TPG(TPG) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Management fees totaled $279 million, growing 9% from the previous quarter due to improved fundraising and an increase in catch-up fees [32] - Transaction fees increased 83% sequentially to $31 million, driven primarily by the firm's lead role in structuring and placing debt financing for new investments [32] - After-tax distributable earnings for the third quarter were $196 million or $0.56 per share, including $43 million in net realized performance allocations [58] - FRE was $156 million for the third quarter, up 24% sequentially and 29% year-over-year, with an FRE margin of 49% [33] Business Line Data and Key Metrics Changes - The private equity portfolio grew revenues by 26% over the last 12 months, with net operating income growing 11% year-over-year [60] - TPG Capital closed the acquisition of Nextech, a leading provider of electronic medical records, reinforcing the focus on healthcare provider efficiency tools [26] - The Impact Platform, investing under the Rise brand, continues to differentiate TPG, with significant investments in climate-related initiatives [10][11] Market Data and Key Metrics Changes - TPG finished the third quarter with $136 billion of assets under management, up 1% year-over-year, driven by $11 billion of capital raised and $3 billion of value creation [37] - The Asia business successfully completed the IPO of RR Campo, which is currently trading up 36% from the IPO price, highlighting TPG's strong franchise in India [49] - The regional banking crisis earlier this year has enhanced interest in the credit space, with TPG Angelo Gordon raising over $1 billion for its first asset-backed lending fund [30] Company Strategy and Development Direction - The addition of Angelo Gordon positions TPG to capitalize on long-term secular trends in the alternatives industry, including increased demand for multi-strategy credit capabilities [20][22] - TPG is focusing on expanding its geographic footprint, particularly in Asia, leveraging Angelo Gordon's established presence in markets like Tokyo and Seoul [29] - The company is strategically looking to use continuation vehicles to manage exit activity and return capital to LPs, reflecting a shift in the private equity landscape [106] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to drive consistent, meaningful, and diversified growth across the business, particularly with the integration of Angelo Gordon [40] - The firm anticipates a reacceleration of fundraising for Angelo Gordon as they engage with LPs and leverage TPG's broader capabilities [46] - Management noted that while the IPO market is challenging, TPG is well-positioned to provide solutions for companies needing follow-on capital [74] Other Important Information - TPG raised $3.4 billion during the quarter and expects each fund to be larger than its predecessor, indicating strong fundraising momentum [61] - The firm is actively working towards launching its inaugural climate transition infrastructure fund, with strong interest from anchor LPs [63] - TPG's real estate platform is well-suited for the current environment, having raised nearly $7 billion for its flagship opportunistic fund TREP [28] Q&A Session Summary Question: Discussion on Angelo Gordon's fundraising constraints - Management acknowledged a temporary pause in fundraising momentum for Angelo Gordon due to the transaction announcement, but expects reacceleration as they engage with LPs [42][43][46] Question: TPG's fundraising strategy in a challenging environment - Management expressed confidence in the upcoming fundraising campaigns, including the Climate Infrastructure Fund, and noted strong engagement from LPs [47][72] Question: Real estate credit strategy and opportunities - Management highlighted the existing origination capabilities and the potential for scaling the real estate credit platform, emphasizing the current market dislocation [83][85] Question: Performance of growth capital business - Management reported strong revenue growth in the growth portfolio, with mid-teens growth rates and margin expansion, indicating overall portfolio health [102][104] Question: Continuation funds and exit activity - Management discussed the increasing importance of continuation vehicles in the current market, noting the success of the CAA vehicle as a credibility booster [106][108]