Goldman Sachs-backed Petershill’s fee earnings hit by dealmaking slump

Petershill Partners has posted a drop in earnings from its partner firms’ fees amid a “challenging external backdrop” as higher interest rates stifled dealmaking last year.

The Goldman Sachs-backed firm reported a post-tax profit of $321m (£253) in 2023 from a $453m (£358) loss in 2022. On an adjusted basis, this figure came in at $200m (£158m) from $273m (£216m) profit in 2022.

Its total income fell to $379m (£299m) from $319m (£252m), while earnings per share dropped to 28.4 cents (22.4p) from 39.4 cents (31.1p).

Petershill’s partner fee-related earnings came in at $203m (£160m) last year. This figure was down from $213m (£168m) in 2022 but in line with the company’s downgraded guidance issued last September.

It had pinned the lower expectation mainly on “the slower deployment environment impacting timing of fee activation”.

Petershill’s shares currently trade at half the price at which they floated in September 2021. The firm was founded by Goldman Sachs Asset Management in 2007 and owns stakes in 25 alternative asset managers, earning a portion of their fee income.

These partner firms had aggregate assets under management of $304bn (£240bn) at the end of December, up from $283bn (£224bn) in 2022.

Petershill’s Ali Raissi-Dehkordy and Robert Hamilton Kelly commented: “Despite a challenging external backdrop in 2023, we were pleased with our Partner-firms raising $23bn of fee eligible assets, on track relative to both size and timing.

“Unsurprisingly, distributable earnings were lower in the year predominately reflecting lower transaction activity, and the slower realisation environment impacting partner-firm realised performance revenues.”

They said they “remain confident” in the medium-term outlook for fee-related earnings, bolstered by “attractive organic fee-paying AuM growth with potential for future M&A and note an increase in accrued performance fees”.

Petershill said its board was considering launching a $100m (£79m) share buyback and would make a decision by the end of April.

The board has proposed a final dividend of 10.1 cents (8p) per share, taking its full-year dividend to 15 cents (11.9p) from 14.5 cents (11p) in 2022.