Investing.com -- Barclays (LON:BARC) has upgraded Partners Group to "overweight,” reflecting increased confidence in its outlook for 2025, in a note dated Thursday.
This decision reflects Partners Group's unique positioning among European private capital managers, particularly its exposure to the healthier U.S. market.
European alternative asset managers have lagged behind their U.S. counterparts, with valuations seeing a sharp divergence over the past year.
While U.S. private capital firms enjoyed robust share price gains and re-ratings, European firms largely traded sideways, leading to a valuation gap.
Partners Group stands out within this group, trading at 40% below its peak valuation while its U.S. peers remain within 15% of their highs.
Barclays sees this as an opportunity for revaluation, particularly given Partners' alignment with the U.S.-centric market dynamics.
Key factors contributing to Barclays' upgrade include Partners Group's portfolio exposure, with 45% of its assets under management tied to the U.S., the highest among European peers.
This aligns with expectations of increased transactional activity in the U.S., supported by a favorable macroeconomic and political backdrop.
Additionally, Partners' foothold in U.S. private wealth is a critical driver. Its private wealth AUM in North America accounts for 55% of its regional total and 42% of its evergreen product AUM, underscoring its dominance in this high-growth segment.
Fundraising and performance fee dynamics also play a role in this reassessment. While 2024 saw underwhelming performance fees across the sector due to muted exit activity, Partners Group is well-positioned for a rebound.
Its recent transactions, such as exits from Techem and Vishal Mega Mart, have already contributed to its 2024 earnings and are expected to provide a boost in 2025.
Its diversified mix of evergreen funds and institutional mandates further reduces its exposure to single-product risks, providing stability amid industry fluctuations.
Barclays' outlook also notes that Partners' forward price-to-earnings (P/E) ratio, though below historical peaks, offers headroom for growth.
The brokerage has set a new price target of CHF 1,470, reflecting anticipated improvements in market conditions and Partners' ability to capitalize on them.
This projection comes alongside a forecast of increasing earnings per share, driven by higher performance fees and steady management fee growth.
Shares of the Swiss-based global private equity firm rose 1.8% at 06:15 ET (11:15 GMT).