Q4 2021 TPG Inc Earnings Call
Good morning, and welcome to the C. P T fourth quarter 2021 earnings conference call.
Currently all colors have been placed in a listen only mode and following management's prepared remarks, the call will be opened up for your question, but if you would like to ask a question at that time. Please press star one on your telephone keypad looking to remove yourself from the queue. Please press the pound key.
Anytime if you should need operator assistance, Please press star zero.
Be advised that today's call is being recorded please go to T. T. G. I R website took T earnings materials I would now like to turn the call over to Gary Stein head of Investor Relations at G. P T.
Okay.
Great. Thank you operator, welcome to our fourth quarter 2021 earnings call. Joining me. This morning are John Michael Reed, Chief Executive Officer, and Jack Wine Garg, Chief Financial Officer. In addition, our executive Chairman and co founder Jim Culture, and our President Todd to 50 are also here with us and will be available for the Q&A portion of this morning's call.
Before we begin I'd like to remind you. This call may include forward looking statements, which do not guarantee future events or performance. Please refer to Tpg's earnings release, and SEC filings for factors that could cause actual results to differ materially from these statements.
TPG undertakes no obligation to revise or update any forward looking statements, except as required by law.
Within our discussion in earnings release, we are presenting GAAP measures non-GAAP measures and pro forma GAAP and non-GAAP measures, reflecting the reorganization that was completed during 2021 and immediately prior to Tpg's IPO.
We believe it is helpful for investors and analysts to understand the historic results through the lens of our go forward structure and please refer to Tpg's earnings release for details on our pro forma financial information.
We will also be discussing certain non-GAAP measures on this call that management believes are relevant in assessing the financial performance of the business.
non-GAAP measures are reconciled to the nearest GAAP figures and Tpg's earnings release, which is available on the company's website.
Note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any TPG fund.
I'd now like to turn the call over to John and Michael Reed, Chief Executive Officer.
Thanks, Gary and good morning to everyone.
I'd like to thank you all for joining us for our first public investor call. Since we completed our IPO on NASDAQ in January .
Summing up publicly listed company was a significant milestone for TPG as we celebrate our 30th anniversary as an innovator in the alternative asset management industry.
During our prepared remarks, I'm going to touch on our strong performance for the fourth quarter and full year of 2021, and then I'll discuss a few highlights across the five multi product platforms that comprise tpg's business.
I'll, then turn the call over to Jack to provide some more details on our financial results.
After that I'll make some closing remarks, and then we'll open up the call to take your questions.
Before I discuss our performance I'd like to address the situation in Ukraine.
Im sure continues to weigh heavily on all of your adjusted just as it does.
Just as it does on us here at TPG.
Humanitarian perspective, we've all been watching unfold as truly heart wrenching on so many levels and we extend our thoughts to the courageous citizens of Ukraine.
We are providing financial assistance through several charities on the ground in Ukraine, and we are also encouraging all of our employees to do whatever they can to help.
From a business perspective, we have conducted a thorough review of all of our activities and we've confirmed the funds we manage have no direct investments in any Russia or Ukraine based companies.
In addition, no Russian.
Institutional investors were sanctioned Russian nationals.
Our limited partners and any of Tpg's funds.
We finished 2021 with $114 billion of total assets under management, which increased 27% year over year.
This growth was driven by a combination of strong investment performance and fundraising across our five platforms.
Partially offset by significant realization activity.
So a value creation perspective, tpg's funds increased by 7% in the fourth quarter and 38% for the year, which compares to 18% in the prior year.
Turning to fund raising we had our second strongest year on record with approximately $20 billion raised nearly tripling the amount of capital we raised in 2020.
Looking at invested capital, we put nearly $8 billion to work in the fourth quarter and deployed $22 billion during the year.
We have also been very intentional with our realization strategy.
We've had an outstanding year with $7 billion of realizations in the fourth quarter and more than $25 billion for the full year.
Taking a step back we recognize we're talking with you. This morning about results that occurred several months ago.
Since that time, the global geopolitical and economic landscape has changed dramatically.
We are now operating a missile far more uncertain and volatile backdrop due to a number of significant macro factors, including widespread inflation.
Rising rate environment global supply chain disruptions and a tight labor market that is driving an extraordinary demand for talent.
In addition of course to the war in Ukraine.
In an environment such as this we're even more intently focus on adhering to our investment strategy and approach and we were relying on the playbook. We have developed through our 30 years of experience investing across cycles as we navigate through this period.
Our expertise is informing every aspect of our business such as how we source and underwrite new investments and <unk>.
Gauge with our portfolio companies.
And attract and retain top talent.
With that in mind I'd like to spend a few minutes walking you through some of the highlights across our five multi product platforms, starting with our largest platform capital, which had a total AUM of 55 billion.
At the end of 2021.
The recent performance of the portfolio companies within our capital funds has been very strong with value creation of more than 7% in the fourth quarter and 43% for the full year. This.
This performance was driven by strong growth at the portfolio company level and underscores our investment strategy and focus on bending the curve with respect to the growth trajectory of our portfolio companies.
We have also been actively investing across the capital platform deploying nearly $11 billion in 2021 with a focus on large scale control oriented investments in our core sectors. As an example of the types of investments we made in the fourth quarter in November we announced a significant transaction strategic investment in <unk>, the world's largest <unk>.
<unk> and club related leisure and hospitality services company. We made this investment together with professional golfer Rory Mcilroy, who invested in the company in partnership with Us.
During the fourth quarter, we also completed the corporate carve out of Boomy from Dell.
$4 billion transaction.
2021 was also a very significant year for us to deploy capital through our Asia franchise. During the year, we made several investments in the region such as Greenfields dairy, which is a leading consumer dairy business in southeast Asia and fund lab, which is a leading out of home Entertainment company with operations in Australia, New Zealand and Singapore.
As I mentioned, we have also been highly focused on returning profits to our fund investors and during 2021, we generated record total realizations in the capital platform of approximately 16 billion, including $4 billion in the fourth quarter.
We also have a robust pipeline of realizations in 2022, including the sales of Mcafee and wind River Jack will provide some additional details regarding these significant transactions during his remarks.
I would now like to discuss our growth platform, which had 22 billion of total AUM at the end of 2021.
This platform provides flexible and scaled capital for rapidly growing business businesses through our growth.
Check Adjacencies and digital media funds.
These funds are well positioned to capitalize on the continued trend of high quality growth companies staying private for longer.
Given the scale and stage at which we are investing and the resources, we bring to bear in the current volatile and uncertain market, we are seeing excellent opportunities to invest including investments with structured securities with downside protection.
Similar to our capital portfolio.
Our growth funds continue to perform well with aggregate value creation of 5% in the fourth quarter at 32% for the year.
We deployed more than $3 billion during 2021, and a wide variety of companies and returned $4 billion to our investors during the same period.
Since the beginning of the year, we have already announced several investments, including project 44, a leading provider of supply chain visibility solutions and express piece one.
One of the fastest growing third party logistics firms in India.
Moving on I'd like to briefly discuss our impact platform, which had total AUM of $14 billion as of December 31, including our inaugural rise climate Fund, which currently has nearly $7 billion of AUM.
AUM and we believe is one of the largest and most significant new private equity fund raises.
We were a first mover to institutionalize the private market impact investing more than five years ago, and we are incredibly proud of the market leading platform we have built.
Our impact funds, which operate under the rice bran focus on investing in companies that are driving societal benefits, while also generating non concessionary financial returns.
In addition, we have built a rigorous proprietary impact measurement framework through why analytics Tpg's impact assessment and ESG performance arm to objectively measure and report the true impact of our funds invested capital.
Consistent with our long held view that impact investments.
Do not need to have lower returns or rise funds had a net IRR of 25% as of December 31, with a portfolio of attractive high growth companies across a range of sectors, such as education health care accessibility.
Financial inclusion and climate.
As an example of the types of significant impact investments, we make during the fourth quarter, we announced that rise climate is investing $1 billion in a newly created electric vehicles subsidiary of Tata Motors.
One of India's largest vehicle manufacturers.
This sizeable transaction aligns with rise climate is focus on Decarbonize transport.
Leveraging TPC Tpg's long history of investing in India, and our expertise in corporate carve outs.
It also underscores the substantial number of opportunities we are seeing to deploy capital at scale and proprietary climate investments around the world.
In terms of operating results the value creation across our impact funds was 9% for the fourth quarter and 33% for the year.
During 2021, our impact funds deployed $1 $7 billion, and we returned more than $1 billion to our fund investors nearly half of those realizations were generated in the fourth quarter led by the sale of the Dream box learning a pioneer in the emerging field of intelligent adaptive learning.
Turning now to real estate. This multi product platform ended 2021 with $13 billion of total AUM across our opportunistic real estate funds are core or core plus strategy and a publicly traded REIT.
Our real estate investments are a real estate platform harnesses tpg's collective sector expertise and knowledge applying a thematic approach to investing with a focus on building companies and platforms. This differentiated investment strategy has enabled our $3 7 billion opportunistic real estate fund <unk> III to generate a 30% net IRR since inception.
As of the end of 2021.
<unk> real estate platform delivered value creation of 6% for the fourth quarter at 31% for the year across our opportunistic and core plus funds. Our team has been <unk> been very active deploying and returning capital to our investors. The platform invested $4 5 billion in 2021, including $1 7 billion in the fourth quarter.
And had total realizations of $3 billion for the year.
One transaction I would like to highlight is the acquisition of cinema <unk> Studios, which is north of it which is north America's second largest independent soundstage platform Center space is well positioned for growth driven by the surge in demand for original TV and film content.
This transaction reflects the deep expertise in media and content development across the firm and is a great example of our thematic approach to investing.
Lastly, I'd like to touch on our market solutions platform, which had $10 billion of total AUM at the end of 2021 across several strategies, including our long short and long only public investing funds, our capital markets group and private market solutions, which is our secondaries business.
Our capital markets business, which we established more than 15 years ago has continued to drive significant value by delivering bespoke solutions and optimized financing outcomes for our portfolio companies.
Our Asian Secondaries business, New Quest continues to perform well driven by its distinct focus on GP solutions and we are actively building out our secondaries platform globally.
Summing it all up 2021 was an excellent and important year for TPG.
For us that starts with continuing to deliver outstanding investment results across each of our five platforms and generating strong operational and financial results firm wide.
We are carrying that momentum into 2022, which began with our successful initial public offering in January .
Our strong start to the year has continued with a number of significant developments regarding realization events, new investments by our funds and ongoing success with our broad based fundraising campaign.
We will also continue to explore ways to diversify and expand our business through both organic and inorganic opportunities.
We've been highly successful with our organic growth initiatives over the last four years, we have raised $17 billion for five new products regarding.
Regarding inorganic growth through our several asset classes.
Where we do not currently have a presence that would be highly complementary to our existing product set we are continually continually exploring a pipeline of strategic growth opportunities that may help accelerate our ongoing expansion and diversification.
Now I'd like to turn the call over to Jack So he can take you through our financial results.
Thanks, John and good morning, everyone I'm going to briefly walk through our financial results and highlight some of the more significant points regarding our fourth quarter and full year financial performance.
Our total assets under management grew from 90 billion at the end of 2020 to 114 billion at the end of 'twenty one.
The drivers of this 27, 27% increase during the year include $29 billion of value creation from our underlying fund investments and over $20 billion from capital raises but partially offset by more than 25 billion of realizations as John alluded to.
We returned to our fund investors throughout 2021.
Looking briefly at fee generating AUM, we had approximately $60 billion at the end of 'twenty, one compared to 51 billion at the end of 2020. This 19% increase was driven primarily by the successful raising of nearly $9 billion in fee, earning capital related to the impact and growth platforms.
As you may have noticed on page 20 of our earnings presentation. We have provided some additional detail regarding the duration of our total and fee earning <unk>.
Assets under management.
At the end of 'twenty, one approximately 87% of our AUM and 85% of our fee, earning AUM was in either perpetual or long dated funds with a duration at inception of 10 years or longer.
In addition, 75% of our fee, earning AUM.
The remaining duration of five or more years as of the end of 2021 with nearly 25% in vehicles with 10 or more years remaining.
At year end, we also had $9 4 billion of AUM subject to fee, earning growth, including nearly $7 billion of AUM, not yet, earning fees and $2 5 billion of fee, earning AUM subject to fee rates step ups in the future.
In total we estimate the potential fee related revenue opportunity associated with this AUM is approximately $50 million to $55 million on an annual basis with very high incremental margins.
In addition at the end of 2021, our funds had more than 28 billion of available capital for dry powder for future deployment.
As Gary mentioned, we recently completed a reorganization in connection with our IPO.
Beginning in 2022, we are now operating under our new structure.
And we believe it is important to communicate our historical results to you on a pro forma basis for comparability purposes.
We recorded GAAP net income for the quarter of $326 million and on a pro forma basis GAAP net income totaled $41 million.
Turning to our pro forma non-GAAP results for the fourth quarter and full year of 2021.
We reported fee related revenues of $238 million.
For the fourth quarter, which increased 18% year over year and $874 million for the full year, which increased 20% versus the prior year.
We also reported pro forma fee related earnings or FRE of $91 million for the quarter and $326 million for the year.
Which was an increase of 44% versus pro forma 2020.
The strong growth in our quarterly and full year fee related earnings was driven by a combination of topline growth and management fees.
A meaningful expansion in our FRE margins as we continue to scale, our business and generate operating leverage.
Our pro forma FRE margins were 38% for the fourth quarter of 'twenty, one and 37% for the full year compared to 31% in 2020 and 26% in 2019.
As we've indicated previously we expect to continue growth in our FRE margins with a target margin of 45% that we expect to achieve in the next two years.
Our pro forma after tax distributable earnings in the fourth quarter of 'twenty, one were $137 million, which increased 34% versus the year ago quarter and for the full year, we generated $538 million of pro forma after tax day.
Which more than doubled compared to 2020.
In addition to the strong FRE growth that I just discussed our pro forma after tax day for the fourth quarter and full year of 'twenty. One also.
<unk> also benefited from a substantial amount of realized performance allocations, which were $54 million in the fourth quarter and $205 million for the year.
Notwithstanding the significant amount of realized performance allocations, we generated in 2021, we ended the year with a pro forma net accrued performance allocation balance, which reflects the 20% allocation to the TPG operating group of $769 million an increase of 96%.
<unk> to a balance of $392 million at year end 2020.
We also have begun 2022 with a significant amount of realized performance allocations already locked in.
Including the two signed sale transactions in our capital funds.
John mentioned, the $14 billion take private of Mcafee.
Where we were substantial shareholders and the sale of wind river to active in a 4 billion strategic acquisition.
Based only on sales of portfolio companies that have been contractually committed in our capital growth and impact platforms, including wind River and Mcafee.
We currently expect these transactions will generate more than $200 million.
Of realized performance allocations on a pre tax basis.
The Mcafee sale closed earlier this month so the performance allocations from this sale will be included in our Q1 dividend and we expect the sale of wind River to close in the next two quarters.
Turning briefly to our balance sheet on page 17 of our earnings presentation. We've included a pro forma view, assuming our IPO occurred on December 31.
2021, and as you can see we have a balance sheet light.
As this model and we are well capitalized with approximately $650 million of cash and less than $450 million of long term debt.
Looking forward, we have an exciting period of growth ahead of us at TPG.
We have a broad series of fundraising campaigns underway.
Banning of 11 products across all five of our multi product platforms.
In capital we launched next generation funds in January as planned for all three of our products TPG capital TPG Asia in healthcare partners.
And impact we recently launched our next rise fund.
And in real estate, we are nearing completion of our next opportunistic fund and.
And we just had a final close last week on our first core plus product.
We also expect to be in market with several new products over the next 18 months, including life Sciences and secondaries.
While the fundraising market has become more challenging in recent months, we've been very pleased with our clients receptivity to these campaigns, we are experiencing strong momentum and we remain confident in our ability to achieve our broad fundraising objectives.
Through this fundraising cycle. We're also focused on strategically expanding our institutional client base and further building our presence in the high net worth channel.
And we're seeing very strong demand from our high net worth channel partners in particular.
Before I turn the call back over to John I'd like to share some financial guidance based on our current expectations for the first quarter of 2022.
While we do not intend to provide quarterly guidance on a regular basis. Since we are since we are reporting the fourth quarter results. So close to the end of the first quarter.
We believe it's appropriate to provide guidance in this instance.
For the first quarter of 'twenty two we currently expect fee related revenue in the range of $235 to $245 million.
FRE in the range of $87 million to $92 million.
And pretax de <unk> in the range of $190 million to $200 million.
I'd also like to quickly remind you of the timing for our first dividend as well as our dividend policy.
As we noted during the IPO process, we expect the executive Committee of our board to declare our first dividend in the second quarter of this year with respect to the first quarter of 'twenty two.
Based on this timing we currently plan to publish our first quarter 'twenty two results in May and pay a dividend to record holders during the month of June .
As a reminder, our current intention is to pay out to shareholders at least 85% of the after tax distributable earnings attributable to the TPG operating group.
On a quarterly basis subject to necessary approvals.
I would now like to turn the call back over to John for a few closing remarks.
Thanks Jack.
Before we take your questions I wanted to touch on what we view as the most critical element of our strategy Tpg's culture.
Our family Office Heritage and our West Coast Route we maintain a flat organizational structure that fosters, an entrepreneurial and inclusive environment and celebrates innovation authenticity and.
Then a hands on approach towards identifying solutions and building businesses.
As we talk about culture I'd like to highlight Tpg's long standing commitment to fostering strong ESG performance as a firm.
And in our investment practices.
ESG is a core tenant of Tpg's culture, and manifests itself in everything we do from impact investing and building a responsible portfolio two advancing diversity and inclusivity within our organization ecosystem and industry.
Earlier this month TPG sponsored the annual women in private equity summit for the six year with 21 of our senior women representing the firm at this leading industry event.
We believe our commitment to building a diverse equitable and inclusive culture improves the quality of our investments and our ability to build great companies.
Last month, we held our strategy off site in San Francisco for our senior business leaders, who was the first time, we had been altogether in person since COVID-19 and it reinforced the momentum we are feeling across the firm.
We have started bringing our employees back into our offices around the world on a regular basis and the collective level of enthusiasm across the firm has been incredible.
It's clear to me and other members of our leadership team that despite our extended period of time working away from the office. The culture TPG has never been stronger we're extremely proud of our team for their exceptional performance during an unprecedented time in our professional careers and we look forward to what we will accomplish as we move forward together at TPG.
With that we'll open up the line for questions.
Okay.
At this time, if you wish to ask a question. Please press star one on your telephone keypad, you may remove yourself from the queue by pressing the pound key.
We will take our first question from Greg <unk>.
With Bank of America. Your line is now open.
Greg Greg.
Yeah.
Greg Your line is now open please check your mute function on your phone.
Okay, well why don't we go to the next question, we'll see if we can get Greg back in the queue.
Okay.
Alright.
We will take our next question from Glenn Schorr with Evercore. Your line is now open.
Alright, thanks very much.
I heard you on your.
Standing firm on your broad fundraising objective, so I wanted to dig a little deeper into the like near term say this.
This year.
Yes.
You've seen the pull down in rotation out of growth and rising rates that you've mentioned and cracks and valuations.
I think that might be a good thing for deploying capital, but I don't know if that slows realizations such that Lp's liquidity is gummed up. So can you just talk about the current fund raising environment growth in capital and how you weigh the puts and takes them all that.
Sure Hey, Glenn as Jack Thanks for the question.
Look I think.
The fundraising environment.
Let me start by saying.
Over a longer arc.
We continue to believe that the very positive secular growth drivers for our industry remain intact.
The growth of Investable capital will continue the allocations to alternatives across most pools of capital around the world will continue and the desire among the largest allocators to invest more capital with fewer managers, we think will will certainly benefit firms like TPG.
In the short term to answer your question.
The industry is definitely experiencing some indigestion.
Due to a few factors you pointed to the slowdown in liquidity and we certainly would expect that I think as you heard from my comments, our liquidity, we have a substantial amount already locked in there we'll be closing over the coming quarters from sales that have already been that had already been signed so I think we will continue to be a standout among the Lps in driving.
<unk> substantial liquidity from our portfolios, but for the industry.
Choppy markets continue liquidity will likely slowdown.
Theres also been faster deployment than expected across the industry.
And there has been a bit of a numerator denominator effect kicking in as many of you have written about with last year's strong alternative performance driving.
Outsized gains in Lps.
Alternative portfolios and in this year's choppy markets driving a bit of a denominator.
Fact, with total assets going down on the margin. So the result of all of that.
Is a bit of indigestion in the market, but I will tell you. We are in the market with many of our campaigns that I alluded to on the call and as I said, we are seeing strong reception from our clients for our fundraising campaigns and we do expect to to be successful across our fundraising efforts.
But those dynamics that you alluded to in the market are definitely real.
And I agree with Tom a long time, maybe one quick follow up on.
The there's liquidity driving all different parts of the market and just some articles written recently on how the demand for private credit capital is very high.
The demand with the backup in rates. So curious how you are.
Thinking about I know it hasnt been that long since our last conversation.
Yes.
Build versus buy what youre doing on the organic front to address some credit demands in the market and then how youre thinking about the backdrop is this a good thing or bad thing with the market shifts and your ability to maybe find a partner in the credit side.
Glen It's John Thanks.
Thanks for the question look I think.
At a high level.
Don't think any of us have ever seen sort of the level of.
Kind of evolution within our industry going on in terms of <unk>.
M&A activity strategic activity across the board.
And I think that with some of the forces that Jack described enforces that we've described before.
I think that we find that.
The.
Size and scale is continuing to matter more being able to being able to raise capital in source capital is.
I think as is being ever more influenced by brand and strength of brand.
And our Lps that we are close to want to do more with us across a range of different products.
And so I think that that forces sort of affecting the industry more broadly.
And we were looking at some of the data the other day I think over.
From a decade of one nine to 2018, there were something like.
Something like for M&A deals done in our industry and I think last year.
There were eight only.
I think last year, only and I think theres four or five already this year. So there's a lot of talk and a lot of dialogue going on in the industry.
And I think there are many managers across.
Various strategies, including credit.
But but not exclusive to credit as you've already seen that are trying to see and trying to think about what the future looks like that's creating a lot of dialogue and it's creating a lot of opportunity. So we're.
We are.
As we discussed when we went through our IPO process, we think we're well positioned.
As sort of a strategic partner for <unk>.
A number of different types of businesses as.
As I mentioned before I think we feel like credit as an example is and by the way it's not the only area, but we feel like we feel like credit is complementary to the firm and our capabilities overall.
So we are evaluating opportunities and we're going to be.
As you would expect I think we're going to be careful about what we do and we're going to try to be tactical about what we do.
With respect to.
Doing something that we feel like we can.
Complementary with our overall franchise something that we feel like we can help continue to scale.
Also something that where the culture and the people.
Are compatible with what's important to us as an organization.
And where we feel again that will get sorted.
The power of the brand and the power of the franchise working together.
And so.
I would expect us to.
To make some progress on that over time, but.
We're not.
We certainly don't feel compelled to rush on anything we want to find the right opportunities. There are a couple of other areas I would say that we feel like we can leverage our brand and expertise well into I would say another area might be.
The broader infrastructure space, particularly as it relates to energy transition leveraging off of what we've built on the rise within our rise.
Business within the impact business, leveraging off our rice bran or why analytics capability and what we've seen and what we're doing in climate where were seeing.
As a result of having now raised the capital and deploying our team into the market, we're seeing a lot of interesting opportunities.
And so I think.
Building some capital with.
Perhaps somewhat different cost of capital features to it.
Building an expertise in other disciplines might be might be very additive to us there.
We made an acquisition in the secondaries GP solution space, which is new quest I think we continue to be interested in continuing to grow that.
We're organically kind of launching our business within GP solutions in the U S and in Europe by having added a team, which we've talked about before and we're about to add we're about to launch.
Yes.
Another and another organic step out strategy of ours will be life Sciences, which we're about to launch in the market, which is obviously leveraging off our deep expertise there. So.
I think a mix of kind of organic step out growth opportunities for us.
We will continue to be an important part of our playbook and then we have our eyes and ears open with respect to other opportunities strategically in the market.
Thank you for all that.
And as a reminder, we do ask could you. Please limit yourself to one question and one follow up question.
We'll take our next question from Craig Siegenthaler with Bank of America. Your line is now open.
Greg can you guys hear me okay, yes.
Yes, okay clear.
Alright, perfect. Good so good morning, everyone hope, you're all doing well.
Good morning. My question is on the growth of value rotation that were seeing U S equity markets go through a multiyear growth to value rotation can you talk about how this will impact the business, but also remind us how private market investing is different than public market and absolutely in some way, it's less impacted by public market valuations.
Great. Thanks, Greg It's <unk> here.
Thank you for the questions.
I'd say first of all you're right we've been oriented as growth investors.
And transformational investors and I think.
I'll get to in a moment, but I think your point about the private market has been somewhat different in the public market is spot on.
And we've been anticipating choppy markets and really a potential downturn now for several years.
And that expectation has really shaped our approach to investing and managing our portfolio.
So firstly on the new investment front our.
Our expectation for market reset and denser downturn is factored into the go to market strategy. The way that we source the new investments that we make.
And for several years now we built multiple compression so an expectation that we will exit at a lower multiple than we acquired company into our financial model.
And our expectations.
This downturn has led us to be even more committed to our core strategy.
Of investing only in those sectors and in those themes, we have really strong conviction across the partnership and we built up angles and confidence in our strategies over a number of years.
And.
For us.
Especially in the late cycle, but really throughout our strategy, we focus on investing in secular sources of growth rather than than cyclical growth, which we do think navigate very well through different economic environments. So you can see for us even with the Choppiness of the past 12 month period, and the Covid effect, our broad portfolio grew its revenue at a rate of.
35% versus 17% for the S&P 500 total return index.
So really the sectors and themes, we're investing behind in healthcare in cyber security and climate and Dev ops and Ed Tech. These are all themes that we think will will grow well and we will grow through different market environments and will overwhelm the multiple contraction that we're modeling.
So if you were to distill our investment strategy on two principles. The first is to focus on sectors and themes.
And the second is really to invest and this is where I think it gets to the point that you were raising about the difference between private and public markets.
In situations, where we can inflect the growth where we can bend the curve as John mentioned in his comments of the companies that we invest in.
And so we're able to really focus on organic growth and inorganic growth. We spent years developing themes building relationships with Ceos and once we have a company. It's a platform for us. So we invest in it with a view of a longer term hold in some cases.
Through different site.
Market cycles.
Point, where we feel like we have some nice growth more strategic and that's a big part of the reason that you see so many interesting strategic exits for us on.
On the other side and our experience over 30 years of investing across cycles is that the strong secular growers with strong support engagement investment.
From from Us as it is.
As the sponsor can perform quite well through two recessions.
So again, recognizing that we're living through a complicated and choppy market.
This is.
These are exactly the type of companies the ones. We've invested over the last few years that we think we would invest in under any market condition, including late cycle.
And where we find ourselves now in the market.
The only other akshay should make relative to your question of the rotation from growth to value is that a lot of the discussion of a public market reset is really around young and often pre revenue companies.
That saw explosive growth run ups in the mirror and often.
It seem recently has been weighed towards companies, who badly missed aggressive revenue projections.
And stepping back of course, it would make some sense that these pre revenue companies are very early stage companies would be particularly sensitive to capital market volatility because these companies need access to additional funding to keep operating but pre revenue is really not part of the market that we focus on.
And we've really seen very strong performance in our portfolio not the extraordinary performance misses that you've seen some of these high fine.
Young growth companies.
So the last one new investment front, the reset in the public market.
In a lot of ways as you as you also mentioned creates a really interesting opportunity for us on the new investment front in the intermediate term only to 2025% to 30% of our exits.
In the growth arena had been public markets, but the public markets really are a meaningful competitor.
Back in the IPO boom over the past couple of years represented a big competitor.
Dozens of opportunities that we might have otherwise pursued away.
And so.
Right now we find ourselves in a very good position, where capital has become more scarce again, which is of course, a very positive thing for us.
The other thing I'd, just point out briefly relative to.
To the market environment is that.
That is our expectation of a downturn.
And Choppiness in the market has also driven our priority and our focus around liquidity as both John and Jack described we've been very focused on driving liquidity during the favorable period of the last few years record liquidity returned to our investors in several business units.
And driven overwhelmingly through a sale of equity and specifically full company sales rather than than floating companies or doing recaps.
And so that had the effect, which is a very positive one for us, particularly in the context of our fundraising efforts of returning capital at the same El piece that we're going to be that we're going to you for additional new fund raises.
But also.
<unk> and our returns and locking in our performance.
And so from our standpoint, that's been that's been a really important part of our of our macro view, where we are in the cycle. So we're very focused in this environment and we do anticipate choppy times ahead, but we actually feel like our playbook.
Our strategy of investing in growth companies, and then transforming and inflicting those growth companies is actually very well suited to the current environment. We feel really excited about the portfolio that we've built up over the last few years.
Jim do you want anything you'd add to that.
Well said Todd Craig having done this for a long time, it's always been interesting to me how different the private market growth investing landscape is in the public market investing landscape tend to think indices in the public market investing world, we tend to think companies and our world.
And as Todd pointed out where you get hurt us if you have unexpected multiple compression, which is not what we're seeing in our underwriting secondly, you heard if you Miss your numbers and our portfolio is performing very very strong.
And third in <unk>.
Some ways the public market as a robust competitor for us.
The World, we went through last year.
<unk>.
Very high access to public markets and spec activity in some ways was less attractive for us than the environment. We're in now.
In the intermediate term to long term investing area that we're in.
This is actually a better.
Part of the cycle for us to invest in and I think our Lps understand that.
Continue to support us as we as.
As we delve into this very interesting market.
Hi, Thanks.
The comprehensive response, there just a quick follow up on inorganic growth corporate M&A.
We just wanted to update in terms of how youre thinking about this.
It changed.
I was especially interested in the credit vertical and also have retail distribution.
When you say changed relative to what.
Your prior expectation certain organic growth.
No I don't think so I mean I think.
We're.
I would say if there is anything that.
May be changed.
Is <unk>.
Mind full of price.
Because the valley.
Values in various parts of the market.
Have been have been.
I would say.
Frothy to a degree.
For certain businesses at certain levels of scale or certain levels of development.
Everybody thinks they have a really valuable thing.
And so we're mindful of that as we look at opportunities but.
I think again the important things for us.
Our.
Quality of.
Quality of business quality of partner.
And what we feel is a.
As an intelligent fit both by virtue of the nature of the business as well as the team that people were not buying something we wouldn't be buying something with an eye toward.
No.
Just having sort of some kind of independent subsidiaries somewhere we'd be buying something that would become part of our overall franchise and so we also are looking for is people who want to join us, but that would continue to be builders and building the business.
And so that's that's important to us I think that.
Within the landscape.
<unk>.
Credit as an example, obviously credit is not just one thing there are multiple aspects to what credit strategies do.
And I think that we would over time also be looking to build a balanced approach to that.
In terms of the different kind of lines of business. If you will and so we may we may accomplish if we're able to do something.
Terms of an acquisition as an example, we may do something Thats a piece of that.
Our strategy to start with and then continue to build from there so.
I don't think I have anything more yet other than there are in our.
Our intent to continue to build and diversify our franchise that we talked about during our IPO process. When we last talked about this is still the same.
Thank you John .
Thanks.
Yeah.
We will take our next question from Ken Worthington with Jpmorgan. Your line is now open hi.
Hi, good morning.
TPG is you structured products and other mechanisms to provide some downside protection to your fund returns I guess I wanted to better understand how that downside protection, maybe holding up in the current markets and where I've struggled is with the degree of protection you're actually getting from these structures. So I was hoping you could help.
US on maybe the magnitude of the downside protection you have built in either from the proportion of your investments that utilize these structures.
Or maybe another way would be if the market's down a certain percent what sort of downside protection, you're thinking overall portfolio might get.
From your utilization of these this downside protection.
And as you know in the growth equity market.
In this case differentiated from venture.
There is a wide usage of preferred stock structures.
And also those preferred stocks have real teeth, because the businesses are at a point, where they have achieved fundamental long term value.
I would say a very high percentage of our growth equity investing is in preferred structures and increasingly as markets get choppy. Those preferreds are not only downside protection, but often have ratchets super premiums or other things that provide not only downside.
But upside even in a downside scenario.
That's one of the innovations, we really have been leaders in and the growth equity marketplace.
Coming not from venture, but instead from the structured world of private equity we have always built that into our portfolio I can't give you today, a absolute percentages to what percent of the capital would be in that structure, but it is a very broad piece of our economic tool kit.
And that.
Is something you will also see us use even more aggressively going forward.
In moments like this Ken as well.
Companies go to the financing markets with uncertainty.
Often there.
Wanting to avoid down rounds, and that allows us to create very attractive structure transactions for the capital that they will need.
As they continue to grow.
Okay brilliant. Thank you and then just maybe briefly non comp expense I believe is $36 million. This quarter were there unusual items in <unk> or is that sort of opex a good starting point for <unk> and beyond.
I think it's a good starting point for <unk> and beyond we are as you know.
No we've had to build substantial resources to support all the activities as a public company and I think that's a good starting point for <unk>.
Opex going forward.
Great. Thank you very much.
Thanks.
We will take our next question from Alex <unk> with Goldman Sachs. Your line is now open.
Hey, guys. Good morning, Thanks for taking the question as well.
Just building on some of the fundraising discussion from earlier.
Some of your comments around private equity and sort of some of the indigestion in the marketplace.
Sort of consistent with how we've been looking at it as well, but curious if you're seeing any other similar signs in terms of fundraising within other parts of private markets and if you could also give us a sense of within private equity buy tap of LP or geography are you seeing any notable differences or is your common fairly broad based.
Sorry, Alex you are saying.
Just kind of drilling down on the characterization I gave.
By geography and type of LP.
Yes, exactly right. So the private equity you broadly comment I heard that loud and clear for the industry, but you guys generally expect your your fundraising to be on track with what you've communicated during the IPO, but as you kind of double click into that geographies and LP types are there notable differences between different different customer basis, yes. That's a good question, Alex and I know you.
You wrote.
Somewhat extensively about this I think I agree with a lot of your comments, but to your point. These these dynamics are very different in different parts of the world and with different types of Lp's. The most <unk>.
<unk> impacted by some of the numerator denominator allocation target.
Type math that I walked through our.
Our.
Maybe a good example would be U S state pension funds.
Operate where the target for alternatives and although some of those targets are moving higher and theres been some publicity about that do they have to manage to a target pretty.
Specifically.
And some of the some of the maybe international pools of capital that are growing more rapidly.
And don't don't have quite as strict target to manage to or actually we're seeing increasing allocations to our funds as we are in the market. We have some who are more directly impacted by this.
Re upping with us for sure in some cases staying flat when they would have preferred to increase the amount of capital that we invest for them, but in the international pools of capital.
We're seeing in some cases substantial increases in commitment sizes.
Great that's really helpful color.
Just pivoting to maybe some of the other growth initiatives, we talked about in the past I was hoping maybe we could zone in on core plus real estate and when you guys are doing there with especially with respect to opportunities to roll this product out to retail broadly.
Any sort of timing of that would be would be helpful. Thanks.
Would make one more comment on that.
Left out you just sparked my thought process, Alex but within the broad high net worth and retail landscape that whole universe of investors is still substantially under allocated to alternatives.
And is not impacted by the kind of current.
Formulaic numerator denominator effect, so we continue to see real opportunity to grow into that space.
And Alex as Jim One thing I would add also is the learnings of the last private equity cycle was.
Is that.
Investors, who stepped back from their deployment actually led to some poor performance afterwards, so we're seeing our clients.
Really work to continue deployment, even with some of the ingestion learning from past cycles.
Alex on the just moving to your example on real estate I think first of all.
A very important business for us in terms of a driver of growth I think we talked about this around the IPO.
The momentum that we have with respect to that platform is very strong.
I reviewed my comments, obviously the types of returns we've generated there.
And obviously, that's led to us going through a meaningful period of scaling within our real estate platform and also the ability to leverage that performance into new product development.
In terms of our progress on fundraising.
One area as an example, where.
I think we had highlighted we were going to be in the market raising our four are.
Our fourth opportunistic fund, which was which is trapped for.
And the progress there I guess, let me just say has been excellent.
And I think will be.
Announcing.
Relatively soon and I think a final close with respect to trip for and that's been excellent I think Jack May have mentioned in his comments that we have announced the final close on our first core plus strategy, which was.
I had mentioned to you before.
Our strategy.
Several of our Lps.
Who have had success with us in the real estate business came to us.
It helped us basically launch into that part of the market, we closed $1 750.
And our first core plus strategy and I think we mentioned that we had design that we're after it.
Effectively after most of the capital is invested we have an opportunity to work with our Lps.
You flip that into an open ended fund structure.
One of the things that we've been doing recently is thinking through whether or not that.
As the most effective way to do it.
By the way I think that our Lps are going to be interested in seeing the investments in that fund.
Perform for a little while.
No.
I would say that we have a little bit of work to do still in front of US before we were able to open it up but the other thing that we've been evaluating is potentially a long side of that whether or not we use some other structures other investing structures in the market like for instance.
Non traded reach and things like that.
To continue the expansion of that strategy.
So we feel pretty good about where we stand right now on the real estate front, we also.
As you know have a commercial mortgage.
Publicly traded commercial mortgage REIT.
We recently made.
Higher, which we have announced where we're hiring and we hired a new CEO for the REIT, Doug Burkhardt, who comes from Goldman Sachs.
It will be joining us very shortly.
Hopefully, we'll continue to help us build out.
In the credit space around real estate as well with some other structures. So we feel pretty good about the momentum there.
The other area, obviously with respect to our progress had mentioned earlier is within the rise and impact platform Theres been a lot of focus obviously on that we feel like.
That's a we certainly feel like our franchises differentiated there and I think we did we.
During our IPO Road show we were right.
We're working on it in the middle of raising our climate fund, which Jim leads.
And.
We have effectively reached our fundraising goal there having raised about $7 billion.
For our climate fund.
And I would say I don't know Jim you might want to talk about it but in terms of one of the questions that we got along the way was what would deployment look like and climate since it's been since as to an extent a new sector.
In the market and.
I think we are.
We're we're very encouraged.
Investors have asked us how can this scale over time and we're very encouraged by what we're seeing there in terms of opportunities.
I would add in that that question of.
The opportunity set would be large enough is at least in my mind.
Much answered to give you a sense Alex Ware.
Little over six months into the close of that fund in activity levels across our climate investing have been in excess of <unk>.
$3 4 billion of total capital committed across our rise platform and co invest.
And that's really accomplished while we were in the fundraising market. So.
Indicative of.
Very substantial opportunities too.
Attractively deploy capital and grow that product base.
Hey, Ken.
Alright, Ken This is Jack I wanted to go back to your Opex question, because I don't want to.
Indicate that <unk> 36 per quarter is what you what you should expect going forward in 'twenty two.
We do continue to invest in resources for the public company.
We do expect that with Covid related travel restrictions.
Moving moving at what we are seeing an increase in travel expense. So I would I would guide you toward kind of go forward quarterly opex in the <unk>.
In the low <unk>.
Thanks, everybody.
We will take our next question from Robert Lee with.
<unk> Your line is now open.
Great. Good morning, Thanks for taking my questions and congratulations on your first.
Public earnings call.
And then maybe going back to.
Maybe going back to fund raising and deployment.
Certainly I appreciate the comments about the fund raising environment.
At the same time it does leave some getting a sense might think of.
T Rep for I guess now may be closing in the not too or having a close enough.
Or maybe grow gross deployment is maybe how things may be growth.
Faster kind of feels like maybe some of your fund raising as being.
Potentially actually being pulled forward and different versus maybe what you initially thought.
Just thinking forward.
<unk> nine is that fair characterization of kind of feels like some things are happening a bit faster.
Yeah, Hey, Rob It's Jack let me.
And we're not going to be giving substantial intra quarter guidance as we go here, but obviously, we will be giving.
Information as we close on capital raises that being said this is our first quarter I noticed obviously, our fundraising Super cycle ahead of US is super important.
So let me try to give you give you all a little bit more framework and a little more information kind of campaign by campaign I think your.
Youre the inference of your question is correct that we are seeing a bit of a pull forward relative to our expectations.
In fund raising in the context of what I mentioned was the strong demand that we're seeing from our clients for our funds and as I mentioned in my comments, we have about 11 funds, we expect to be in the market with this year and let me just walk through the most significant of those to give you more color.
On the real estate platform. We are currently oversubscribed on our next opportunistic fund truck for John alluded to that and we expect to hold our final close there in the second quarter.
And we'll obviously give an update at the end of the first quarter about how much we've closed on as of then.
And we expect to hit our hard cap there of six 5 billion.
We just had our final closed last week as I mentioned on the on the Tech plus core plus product, which is an exciting expansion.
One of our real estate platform.
On the impact side.
We expect to hold a final close for the climate fund in the second quarter at the hard cap of $7 2 billion.
And we recently launched our next broad based impact fund rise III with a target of $3 billion.
On the capital platform, which you, which you asked about we did launch TPG nine healthcare partners too and the next Asia.
Fund.
In January as planned on the capital on the TPG capital side, TPG nine and health care partners. As you know, we're kind of joined at the hip.
And those two we haven't we have articulated to our Lps and aggregate target across those capital basis of $18 5 billion.
And on the Asia side, we launched with a target of $6 billion.
And we had planned across those businesses to hold first closes as you know from our IPO discussions more in the back half of the year and I would say given the pace of investing that we've been we've been seeing.
And given the demand we're seeing for the products.
Currently expect that we hold first closes across all three of those products typically nine health care partners in Asia.
Towards the end of the second quarter.
Great. That's super helpful. Thank you and maybe.
To follow up on that.
Maybe in the two two part of the first Jack if you could also just want to make sure I had the numbers right. Your <unk> guidance on pre tax de was that 190 to 200, so I make sure I had the numbers right.
Q1, Q1, Q1, sorry, Q1, yes, yes on pretax pre tax day, yes.
Alright.
And then maybe more broadly one of the.
One of the.
Hey, guys impacts.
Yes.
The award in Ukraine is more <unk>.
Focusing on energy security.
Which necessarily in this day and age still means fossil fuels.
Does that at all impact as you think about your buys an impact at all impact.
How do you think about the opportunities that may evolve over the next couple of years.
It's going to help to be more and.
More focus globally on secure domestic.
Production on the gas generation does it have any impact at all.
Do you think of the opportunities.
Generally I see it accelerating a lot of our activity in the climate area and let me give you a few pieces of.
Data around that.
First of all one of the big issues and climate product evolution is what's known as the green premium.
Much more expensive or in some cases less expensive it is to do climate friendly activity higher.
Higher oil prices generally.
Create.
Very attractive shifts and the green premium and can accelerate.
Projects and activities around around climate investing.
So first of all higher oil prices tend to help us.
Secondly, as people focus on energy security and building into energy security Theyre doing so thinking about it with a green future in front of them.
So if you were for example in Europe , not only are you worried about liquid natural gas, but youre looking beyond that to questions of how do we build our solar and other sustainable types of fuels and executions. So essentially.
While there will be a lot of focus on fossil fuels are also be focused on what are we doing next and that will accelerate activities for green investing we're seeing that very much in our pipeline.
And.
Overall.
We are also seeing very substantial investing in re shoring of supply chains. So as people are thinking about battery investing or solar panel investing there is a real movement towards moving that question of energy security.
Those are into regions, you see that particularly in Europe , but also in the U S and that will drive substantial investment opportunities for us.
So a lot of difficult things coming out of the Ukraine there'll be a lot of near term focus on fossil fuels is there should be but I think in many ways. This will accelerate the activity that we're seeing in our pipeline to move to a green future.
Great. That's very helpful. Thank you thanks for taking my questions. Okay. Thanks, Rob.
And we'll take our next question from Bill Katz with Citigroup. Your line is now open.
Okay. Good afternoon, everybody. Thanks for taking the question at this point.
So first one maybe for Jack could you unpack the guidance for the first question I appreciate it around the revenues to 35% to $2 45, how much might be base versus transaction mining fees and for either the quarter just over or the upcoming quarter are there any catch up fees embedded in that guidance. Thank you.
Hey, Bill.
I would say.
<unk>.
There is there's actually.
A little bit less.
I would say that the mix of management fees and transaction and monitoring fees.
Is expected to be pretty consistent with what we experienced last year and what we expect to experience.
This year.
Okay.
On your second.
<unk> I don't think there are any material catch up fees embedded in that Q1 guidance.
Great. Thank you I apologize for that.
Bigger question maybe.
I know you guys just in terms of funding markets. Just wondering if you comment on that and then as you.
Look into your downstream view with the portfolio of companies.
What are you seeing in terms of economic slowdown as we look out over the next sort of three to nine months. Thank you.
When you're talking about funding markets Bill you're talking about financing markets financing funding markets for sure right as the ability to impact deployment. Thank you.
Sure.
Hey, it's that toxicity.
Yes.
I think from our standpoint.
Yeah.
We have generally been very conservative on leverage and so our strategy is growth investors and transmission investments and sort of necessitated been not I can't remember the last time, we've actually taken the full amount of leverage offered by banks and some of these situations.
We need the flexibility we need the ability to put more money into our into our platforms, both equity and debt.
And so despite the ample availability of debt over the last five years to seven years.
Our overall net debt to EBITDA portfolio wide is below four times.
Which again is consistent with our with our strategy and our exposure I'd also say that again with <unk>.
<unk> about the Choppiness of the market for some number of years. Once we once we do acquire companies won't use we use leverage and we have floating rate debt, we typically hedging 75% to 85% of the rate exposure.
So I think your comment about I mean, obviously interest rates are going to be increasing.
And that.
That'll that'll factor and I think to the overall deal environment I do think that our strategy is probably a bit insulated from the financial engineering type strategies that really require.
High availability of cheap leverage.
And.
As a result, I think we feel pretty comfortable with where we set.
Thank you.
Okay.
Thanks Bill.
Our next question from Brian Bedell with Deutsche Bank. Your line is now open.
Okay.
You're breaking up Bryan.
It's hard to hear you.
Can you hear me better now.
Yes, yes, yes, okay, great great. Thank you I apologize that just stepped off the call for a few minutes if I am not sure. If you answered this but I did want to understand the infrastructure comments I think that you made earlier John .
On the.
Looking at step outs to build the business and I just want to understand if that was.
On the infrastructure side is that largely part of an impact strategy overall, because you had mentioned obviously energy transition.
Being a major role within that infrastructure or is that something that youre thinking about it as a separate platform.
And then obviously I guess organic versus inorganic inorganic possibility within that strategy.
I think both organic and inorganic.
It's a possibility within infrastructure and as with any acquisition it would be where would you take it from where we began there's two areas that interest us greatly in the infrastructure area, where we also think we have some natural advantages. The first is related to rise climate.
And in the Tech Revolution, what we've found is early on private equity was successful in data centers and towers and then over time as those revolutions continued they moved into the infrastructure area and so having the knowledge, but having multiple pools of capital will be helpful. In the in.
The climate resolution just as it was in the Tech Revolution. So we have natural amounts of.
Quite substantial deal flow and often that deal flow doesn't know if it's private equity or infrastructure. So having the opportunity to correct that deal flow and take advantage of our knowledge is a natural for us.
The second area that I would point out we have some advantages as digital infrastructure.
Which is as you know one of the fastest growing parts of the infrastructure and across what we've done in fiber and elsewhere. We.
Have a strong track record there. So those two particular areas are the most interesting for us and both of them are things, we're thinking deeply about.
And that's more in the near term or.
Or are we talking about sort of more of a multiyear vision starting say next year.
As with all acquisition discussions, it's hard to predict timing, but we're business builders. As you know these are clear areas that we would have advantages in building into our acquired yes.
Okay that makes sense and then just a follow up on the retail strategy obviously.
Now youre trying to certainly advance that how important is the credit platform or youre acquiring a credit platform.
To that retail strategy if that's.
If that ends up getting sort of postpone for a little while if it has any issues and finding the right partner.
Do you feel that you can really advance the retail strategy.
From a distribution angle given given your product mix right now.
Yes, Jack let me.
Touch on that.
Think it's I don't think it is a problem if if if.
Credit is in say our build into credit to somehow delayed.
But.
You start by thinking about like our current product set is particularly relevant to the high end of the high net worth market.
And we are continuing to invest in building our brand among among those high net worth investors, we're continuing to build our team to market to this channel directly at all levels and we do without having a credit platform. During this fundraising cycle that I described we do expect to raise a greater percentage of our capital from.
This channel than we have in the past.
Give you a sense I think we have 15 separate campaigns planned across many banks and across almost every product that we have in the market.
So we are putting real resources into building, our brand and building into that channel.
I agree with you the inference of your question as we do continue to diversify our products Tac plus on the on the real estate side, as we expand that that product and expand into further.
Real estate products and eventually into credit as well I think we will have set up our brand and the channel to readily capitalize on those opportunities and those products will be applicable to a much broader set of retail investors.
Okay, Great. That's super helpful. Thank you.
Okay.
Well take our next question from Michael Cyprus with Morgan Stanley .
Hi, Good morning, it's <unk> here from Morgan Stanley 's Cypress. Thanks for taking my question I'm, just going back to organic growth very quickly.
Talk a little bit about them for as well as.
Some other expansions I'm just curious what are the Adjacencies that you think you could get into say over the next three to five years and just more generally how do you think about where exactly you slip out into how meaningful could those step outs be overtime.
I think I think there's a lot of examples if you look at our at our at our history.
With the healthcare <unk>.
None that we've attached to TPG capital.
That's been very successful there is a lot of demand for that not that many places actually have expressed scale health care investing.
John I think mentioned in passing but another near term opportunity sort of along the same lines. Even in the same sectors are life Sciences fund.
As part of building over many decades now.
<unk> based.
Health care focus, which is not just in TPG capital it's in growth it's in TPG.
Asia.
We have gotten into the flow of a lot of opportunities that are just earlier stage and really exciting opportunities that we feel very well equipped.
To evaluate and we want to create an opportunity a liability stream that's better suited to.
Dressing that part of the market and frankly, the pullback in the in our life Sciences World creates an even more compelling opportunity from our new capital standpoint.
So we have a have a great team that we built around that we have a lot of resources around the firm that are excited to be involved from the investment community standpoint, and a sourcing standpoint, and again, it's a perfectly natural step out and one that the the Lps that we've partnered with as long as we have particularly around around health care are very excited to be part of as well.
Second area I would point out is Asia, where we have some very.
Substantial opportunity for expansion and.
And lastly, just as a general comment innovation is alive and well at TPG and the type of innovation you've seen over the last few years.
I don't know what you think Jamba my sense around the firm as its not slowing down.
No. There is look theres a people are <unk>.
Instantly looking for ways.
Growing the franchise and growing their platforms and one of the things that.
We are trying to be thoughtful about is how to.
Think about.
Where to allocate resources to because in our.
In our view one of the things that's important is that things either have to be very complementary to the ecosystem and therefore drive.
That flywheel effect that we have Todd referenced in life Sciences is a great example, because we are so deep in healthcare and we've actually done we've been successful in a number of cases in life Sciences investing already.
It provides the basis off of which to build a meaningful.
Credible step out opportunity.
Where we have a reason to win in the market.
The other thing that we focus on is.
Not only this question of whether or not it completes the ecosystem, but also whether or not it can scale or not and so those are other things that we're mindful of as we think about because ultimately to generate the kinds of economics, we want to generate for the business and grow our business and.
In our financial results. We also want to make sure that we can develop the scale, which implies ultimately.
Sufficient margin.
So we focus on that as well so when we talked about for instance, infra as an example, that's a place where it links back into a couple of our businesses, but also has a very potentially scaled opportunity where we're already seeing opportunities as an example.
As Jim had mentioned an energy transition, we're already seeing opportunities there and the question is how does the cost of capital effect that has return profile of the pool of capital effect are you something how you stand up something on its own versus integrated and what you have.
Jim mentioned Asia as an example, we have a private equity business in Asia.
And I think over time, there are a number of different there are there are there's the potential for step outs.
And organic growth in Asia as a result of the same phenomenon that we've seen here developing in Asia as an example.
We developed our tech Adjacencies platform here, because we saw opportunities through our franchise that we are slightly different than traditional growth equity opportunities either in structure or in terms of deep.
Deep minority or whatever the opportunity might've been.
I think that given the given the development of some of the markets around Asia, particularly outside of China, we see potential opportunities to do that whether it's in Australia or in some cases in India and southeast Asia. So.
That's how we think that's just to give you a sense of our mindset in terms of how we approach these things.
Theres lots of innovation energy.
We have to kind of meter it out and manage it in an appropriate way.
That's great color. Thank you very much and if I could just ask a quick follow up on capital return. How did you think about the 85% payout ratio versus say, a fixed dividend or some of your peers do.
And how that would allow you potentially to retain capital for investments depreciation via balance sheet light strategy Youre trying to pursue.
Joe It's Jack I think you hit on it right there right.
We pro forma for the IPO as I mentioned, we've got 650 million of cash on the balance sheet.
With retaining retaining 15% of after tax de will continue to add to that balance sheet flexibility and we have relatively little debt. So as we sit here today and think about pursuing the growth opportunities that we've talked about.
We believe we have plenty of capital and as long as we feel that way.
We believe the right answer is or return capital to shareholders. So that will continue.
Continue to be our policy.
That's great. Thank you very much.
Thanks.
We will take our final question from Mrs. Hulme with bank of Montreal. Your line is now open.
Alright, Thanks for taking my question.
I wanted to get some more detail on deployment trends across your different investment platforms.
Are you seeing the best opportunities in terms of deployment.
And also relative to the roughly $8 billion of capital you invested last quarter, roughly where are you year to date versus that run rate.
Yes.
Sure.
I'll start with the <unk>.
This sort of where we're seeing opportunities again.
Apologies, if it sounds a bit repetitive.
We've continued to I think find our best opportunities in the areas, where we have our strongest focus our strongest teamwork.
Hopefully you've gotten a sense from this culturally we're very much oriented around themes around sectors around getting very deep in developing conviction across our investment committees and the opportunities that we.
Yet, we have resources and ecosystems built up and so for us.
And I think actually it's worked out quite well, particularly in recent years as we've.
Envision getting later later in the cycle in terms of the investment strategy. So for US I would say that we continue to see a lot of activity and a lot of interesting differentiated making proprietary opportunities.
In the broad worlds of technology, which would include both software.
Content media.
And a host of other sort of interesting areas in and around technology.
And health care those are two sort of big.
Sector areas and of course within each one there is a lot of there's a lot of granularity as to what were finding John mentioned, an interesting opportunity that intersected two of our of our other sectors.
In Troon, which overlap both business services and.
And consumer which are which are important sectors for us as well.
But but semantically again I think we've continued to sort of leaning into places where we have the most conviction and we feel like we have the best resources to continue to drive the growth in our companies and that has continued to generate.
The most attractive deal flow from our standpoint, and we continue to have very busy investment committees.
With a sense of a lot of opportunity in front of us will be well beyond three years or four final pricing is after we're done with the call today in fact.
Thank you.
Thanks.
This concludes the question and answer portion of today's call I would now like to turn the call back over to Gary Stein for any additional or closing remarks.
Great. Thank you operator, thanks, everyone for joining us today.
Look forward to following up with you again next quarter.
Thanks, everyone.
Sure.
This concludes todays <unk> fourth quarter 2021 earnings conference call and webcast. You may disconnect. Your line at this time and have a wonderful day.
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