Q2 2025 TPG Inc Earnings Call

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Please stand by your program is about to begin.

Good morning and welcome to TPG's second quarter 2025 earnings conference call. Currently, all callers have been placed in a listen-only mode. 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 to get to as many questions as time permits, we ask that you, please limit yourself to 1 question at any time, if you should need operator assistance, please press star zero. Please be advised that today's call is being recorded, please go to tpgs website to obtain the earnings materials. 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.

Joining me this morning are John Winkle, Reed, chief executive officer and Jack Weingartz Chief Financial Officer. In addition, our executive chairman and co-founder, Jim Coulter. And our president, Todd sitki are also here and will be available for the Q&A portion of this morning's call.

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.

Within our discussion and earnings release representing GAAP and non-GAAP measures, we believe certain non-GAAP measures that we discuss on this call are relevant in assessing the financial performance of the business.

These non-gaap measures are reconciled to the nearest Gap figures in tpg's, earnings release which is available on our website.

Please note that nothing on this call constitutes an offer to sell or is solicitation of an offer to purchase and interest in any tpg fund.

Looking briefly at our results for the second quarter. We reported gaap net income attributable, to tpg Inc, of 15 million. And after tax distributable earnings of 268 million or 69 cents per share of class a common stock.

we declared a dividend of 59 cents per share of class a common stock, which will be paid on September 2nd 2025 to Holders of record as of August 18th 2025, I'll now turn the call over to John

Thanks Gary. Good morning everyone.

Before we begin, we want to acknowledge the senseless act of violence that occurred at 3:45 Park Avenue last week.

Our thoughts and prayers, go out to those impacted by this tragedy.

And we stand in solidarity with our friends at Blackstone.

Written management, New York Police Department, the NFL and KPMG during this difficult time.

To the First Responders who acted swiftly and courageously. Thank you.

Moving to earnings tpg delivered outstanding results. In the second quarter reflecting the strength and durability of our franchise.

Our after tax distributable earnings for the quarter increased 30% compared to last year, driven by our strong operating metrics.

On a year-over-year basis. Our second quarter, fundraising grew nearly 80%, to 11.3 billion.

And deployment grew 36% to $10.4 billion, and realizations grew more than 20% to $6.5 billion.

After quarter end, we completed our acquisition of pepper tree and the integration process is well underway.

We're excited to welcome our Pepper Tree colleagues to tpg and to introduce our clients to this compelling digital infrastructure strategy.

This morning, I'll discuss our momentum across fundraising deployment and realizations before turning the call over to Jack to cover our financial results.

On the capital formation front. We have the second highest fundraising quarter in our history and the strongest credit fundraising quarter ever

On our last call, I highlighted the strength of our credit fundraising Pipeline and that we were at an inflection point and our client dialogues.

In the second quarter, we converted that momentum into 11.3 billion of capital raised of which 5.4 billion.

Was from our credit platform.

Importantly, our second quarter numbers, do not include any commitments for our Flagship buyout funds, tpg Capital 10 and HealthCare Partners 3.

We're seeing an acceleration of fundraising into the third quarter and our increasingly confident that we will raise significantly more capital in 2025 than last year.

I'll share some updates across our campaigns.

And private Equity during the quarter. We completed fundraising for tpg growth 6.

Exceeding, our 4 billion, dollar Target to raise a total of 4.8 billion for the fund and Affiliated vehicles.

This represents a 35% increase over growth 5 which is consistent with our track record of driving fund over fund growth across our strategies.

In addition to continued, support from existing clients, we meaningfully expanded our investor Base outside of North America, particularly in the Middle East, Asia and Latin America.

Additionally, we are seeing strong early support for our second GP Solutions fund, which we expect to be significantly larger than its predecessor.

As a reminder, tjs is our gp-led, secondary strategy focused on North America and Europe and its experiencing significant demand, as GPS look for creative ways to drive liquidity for their strongest performing assets.

We recently launched the TGs 2 campaign and closed on 1.3 billion dollars in the quarter.

This early momentum is driven by the strong deployment and performance in our inaugural fund, which is now fully committed across 14 Investments.

In May, we also launched Teapot, our new perpetually offered private equity product, on two of the largest warehouses in the U.S.

The initial feedback has been very positive and we raised approximately 430 million across our first 2 closes, in June and July.

The TBT brand is resonating in the channel, and we are establishing a strong following.

With more than 560 individual financial advisors participating in these closes.

In credit. The second quarter was a record fundraising quarter with 5.4 billion of total Capital raised across our strategies.

And Credit Solutions, we closed an additional 1.4 billion of capital. For our third Flagship fund, bringing the total raised to date to 4 billion.

Our market leadership in the Opportunity, opportunistic credit space, further enhanced by our strong cross-firm collaboration, continues to resonate with clients, and our fundraising pipeline remains robust.

In Middle Market direct lending, we held a first close of 1.4 billion for our sixth draw down fund during the quarter.

Due to Twin Brooks leadership position in the lower Middle Market and a continued steady pace of originations, we launched fundraising for our next vintage fund, just 7 months after the final close of its predecessor.

Twin Brooks' differentiated portfolio, disciplined underwriting, and stable returns continue to resonate with both existing and new clients, resulting in a very strong initial close.

And in structured credit, we raised 1.4 billion across our ABC, draw down and Evergreen funds.

As well as a number of smas.

Demand for structured credit is high and continues to grow. As clients are generally underweight and looking to diversify their exposure Beyond corporate credit.

Additionally, we continue to expand our product set into key areas such as private investment grade asset back securities.

In aggregate, we are seeing significant broad-based momentum in credit fundraising, and we expect 2025 to be a breakout year.

I also want to highlight the meaningful progress. We've made in the insurance Channel.

Insurance contributed nearly 30% of the credit Capital, we raised in the second quarter primarily through our structured credit and credit solution strategies.

Our scaled and diversified credit platform has enabled us to deepen relationships with our existing Insurance Partners. While also establishing new ones,

As we continue to organically grow our insurance client base and commitments, we are also actively evaluating broader strategic partnerships and inorganic opportunities within the channel.

While I'm very pleased with our Capital formation. During the second quarter, I'm even more enthusiastic. As I look ahead.

For TBG Capital, $10 billion and HealthCare Partners, $3 billion. We're in the midst of a rolling first close where we expect to receive total commitments of approximately $9 billion.

This strong result during a challenging private equity fundraising environment is a testament to the trust we've built with our clients through our distinct investment approach and excellent performance.

While clients, remain cautious and highly selective amidst, ongoing macro uncertainty and muted distributions.

Our Market leadership and differentiated value proposition, and private Equity, have driven strong, absolute and relative fundraising results.

Moving on to deployment. We had a robust quarter with more than 10 billion dollars of capital invested which increased 36% year-over-year.

In TBT Capital. We announced the 2.2 billion take private of avid exchange. A leading provider of AP automation, software and Payment Solutions in partnership with Corp pay.

This is another example of a creative, win-win corporate partnership that offers significant downside protection.

And after the quarter end, we close the carveout of saber corporations Hospitality Solutions business, a leading Technology Solutions provider to the hospitality industry.

Given our focus on vertical Market, software, and the travel. And Leisure space. We are excited to drive transformational growth in the newly separated business.

And Rise climate. We recently announced a number of Investments across Europe and Asia represent, representing over 10 billion dollars of total Enterprise Value.

this includes CIT group a Pioneer in sustainable agriculture, Aurora Energy, Research, a uk-based provider of data and analytics for the global energy markets and techum a leading digital first provider of submetering solutions

In credit, we deployed 4.3 billion dollars of capital across our strategies in the second quarter.

And structured credit. We continue to be a market leader in residential mortgage securitizations, as one of the few managers who are vertically integrated within the space.

We placed 5 issues in the quarter. Across Home Equity, non-qualified Mortgage and agency eligible, collateral types, to bring year-to-date securitizations to 8.

Twinbrook generated 1.2 billion dollars of gross. Originations in the second quarter.

Add-ons made up nearly half of the activity in the quarter, demonstrating the power of Twin Brook's incumbency within its existing portfolio.

And in Credit Solutions, we continue to see a growing pipeline of companies looking for Solutions Capital at scale.

Did A1 billion dollar, asset, backed Term Loan, facility, for all T. USA. In partnership with Goldman Sachs,

This is a first of its kind transaction and infrastructure. Back financing secured by altice Bronx and Brooklyn Network assets.

We also recently anchored, an Innovative multi-billion dollar debt financing for xai, which is 1 of the world's leading AI companies.

We believe this represents 1 of the first large-scale credit solutions to be provided in the AI space where we expect the demand for creative financing to grow significantly. Given the immense funding requirements.

Both of these financings are great examples of our abilities to deliver customized, scaled solutions to address the complex capital needs of corporates.

Similar to the Dish transaction last year, they reflect our culture of cross-firm collaboration.

OUR Credit Solutions private equity and real estate teams. Work together seamlessly to execute these highly bespoke Solutions.

With the within our core thematic areas.

In real estate.

We continue to take a patient and disciplined approach to capitalize on the dislocation within the asset class.

Over the last two years, we have acquired a number of high-quality assets that are typically unavailable from sellers facing liquidity pressure. These investments have performed well, with strong operating fundamentals driving LTM value creation for our TPG Real Estate of 14%.

As we look ahead, we expect to see a growing pipeline of attractive investment opportunities.

Shortly after quarter, end Trev completed the acquisition of 2 adjacent high-quality office towers located on a full block of Park Avenue South

This is a top submarket, New York City, where favorable Supply demand Dynamics have led to a significant Improvement in office fundamentals.

As a result of strong fundraising, we ended the quarter with record Dry Powder of $63 billion, representing 43% of fee-earning AUM.

Our investment pipelines remain very active and we expect our deployment Pace to accelerate in the back half of this year.

Finally, we continue to successfully execute on important. Exits, and liquidity events, driving 6, and a half billion of realizations. During the quarter across a number of our platforms.

We realized nearly $2 billion of total proceeds from public market sales during the quarter.

This included fully exiting from biking, cruises top top Technologies and service Titan and selling down our positions and Lifetime Fitness and sigh life sciences.

Tbg growth also completed the full company sales of Q Centrics and Crunch Fitness.

We've generated 2.3 billion dollars of liquidity in tpg growth year to date including signed but not yet closed transactions. Putting us on track to reach 1 of our highest years for realizations for this strategy.

And this week, we announced our first exit from TG capital N with the sale with the sale of elite.

Which we carved out of Thompson Reuters, to years ago.

This investment marks, a strong early outcome for the fund and is a great example of our ability to drive meaningful Topline growth through disciplined operational transformation.

Looking at the firm, we continue to experience strong momentum in scaling, our business and deepening and broadening our client relationships.

In private Equity, despite persistent headwinds. And the fundraising environment, we continue to differentiate ourselves with strong investment performance and DPI.

We believe we are being positively selected by clients and continue to gain market. Share, driving fund over fund growth across across. Both our existing and newer strategies.

In credit, we've reached an important inflection point and are establishing our credit franchise. With our institutional clients,

We are now in the process of significantly, expanding the capital base, across each of our credit businesses, including partnering, with our clients to develop and see new strategies.

In private wealth tap and tap have provided us with a strong Foundation to build our presence in the channel, where we believe our differentiated brand and track record are resonating with advisors and their clients.

We continue to build out our sales, team infrastructure servicing capabilities, and Suite of products, given the long-term growth opportunity and wealth.

Lastly, as large as pools of capital globally, continue to consolidate their relationships with fewer GPS. We are actively engaged in a number of cross-platform strategic partnership discussions.

These partnerships position us to grow with our largest clients across multiple strategies and asset classes, while also increasing the duration.

And continuity of our Capital base.

And shareholders, I'll turn the call over to Jack to discuss our financial results. Thank you John and thanks to all of you for joining us today. As many of you know last year we focused on putting the building blocks in place to support our next leg of growth.

These included 1, scaling our credit businesses through a successful fundraising year expecting that this Capital would flow into fee paying AUM.

As we invested this year in the Future 2 preparing, for the launch of our next series of private Equity Funds, and 3, continuing to innovate building new products and businesses including GP Solutions, climate infrastructure and teapop that we expect to scale into greater profitability over time.

Through these levers, we expected to begin a new wave of growth this year.

Our strong second quarter results. Highlight our early success in executing this growth strategy and we expect our momentum to accelerate from here.

We ended the second quarter with 261 billion of total assets under management up 14% year-over-year.

By 36 billion of capital raised and 21 billion of value creation, partly offset by 23 billion. Okay? Of realizations. Over the last 12 months,

Fee earning AUM, increased 7% year-over-year to reach 146 billion as of June 30th.

These figures do not include tbg Pepper Tree, which closed on July 1st and added approximately 8 billion of AUM and over 4 billion of fee paying AUM.

AUM subject to fee. Earning growth was 30 billion dollars at the end of the quarter which included 23 billion of AUM. Not yet earning fees and represents a revenue opportunity of nearly 200 million on an annualized basis.

This Shadow faum has been scaling with our credit businesses and as John indicated, our deployment Pace has begun to accelerate.

At the end of the quarter, our net recruited performance balance remained at $1 billion, as strong value creation and realizations largely offset each other during the quarter.

Our fee-related revenue in the second quarter increased to $495 million.

And included, 43 million of ketchup, fees primarily associated with a strong Final close of tpg growth 6.

We reported quarterly fee-related earnings of $220 million.

Our our F margin of 44% in the second quarter benefited from the ketchup fees, as well as a step down in cash. Compensation expense from the seasonally elevated. First quarter,

After tax distributable earnings for the second quarter, increased 30% year-over-year to 268 million or 69 cents per share of class a common stock.

Which included 87 million of realized performance allocations?

As John noted, our strong pace of monetization has been a significant point of differentiation for us which continues to benefit our fundraising discussions with clients.

Looking at the back half of the year, we expect to drive additional realizations. Particularly, as, as the broader Market, backdrop continues to improve

as a result of our strong quarter, we declared a record dividend of 59 cents per share.

Looking at our non-gaap balance sheet during the quarter, we further enhanced our liquidity by upsizing our revolving credit facility from 1.2 billion to 1.75 billion.

We've drawn on our revolver to fund several growth initiatives, including seating pops Investment Portfolio as well as funding. The cash portion of the pepper tree acquisition in July proformer for the pepper tree, funding the outstanding balance. On our revolver is 570 million.

And our available liquidity is more than 1.3 billion.

Turning to our portfolio, we continue to drive positive value creation across all our platforms for the second quarter and over the last 12 months.

In private Equity, the fundamentals across our portfolios, remain strong. And we continue to see robust growth. That is outpacing the broader Market.

The portfolio companies within our Capital Growth and impact platforms.

Grew revenue and AUM by approximately 16% and 23%, respectively, over the last 12 months.

Our private Equity portfolio in aggregate appreciated 2% in the quarter and 11% over the last 12 months.

In credit our portfolio appreciated 2% in the quarter and 12% over the last 12 months.

In Middle Market direct lending.

All our funds remain at or above their target return ranges as of quarter end.

Within our portfolio. Our average interest coverage ratio has remained stable at approximately 2 times at our annualized loss, ratio is approximately 2 basis points.

As a b based credit funds, net irr since Inception.

Was above its target range at 13% at the end of the second quarter.

TPG's real estate portfolio appreciated approximately 3% in the second quarter and 14% over the last 12 months.

We continue to see strong performance and value Creation in our data set data, center industrial and residential Investments.

In addition tpg AG is real estate portfolio appreciated by 20 basis points in the second quarter and nearly 3%.

Over the last 12 months.

Turning to fundraising we raised over 11 billion dollars during the second quarter as John noted. This was the second highest fund rating fundraising quarter on the firm's history and the highest fundraising quarter ever for our credit platform.

As a result of our strong fundraising momentum, we remain very confident that we'll raise significantly more capital this year than last year.

Looking at the remainder of the year, we'll be in the market with approximately 25 different products across most of our platforms.

The biggest contributors to our fundraising in the back, half of the Year include the following.

1 the rolling first closed for our next Flagship buyout funds. Tpg capital and HealthCare Partners. As John mentioned, we expect to receive total commitments of approximately 9 billion dollars during our rolling first close in the third quarter.

2 continued, strong Capital, raising across all of our credit strategies in draw down funds, Perpetual vehicles and smas.

3, formal first closest for our second GP Solutions fund.

And our third Tech Jason sees fund, as well as additional closest for Tikka, our new Asia growth buyout strategy, we continue to make, strong progress with Tika and have already raised more than half our Target.

And 4 penetration within private, wealth and insurance.

On the topic of private wealth, I'd like to provide a bit more information on our strong progress in this important business.

As John mentioned, tap is off to a great start. Raising 430 million in June and July alone.

And we expect strong continued expansion with our two initial launch partners.

We also have several additional Partners lined up domestically and internationally over the next several quarters including expanding into the Raya Channel.

On the credit side, Twin Brooks non-traded BDC TCAP at its. Highest organic fundraising quarter. Yet in the second quarter with more than 200 million of inflows TCAP is now actively distributed on 3, major warehouses and we expect further expansion in the near future

Across our private wealth business more broadly, we continue to grow our distribution network.

We're now partnered with over 30 firms globally, which is increased more than 4-fold just since the age of acquisition.

We're also focused on expanding our suite of Evergreen offerings across asset classes, having created a strong foundation with teapot and tap.

We're actively working on additional products across credit and real assets.

Private wealth is a high-priority growth area for the firm, and we continue to invest in broadening our capabilities to serve the growing needs of financial advisors and their clients.

I'd like to provide a few important points regarding our near-term financial outlook.

Beginning with the third quarter, our results will include the financial contribution from tpg Pepper. Tree within our Market Solutions platform

As we noted when we announced this transaction, we expect tpg pepper treat to be immediately, accretive to F and after tax de per share.

Following the completion of our Direct TV investment tpg. Capital 9 is now fully invested and reserved and we already activated tpg Capital 10 in early July.

We expect catch-up fees to step down in Q3 and then pick back up throughout next year as we hold subsequent closes in our capital and climate campaigns.

Following the step down in compensation expense. In the second quarter. We expect this line item to begin. Trending back up, starting in the third quarter.

We continue to invest in our teams in strategic growth areas such as private wealth and climate infrastructure.

Although we expect our F margin to decline modestly in the third quarter consistent with our prior guidance.

We continue to expect to exit the year with an FR margin in the mid-40s.

And finally, we expect our effective corporate tax rate to remain in the mid to high single digits through the remainder of the year.

Before I wrap up, I'd like to highlight the significant progress. We've made in enhancing the liquidity in our stock, since our IPO,

Recent events. Have contributed to this meaningfully.

First in May, David Bond's estate sold 21 million shares of TPG stock.

in order to satisfy certain obligations including estate tax payments,

And second in connection with the closing of the pepper tree. Transaction. Last month, we issued and registered 2.9 Million Class A shares as partial consideration.

These shares which were not owned by employees of pepper. Tree have already been fully liquidated in the public market.

This supply was well received in the market, broadening our shareholder base and allowing many of our largest existing shareholders to further build their positions.

Primarily as a result of these 2 events, the percentage of tpg operating group Equity owned by tpg Inc, Class A shareholders, as increased from 22% to approximately 40% in, just 18 months.

Taking a step back. We are very pleased with our strong second quarter results. And the progress. We continue to make driving growth and diversification across our business.

We're experiencing substantial momentum as the pace of activity across the key drivers of our business, fundraising and realizations continues to accelerate and we look forward to creating additional value.

For all of our stakeholders.

Now, I'll turn the call back to the operator to take your questions.

Thank you. And 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 1 question, and we'll take our first question from Glenn Shore with evercore. Please go ahead.

Hi, thank you.

So, I wonder if you could help us, you're the last of the, I think, the, the goals to report and we've seen. If you guys had good performance and cross private Equity, you've raised a lot of money. You've returned a lot of money.

Um, yet the aggregate details across private equity are still stuck, portfolios low DPI, and I see some surveys that show almost half of LPs saying that they're...

They're overweight with maybe potential to custom allocations. So like is it that the big get more successful and, and you're seeing more like, I'm I'm curious to get your thoughts on the, on the highest level industry dynamic, because you're clearly, not seeing the same PE stuck in the mud that that a lot of the, uh, the bigger picture surveys would have you believe. So I'm I'm just looking for you.

Where we're at in that private Equity cycle right now? Thanks,

Yeah, well thanks, Glenn. Um, I think um...

uh and it's a good question and um, I think that um, you know, our what we're experiencing

um, I think is, um,

a little bit different than, you know, sort of the

the, the general kind of theme that you characterize as it relates to private equity,

Um, I think it starts, just to be honest with you. I mean, I think that we don't, first of all, at a high level...

Uh I mean allocations obviously are Fuller and higher in PE than maybe in some other some of the other asset classes. But with respect to the broader Market I think you know we still have a lot of confidence in um the importance of the PE asset class as a return driver. Um for you know the cross-section of larger institutional accounts.

Um, and also, I think, you know, some of the reaction that we've gotten, as we've gone out in the market, um, to continue to, uh, to penetrate the wealth markets. I think there as well, because of the nature of the public markets and where the returns are being driven in the public markets. Um, I think that, uh, there is a clear perception and a clearer. I think, um, interest in, um, Alpha creation from private companies that are driven by the private Equity industry. So you know, we we we still feel um,

Very strongly that um you know, the private Equity asset class is going to be very important and durable. Um for a lot of those reasons going forward, I think what we're seeing for our own in our own situation is it starts fundamentally with performance and how we've managed our business and how we've managed our funds. And if you look at, um, you know, those 2 categories of things, I think that, you know, we feel very good about our performance across, um, our fund families. Um, consistently. And then the other thing I think we also have been doing and I think we've talked about this before, is we've been very intentional and deliberate with respect to how we've been managing our funds from the from the perspective of

Uh, not only on the entry on the buy, but we've been very intentional on how we think about exits, um, and the importance of managing the, uh, process of exiting companies returning capital, and how that also influences, the returns people are experiencing, um, with us, um, in a holistic sense, both from a return perspective, as well as from sort of flow of funds that, you know, kind of back and forth. And, you know, it's just very clear that with the largest pools of capital. I mean, you know, I think you could probably say that the largest Institute, the largest players in the industry are gaining share. We think we are gaining shared disproportionately. Um, you know, we we've done, we've looked at some of the numbers. We've looked at sort of our incremental growth with our largest LPS. Um and since our IPO, if you look at the top, you know, 100 relationships that we have, we have grown

Very meaningfully with all of those institutions. Um, uh, you know, across the portfolio of private Equity as well as um, our credit and real estate businesses. But since your question is focused on private Equity, um, you know we have a number of major relationships that are not going down with us, they're going up, they're Inc. They're, they're incrementally adding to their commitments, to our funds. Um and um, and that's not to mention, obviously, uh, relationships. That have kind of that we've that we've either restarted. Um, you know that um, or over the course of the last, you know, 4 or 5.

Five years, um, or um, brand new relationships and other parts of the globe, um, that we've been able to initiate.

So, you know, I think we, you know, feel like our private Equity business is very strong, very durable. Um, and um, you know, I think that there are going to be

Uh, you know, if I could say it, I mean, they're going to, I think they're going to be sort of, you know, Haves and Have Nots as it relates to how the industry is evolving. And uh, you know, we feel we feel like we're in a strong position.

Thanks for all that John.

Thank you, and we will take our next question from Ken bington with JP Morgan. Please go ahead.

Hi. Hi. Good morning, thank you for taking the question. I wanted to maybe dig into the buildout of insurance. Um, can you talk about your view on balance sheet? Heavy versus balance sheet light? I think the preference has generally been Partnerships and balance sheet light. Uh, you call that a number of times, you don't want to be an insurance company, what would you want or need to see and something more balance sheet heavy that might change your mind in terms of, you know, what could be a good fit for tpg? Is it size? Is it price? Is it all the above? Is there, some other, you know, Nuance on mix that? Um you know, ultimately makes uh a different structure. Uh, a good idea for tpg.

Um, yeah.

Uh, thanks for the question, I think. Um,

Uh, let me let me sort of come at it this way, which is that? I think that, um, what is

um, first and foremost, just in terms of how we think about,

Um, how insurance?

Um, or Insurance, you know, related transactions. Um, might

Fit into TPG, um, would be, um, a couple of sort of core principles. One is that, um, it's important to us to maintain, you know, what we think of as sort of fiduciary centricity. That's what we, that that's kind of like, you know, top of mind for us in terms of driving, um, our asset management, um, business and, um, driving, you know, core um, fee-related earnings growth. And so, um, that's kind of, you know, that's kind of front and center as we think about what does.

A potential transaction do for us. Um, additionally, I think as we've talked about sort of not turning ourselves into an insurance company, I think that to be maybe a little bit more specific, I think we are very sensitive to what types of liabilities, we assume in the context of um, doing some kind of an insurance transaction. So

Looked at, um, you know, how does it impact, um, our ability to grow. Um, our um, our asset management franchise grow our FR, um, without taking undue risk, as it relates to the balance sheet. Um, and and in certain cases, what we've done is we've looked at a couple of opportunities where we've actually

Looked at partnering with some strategic Partners, um, within the insurance business, um, which um, would allow us to essentially try to, um, acquire the portions of the business, particularly, as it relates to, um, you know, distribution capabilities, uh, that expand our ability to accumulate Capital. Um, but not take on, uh, the parts of the business that are probably better, uh, better left in, uh, the hands of, um, a uh, you know, an insurance business. Um, so that's those are our core principles. That's our approach. Um, we, um, continue to see the industry evolving, um, uh, in terms of

Um what it takes to compete in the industry and we continue to be in. Um, we we we we continue to evaluate opportunities and we you know, and I think that um, you know, we'll uh we we if we do something it'll it'll, it'll be with those, um, uh, you know, core objectives in mind.

Great. That was very, very helpful. Thank you.

You're welcome.

Thank you. And our next question comes from Alex Blasting with Goldman Sachs. Please go ahead.

Um hey guys, good morning. Uh thank you for taking the questions. Well um maybe going back to Glenn's question around private Equity. Obviously very impressive fundraising numbers for the first close here. I was hoping you could help us think through how you might sort of, think about the ultimate size of these funds. Now, I feel like in the past, you talked about 40 to 50%, uh, typically comes in in the first close. So, the 9, the erased, uh, potentially puts you quite quite above, I think, then then, certainly prior fonts, but also maybe what we were thinking before and then also Jack, maybe just kind of walk us through the p&l impact on management fees, uh in the third quarter as you started to earn management fees on these funds and perhaps any step down thinks we need to consider. Thanks.

Yeah. Hey Alex, thanks for the questions. Just a little more color on. What John said, just qualitatively about the market, I think

When we look at the institutional LP market globally, we really don't see a reduction in allocations to private equity as an ecosystem. Globally, we're still seeing increases in allocations to private equity, though this varies in different parts of the market. I think there's an overlay of the liquidity that LPs have to work with and how they manage that, which is compressing certain parts of the market—really, mostly in the U.S. institutional market.

But there is I think there is a sorting out going on as John alluded to and I think we're benefiting from the conclusions of that sorting out. If you look at this first uh 9 billion we said we expect to close on

In tbgs 10 and HealthCare Partners 3.

Almost all of that is re-ups from existing LPS, and on average in that, uh, first close process. The existing, LPS, are increasing their commitments To Us by north of 20%.

So, we are clearly gaining share with those LPS and then the longer tail of the fund raise, will be driven by additional re-ups. In addition to new, LPS, coming into our ecosystem,

Um, in terms of the size, I agree with you that that kind of size in a first close,

Is.

Higher. A higher percentage than many are achieving in this market. Look, our goal remains what we've been talking about, which is in each of our private equity businesses to increase the fund size.

Um, kind of in each sequence, we obviously did that. And growth, as we talked about, growing 35% versus the prior fund. I think in TBG 10 and HealthCare Partners 3, we have not set a target for those two funds collectively, but I would expect at least the same kind of growth rate over the prior vintage as we did in the prior sequence for the same fund complex, which means, which tells you that the start we're off to, in the first close, is very strong. Now the impact on man,

Management fees, we will see ah, I I mentioned in my comments that we activated tbg 10 uh last month in July.

Um, next quarter.

In the fourth quarter.

Yep, thank you.

Thank you. And our next question comes from Bill Cats with TV Co. Please go ahead.

Great. Thank you very much for taking the questions and all the guidance. Um, just you mentioned the, uh, sort of flywheel accelerating to the second half of the year, and great to see the significant jump in AUM, not yet paying fees. How quickly do you think you can sort of deploy that $30 billion? And then the second part of the question is, oh, I think you mentioned a significantly higher level of revenues on that. How much incremental margin might be against that incremental revenue? Thank you.

um,

well, I think, um,

what we said is that we um are feeling good about deployment opportunities, across our business and um, obviously it's somewhat uh, related to

How the markets act overall. But when you look at our pipelines across really all of our businesses, um, our pipelines have been increasing quarter over quarter over the course of, you know, 2025 so far.

So, um, we feel like deployment, um, should continue uh, to um, Advanced and um, on balance. I think, you know, our expectation is that, um, our Outlook is at deployment, will pick up a bit, um, as we go through the balance of the year, uh, and, you know, then we'll see what happens into 2026. Um, so we're feeling pretty good overall about the opportunities that we're seeing. Um, when you look across the firm as a result of the breadth of our business and the variety of strategies and the and the flexible Capital that we have across our funds,

I think we can respond to a lot of really interesting, um, bespoke opportunities. And I think that, you know that's inherent in our strategy which is to be able um, to be, um, uh, active across, you know, the um the variety of uh of uh opportunities that present itself to us across the capital structure. Um, so from from that perspective, I think, you know, we're we continue to be um, reasonably bullish on deployment opportunities.

well, the second part of the question was

Um, I think you hit it. Margin margin margin on incremental deployment.

but, I mean, obviously that's going to differ, you know, any Jessa class

Thank you. Thank you.

And we will take our next question from Stephen. Chew back with the wolf research. Please go ahead.

Hey, good morning. Uh, John and Jack, thanks for taking my questions.

1 opportunity that maybe hasn't gotten as much airplay on the call, um, is within Capital markets and I was hoping you could speak to giving some of the Improvement in deployment in 2q, certainly encouraging to hear expectations for continued acceleration in the back half.

What is the potential windfall on the capital market side, and are there any remaining gaps in terms of your capabilities and just longer term? How large could this business grow over time?

Yeah, look, I mean we've talked about capital markets pretty consistently over the last, you know, uh, few years and the importance of the business to the firm and the continued buildout of our business. And, um, I think what we have done is.

We are continuing to, we've done a few things and we continue to 1 is we continue to build out our Capital markets capabilities across all of our strategies and simply what we've done is we've um uh We've we've um, uh added Capital Market expertise really embedded in each of our strategies, so that they are, uh, connected to and close to the deal making process. Um, which gives us the opportunity to finance deals. It gives us the opportunity to refinance, uh, balance sheets. Um,

So, when you see some of these deals that we're doing, some of these investments that we're making, and some of these deals that we're doing that I mentioned earlier, like the Alt Steel, the Dish Steel that we did last year, and the XAI deal.

Um, those transactions, um are um, are really being executed by um, some collaboration of our investment teams across credit, and private equity, and those cases actually in, um, in um, in the uh, and, and in a couple of cases are real estate team as well, but also involving our Capital markets capability and all of them, um, again, to extend our Capital base or either Syndicate risk, Etc. I think that as we move forward in the future as the firm continues to to grow as a number of strategies continue to evolve. Um, you know, um obviously somewhat subject to uh of course subject to um deal pace and deployment Pace um Capital markets, should just generally grow. It should be correlated to the growth of the firm and the transactional activity overall. So um, we feel very good about it. Um, and um, you know it'll I think it'll continue to be an important driver for us.

Yeah, I would just say that that transaction monitoring and other fee line item moves that was about 150 or so. Last year, we can, as John said, we continue to expect that to grow over time, not just with the pace of our of our overall growth, but ahead of the pace of our growth because we are penetrating additional segments of our business that we hadn't before by growing our Cath.

Markets team. We continue to expect that line item to grow this year over last year in a healthy way, and even faster next year.

Very helpful caller. Thanks for taking my question.

No problem, no problem.

Thank you. And our next question comes from Dan Fannon with Jefferies. Please go ahead.

Uh, thanks. Good morning. I wanted to follow up on the retail opportunity and the initial roll-out of Teapop. Um, so you talked about, I think, broadening distribution. Maybe if you could expand upon what that looks like, then also the product roadmap for other products for this channel and how you see that proliferating in the coming quarters?

Sure, thanks for the question. Um, first of all on teapop.

Really, the first couple of closes we alluded to were with our... we've said we've had two large U.S. wire houses as our launch partners. So really, most of that capital came from those two partners. As we look into the future, we certainly have a lot of penetration that we continue to expect through those core partners.

But we have several additional partners lined up, both domestically and internationally. We're launching in a couple of months with a large international bank, with a focus on the Asian market.

Um we have a a product we have a, a focus on the ra Market. Um it's been publicly disclosed that I capital is is has has filed a registration statement for a tpg branded fund that they will be managing. That's going to look a lot like teapop but focused on the Raa Market. Um,

And then was the second part of the question.

Um,

The the product road map, uh, Beyond private Equity. So we've got, we've got a lot of growth ahead of us in the, in this core private Equity product top while we're accomplishing that we're also in the middle of Designing the next wave of products, which will include something broader in credit, like a multi, multi-asset Class Credit interval, fund something in real assets. As well, we we've, you know, described a lot about our broad-based real estate platform and, um, we're in the middle of Designing a product there as well.

Thank you.

Thank you. And our next question comes from. Brian battle with Deutsche Bank. Please go ahead.

You can update it on the timing of the incremental fund raise their. Uh, and then just 3, just just the tangent strategies to, um, to the impact platform like, like, like climate infrastructure, for example, um, expectations of that into 26,

Shows, Jim. Let me take those and, uh, let me step back and talk a little bit about what's happening in that area generally. So, first of all, specifically on Rise 3 and 4, we expect to be holding first closes for Rise 4 probably in the fourth quarter. So, you're right in saying that we are heading into the market, and so we'll have more to report going forward.

And, uh, the climate discussion, I think, requires a step back and what's happening in the climate world generally. So let me do that. First of all, it's very, very helpful to have the bill passed, so the policy landscape is relatively clear.

As I travel on the world. Um, but before I jump in the US, let me make a general comment as I travel around the world. There's a lot of discussion of tariffs. The rest of the world is not that fussed with us energy policy. And as John noted, uh, we've been very active in the climate franchise, in the first half of the Year 5 deals, all International as the market in the US is paused for a bit to see where policy would land. Where did it land? Uh, the bill landed in a place.

Place that was, uh, better than people expected.

The way to think about that is to probably watch the Clean Energy Index, S&P Clean Energy Index. Back in April and May, there was a lot of concern. But as the bill language came out, that index roared back. In fact, it sits 6% above where it was at the election at this point, and sub-sectors are actually doing much better.

Uh, within the bill, um, the area that probably got hurt most was EVS, where we have in the U.S., which we have been very vocally, not an investor. But if you go deep on the policy,

The way to look at it is: where are we versus where we were before the IRA? Because the IRA was never fully implemented, and generally the picture is quite surprising.

In most areas, there's more support than there was in 2022 when ChatGPT dropped. For example, on batteries, which are critically important. Now, the new bill kept the IRA provisions for very substantial support.

Incentives and added us incentives to that. So, uh, underneath, uh, the noise in the US market, I think the clarity we now have is, uh, really interesting in our pipeline as a result is very, uh, uh, very busy, the 2. Big factors to look at going forward is that we are way

Short energy in the US, and that the fastest way, and cheapest way to add energy is still renewables. Yes, there will be more gas, but gas was only 7% of the market this year.

Uh, and secondly, adaptation will continue to be, um, very robust.

Translating that into fundraising. As, you know, we had strong first closest. Well above that is 50%. Uh, uh, targets. We were talking about, uh, in spite of all the noise in the market, the first half of this year in, uh, the rise climate franchise, we closed on a billion and a half capital, and in the barbell world, we now live, we're now moving into the back half of, uh, those, uh, campaigns, uh, well, over where we were in the last month cycle. So in terms of, uh, Capital committed, some of which, so to be activated, uh, we are well over where we were in the last month cycle. And so, uh, with Clarity in the market, we're now, uh, looking forward to the

Back part of the fund cycle for TRC 2 and uh uh the really the initiation after our anchor, commitments of TI uh, and the opportunity set for those is robust. So I think we're kind of on track in these areas. Uh, with understanding that there was a pause as the market tried to figure out where the bill was going to land and a, a likely elongation from our original intentions. But I think that's probably

System of what you're seeing in fundraising generally in the market. So, the impact franchise should have a busy next 6 to 9 months.

That's great perspective. Thanks Jim.

Thank you. And our next question comes from Michael Cyprus with Morgan Stanley. Please go ahead.

Your engagement in cross-platform strategic partnership discussions aims to increase duration and constitute continuity of the capital B. I was hoping you could elaborate a bit on your aspirations, their strategy, how you're approaching this, what this could look like, and how it might contribute over time for TPG.

Sure. Um, thanks Michael. Um,

I think we alluded to, um, an example of a, uh, strategic partnership. I I think it was on last quarter's call, um, but I think that the general approach is consistent with the theme that we talked about earlier on this call, which is that what we're finding is that the largest institutional partners are narrowing and focusing their relationships. Um, and as a result of that,

uh,

Um, they're really, I think, um, trying to figure out ways of um, structuring win-wins with firms and partnerships where, with partners that they have a lot of confidence in.

and so increasingly what we're finding is, um, engaging in dialogue with, um, a number of, um, our largest Partners, uh, about, um, how can we structure, um, essentially longer term relationships with 1 another, uh, that usually come in the form of thinking, about commitments, across asset classes, um, which is important, by the way because, you know, it's not just

Touching just 1 asset class. But thinking about commitments, that go across asset classes, where um, in exchange for commitments of um, certain dollar amounts of capital over a period of time and that could vary depending on the, these are very bespoke Arrangements. By the way, that could vary from, you know, a 3, 4 5 year kind of time Horizon, um, where they commit, um, a certain amount of capital to tpg and to our various funds and in return for that, there's incentives for them. Um, there are, um, uh, economic incentives that are again are also fairly, um, bespoke in nature. Um, but um, the, um, the, you know, the basic partnership Arrangement is that they're looking at very significant large, Capital commitments to the firm in return, for those benefits and for some reason, if things change, or if they have to make adjustments in their plan, um, and um, and they don't achieve those milestones.

Then some of the economic benefits roll back. Um, and so again, I want to emphasize that there are very sort of, you know, bespoke. But I would say that we're engaged in.

That dialogue with more of our major Partners than I think we've ever been before in our history and what it does is it obviously, ties us closer together, I mean, their, you know, their their um, uh, there are sort of, um, other dynamics that some of these partnership Arrangements where, you know, we spend time with 1 another at the top of the house, um, you know, um, uh, sharing ideas, um, and talking about markets and talking about what we're seeing. Um, but essentially, it is a kind of throwing in together, um, on a longer term basis and what it does for us. Obviously, it gives us much higher degrees of confidence in re-ups, in our major funds, um, because those are sort of our core strategies and it also creates

Additional incentives for them to essentially work with us to Anchor, new strategies. And I think as you know, um, you know, building and anchoring newer strategies is, um, on, you know. And, and growing organically, that's probably 1 of the toughest things to do in our industry. Which is, you know, start something new bring, um, anchor, LPS in and then scale it from there. And so what these kinds of things do is it creates, um, you know, a, um, a partnership approach to doing that with our biggest relationships and it generally accelerates our ability to do that. Um, and so, um, you know, we're um, you know, we're we're, uh, um,

You know, we're we're excited about these conversations that we're having. And um you know, when I think that um uh when we talk about things like our first closest and the time to First close, um, like we were talking about before these Partnerships impact that, um, because generally, it implies that, you know, the these these partners are more inclined to be first closers in these funds and also again, um, exploring new avenues growth with us as well.

Yeah, it's Jack just a little bit. I mean I I see it as it's almost a byproduct of

What a bigger partnership might look like and that begins the dialogue about what a longer-term partnership might look like whether it's whether it's design as an SMA, a fund of 1, a Perpetual fund with kind of inherent re-ups but that's the nature of the dialogue that and and fortunately, we're on the on the winning end of a lot of those discussions which is leading to a lot of these discuss a lot of these partnership discussions. I think 1 other thing. That's affecting it too. Mike is that? Um,

1 1, 1 important kind of like overriding Trend that we're seeing in the market is that I think that you know, there was a time when

Um, you know, and not recently, there was a time when, um, you know, some of the largest pools of capital in the world were really, um, continuing to focus on their ability to be quote, unquote, direct investors. And, um, some of them still are. But what I would say is that there's been a fairly big pendulum swing back the other way, where some of the largest pools of capital in the world are really now much more focused on this partnership model where they realize that their ability to source, um, uh, on a very broad basis, on a global basis, some of the most interesting transactions across multiple strategies.

Is enhanced by engaging in these Partnerships, um, with our core partners. And so, I think that 1 that that's another Trend that I think is giving rise to this desire to figure out, how do they construct these Partnerships where they get the benefits of, um, you know, seeing the opportunities that we're creating, um, but also being able to partner together to get them done. Um, and so I, I was, I would say that's another kind of broader Trend that we're seeing. There's this a bit of a pendulum swing back to this kind of, you know, doubling down on kind of the partnership model.

Great. Thanks so much.

Thank you. And our next question comes from Kyle Voight with KBW. Please go ahead.

Hey, good morning everyone. Um

Maybe just a question on the 401(k) opportunity. So now that you're adding more breadth to your semi-liquid product suite, I'm just wondering how you're thinking about addressing the 401(k) opportunity. If that market begins to potentially open up more to private investments over time.

Yeah, that’s a good question, obviously. As we are building out our suite of evergreen products and high-net-worth focused products across alternatives.

It's a natural focus area. I think it's a bit early to speculate on how it's all going to play out because the executive order hasn't.

been issued yet. Um, but you know when you step back and look at the overall,

Us retirement, savings ecosystem. It's approximately 35 trillion dollar market about 10 trillion of that is in defined benefit.

Uh, pension funds have about $10 trillion in the 401(k) market, and the rest is in things like the IRA.

To find benefit, pension plans are some of our biggest clients. They were among the earliest institutional investors.

To adopt alternatives, you know, 30 to 35 years ago, they had very little exposure to alternatives. Today, it's probably a third or so on average.

Of their investment portfolio because they've been diversifying their exposure beyond public markets.

Looking for enhanced return opportunities to generate long-term compounding of wealth for their constituents.

Um, and when you look at the 4011, K Market,

Those same objectives should apply, right? The constituents in 401K plans should be looking at a compound wealth over decades and looking for diversification and enhanced returns. So we think the moves being made talked about, people talked about being made, make it a lot of sense for uh, 401K participants to have access to diversity the diversification and enhanced return benefit of Alternatives. Now,

If you look at how 401(k) plans today are invested, about 40% of the capital is invested in target date funds. We think that's the natural entry point for alternatives, as opposed to, you know, a private equity fund.

By GPX being, uh, an investment alternative for alternative assets to be co-mingled with, uh, things like target date funds. So, we're in active discussions with potential partners.

Investments because that's the higher returning expected to be a higher returning, asset class, that compounds wealth over decades. So private equity, in particular over time will be a very attractive addition, to 401K plans, and we're a very natural partner for, uh, for those managers the source that, uh, that flow.

And as you're alluding to the work we're putting in to creating different entry points and different structures around our private equity business, that will feed into that kind of partnership naturally.

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.

Okay, thank you, operator. Thank you all for joining us today. If you have any additional questions, please feel free to follow up with the IR team directly. Thanks, everyone.

Thank you.

Includes today's.

The second quarter 2025 earnings call and webcast. You may disconnect your line at this time and have a wonderful day.