TPG Inc. (TPG) Earnings Call Transcript & Summary

All right. Hello, everyone. Welcome to our next session. I'm Ben Budish, Barclays analyst covering the U.S. brokers and asset managers and exchanges. And with us for this chat is Todd Sisitsky, President of TPG. Todd, thanks so much for being with us.

Thank you for having me. [ Proud ] to be here.

Maybe just to jump in some background on TPG, the company was founded in 1992, but it was one of the more recent IPOs and one of the alternatives asset managers. So maybe for those less familiar with the story, can you give a brief overview of the company? What differentiates TPG from a strategic and cultural standpoint?

Sure. Well, first, I'll start off. I've been here about 21, 23 years now. So I'm like a part of the furniture at this point. And I think I've stated [ this ] for a combination of reasons, and I think that's one of the reasons we've had such consistency in our people and why we have so much tenure and [ sort of growing up ] together. On the cultural side, actually, our heritage does really play a role in how we think about our jobs and I think why people enjoy working there. We started not on Wall Street, but really as a [ family ] office. It was a regional -- the founders came from [indiscernible] family office. And so I feel like there's a bit of a service mentality. It's a very low-ego environment. It's very flat as an organization. I'll come back to a little bit more in a moment, but I think that the culture for us really is a strategy. I'll elaborate on that in a moment. As I think about strategy, this is an industry with a tremendous number of incredibly smart people. And we try to apply to ourselves the same discipline that we ask our companies to apply as it relates to their strategy. In a competitive world, it's only becoming more competitive, how do you focus on what you're really good at, make sure that you've resourced yourself around that and how do you make sure that you continue to build your competitive advantages every year. And I think we start by -- particularly discovered it during the financial crisis. Outlined [ some of ], so we do not worry about how other people make their money, we do not worry about the number of great competitors we have out there that might pursue very different strategies, that might be very valid strategies. We just try to be very good we're doing. For us, that means picking our spot. On the sourcing side, what it really means is we are students of our sectors, we're students of our themes and we try to pursue those and really try to figure out what's interesting, not just chase what's actionable, but really try to pursue what's interesting to create opportunities that we think are well positioned from a secular growth standpoint, and where we really took conviction over years, not over months or over a few chaperoned hours with the management team. And then secondarily, we want to invest in places where we can inflect the growth of an already-growing company, in that sales having an operating capability. So we have folks that are from the financial backgrounds and from operating background, same bonus pool, same promote pool, sitting side-by-side as partners running these groups together. And we tend to be very patient, very deliberate. We celebrate what we think of as the inputs to these interesting deals, and we never feel pressure to chase what happens to be available. I think that's put us in a lot of interesting situations over the years. People ask me sometimes, are you a contrarian investor? And we have been at times. But really, I think of it as more just independent-minded investors. So we were doing leveraged buyouts or levered investments in technology in the mid-1990s when everyone thought that, that was the [ actually ] more on leverage in technology. I think our first buyout was in '96 or '97 in the technology space. We were early investors even as large check investors in Airbnb and Uber. And our health care franchise is -- has been investing really for the full 3 decades of the firm, one of the largest global franchise, one of the largest investors in health care. And there are a number of stations who, historically, have not been the center of the fairway for private equity, and we've got a lot of success there. Most recently, in Climate and Impact investing, I think we'll probably talk about it a little bit more later, but we've been really innovators and I think, have approached the space quite differently, and I think as a result, have had a lot of success in it and have established ourselves at this point of $19 billion of assets management after less than a decade focusing on and has a pathway to $35 billion by early 2026. So in any event, we've had a lot of benefits, I think, by trying to be students of the sectors and thinking about where opportunities might emerge over time and where we want to put our energy. Back just for a moment to the culture point, which is really important to us, it is differentiating. It's a very flat organization. I don't think I ever remember hearing someone yell or run down the hallways in like 22 years of being with the firm. And everybody is really on the frontline. So I have had only one continuous job since I joined TPG, which is as a health care investor, to leading the TPG Capital, Healthcare efforts. And we have a lot of codes, actually, of all of our business units to leaders because everybody remains active on the investment front. We want to keep our experienced folks in the field. At the same time, we have open investment committees. Every member of the firm is not only invited to participate, but expected to participate when they have a point of view, particularly on their own deals. And I think that reflects a recognition that this is going to be a humbling business, and there's no group that has a monopoly on investment judgment. And ultimately, the proof has been [ footings ]. In the 22 years that I've been a TPG health care investor, in that capital business, we've never lost a person that's led a deal or the #2 in a deal like [ Hotel California ]. There's a lot of continuity, and we -- even though we spend more time with each other than we do with our own spouses, we really -- I think it's a place that people like to work and where we've had great continuity from a [indiscernible] capital standpoint.

There's one more kind of high-level question before we dig into some of the businesses. Maybe just to set the stage, talk a little bit about what you're seeing in the current market environment. On the August call, you said it seems like we're in a period of new higher volatility, more imminent rate cuts, heightened geopolitical risks. How is this going to impact the economy, the business, the companies into which you invested, realization outlook? I mean there's a lot there, but the high level of what's-happening-in-the-world question.

Well, it felt like at the time we were in the earnings season and today that it almost just depended on the day as to whether people were -- I mean since the market is up today, everything is great. I take that -- I think this is definitely a moment of greater volatility. And candidly, I think this is a moment where it is tricky as an investor because there's probably a little less -- there's probably a little more -- a little less clarity and a little more opacity in terms of the global economic environment, some of the geopolitical risks. For us, in that environment, first of all, we're long-term investors, but we also, in those situations, in those environments; take the opportunity to really just double down on our strategy and double down on our playbook and focus on those areas that we built conviction over, again, years that we understand and know which companies want to partner with, which CEOs we want to partner with. And so we have found some of the most interesting investments in my career, probably in the last few years, even at a moment where we're modeling multiple compression between the investment and the exit. And I think that's in large part of a function of how we go to market. The other -- I mean, there's an [ open-end ] question. The other thing that people ask when we were meeting with investors is how are we seeing this global uncertainty reflect itself in our portfolio. And the answer is perhaps in part because we're focused on businesses that are secularly growing where we can inflect their [ growth ]. Our portfolio has been performing quite well. So I think as of 6/30, our private equity portfolio was up 18% on a revenue basis. And actually, [ net ] margins were a little better than that. So EBITDA was up low 20s. And on the other sort of business that we asked about a lot is the middle market direct lending business, Twin Brook. That business has continued to perform very well. It's a sort of lower middle market business. So we have 2 covenants in every deal that tend to be the sole lender, but the business has a 1 basis point loss ratio since inception. The watch list is very steady. So it hasn't increased. So we're seeing a lot of health in our portfolio. But again, it's a time to be cautious, in my opinion. To your original question on differentiated strategy in the [ troubled ] market, it's time to stick to your knitting in the areas we feel very comfortable.

Jumping to private equity a little bit, maybe another kind of high-level question. How are [ LPs ] thinking about private these days, given more mature allocations? And when you're thinking about where we are versus the last few years, and have lower levels of DPI impacted the ability to raise here?

Yes. I mean it's been an interesting moment in private equity. I mean when we went public a few years ago, we characterized the period we're going into as a fundraising super cycle, primarily for private equity, which was a big portion of our [ assets ] management, particularly then. And I'm happy to tell you that those fundraisings, I think there were 4 of our flagship funds, were successful. They all were up, I think, 12% on average. But it did take a little bit longer. I think it is an environment where the fundraising fundamentals are a little bit more challenging. From our standpoint, actually, it varies quite a bit by market. So the U.S. pension fund market, and that's still a very important work for us with some of our more important partners, that has had more capacity issues. And so that's an area where you have investors that are really picking their partners and down selecting to the folks that they want to have multiple relationships across multiple assets -- asset classes with. And that's what we're seeing in that part of the market. There are other parts of the market, the Middle East, Asia; that continue to be quite healthy and growing. And you see that in the composition of our investor base. So if you look at TPG Capital Asia, I think we went from more or less 1/3 of the institutional PB, it's coming from Asia and the Middle East, to a little over half in the most recent fund. So that's the fund of the funds evolution. So we're building and we're investing in our capital [ raising ] capabilities. There, of course, are a lot of opportunities, which we'll get to, I'm sure, in the retail space, which we're pursuing aggressively, in insurance and elsewhere. But it is definitely the case that there are some parts of the market that are more challenging from a funding perspective. I would tell you that the other thing that is implicit, all that is sort of what is the criteria, how are people deciding who to work with. One is the main criteria is certainly, the liquidity that's getting returned to them. So we try to apply as much discipline as we do around liquidity and exits as we do the investment decisions. And for us, in TPG Capital, for example, about 60% of our whole company sales have been [ strategic ]. That's a little less sensitive to the macro volatility. We're trying to build -- growing businesses that will perform well, well after we sell them, and that's sort of why they end up in strategic hands. In other markets, I think in India, we've taken, I think, 8 companies public since late '21, most recently, one in August. So that's been a great opportunity. And we were up in the IPO market in a scaled way with fighting not too long ago. [ Of course, we have ] billions more equity in that company. So we're very focused on liquidity and then it's performance, performance, performance. And we feel really good about where we stand. But in the private equity world, that is something that is highly scrutinized and you're compared certainly against all your competitors. I feel really good about where we sit, but that's something we're never going to compromise on. It's just always making sure that we're delivering for our [ LPs ] because that's the key to all the other successes that we want to have in private equity and across the platform.

And given -- speaking about liquidity, exits and monetizations, just given the sort of industry-specific focus areas you have around technology, health care, are there any nuances investors seem to be aware of as we're thinking through kind of modeling what the next year looks like? Anything in particular for TPG to keep in mind?

This is more on the deployment side?

Monetization.

On the monetization side. Well, on the monetization side, I feel it's sort of both, [ I'll get to start ] on the monetization side. We got a lot of credit, I believe, because -- perhaps because we're -- we've been cautious about the macro environment now for a while, in that we were very aggressive in selling in '20, '21 and 2022. In fact, we were net sellers through the end of '22. It was only in '23 where we switched to net buyers. So we were investing in software companies. But TPG Capital, we sold every software company prior 2019 vintage fund at the same time that we were buying other companies that we felt then and feel now are compelling. We continue to be aggressive in thinking about -- and systematic in thinking about ways to create liquidity. And actually, no promises, but I feel very encouraged about some of the activity that we see now, particularly in the whole company [ sale ] side, but also potentially on the public side. So we have a lot of activity really across the platform, across the geographies that I think will continue to keep us in good stead with our investors as it relates to the liquidity. On the deployment side, this may sound a little bit -- like I'm talking on the best side of my mouth here, but I do feel like it's a challenging environment for investments. But as I mentioned, I feel like some of the things that we are -- the opportunities that we're creating are extraordinarily interesting. And I think that the investments that are in our portfolio is across private equity and across real estate and increasingly some other parts of the business look very different from what you would see in our competitors' portfolios. The reason for that, I believe, is that there's sort of a flow side of the market that is very active when multiples are high, debt is readily available, interest rates are low. Those tend to be intermediated, you tend to have less time to figure those out. That's never been our sweet spot. But particularly in a moment where we're a little cautious about some of the macro, we're finding things that we think of as the more bespoke, customized source side of the market. That's what's been comprising our portfolios. In many of these cases, it's structured deals with corporates. In some cases, there's no seller and no buyer. It's just two parties trying to come up with a way to create a great company or corporate carve-outs. I mean we've partnered with not-for-profits. That was the last investment in TPG Growth with a not-for-profit health care system with families, with universities and with a number of strategics. I think it's somewhere between 60%. And 2/3 of TPG Capital current portfolio are some combination restructured deals we carve out, 60% of TPG Growth's portfolio are proprietary deals. And so I am excited about these opportunities because I think they're quite unusual. And it requires us celebrating, again, the effort to put into these investments that don't always come to fruition. But when they do come to fruition, we have something pretty special. So we hear a lot about the pace of deployment increasing in the second half of '24. Just based on how busy my summer was, I'm actually a little worried about that. We've been very busy already, and we'll be out 3 to 4 years from raising the -- starting the raising of TPG Capital, [ now ] in Healthcare Partners II, which is exactly the pace we identified. And we've seen good, strong deployment and a really healthy pipeline really across our businesses. And again, we had a private equity, but the same is true for our credit businesses as well.

Great. So on to the PE umbrella, your Impact strategy is one of the newest. I think, it's about 7 years old. Can you, high level, talk a bit about what your goals are for this business? And then maybe, just given sort of the changes in sentiment around ESG, at least on the public side, how is investor appetite evolved over the last few years? And how does the LP base compare to like the legacy base across capital and growth?

Absolutely. I'm excited to talk about the [ Impact ] platform. There's a lot to be excited about in this for us and for all of our investors. Let me just go back to the comment in the beginning. We try to think ourselves as really independent thinkers, not necessarily contrarian. But as we approach -- and it really wasn't that long ago, it was in the mid-2010. As we looked at the impact [ word ], it started with a DNA that is very consistent with impact. So we looked at the 30 years that we've been investing in health care. That's been one of our overarching criteria. We want to be part of the side of the angels improving the system. But if you look at the Impact investing [ word ] per se, we noticed -- observed a few things that we thought were interesting. First was that there's capital formation on the venture side for new technologies. There was capital available for some public companies, Tesla and others that could credibly claim to be impact companies. But there was really no capital formation and no organized capital availability in the great middle, which is literally trillions of dollars a year of capital need. And for us, it was clearly the most compelling part of the broader Impact arena and the most compelling opportunity. The other issues we saw were, first, there was a distinct lack of rigor, clarity and measurement of impact. There was a sense of, if you use the right word, impact. But of course, that creates a backlash in people having uncertainties to whether or not you are driving impact. And then there was a sense, which we were -- became convinced after a lot of study that was not accurate, that there was a trade-off between impact and financial [ reserves ]. So when we decided to get into the space and to get in the space with real focus, we created Y Analytics, which is an internal platform that brings the same level of rigor and measurement to Impact that we do the financial returns. When we're underwriting, we have the same level of focus on both sets of metrics. When we're measuring the performance of these companies, we're ultimately reporting back when we sold a company. And our investors care about those numbers very much. We also believe strongly, and I think now have the evidence to demonstrate, that not only is there not a tension between financial returns and impact returns, in fact, they're colinear, they're self-reinforcing, in part because as a leader, many of the folks who are selling and looking to partner their businesses want to be with someone who is authentically very focused on impact, who will raise their visibility and help them do what they do better. And it's not just what's the highest price that I can get from my shares or the best [ returns ] for my investment. So as I said, now as we have evidence, I think we've continued to prove that out. And of course, as we do with any of our sectors or any of our business units, we applied an enormous amount of time and energy and resources to building out what we think of as an excellent ecosystem that differentiates us in impact investing. And that's everything from public policy experts to climate scientists who can help us in thinking about some of the decarbonization technologies to companies, corporate leaders. I mean, I'm sort of evolving -- moving to your last part of your question, which was do we have new investors as a result of our rise and climate investing? And the answer is absolutely. I think 70% of our [ RISE I ] investors were new to the firm. And they were unusual investors. So we have 28 companies that were literally the who's who of corporate America, whether they're from Apple and Alphabet to 3M and Westinghouse -- or Honeywell, a whole bit bunch of additional companies that partner with us because they're trying to develop their own strategies and because they wanted to be part of the journey. And of course, that has positive benefits, not just in our Impact platform but across the broader TPG landscape. So it's been a great journey for us. Today, as I said, we're at $19 billion with line of sight by early [ 2026 ] to $36 billion, [ $35 ] billion. And we see a whole host of places to go from there. I mean we probably have sourced [ $30 billion ] opportunity in infrastructure for climate, but we didn't have the capital base. So we're -- we made a senior hire from Goldman. We're going to pursue that credit, real estate, public equity. There's just so much behind that. And we really want to be the household name in impact investing and feel like we're on our way to doing that.

And maybe one of the kind of high-level private equity question, then we'll move in to credit and Angelo Gordon. How do you think about new opportunities in organic growth? It seems like a lot of your growth comes from horizontal expansion rather than fund-over-fund growth. You have a lot of new strategies, tech adjacencies and health care partners. So what do you see as the benefits of this approach? And how do you think about organic growth in private equity at a high level?

Well, if you think about TPG prior to the Angelo Gordon acquisition, the vast majority of our growth -- almost all of our growth is organic. And I think a lot of that goes back to this cultural question. Nobody gets into their little hole and focus on their job. We think of ourselves as business builders. When we think about organic growth, we're not looking at a blank sheet of paper around alternative assets and saying, "Oh, we want to be here because that's open, because that's there." We tended to start with our strength and follow those, open the aperture of the sourcing and to follow those into new opportunities. And our LPs have been really excited by that. So if you look at two recent examples of organic innovation, the health care partners fund and now -- and TTAD, which is our tech adjacencies fund, both of those, not only are they interesting starts, but the fund-over-fund growth has actually done very fine. So TPG Healthcare Partners II, I think, was the third bigger than Healthcare Partners I and probably could have allowed it to be bigger still if we wanted to at the time. TTAD was more than twice, more than 100% bigger, TTAD II versus TTAD I. So there's a lot of opportunity for organic growth. And beyond that, there's a lot of opportunity for incremental organic growth. We're looking in Asia at sort of something that leverages our strength in growth investing and in our Asia platform in what's called [ TCAP ]. And that is exciting and I think has a lot of legs. And then there are a series of newer things that also feel like natural extensions for us. So we haven't given an update that hopefully we'll be able to soon on our secondaries business in the U.S. and Europe, TGS. They leverage a lot of the same ecosystem and a lot of the same IP that we have in the private equity business. They focus on similar sectors. They often bring team over to help with some of these investments, been off to a great start from a capital formation and from an investment standpoint. And that has the opportunity to scale significantly. TRECO, which is our real estate debt business, credit business, a natural extension of what we're already doing in real estate. So you might not be surprised to hear, I'm actually very excited about all of the opportunities to grow organically from where we are, not just fund of fund, but with these new capital basis. And while we turn to private equity, I would be remiss if I didn't say that there's also a whole set of new opportunities that were not even available to us a year ago, that reflect the intersection between what legacy Angelo Gordon has and the skills and resources they have and what we have on the legacy TPG side. We've already started by launching the fund, but there's a series of opportunities that we can pursue behind that, that I think are quite exciting from an organic standpoint.

That's a great segue to the next questions on Angelo Gordon. So maybe -- you talked about sort of the opportunities there. Maybe remind us of the strategic rationale. And perhaps you were kind of leading there anyway, but what do you see as sort of the benefits to the business? How is the integration going?

Absolutely. I spent a lot of my last 2 years to focus on the Angelo Gordon, next thing to talk about it. The net-net is I think we have a lot of -- we really want to be on the integration in terms of the -- we've put a lot of resources against that, we've put a lot of energy, and we feel really good about where we sit. Just to step back, to set up the rationale and the strategic points that have made us so exciting about this one. If you start at the time of our IPO, we said that we want to continue to grow organically, which has really been much in the firm, but that we also wanted to explore, in the right situation, strategic acquisitions. And at the very top of the list, of course, was credit. That was important because our LPs want us to be in a broader set of products and increasingly want to focus on a smaller number of GP relationships. But it's also important because it represents a very big opportunity in terms of places to express the themes and the IP that we have developed on the TPG side and that, frankly, the AG team has done in their history as well. We want to be able to play at different parts of the capital structure. So it's also -- it's a very logical extension of what we've tried to build in our broader business over the decades that we've been working on it. Because we were without a credit platform, it might not surprise you to hear that we had many, many credit firms that approached us during the course of the year or so after IPO. I think we had at least 50 or 60 dialogues. And I can tell you, among all the dialogues we had, Angelo Gordon is far and away the most exciting, and not by a marginal amount, by a lot; of those dialogues. And as a [ deal ] person, doesn't always work -- worked on it for over a year. Every week, every month, I felt more excited about the combination. There were a range of reasons. One of those reasons was certainly that we like the parts of credit therein, and I'll give you a quick [ recount ] of those in a moment. In growing areas, it's balanced among these 3 areas. We like very much the real estate business. We feel like that real estate business is quite complementary to our real estate business, geographically and from a skill set perspective. Secondly, I think there's just a great cultural fit. You probably can imagine that some of those 60 people that came to us were looking more to sell their business or to crystallize the business as opposed to throw in and to build businesses together. That's what we have in this group at Angelo Gordon. And we've -- that's only been proven to us with even more clarity now that we've had a few quarters under -- of the transaction being closed. And finally, there is just a sense of the range of growth opportunities that would be available to us. And some of that relates to the fact that we had a surprisingly limited overlap with LPs, and some of it was just based on the fact that we feel like the Angelo Gordon chassis is built to be bigger and to grow with more capital, more resources. And so we just -- we see a lot of opportunities for that. And I can come back to some of those if that's of interest to you. The business itself, as I said, 3 buckets, not exactly equal, but each of -- has got critical mass. One is the middle market lending business, that's Twin Brook. I mentioned earlier, this is not the more crowded part of the market. They're a real leader in this lower middle market. And they have a really, I think, distinctive product that has performed very well over time. And as we've learned about it, we've understood the interesting attributes of that. And we've come to really like it. In fact, we think there's some growth opportunities to graduate with these companies. But it's a great starting point. There's a Credit Solutions business. The Credit Solutions business is a little more like what we think of in the private equity world. It's more customized, it's more bespoke. That business has been very [indiscernible], signed 190 NDAs. So there's a lot of pipeline coming. They've innovated. They call it going to the lab. They created a business called [ Central Housing ], which started with partnership with the land -- excuse me, with a homebuilder, Lennar, that now have 10 other homebuilders in this partnership. And they essentially created this from a whole [ plot ]. So that's an interesting space. And then the third is structured credit, which you should think of really as the non-EBITDA product credit, CMBS, [ RMBS ]. That's a very fast-growing area in credit. And that business, I think, is really well positioned as well. And we have a lot of interest from our LPs and particularly some of the insurance companies we work with to grow in that space. So there's -- as interest rates come down, as banks get more and more aggressive on sort of managing which risks they want to have on their balance sheet and how they want to they want to manage their balance sheet more broadly, this is a great counterparty, and we've seen a nice pickup in activity. And then, again, the huge opportunity here is in trying to find ways to leverage what we're doing today, whether it's capital markets, broker-dealer capabilities, which is not only a competitive advantage, but a revenue source that could be applied across Angelo Gordon, which does not have a broker-dealer or it's this very big opportunity, which is a steady-build opportunity around introducing TPG historical LPs, in particular, to the Angelo Gordon side. And we've had, I think, 500-plus -- 530 meetings. I looked at the number of senior TPG folks with LPs and senior legacy AG folks talking about new products. And we've gotten some nice early wins on that dimension and feel like there's an enormous amount running in from here.

Great. One of the areas of overlap or limited overlap and talks about what the LP base. In terms of the synergies that have been identified with the acquisition, I think that was one of the bigger ones. What are you seeing in terms of cross-selling efforts playing out? It's a pretty consistent theme we've heard about the GP consolidation among LPs. So it seems like it's an opportunity for you, but what are you seeing since the acquisition is closed?

Well, again, just to frame it, the day before the acquisition, we had 550 LPs; and the day after, we had 900. So I mean, it was a very significant opening of the aperture in terms of the LPs we're able to engage with. And I think that the -- this is more a qualitative answer, but I remember in one of the early meetings, we [ tipped ] the senior folks from Angelo Gordon to one of the -- one of our very long-term partners. And the opening comment from the partner was welcome to the family. That's not to say that this is ever going to be easy or it's ever a matter of just show me where to sign. This is a place -- this is an environment where you earn all these things. But as we've demonstrated and shown this track record that the team has, as we've introduced the people and as the relationships we have built, we've really seen a lot of [ increase ] in some early wins. So we had a successful fundraise in the middle-market lending business and we had a lot of appetite among legacy TPG LPs to help us build that graduating company's vertical, which is again a whole new opportunity, which would be perfectly situated to my earlier comment about starting with your strength and building from there as opposed to just going to white spaces. We're very well positioned there. We've launched, with a lot of support, a product that's between, as I said, TTAD and Credit Solutions, this hybrid solutions business with an anchor and a lot of interest among our investor base. And there's some early wins in the Credit Solutions side in Asia and elsewhere of people that are already coming through. But I think the reality behind your answer is, this is a persistent effort that we will put in and we have put in. And the 550 meetings, they're generating -- that's generating a lot of interest. So I think that the overarching desire of our LPs to focus on a smaller number of GP partners is at least it's clear -- probably more clear than it's ever been in the history of our industry. The enthusiasm that they've had is they've seen the people and they've seen the cultural fit that we observed during diligence, I think it's only grown. And the number of dialogues and the level of interaction among this broader LP base with products that they had not previously invested in, I think, all gives us a lot of confidence that the opportunity is there and already starting to prove out.

I want to ask you a little bit about the deployment environment for private credit. But maybe just given the time, we have to kind of roll it into one and ask you the same on the real estate side. Given Angelo Gordon did also kind of mean scale your [ real estate ] business, so I would love to hear your thoughts on both, but private credit kind of different -- but your kind of near-term outlook on deployment for the two different...

Absolutely. So let me -- I'll run through both quickly. I realize I tend to ramble a bit, I got us down to 5 minutes here. On the credit deployment side, in Q2, we had $4.5 billion of credit deployment, which was up, I think, more than 40% from the prior quarter. So we've seen a lot of scaling. And middle market direct lending has been very busy. And feels like it's going to continue to be very busy. And so that's been off to the races. Credit Solutions has, as I said, a very big backlog of NDAs and opportunities it's pursuing. It's been very busy in [ Central Housing ]. I think we've seen sort of continued growth in the activity level across [ Credit Solutions ]. And as I said, the sort of overall growth in the structured credit world is also pretty compelling. I think there are [ 30 ] deals under review in that business right now. So the short answer on credit is we continue to see a robust pipeline across the credit platform. And as you know, we're doing -- we're making investments where we want to make -- where investments make sense. But that has a flow-through benefit to our P&L because in much of the credit world, the fees start to flow on deployment, not -- once the capital is committed. So from that standpoint, I think we feel quite good about the second half of the year. On the real estate side, it's interesting, it was quiet for a period because I think our real estate team, which on both sides of the house, is an excellent team that has demonstrated a lot of success over time; they felt like there was more [ dislocation ] as being reflected in the market. And so they really took a posture of waiting for their pitches. The pitches have started to come. So we've actually significantly picked up our activity level. And we've actually -- on the real estate side, the private equity side -- excuse me, the equity side is [ suppose to be on ] the debt side, we've seen sellers that range from pension funds to REIT -- nontraditional sellers that for different reasons had to offer up assets that we probably wouldn't have had access to in most environments. So really interesting deals in the thematic areas we're focused on, some life sciences, some student housing, so logistics and industrial where the with a big supply-demand imbalance. We've seen it in the U.S. and Europe. We've actually seen a lot of activity in the Asia businesses that came from Angelo Gordon. So that activity level has increased. And I'm [ glad for ] the pitches because I think the investments that we're making now are quite compelling. On the real estate credit side, it's a very unusual moment actually. I think that with rates having risen and the spreads [ haven't ] widened, it feels like we are seeing mid -- LTVs in the 70% range and mid-teen returns in terms of these opportunities. And again, it's a function of activity in some part because of 4 sellers. But again, as the rates have moved. So there was a moment where it was quieter, but it certainly picked up. And I think it's picked up with -- consistent with my earlier theme of some very interesting and differentiated deal flow.

Great. Well, let me squeeze in one question here on the private wealth channel, one of the other biggest topics for the alternatives asset managers. So I think you guys have talked about launching a semi-liquid private equity vehicle next year. How do you think about differentiating -- differentiation here, given it's becoming a bit more crowded? And what are your kind of longer-term ambitions with democratized products?

Absolutely. This is a big priority for us. It's something that we think of as not only the [ part of the place ] where we have a right to win. I'd start with -- we already are having success here. We're already putting a lot of time against it. We are at north of 2, 2.25x the private wealth, the retail channel's contribution to our fundraising this year than we were last year. So the growth is already there. As you point out though, in order to really step-function that growth, you not only have to sort of build your dialogue, you have to modify your products in a way that's compelling. So the first effort for that was our [ nontraded ] BDC, which is focused on the middle-market lending business. And that's on, I think, to wire houses [ and a ] third to come. The story about it being differentiated and unusual, not one of the more crowded parts of this space, I think, is playing really well. So we're excited about that. The semiliquid private equity is certainly our next priority. And hopefully, not to sound too modest, we should win in private equity. I'm knocking on wood here. Our results are very strong. Our performance has been strong. We have very interesting products, and they range -- they're global in nature, secondaries, climate, things that I think people are quite interested in, health care technology. We're already warehousing equity for that product. As to why we win -- and we've had a dozen, I think, 45-plus dialogues with wealth management partners. As to why we win? I think the world has evolved from wanting more of a supermarket approach, giant generalist funds to more interesting bespoke, differentiated areas where with the underlying company, the underlying GP as regarded having authentic strength. I think we play very well in that environment. I think it's very consistent with our strategy of where we try to build resources, where we try to build capital in any event. And I think that the world is moving in that direction. And I feel like what we hear from these wealth managers is they want something different. They want to be able to tell the story of why the TPG climate funds are something that you should invest in that this is really differentiated. And that story has -- it seems to be coming from a lot of different sources now it feels like it's coming from the -- ultimately from the investors themselves. And in that environment, I think that we should have a lot of success. And of course, we're putting particular on our resource against this semiliquid private equity product because we view that as a template for other semiliquid products that we feel like we can introduce, whether it be across real estate, potentially more narrowly, and things like climate or elsewhere. We feel like we're really well positioned. We have a strong brand name. We're spending a lot of time in building. But we have the underlying products that should enable us to be really successful in this space.

Great. Well, we're out of time there, but Todd, what a pleasure. Thanks so much.

Thank you.