TPG Inc. Q1 FY2024 earnings call

• TPG entered 2024 with momentum from successful fundraises for existing strategies, with vintage over vintage growth in funds across TPG Capital, healthcare partners, Asia, and Rise. They completed 6 successor fund raises post-IPO, increasing fund sizes by an average of 27%.
• The acquisition of Angelo Gordon expanded TPG's credit investing and real estate platform. The team grew over 60% to ~1,800 professionals, strategies increased from 18 to 30, and fee-paying AUM grew to $137 billion.
• In Asia, celebrating 30 years of investing, they had strong fundraising in private equity (TPG Asia VIII final close, ~$5.3 billion fund size) and real estate (over $2.5 billion raised for 2 TPG AG real estate funds).
• Climate franchise driving growth with 3 strategies: Rise Climate (inaugural fund ~85% invested, second fund in market for Q3 first close), Global South initiative (anchor commitment from ALTÉRRA), and climate infrastructure (expected first close later in 2024).
• GP solutions fund completed 5 investments, focusing on GP-led secondaries. Private wealth is expanding global distribution and developing tailored products, aiming to grow capital raised from the wealth channel.
• Deployment activity was strong, with over $51 billion of dry powder. Notable investments included in private equity, real estate (e.g., acquisition of downtown Manhattan office building converted to multifamily), and credit (e.g., over $2 billion raised in credit in Q1).
• Realizations included sales of Nextracker, Onfido, Singlife, and the successful IPO of Viking Cruises, which was a significant monetization for TPG VII.

TPG's fee-paying AUM grew 74% from $79 billion to $137 billion in the first quarter. The firm's asset under management (AUM) totaled $224 billion at the end of the quarter. Credit and real estate currently represent 44% of the total AUM. Private equity, credit, and real estate are the key product segments.

• Expect total private equity and infrastructure capital raised in 2024 to grow compared to 2023, driven by fundraises for growth and Rise Climate, and the launch of the climate infrastructure strategy.
• FRE margin expected to exceed 40% for the full year 2024 as operating leverage from integration and growth initiatives is realized.
• Fundraising for the second Rise Climate Fund is off to a strong start, with expectations of a substantial first close in the third quarter.
• PRE (performance-related earnings) is expected to begin picking up in the back half of 2024.

Q: Big picture on the investing side of the businesses, focusing on legacy TPG businesses' investment pipelines and if a significant ramp in deployments is expected later this year.

A: Todd Sisitsky stated that the deployment pace in legacy businesses has been strong, with the pipeline looking good. Jon Winkelried added that deal flow is strong, but selectivity is important as pricing and valuation dynamics are evolving.

Q: Integration of Angelo Gordon, including reception and priorities over the next 12-3 years.

A: Jon Winkelried said integration has gone well, with cross-marketing underway and focus on scaling credit businesses, innovating products, and penetrating new channels like insurance. Jack Weingart added focus on scaling existing TPG AG credit businesses and penetrating new client relationships.

Q: Product development in the wealth channel over the next 12-18 months, including semi-liquid products.

A: Jack Weingart mentioned they are actively working on a private equity semi-liquid product, expecting to launch it early next year, and focusing on expanding distribution in the wealth channel.

Q: Growth profile of the credit business on a multiyear basis and biggest contributors within credit.

A: Jon Winkelried discussed scaling the credit business, with opportunities in direct lending, Credit Solutions, and structured credit. The direct lending business had a record quarter in Q1, and structured credit benefits from market dynamics like regional banking constraints.

Q: Transaction fees and split of revenue contribution from legacy TPG and Angelo Gordon businesses.

A: Jack Weingart said transaction fees in Q1 were almost entirely from legacy TPG businesses, with Angelo Gordon contributions to come as integration progresses. Near-term transaction fees are driven by legacy TPG, with long-term growth from AG integration.

Q: Change to fundraising and flow into fee-earning AUM for AG Credit.

A: Jack Weingart noted that fundraising for AG Credit is setting up growth for next year, with deployment pace driving near-term FAUM. Fee rates for AG Credit are driven by deployment mix across different businesses.

Q: Wealth management channel product rollout and distribution relationships.

A: Jon Winkelried discussed ongoing distribution relationships, with products being rolled out through multiple partners. Focus on continuously offered products like semi-liquid private wealth products and nontraded REITs for future growth.

Q: Longer-term FRE margins and company profile beyond 2024.

A: Jack Weingart mentioned that while 2024 targets FRE margin above 40%, there's potential for margin expansion beyond 2024 as fundraising and deployment activities drive growth