Q1 2025 TPG Inc Earnings Call
No Tears Left To Cry
Speaker Change: Good morning and welcome to the TPG's first quarter 2025 earnings conference call.
Speaker Change: Currently, all collars have been placed in a lesson only mode, and following management's prepared remarks, the call will be open for your questions. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If you need to remove yourself from the queue, press star 2.
Speaker Change: To get as many questions as time permits, we ask that you please limit yourself to one question.
Speaker Change: At any time, if you should need operator assistance, please press star zero
Please be advised so that today's call is being recorded.
Speaker Change: Please go to TPG's IR website to obtain the earnings materials.
Speaker Change: I will now turn the call over to Gary Stein, head of investor relations at TPG. Thank you, you may begin.
Great. Thanks, Operator, and welcome, everyone.
Speaker Change: Joining me this morning are Jon Winkelried, Chief Executive Officer, and Jack Weingart, Chief Financial Officer. In addition, our Executive Chairman and Co-Founder, Jim Coulter, and our President, Todd Cicisky, are also here and will be available for the Q&A portion of this morning's call.
Speaker Change: I'd like to remind you this call may include forward-looking statements that 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.
Speaker Change: TPG undertakes no obligation to revise or update any forward-looking statements except as required by law.
Speaker Change: Within our earnings, within our discussion and earnings release, we're presenting GAAP and non-GAAP measures and we believe certain non-GAAP measures that we discuss on this call are relevant in assessing the financial performance of the business.
Speaker Change: These non-GAP measures are reconciled to the nearest GAP figures in TPG earnings release, which is available on our website.
Speaker Change: Please 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.
Speaker Change: Looking briefly at our results for the first quarter, we reported gap net income attributable to TPG, Inc. of $25 million, and after-tax distributable earnings of $187 million, or $0.48 per share of Class A common stock.
Speaker Change: We declared a dividend of 41 cents per share of Class A common stock, which will be paid on June 2nd, 2025 to holders of record as of May 19th, 2025. I'll now turn the call over to Jon.
Thanks, Gary, and good morning, everyone.
Jon Winkelried: Yesterday, we announced that TPG had agreed to acquire Peppertree Capital Management.
Jon Winkelried: Peppertree is a leading specialized digital infrastructure manager with a focus on wireless communication towers. This acquisition leverages our deep sector expertise and communications and represents our further expansion into the digital infrastructure space.
Speaker Change: For our call today, Jack and I will first cover the current environment and our quarterly results, and then we'll provide some additional details on the pepper tree acquisition.
Speaker Change: We've witnessed a dramatic shift in the market environment over the last few months.
Speaker Change: Coming into 2025, those broad-based strengths across the economy and confidence levels were near record highs.
Speaker Change: The market was anticipating meaningful earnings growth, accelerated M&A activity, and rising equity valuations.
Speaker Change: Several factors, including tariffs and general policy uncertainty, have upended the environment and created significant volatility.
Speaker Change: As a result, we're seeing unusual market correlations, renewed fears of inflation, and concerns around slowing economic growth.
Jon Winkelried: At TPG, we remain focused on executing our business and driving growth.
Jon Winkelried: Our leadership team has navigated through many cycles, and one of our core beliefs is that staying engaged and highly connected is critical during times like these.
Jon Winkelried: In my conversations with leaders of some of our largest strategic partners globally, I'm observing several consistent themes.
Jon Winkelried: Clients are adjusting their expectations around performance and liquidity in their portfolios.
and they're evaluating the geographic diversification of their investments.
Jon Winkelried: At the same time, our clients are looking to partner with us to take advantage of opportunities created by the current environment and to leverage our global franchise.
Jon Winkelried: With respect to our portfolio, we entered this period with significant momentum, including strong top line and earnings growth.
Jon Winkelried: We've assessed the direct exposure across our investments to recent tariffs, and we've seen minimal first-order risk. While we expect uncertainty and market fluctuations to persist, our investment strategy, characterized by our intentional selection of sectors and themes,
It gives us confidence in the quality of our portfolio.
Jon Winkelried: and consistent with our dialogues with our largest clients, we're leaning into opportunities to deploy capital and play offense.
Jon Winkelried: As it relates to our capital formation efforts, we're seeing the benefits of strong connectivity with our clients.
Jon Winkelried: Despite a volatile environment, we continue to expect to raise significantly more capital this year than last.
Jon Winkelried: Several of our campaigns will likely elongate as clients manage through this period of disruption, but we remain very confident in our overall objectives.
And credit, we have strong momentum.
Jon Winkelried: In prior quarters, we've discussed our focus on introducing our largest client relationships to our credit platform.
Jon Winkelried: Despite somewhat lighter credit fundraising in the first quarter, we're at an inflection point in our dialogues and have seen an acceleration in commitments to our strategies.
Jon Winkelried: In addition to the capital we raised in the first quarter, we have more than $3 billion of discrete credit mandates that have closed or are expected to close over the next several months.
Jon Winkelried: In private equity, we recently launched campaigns for the next vintage of our TPG Capital and Healthcare Partners Funds.
Jon Winkelried: We're receiving strong support from both existing and new clients, and we expect to hold sizable first closes around mid-year.
Jon Winkelried: In the next few weeks, we're launching the campaign of our second GP Solutions Fund.
Jon Winkelried: Our first fund is now approximately 85% committed, and we expect to raise a meaningfully larger successor fund.
Jon Winkelried: Additionally, in our impact platform, we continue to drive several ongoing fundraisers, including our RISE Climate Private Equity Fund, the Global South Initiative, and our Climate Transition Infrastructure Fund.
Jon Winkelried: We had a strong start to these campaigns and have raised more than 60% of our target.
Jon Winkelried: while fundraising timelines for climate-related strategies will be elongated due to policy uncertainty in the United States.
Jon Winkelried: We believe energy transition is a generational investing opportunity and the strength of the RISE franchise continues to resonate with clients globally.
Jon Winkelried: TBG AG Real Estate held a successful final close for its fourth European fund.
This campaign was mid-flight when we acquired Angelo Gordon.
Jon Winkelried: And it's a testament to the strength of our integration and the quality of our business that we successfully grew the fund to nearly $2.3 billion, a 50% increase from its predecessor.
Jon Winkelried: Broadly across fundraising, we're benefiting from the quality and depth of our relationships with our largest clients globally through the formation of strategic partnerships and customized solutions.
Just last week
Jon Winkelried: We establish the largest strategic partnership in our history, which will span across private equity, credit, real estate, and infrastructure.
Jon Winkelried: This partnership, which represents over $4 billion of potential new capital.
Jon Winkelried: will accelerate scale and innovation across our investment strategies. It reflects the strong trust we built with our clients as a result of our differentiated investment approach and long track record of delivering excellent performance.
Jon Winkelried: Overall, while not immune to the broader industry dynamics and macro uncertainty, our clients continue to recognize our differentiated investment performance and, in particular, the excellent DPI we're consistently delivering.
Jon Winkelried: I'd also like to provide an update on private wealth which is a high-priority growth area.
Jon Winkelried: Our private well strategy has several key elements, including building deep connectivity with leading wire house partners.
Jon Winkelried: accessing the RIA channel, and continuing to expand our team and product set.
Since our last earnings call, we've made meaningful progress.
Jon Winkelried: We recently launched TPOP, our new Perpetually Offered Private Equity Vehicle, with two of the largest wirehouses in the United States. We have longstanding high-quality relationships in the channel, and the level of engagement and interest in TPOP is high.
Jon Winkelried: In connection with the launch, Jim Coulter, Tata Sitzke, and over a dozen leaders from our private equity business led marketing events with key executives and financial advisors.
Jon Winkelried: Outside of the United States we're taking a similar approach and we'll be launching TPOP with one of the leading international private banks later this year.
Jon Winkelried: Over time, we expect to partner with additional banks to offer TPOP on their platforms.
Jon Winkelried: As it relates to the RIA channel, we're focused on enhancing our presence and footprint.
Jon Winkelried: We're actively structuring several innovative partnerships to extend our brand and increase the accessibility of our products for the RIA community.
Jon Winkelried: And finally, we remain focused on continuing to grow our private wealth team both domestically and internationally.
Jon Winkelried: As a result of our comprehensive approach, we've successfully launched TPOP and expect to begin seeing inflows over the next couple of months.
Jon Winkelried: With the introduction of TPOP, we've enhanced our product set for the private wealth channel which includes TCAP, our non-traded BDC, and mortgage value partners, a key product in our structured credit franchise.
Jon Winkelried: We expect to continue to build our suite of private wealth products across private equity, credit, and real assets.
Thank you.
Jon Winkelried: Turning to deployment, we maintained a strong pace with 7.3 billion dollars of capital invested in the first quarter and recently announced a number of interesting investments.
Jon Winkelried: In TPG Growth, we agreed to acquire a significant stake in Cliffwater, a leading retail alternatives investment manager in the United States.
Jon Winkelried: The private wealth sector is one of our highest conviction thematic areas and Clifforder builds upon TPG's existing investments in creative planning and Homeric Burke
Jon Winkelried: RISE Climate has agreed to partner with Siemens Gamesa to carve out its onshore wind turbine manufacturing and services business in India and South Asia.
Jon Winkelried: Siemens chose to partner with TPG given our strong climate investing credentials and key relationships in the industry. This will be the first investment for the RISE Climate Global South initiative.
Jon Winkelried: And in our Asia Mid-Cap Growth and Buyout Strategy, PICA, we announced two transactions.
Jon Winkelried: First, the acquisition of Orange Valley and the proposed take private of Econ Healthcare, two leading private nursing home operators in Singapore. And second...
The Acquisition of a Controlling Stake
Jon Winkelried: and five good friends, a technology-led home care disruptor in Australia.
Jon Winkelried: Looking ahead, as we've seen in prior periods of uncertainty, overall deal volume across the industry may moderate.
However, currently our pipelines remain robust.
Jon Winkelried: The deal flow across our platforms is characterized by proprietary opportunities we've sourced off-market and reflects our strong track record of structuring creative transactions, including corporate carve-outs and take-privates.
Jon Winkelried: Additionally, several of our investment strategies are particularly well suited for uncertain environments like this.
Jon Winkelried: Our GP-led secondary strategy currently has a strong pipeline, which is benefiting from the growing pressure for GPs to generate liquidity at a time when options are limited.
Jon Winkelried: Another example is TBG Tech Adjacencies, which provides flexible, solutions-oriented capital for private technology companies. We expect the demand for TTAD's capital to increase as the public markets remain largely shut, and founders and businesses seek alternatives to fund growth and liquidity needs.
Jon Winkelried: And finally, Credit Solutions is well positioned given it provides bespoke, highly structured capital solutions to help companies resolve complex financing challenges. We anticipate there will be an increasing pipeline of private financing opportunities due to the heightened uncertainty and less receptivity from traditional sources of capital such as banks.
Jon Winkelried: As it relates to credit deployment more broadly, Twinbrook had a strong first quarter with $1.8 billion of gross originations. Despite a more volatile market backdrop, we're seeing a steady pace of sponsor M&A activity and our pipeline remains active.
Jon Winkelried: Additionally, as lead lender in almost all our transactions, Twinbrook's incumbency is a powerful source of embedded add-on activity that we have exclusive access to.
Jon Winkelried: In structured credit, activity continues to be robust as those markets have so far been less impacted by the current dislocation and volatility. Spreads and asset-backed securities and residential home loans have remained reasonably stable and asset portfolios continue to trade.
Jon Winkelried: Looking ahead, we believe there will be more opportunities to lend against assets, as well as acquire asset collateral pools at attractive valuations, particularly as originators and banks look for creative ways to manage their risk and liquidity.
Jon Winkelried: In real estate, our deployment pace was intentionally modest during the first quarter.
Jon Winkelried: However, the impact of recent market volatility, uncertainty around interest rates, and a potential recession are creating increasing flows of actionable opportunities.
Jon Winkelried: We have $13 billion of dry powder on a combined basis for our real estate platforms and our teams are evaluating a number of interesting investments in the US, Europe, and Asia.
Jon Winkelried: In addition, the opportunity set for TRECO, our real estate credit strategy, has continued to expand due to the ongoing pullback in bank lending activity and more volatile credit conditions in the debt capital markets.
Jon Winkelried: As we look ahead, our experience has been that periods of dislocation often create some of the most interesting investment opportunities. With 57 billion of total dry powder across the firm, we're in a strong position to take advantage of this environment.
Jon Winkelried: Turning to realizations, we continue to successfully execute on important exits and liquidity events.
Jon Winkelried: This includes the sell-down of some of our largest public positions, such as Viking Cruises, Lifetime Fitness, and the full exit of Next Tracker.
Jon Winkelried: Additionally, we successfully completed two public listings, Dr. Agarwal's Healthcare and One Source Specialty Pharma in India, where over the last three years we've taken 11 of our portfolio companies public, delivering strong returns for fund investors.
Jon Winkelried: And last month, we announced the sale of two TPG growth portfolio companies, Crunch Fitness and a leading healthcare technology company. These investments are expected to generate outstanding returns for our fund investors and demonstrate the quality and resilience of our portfolio.
Jon Winkelried: Year-to-date, we have realized approximately $1.8 billion in our TPG growth funds, including transactions that are signed but not yet closed.
Jon Winkelried: Additionally, consistent with our track record of driving organic innovation in areas where TPG has a right to win, last week we launched a new strategy, TPG Sports, in partnership with Rory McIlroy, Sean O'Flaherty, and the team at Symphony Ventures.
Jon Winkelried: This strategy will invest in businesses that are driving the sports ecosystem.
which is benefiting from strong secular tailwinds and transformational growth.
catalyzed by new technology.
Jon Winkelried: TBG Sports was launched with a significant anchor commitment from Lunit.
Jon Winkelried: an important UAE-based strategic partner for TPG, and we expect to continue to raise capital over the coming quarters.
Jon Winkelried: As we look ahead, we are well-positioned to navigate through this market dislocation. We remain highly focused on executing across our business and continuing to drive long-term growth and value creation for all our stakeholders. I'll turn the call over to Jack to discuss our financial results.
Jack Weingart: Thanks, Jon, and thank you all for joining us today. I'll begin with a discussion of our first quarter financial results and investment performance.
Jack Weingart: And then I'll discuss our outlook for the year, with a particular focus on our fundraising campaigns. Our fee-related revenues in the first quarter were $476 million, which included $413 million of management fees and $54 million of transaction fees.
Jack Weingart: Over the past several years, we've invested in building our capital markets capabilities and integrating our broker-dealer across all our platforms and strategies.
Jack Weingart: We've generated a step function growth in our annual revenue opportunity.
compared to 2023.
Jack Weingart: While the second quarter will likely see a step down in capital markets revenue due to the timing of certain transaction closing activity, we believe that our positive momentum in this business will continue in the back half of the year, and there's significant opportunity for further growth in the years ahead.
Jack Weingart: We reported fee-related earnings of $182 million and an FRA margin of 38%, consistent with our previous guidance.
Jack Weingart: As expected, cash comp and benefits expense was seasonally elevated this quarter due to the annual vesting of our RSUs, which resulted in approximately $14 million of additional cost.
Jack Weingart: Looking ahead, we continue to expect FRE margin expansion in the back half of the year, and we expect to exit the year with a margin in the mid-40s.
Jack Weingart: Realized performance allocations totaled $40 million in the first quarter, primarily from the partial monetizations of our public positions.
Jack Weingart: We continue to find opportunities to monetize assets, including the sale of two TPG Growth portfolio companies that Jon mentioned. Our success driving liquidity and DPI across our portfolios continues to be a strong differentiator for us with our clients.
Jack Weingart: After-tax distributable earnings for the first quarter totaled $187,000,000 or $0.48 per share of Class A common stock.
Jack Weingart: We finished the first quarter with $251 billion of total assets under management, which increased 12% year-over-year. This was driven by $31 billion of capital raising, $20 billion of value creation, partially offset by $22 billion of realizations over the last 12 months.
Jack Weingart: Fee-earning AUM at the end of the first quarter totaled $143 billion. AUM subject to fee-earning growth was $27 billion at quarter end and included $18 billion of AUM not-yet-earning fees.
Jack Weingart: Our performance eligible AUM was $212 billion, or 85% of our total AUM, of which $162 billion is currently generating performance fees.
Jack Weingart: At the end of the quarter, our net accrued performance balance exceeded a billion dollars for the first time, driven by continued strong value creation. This represents significant embedded earnings power that we expect to realize over time.
Jack Weingart: We continue to deliver strong investment performance in the first quarter.
Jack Weingart: with positive value creation across all our platforms. In light of the current period of economic uncertainty, investors are understandably focused on the underlying portfolio quality of alternative asset managers. We are confident in the strength and durability
Jack Weingart: of our investment portfolios. As Jon mentioned, based on a comprehensive bottoms up analysis, we've determined that our portfolios have very limited first order exposure to tariffs, and I'll provide some additional detail for a few of our strategies.
Jack Weingart: Within private equity we expect little to no direct impact from tariffs for approximately 90% of the fair value in our portfolios.
Jack Weingart: This reflects the benefits of TPG's fundamental investment approach, which is focused on sectors such as healthcare, software, and tech-enabled services. These sectors generally have strong secular growth, resilient business models, and limited reliance on physical goods.
Jack Weingart: Through the first quarter, our private equity portfolios, which include capital, growth, and impact platforms, continue to meaningfully outperform the broader market, with revenue growth of approximately 18% over the last 12 months.
Jack Weingart: Looking at our credit platform, in our Twinbrook direct lending business, less than 3% of the fair market value of our portfolio has high direct exposure to tariffs. Our portfolio of over 290 companies is broadly diversified across more than a dozen industries with stable average interest coverage ratio of approximately 2 times.
Jack Weingart: We have strong downside protection with 97% of the portfolio in first lien, senior secured debt, and we have maintenance financial covenants in 100% of our loans.
Jack Weingart: Overall, the nature of the securities across our credit platform, which often includes strong structural protections, insulates us from modest fluctuations in underlying company profitability.
over the last 12 months.
Jack Weingart: In real estate, TPG's real estate portfolio appreciated 7% in the first quarter and nearly 13% over the last 12 months. We continue to drive strong operating performance at our portfolio companies, supported by positive leasing and occupancy trends.
Jack Weingart: Our portfolio is concentrated in attractive sectors where we have strong thematic conviction, such as industrial, residential, and data centers, which benefit from positive supply-demand fundamentals.
Speaker Change: TPGAG's real estate platform appreciated 60 basis points in the quarter and 2.6% over the last 12 months.
Speaker Change: Moving on to fundraising, we raised nearly six billion dollars during the first quarter across our platforms. This included an additional close of more than a billion dollars for our RISE Climate Fund and Global South Initiative.
Speaker Change: As Jon mentioned, the level of engagement with our clients around the world is high, and our fundraising momentum remains strong.
Speaker Change: Looking at the balance of the year, while we do expect the current environment to result in elongated campaigns, we continue to expect to raise significantly more capital this year than we raised in 2024, driven by the following.
Speaker Change: Number one, the continued scaling of our credit platform, including sizable mandates that have closed since quarter end or are approved to close over the next several months.
Speaker Change: Number two, initial closes and the activation of our next TBG Capital and Healthcare Partners Funds in the middle of the year.
Speaker Change: Number three, initial closes for our next-generation funds in GP solutions and tech adjacencies. Number four, continued progress in our climate, private equity, and infrastructure campaigns. Number five, the completion of our TPG growth campaign.
Speaker Change: Number six, additional cross-platform strategic partnerships with some of our largest clients globally.
Speaker Change: And number seven, increasing penetration of the private wealth channel generally, including inflows for TPOP, our new perpetual private equity product.
Speaker Change: Finally, a quick comment on our balance sheet. Last week we amended our senior unsecured revolver to further enhance our already strong financial flexibility and liquidity. We upsized the facility from $1.2 billion to $1.65 billion.
Speaker Change: extended the maturity for a new five-year period and repriced the facility at more favorable rates.
Speaker Change: On that note, I'll turn the call back over to Jon to discuss our acquisition of Peppertree and how that further strengthens our franchise.
Thanks, Jacque.
Speaker Change: We're excited to announce this important acquisition. With more than two decades of experience, Peppertree is the largest pure play wireless tower specialist in the United States with over 8,800 towers in its portfolio. Peppertree has raised 10 funds to date and manages nearly 8 billion dollars of total AUM.
Speaker Change: and a gross realized multiple of 2.4 times invested capital since inception.
Speaker Change: As a result of its success, Peppertree is both a loyal and growing base of institutional clients, driving steady fund-over-fund growth.
Speaker Change: We believe Peppertree is a compelling strategic fit for several reasons.
Speaker Change: First, Peppertree's strategy is highly complementary to TPG's existing investment leadership in the communications sector and will benefit from our scale, deep thematic expertise, and long track record of successfully scaling high quality businesses in the space.
Speaker Change: Second, the wireless communication sector benefits from strong secular growth as global demand for data continues to accelerate.
Speaker Change: As an industry leader, Peppertree provides us immediate scale in the tower and network infrastructure development space. Looking ahead, we believe there are significant opportunities to expand our investment capabilities across digital infrastructure.
Speaker Change: Third, Peppertree's long-dated portfolio of uncorrelated assets generates contractually recurring, highly predictable cash flows, and we believe these attributes will resonate with our client base.
Speaker Change: Fourth, we have spent a significant amount of time with Howard and Ryan and other members of the Peppertree team. It's clear from our close engagement over many months that there's an excellent cultural fit between our two firms.
Speaker Change: The Peppertree team shares TPG's longstanding commitment to entrepreneurship, innovation, and investment excellence, as well as our vision for the growth opportunities that are possible within our ecosystem.
Speaker Change: And finally, we believe there are several meaningful growth drivers created by the combination, including expanding into TPG's existing global client base, extending the duration of Peppertree's capital, and leveraging our broker-dealer capabilities to pursue capital markets opportunities.
Speaker Change: This acquisition will add an additional source of highly attractive and predictable fee revenue. We expect this transaction to be immediately accretive to fee-related earnings and after-tax distributable earnings per share upon closing.
Jack Weingart: Peppertree underscores our continued focus on value accretive acquisitions where we have a natural competitive advantage. We look forward to welcoming the Peppertree team to TPG. I'll turn it back over to Jack to walk through the overview of the transaction and financial details.
Jack Weingart: Thanks, Jon. I want to echo Jon's remarks on the strategic benefits of this transaction. We're establishing a leadership position in an attractive segment within digital infrastructure, leveraging our deep sector expertise, and growing and diversifying our fee-related revenue.
The acquisition is also compelling from a financial perspective.
Jack Weingart: First, we're acquiring Peppertree at an attractive price. The transaction is valued at approximately $660 million, including $242 million in cash and up to $418 million in equity based on TPG's closing price on May 2nd.
Jack Weingart: This represents a multiple of approximately 12 times 2024 after-tax FRE.
Jack Weingart: It's important to note this price also includes the purchase of performance-related earnings for both historical and future funds.
Jack Weingart: At year-end, Peppertree had a crude but unrealized carry of approximately $449 million. So the 20% applicable to TPG operating group would have been approximately $90 million.
Jack Weingart: Adjusting the purchase price only for the $90 million of book value and ignoring the future value, the value of future PRE.
The transaction multiple is approximately 10 times after tax FRE
Jack Weingart: Second, we expect this transaction to be immediately accretive to FRE and Aftertax DE per share.
Peppertree has an attractive margin profile.
Jack Weingart: and we anticipate continued strong management fee growth in the coming years.
Jack Weingart: Third, we have structured the transaction to ensure clear alignment of interest and strong incentive to drive growth in several ways.
Speaker Change: The principals of Peppertree, including Howard and Ryan, have agreed to revest their equity ownership over a five-year period after closing.
Speaker Change: In addition, Pepper Tree's equity consideration will be subject to lock-up for the first full year post-closing, and a third of the equity consideration will be released from lock-up on each of the first, second, and third year anniversaries of the closing.
Thank you.
Speaker Change: And finally, we've structured the earn-out and earn-out provision that's valued at up to $300 million. This earn-out is based on the satisfaction of certain fee-related revenue and fundraising targets over the next few years.
Speaker Change: If any of the earnout is paid, we expect the purchase price multiple to decrease and the acquisition to become more accretive.
Thank you.
Speaker Change: In terms of funding the cash portion of the acquisition at close, we expect to use our current cash balance and to draw on our upsized revolver. Upon completion of the transaction, our leverage will remain conservative and we will continue to have ample liquidity and significant financial flexibility.
Speaker Change: The transaction is subject to customary closing conditions and is expected to close in the third quarter of this year.
Speaker Change: Upon closing, Pepper Tree will join our market solutions platform and Howard and Ryan will continue to lead the strategy.
Speaker Change: Along with all of our colleagues at TPG, we look forward to working with the Peppertree team to build significant long-term value for our clients and for our shareholders.
Now we'll open up the line for questions.
Speaker Change: At this time, if you wish to ask a question, please press Star 1 on your telephone keypad. You may remove yourself from the queue by pressing Star 2.
Again, please limit yourself to one question.
Speaker Change: And we'll take our first question from Craig Siegenthaler with Bank of America. Please go ahead.
Speaker Change: Thank you. Good morning, John and Jack. I hope everyone's doing well.
All right, Greg. Thanks, Greg.
Speaker Change: So we have a follow-up on the private wealth channel, so on the product side
Speaker Change: I'm curious, what is the expected flow contribution or trajectory from TPoV?
Speaker Change: and TCAF over the next year. And it sounds like TPoS may actually start flowing pretty soon, like inside of 2Q25. And then just a follow-up on the REA channel, Jon, I heard your comments around structuring innovative partnerships.
Speaker Change: But do you expect to launch an interval fund with third party private credit managers just given unique requirements to that channel?
Speaker Change: Yeah, I'll start Craig. Thanks for the question. Look, I'll start and Jon covered a lot of this in his remarks, but.
Speaker Change: Increasing our private wealth business is one of our most strategic, most important strategic priorities for the firm. I think it's safe to say the entire firm is focused on it.
Speaker Change: If you look back at the progress we've made so far, last year we raised $2.4 billion from the private wealth channel, including the family office channel, which is more than double what we raised in 2023.
Speaker Change: In the first quarter, we raised about $525 million, so increasing the pace again. And I think right now we view this as an inflection point as we expand our team and expand our product set.
Speaker Change: We've been materially increasing the size of our sales and marketing team. And to your point, we've been very focused on creating new products that are attractive for the channel.
Speaker Change: TPOP is the first of those, and as Jon said, we've got two very important strategic partners on the wirehouse side that we're working actively with toward an activation in June, which is exactly what we've been saying. So, we remain exactly on track.
Speaker Change: for the launch of TPOP. It's hard to quantify expected inflows at this point until we start seeing those, which will occur in June. So we'll have a lot more to say on that in the...
Speaker Change: in the next quarterly call. TCAP is another product along with Mortgage Value Partners, the two evergreen vehicles on the Angelo Gordon platform. And I would say, as we've been out talking to channel partners on
T-POP.
Speaker Change: It's increased the visibility of those two products, and we're seeing increased engagement in what's already been a good increase in the flow there. I don't know how to predict the flows of TCAP, but they should be increasing over time. I'd say also, TCAP, as the...
non-traded BDC that feeds into the Twinbrook business. There's increasing
kind of appreciation in the high net worth
Speaker Change: marketplace just like there is among our institutions for the unique position that that Twinbrook holds in the direct lending business and a real desire for people to diversify their exposure to direct lending.
Speaker Change: away from the high end and toward the lower middle market where Twinbrook is focused. So we're seeing that result in increased flows to both
Speaker Change: to both to TCAP on the private wealth side and into Twinbrook institutionally. Jon talked about some of the engagement with our large strategic clients and how that's resulting in big big commitments that we're in the middle of closing on. That is in part driven by that market position of
Speaker Change: of Twinbrook, as well as the other credit businesses of Angela Gordon.
Sticking with private wealth.
Speaker Change: The other thing we're focused on as we're making good progress on TPOP is diversifying our product set into additional product categories. We're actively working on a multi-strategy credit product that would complement the single-strategy products that are mortgage value partners and TCAP.
Speaker Change: We're actively working on a real estate product for the channel Where the idea of a high-performing real estate platform like ours With with with no kind of legacy portfolio is very attractive to our partners
Speaker Change: So all of that is in the works. And then finally...
Speaker Change: We are in active discussions with potential strategic partners, both to access the RIA channel and, more broadly, to think through some of these public-private partnerships that are in the works. So we're actively working on all of those steps.
Speaker Change: to build this private wealth business. And I think this will be one of the most important topics we all talk about in the coming year or two as we build.
Ken Worthington: Thank you. Our next question will come from Ken Worthington with J.P. Morgan. Please go ahead.
Ken Worthington: Hi, good morning and thanks for taking the question. So going to transaction and other fees, it clearly jumped a lot this quarter. You mentioned the build-out of capital markets. I guess maybe first, are those capabilities
Ken Worthington: Fully or largely built out and launched at this point, and if not how far along the ramping process are you?
Speaker Change: Why so strong? Deployment was down this quarter. What was it about either the type of transactions or the asset classes or the nuances in one queue that contributed to the magnitude of the increase that we saw?
Speaker Change: I'll start on that answer. Thanks for the question, Ken. So, first of all, I would say on your first question, we really have invested in building out the team. We're not done yet, but I'd say we're...
Speaker Change: three-quarters of the way done with adding resources to the team to facilitate the penetration of all of our businesses and the active revenue generation across all of our businesses.
And I'd say the first quarter, while a strong quarter,
really only
partially represents
Speaker Change: the further expansion of that business. As I alluded to in my comments, we see a lot more upside to continue growing that revenue line.
Speaker Change: in the coming quarters and years as we continue to integrate it with other businesses. I think it's going to be much more diversified next year. The credit opportunity, I think we're in the second inning of that opportunity with a lot more growth ahead of us.
In the first quarter it really was nothing
Speaker Change: and they were all very new beyond that further integration into our platforms. There were no particularly strong one-time events. It was really a broad-based...
Speaker Change: use of our capital markets team across all of our transaction closings and across refinancing activity in the portfolio.
Speaker Change: Yeah, the only thing I would add is I think that
Thank you.
As we built this capability
Speaker Change: We've obviously built expertise from a capital markets perspective in terms of bringing people into the firm. As you know, when we talk about
our different businesses, and our different funds.
Speaker Change: If you looked around the organization now, what you would see is capital markets capability essentially embedded into each one of those businesses.
Speaker Change: There is kind of go-to expertise that's sitting with and working.
Speaker Change: consistently with the deal teams in all these different businesses so it's much more present and and it's much more connected to the deal process and
The growth that Jack referred to, if you look at
Speaker Change: The execution of that, a lot of it depends on the adoption and understanding of what we can, where we add value from a capital markets perspective among our deal teams.
Speaker Change: with the addition of Angelo Gordon and our businesses there, particularly when you look at the Credit Solutions opportunity and the Twinbrook opportunity.
as we source opportunities and think about.
Thank you. Bye.
really extending the capabilities of our broker-dealer.
both in some cases.
Speaker Change: for syndication of risk, in other cases for participating in other opportunities as a result of bilateral relationships with other originators. There's just a lot of opportunity there. So, you know, we're going to continue to build it out, but we feel like we've gotten really good traction and momentum within the business. And, you know, my guess is that
Speaker Change: The sort of the base load, if you will, of revenue as a result of the expansion and continued growth of our franchise, you know, will follow suit.
Speaker Change: Thank you. Our next question will come from Alex Blisting with Goldman Sachs. Please go ahead.
Alex Blisting: Thank you and good morning everybody. My question is around private equity. Obviously, this continues to be an area of probably most concern given the changing backdrop we've seen over the last month, month and a half here.
Alex Blisting: I was very encouraged by your comments around fundraising and the way you're thinking about both capital and health care launches in the middle of the year, so I was hoping you could expand on that a little bit and maybe what gives you confidence on
Alex Blisting: being sort of able to get these done this year or get, I guess, the, you know, the first closes done this year. How is LP makeup shaping up maybe relative to your existing base and are there any sort of discounts or incentives that you feel like you have to put into place?
Alex Blisting: to get these campaigns off the ground. So effectively, just kind of hoping to go through some of these details a little bit more.
Speaker Change: Thanks, Alex. Well, maybe I'll make a couple of comments and maybe Todd will also follow on and make some comments because, you know, we're, we're sort of all on the front lines out there talking to our clients constantly.
Speaker Change: First of all, I think that one of the most important things to keep in mind is that not everybody in this market is created equal. And if you look at – and I think that's really important. I think that, you know, there's obviously – the private equity market is tight.
Speaker Change: and there's various impact, there's various reasons for that as you know as kind of we all know it's well written, it's well documented.
Speaker Change: The dialogue that we're having with our clients is really sort of predicated on the fact that
Speaker Change: I think that our franchise, across all of our strategies, is probably performing better than it's ever had in our history, just in terms of consistency and performance.
Speaker Change: And then also in terms of return of capital, I mean, I think that you know we've talked about the consistency with which we have been focused.
Speaker Change: on not only investing well, but also monetizing and returning capital.
Speaker Change: And I think we've been a leader in that, and our clients recognize it and understand it. And also, our clients feel like they're in a better position to return capital to us as a result of that.
Speaker Change: Just out of interest, I have some numbers run that look at our ratio of realized returns to invested capital.
Speaker Change: If you look at our numbers, it's pretty interesting, but you know basically starting in 2020
Speaker Change: In 2020, that ratio was 1.1 times, so we actually returned more capital than we invested.
Speaker Change: in 2021, and this is for all of our private equity strategies combined, in 2021 it was 1.4 times, in 2022 it was one times.
Speaker Change: In 2023, it was 0.5 times, so we invested more than we returned. In 2024, it was 1.1 times, and the first quarter, it was 0.9 times.
Speaker Change: So, when you look at that balance, one of the things I think the conclusion you should draw from that is that not only are we trying to be very tactical in terms of the way we invest, in terms of how we source, the thematic approach that we take, our sectors and our focus.
Speaker Change: in terms of constructing our portfolios, but we're also, I think, very deliberate in terms of how we manage our funds.
and how we think about...
Speaker Change: our stakeholders with respect to return of capital and how we apply oversight to the process of evaluating where do we want to exit, when do we want to exit. So I think that it's, again, not everyone is created equal in this market. And I think that as a result of that, when we make the statement that, you know, we're getting good resonance from our clients, for instance, you know, and you look at TBG Capital,
Speaker Change: You know, there's a there's a reason for that. And and I think that, you know, we've that, you know, I spent I spent a lot of time with our clients, and I think that.
Speaker Change: Our approach really resonates with our clients and they want to continue to partner with us And they're differentiating us relative to others. We're not the only ones but you know, it's definitely you know, it's not one size fits all
Speaker Change: Hey, you know, maybe I'll just turn it over to Todd to give you also some perspective because he's obviously out there on the road on day-to-day and in the middle of it. So Todd, maybe you can give some perspective on it as well.
Todd Cicisky: Absolutely, and I agree with Jon. I think that the DPI piece, the return of capital, is a big part of it, but here's sort of my quick take.
Todd Cicisky: You know, like Jon, Jim, Jack, and a number of our senior partners, we've all been on the road. I've been in the Middle East. We were at the Milken Conference. I've been particularly involved in the capital fundraisers, and as I remain, very involved in that business.
And I think there's a couple of.
Todd Cicisky: of key components to our approach that has resonated well with our with our partners.
Todd Cicisky: One is just the portfolio construction. So if you look at, you know, since you mentioned TPG Capital and the healthcare.
Todd Cicisky: Partners II Fund. I'll mention that, I'll focus on that in particular for a moment.
Over two-thirds of that portfolio is some combination
Todd Cicisky: So, really differentiated deal stories, some of which have some meaningful elements of downside protection.
Todd Cicisky: all in thematic areas. Really, I think a portfolio that you don't see in other private, any of our competitors' portfolios. So folks appreciate that differentiation. The results of the portfolio and the performance of the portfolio in private equities remain very strong.
Todd Cicisky: I think Jack mentioned this, but 18% plus revenue growth with margin expansion over the LTM period.
And that's both by a virtue of focusing on
Jon Winkelried: secularly growing areas and in situations in which we can influx the growth further through our engagement. The DPI, which Jon mentioned, we're very intentional about that, going back now many years, and I think that has become an increasingly positive differentiator for us.
Jon Winkelried: A lot of continuity on the team and just a general high level of engagement with our partners.
Jon Winkelried: We're very sensitive to the macro environment. We take nothing for granted. We're engaged day-to-day.
Jon Winkelried: and always anxious around what's coming around the corner, but at this moment the business feels very strong, you know, as strong as I can remember it.
Speaker Change: and I think our clients appreciate that and I think, as Jon said, are increasingly making differentiated decisions around where they're going to concentrate their capital and where they might be less focused.
Jon Winkelried: lean in and I think we're feeling like we're on the right side of that.
Alex Blisting: And I guess one more comment, Alex, to be responsive to your question.
with respect to
Alex Blisting: fees and arrangements with clients. We're really doing what you would expect us to do, which is our clients are concentrating their focus in terms of the number of managers who they wanna be invested with. So we're obviously taking advantage of that by virtue of creating...
Alex Blisting: strategic relationships and holistic relationships where they get the benefit of doing that across multiple products, multiple asset classes. The strategic partnership that I mentioned.
Alex Blisting: in my opening comments that gives us access to up to $4 billion of additional capital is with, you know, obviously a long-time partner of ours, but that strategic partnership is structured intentionally across.
P.E. Credit.
Real estate. Real estate.
and Infrastructure.
Alex Blisting: and the mindset around that, in terms of how to structure it, is that there are benefits over the long term.
Alex Blisting: that accrued the relationship by participating with us also in a series of funds, not just one fund. So it's a series of funds. So what these relationships are also doing is it's creating more duration.
Alex Blisting: to the capital flow that we see and more stickiness and connectivity and you know you have to have the performance to do that but you also have the relation have to have the relationships to do it.
Speaker Change: Thank you. Our next question will come from Glyn Shore with Evercore. Please go ahead.
Thank you.
Speaker Change: Hello there. So I heard all the comments about the broadening in general across TPG, which I think we all like. See if we could drill down a little bit more on credit to see where you think you need to broaden and deepen.
on insurance-related spread earnings across the industry.
Speaker Change: thinking about broadening in insurance as well. So, thanks. Sorry for the two-part.
That's all right. Squeeze that in there.
Speaker Change: I think, first of all, on the credit side, it's a good question. I think that, let's talk about sort of the growth drivers and sort of the add-ons to our strategies.
Speaker Change: I think just starting with our existing business, you know, one of the things that we identified when we did Angelo Gordon is we felt like we had a lot of opportunity to grow the existing strategies and the platforms.
Speaker Change: Twinbrook, let me just use Twinbrook, which is the lower middle market lending platform as an example.
Speaker Change: You know, we had a view, we had a thesis that we could grow that platform because it was out-originating its capital base, introduce Guttenbruch to a lot of our historical relationships, and as I mentioned in my prepared comments, we really see that flowing through now, and we're starting to see that happen.
Speaker Change: You know, we've owned the platform now for less than two years.
Speaker Change: And I think that as you guys have learned about how you raise capital, particularly in the institutional world,
Speaker Change: You know, it's not a one meeting cycle, so, you know, creating new introductions.
to large pools of capital that haven't
Speaker Change: either participated before takes multiple cycles and a lot of focus and effort and we're doing that we've done that and we're now seeing it inflect and pay off as I mentioned in my my opening comment so
Speaker Change: And when you look at Twinbrook as an example with respect to its strategy,
Speaker Change: and Jack mentioned this specifically in his comments, which is we are seeing, as a result of the growth in private credit and direct lending, what we're seeing is institutions and allocators still allocating to it and increasing allocations.
Speaker Change: Looking for more diversification within the space and the lower middle market space is different than the upper middle market space. In the upper middle market space, you're starting to see club deals. You've got a number of different managers that are participating in the same deals. You get overlaps and exposure. So.
Speaker Change: Not surprising, we've seen an expansion in the size of the platform at Twinbrook and we will continue to. The obvious related issue is...
Speaker Change: Since we have, you know, close to 300 borrowers in that portfolio, and many of them grow over time, there's clearly an opportunity to capture.
Speaker Change: those same borrowers as they go up in size and scale and they move on to the next private equity fund that owns them or the next sponsor that owns them. So we're in the process of structuring.
Speaker Change: kind of our next stage of our lending franchise. And you'll hear about it more over the coming quarters, but we're putting ourselves in a position.
Speaker Change: And there may be a number of different levers to growing this to essentially move up.
in the in the size stack.
Speaker Change: in areas where we feel like we have a competitive advantage and we have a reason to win. So we feel like there's meaningful expansion available to us there on the lending side. So that's one example. Second example, where I think we can grow our platform is we have a smaller...
Speaker Change: CLO platform and we you know when we think about multi, you know being a performing credit manager
Speaker Change: which I think is very important in terms of, you know, our overall capabilities.
Speaker Change: We need to continue to grow and expand that. So we recently made an important hire in terms of, you know, adding to our leadership group on the CLO side, and we're also looking for perhaps
Speaker Change: other areas where we can tuck in other opportunities on the CLO side to continue to get to scale there because scale is important in that business. So that's a second example. A third example is we are looking around
Speaker Change: in Europe for what are the opportunities to grow our credit franchise into Europe.
Speaker Change: where we have, you know, a relatively small capability as it relates to the Angelo Gordon franchise today on the credit side.
Speaker Change: They were established in Europe on the real estate side, but we are looking for opportunities to kind of grow our presence on the credit side in Europe as well.
Speaker Change: So those are some examples of, I think, where we can continue to expand.
our platform.
and then pivoting to insurance.
Speaker Change: On the insurance side, I think we've said for a long time now that we're continuing to focus on partnerships. We've grown our insurance partnerships just in terms of where we're managing assets on the behalf of insurers pretty meaningfully, and we continue to, in terms of the number of new relationships, the amount of capital that we're managing.
Speaker Change: But, to your point, Glenn, on the strategic side, as we've mentioned before, we're trying to be mindful of the fact that we don't want to turn ourselves into an insurance company. But we do feel that it's important for us to actually...
be more embedded.
Speaker Change: in the space as a result of the ability to use that as a driver of capital flows.
Speaker Change: particularly longer-dated capital flows and so we are in dialogue with a number of potential partners as a result of our capabilities overall across asset classes.
Speaker Change: And, you know, I think that, you know, our goal is to have more to talk about on that, you know, as we make more progress and not sort of...
Speaker Change: not move away from our balance sheet orientation that we've traditionally had. So I think we will make progress on that, you know, when we find the right situation, but that's how we're thinking about it.
Thank you.
Speaker Change: Our next question will come from Brian Vidal with Deutsche Bank. Please go ahead.
Speaker Change: Great, great. Thanks. Thanks. Good morning. Thanks for taking my question Maybe just shift to the impact platform. I think you talked about
The elongated cell cycles is...
Speaker Change: I guess the question is, are you seeing a big difference in the U.S. versus outside the U.S. in terms of the perception around policy uncertainties? In other words, is it slowing down in the U.S. for...
Speaker Change: for both deployment prospects on the impact platform as well as fundraising. And I guess, are you seeing more opportunity outside the U.S.? And I know you mentioned the Global South deployment. So maybe just some color around those two dynamics.
going forward.
Speaker Change: I'll take that one, it's Jim Coulter. There is so much going on in the ground in so many sectors right now, but that's certainly true in climate.
Speaker Change: and I think it's really important, as you suggest, to take a global perspective and separate some of the signal from the noise.
Speaker Change: Stepping back for a moment, Todd and I were talking about this the other day.
Speaker Change: On the ground, it feels very much like 2010 in healthcare, where a bunch of discussions about U.S. policies sort of created a lot of noise. That eventually got worked out, and the next five years were extraordinary for healthcare.
Speaker Change: and some of that feel is playing through in the climate area.
Speaker Change: taking you down into the ground and talking globally last year.
Speaker Change: Clean energy spending was over two trillion dollars, which was twice fossil fuel spending
Speaker Change: and around the world, north of 90% of the energy addition was happening through clean energy. And just as an aside, the U.S. was only 10% of energy addition, so 90% of the action is outside of the U.S.
Speaker Change: And interestingly enough, they seem sort of unbothered by the discussion that is going on about U.S. policy, and the markets are continuing.
pace and if anything accelerating.
Speaker Change: As Jon said earlier, we just signed a deal for wind turbine manufacturing in India where
Speaker Change: Clean energy has doubled in the last five years and it's going to double in the next five years We just signed another deal in Europe and adaptation. So the rest of the world
Speaker Change: which is over 50% of where we're targeting our capital and over 70% where our capital comes from is kind of moving apace.
Speaker Change: We'll know that in the next few months. This is happening at a time that Texas just passed California as the largest clean energy state.
Speaker Change: and a lot of the spending from the IRA has gone into Republican districts, so that's going to be an interesting discussion.
Speaker Change: But at the same time that discussion is going on, we are short energy in the U.S. for the first time in
Speaker Change: 20 plus years and so there's an acceleration driven by AI and other industrial factors and the Administration is adopting a policy that I would call all of the above so they want energy dominance in all areas
Speaker Change: How that's actually playing out if you look at energy addition last year in the U.S. It was actually 97% clean. This year it will be 95% clean.
Speaker Change: and even if you could get a gas turbine, you're several years off from that delivery. So as a result...
Speaker Change: We have some uncertainty on the policy side with the IRA, but a huge acceleration in upgrading of the grid and power addition. And those are playing out in interesting ways. Our pipeline is actually quite full.
Speaker Change: and the rest of the world. It's kind of business as usual and in the U.S.
Speaker Change: Some of this noise is creating opportunity. We just did a take private that we closed recently. Alta's power.
Speaker Change: This is a company that was bought at half the price of where it went public, even though EBITDA had more than tripled since it went public. So there's going to be opportunities all over the world.
Speaker Change: On the fundraising side, nobody has dropped out of our fundraising processes yet, but you can imagine that investment committees will take advantage of a chance just to watch things develop for a while.
Speaker Change: So we remain focused on all of our targets, but as Jon said, we suspect it will elongate a touch. So very interesting market and one that I'm fascinated by the opportunity set.
Thank you.
Brian McKenna: Our next question will come from Brian McKenna with Citizens. Please go ahead.
Brian McKenna: Great, thanks. So a couple questions on the pepper tree acquisition. Where does fee-earning AUM stand today and what's the average fee rate for the business?
Brian McKenna: And then Peppertree is growing its underlying flagship funds by about $500 million.
Brian McKenna: over the last few vintages. So how should we think about the size of these flagship funds over time once formally integrated into TPG? And then it looks like the flagship fund is in the market every two years. So should we expect fund 11 to commence fundraising this year?
Thank you. Bye.
Jack Weingart: Well, I'll just start real quick and then turn it over to Jack, but as it relates to sort of the progression of funds I think you're right about
Brian McKenna: how they have done this in terms of being fairly consistent, in terms of being able to grow the capacity.
Brian McKenna: just as the as the as their relationships around the country have grown and developed and deepened
Brian McKenna: and the flow of essentially power development and lease-up has grown. They've been able to grow the opportunity. One of the things that we have spent a lot of time talking to them about
Brian McKenna: is that these cash flows and these returns are really interesting in a number of respects.
Brian McKenna: And one of the things that Ryan and Howard have been focused on is that many of their LPs want to own these cash flows on a longer duration basis. So one of the things that we're going to work on with Peppertree is essentially also moving to
Brian McKenna: a evergreen-style fund structure. So we're going to work on that. That'll lengthen the duration of the capital and create another flow of capital that they can take advantage of.
Brian McKenna: And so that's interesting and attractive to us. The other thing about the Pepper Tree return structure that we like a lot is that when we think about across a range of different other pools of capital,
Brian McKenna: There's opportunities that flow off of these types of assets with the consistency and the return that can be useful to us as a source of assets into insurance.
and particularly the financing for all of this acquisition activity.
Brian McKenna: And then secondly, with respect to what Jack was mentioning before, as we think about the broader flow of product and return opportunity into private wealth is a very attractive return stream as well. So that's how we're thinking about sort of the kind of.
Brian McKenna: next jumping off point in terms of the growth of this platform? And then I'll turn it back, turn it to Jack. Yeah, I was going to say the same thing on the private wealth applicability and the real asset, kind of the fit with other real assets with long term.
Brian McKenna: you know, stable cash flow characteristics. On your question about fee rates, first of all, and FAUM, on AUM versus FAUM, there's really no non-fee-paying capital in the complex.
Brian McKenna: for Peppertree. The difference between AUM and FAUM is simply performance. The performance, as you've seen, has been very strong. So as assets have gone up, you get a gap between invested capital.
Brian McKenna: and current AUM at market value. The FAUM I'd say is in the four and a half to five billion range and average fee rates are very consistent with what you would think of as kind of our average fee rates.
Brian McKenna: for comparably sized private equity oriented funds, which is to say kind of one and a half to 2% range would be an average fee rate for the business.
Brian McKenna: Oh, sorry, last question you asked, try to track them all was, was the.
Brian McKenna: the pace of deployment and the expectation for the next fund.
At this point, the most recent fund, Fund 10,
Brian McKenna: is about 40% called with good investment pace. You're right about the average pacing of their new fundraising activity. So at this point, I would expect we'll be back in the market with their next fund at some point next year.
Thank you.
Speaker Change: Thank you. Our next question will come from Michael Cypress with Morgan Stanley. Please go ahead.
Michael Cypress: Hey, good morning. Thanks for squeezing me in here. Maybe just circling back to some of the commentary you had alluded to earlier in your prepared remarks around hearing about clients.
Michael Cypress: evaluating geographic diversification. I was just hoping you could elaborate a bit on that, just given policy changes here in the U.S. and around the world. Just curious how you're thinking about positioning for that.
Michael Cypress: giving you guys run more of a global fund structure. What's the opportunity set as you think about it from a product standpoint for maybe more regional-specific or country-specific funds? And then maybe you could just remind us on your exposure to China from an investment portfolio and LP capital base. Thank you.
Yeah, sure, Mike.
Speaker Change: Well, look, I think in the dialogue that we're having, I mean, I think I mentioned right in my opening comments that one of the things that we have all doubled down on here is making sure that we are connected to our clients and talking to our clients because there's just a lot of uncertainty in the world right now, and there's certainly a lot of uncertainty around U.S. policy.
Speaker Change: and there have been things that have happened that I think have been...
Speaker Change: Maybe a surprise with respect to market relationships, you know, in terms of how equity markets, bond markets, currency markets have moved. So I think it's not surprising to see.
Speaker Change: large, you know, sophisticated institutional clients take a step back and think about, okay, well, where am I deploying capital? Where are my exposures? And obviously because of the U.S. market being what it is, you know, most big large institutional clients are heavily exposed to the U.S. So
Speaker Change: In thinking about what's going on here, I think there was a lot of different reactions, to be honest with you. I mean, I think last two days, a group of us were out at Milken meeting with clients there.
Speaker Change: We've been traveling around the world. I met with the CEO of a couple of our largest, you know,
Gary Stein: and Gary Stein, Jon Winkelried, Jon Winkelried, Jon Winkelried, Jon Winkelried, Jon Winkelried,
where the opportunities are. Quickly turns to the opportunities.
Gary Stein: and whether or not there are ways of doing some more interesting things in other markets.
Gary Stein: And so just as an example, you know, I think we had one client talk to us about whether or not you know Are there ways to partner for instance on?
Gary Stein: on control deals in Europe, as an example. So, I think that we're, as you mentioned, we are a global franchise, we're operating globally, and, you know, we're seeing interesting opportunities in a bunch of different locations around the world, and I think...
Gary Stein: It gives us an opportunity to do some interesting things with our clients.
Gary Stein: And, you know, we're turning our, you know, we're very focused on that.
Speaker Change: There are areas, as an example, Jim just mentioned in terms of climate, where there's just a lot of activity outside the U.S., and the climate business has already been very active outside the U.S. and will continue to be.
You know we are
part of our total exposure.
Speaker Change: You know, I think that with respect to I think we've talked about this before but with respect to our last couple of funds in in Asia You know, it's it's for
Speaker Change: A combination of reasons not been a focus of ours as it relates to
Speaker Change: as it relates to deploying capital into China. We are obviously continuing to work on the residual portfolio that we have there to make sure that it performs. And the other thing that I think we feel is important
Speaker Change: is we still have a presence in China. And one of the reasons we feel that's important is because from a regional economic perspective, as you invest in Asia, Southeast Asia, Australia, Korea, you know, the trade, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the,
Speaker Change: as a market for an end market for many of the companies that are in our portfolio. It's critically important actually. So we're not, you know, we're not ignoring it from that perspective, but it's very small as a portion of what we're doing.
Speaker Change: Thank you. We'll take our last question from Mike Brown with Wells Fargo Securities. Please go ahead.
Mike Brown: Great, thanks for squeezing me in. So I just wanted to ask on the FRE margin, so if if the
Mike Brown: Some of the fundraising, the elongation there, causes some of your funders to slip a quarter.
Mike Brown: Does lower catch-up fees kind of impact your FRE margin in 4Q? And then is it fair to assume that Pepper Tree is accretive to your margins and is that included in your 4Q FRE margin comment?
Yeah, hey Mike, it's Jack.
Speaker Change: Obviously, to the extent we do see material slippage of fundraising.
Speaker Change: that would flow through to margin. I would tell you that's already built into our model, those assumptions. So it would take further slippage than what we're already forecasting from just basic elongation of campaigns. On Pepper Tree, we don't have that built into our models at this point, and that, as I mentioned in my comments.
It is accretive.
Speaker Change: But it's not very large compared to our base, so we're not assuming significant accretion from peppertree behind my comment that we still expect to be in the mid-40s by year-end.
Speaker Change: Thank you. This concludes the Q&A portion of today's call. I would now like to turn the call back over to Gary Stein for closing remarks.
Gary Stein: Great. Thanks, Operator, and thanks, everyone, for joining us today. If you have any additional questions, please feel free to follow up with the IR team directly.
Gary Stein: This concludes today's TPG's first quarter 2025 earnings call and webcast. You may disconnect your line at this time and have a wonderful day.
Gary Stein: Goodluck Yeah, it's just kind of a joke. Oh, boy. Greetings. I'm Gary Stein.
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