiple and revised growth expectations.