TPG Inc. (TPG) Earnings Call Transcript & Summary

All right. Great. Well, thanks, everybody. I'll give it a second for everyone to settle in. But look, next, I'd like to welcome Jon Winkelried, CEO of TPG. TPG's global alternative asset manager with over $280 billion in AUM across a diverse set of strategies. Over the course of 2025, the firm's been -- the firm has seen significant amount of momentum across the franchise really with accelerating fundraise and deployment, realization and of course, really good investment performance. With several major strategies in the market for 2026, it looks like this is going to be another busy year for you guys. So really happy to have you here. Always good to spend some time with you at this time of the year. So welcome to the Goldman's Conference, and looking forward to the chat.

Thanks, Alex. I always love coming back to Goldman. And thank you for all the support that you give us as well. So great.

No, pleasure.

So let's start with 2026 and just thinking about some of the priorities for you guys. Since becoming a public company really just a few years ago, TPG has really evolved quite a bit, both organically and inorganically. As you look out, what does the business look like over the next 3 years? And what are some of the main priorities and guideposts really for you and your team in '26 to get you to where the vision is a few years from now?

Good. Well, look, I think just to frame it, I mean, because you mentioned it, 2025 has been a really active and busy year for us, and we came into 2025 in an environment which was -- there were some questions about the overall sort of macro environment in terms of capital formation. We had an ambitious plan and agenda for 2025 in terms of capital formation really across a number of our flagship funds, across our credit business. And it's turned out to be a very busy and very active and very successful year for us in terms of both how much money we've been able to raise as well as just the deployment environment. The deployment environment has clearly picked up across all of our strategies. To your point, going into 2026, I think we have another busy year. We are just -- as a firm, I think, as a result of our investment performance, as a result of the franchise that we've been able to fortunately develop and the following that we have, we are just going through a very significant expansion of our platform, frankly. And that's in the form of really scaling strategies that we have organically developed, as you talked about. Some of our really core large strategies that continue to be in the market and that we have to finish raising capital for us or for instance, our buyout fund as an example, continuing to raise capital across our credit platform. But this is also going to be a really important year for us in 2026 as we go into it. We're going to rotate into on the real asset side and our real estate franchise, in particular, we're going to rotate into a significant capital formation period in all of our real estate businesses. So our opportunistic funds are the funds that we inherited from Angelo Gordon. And so I would say that probably the biggest difference in '25 versus '26 is really the real assets and real estate program for us in terms of capital formation. But we have a bunch of things to finish up, like finish our buyout fund. We have several strategies that are newer strategies where we're sort of moving into a position of scale like what we're doing. We're raising our secondaries fund, we call it TGS. It's single name, secondaries, it's continuing to scale our real estate credit franchise. And then across our credit businesses, in particular, and you may have seen the announcement today, we actually announced the completion of our Credit Solutions fund, which essentially doubled vintage over vintage. We raised $6.2 billion of capital. It's already 20% deployed. And we have a number of new insurance partnerships that we're raising -- that have helped us drive our structured credit franchise. So we've got a lot on our plate. So -- and I think we're going into it clearly from a position of strength, in terms of our performance. So we're optimistic.

Yes. Great. Well, look, as you said, lots going on. So I was hoping to zone in on a couple of fundraising themes because you guys have been in the market over the course of this year. To your point raising capital across predominantly your larger private equity strategies, and that's obviously been an area where there's probably been relatively more concerns when it comes to what does the future private markets sort of look like here. But also, you feel free to expand that a little bit more broadly, right? When you're out on the road, you're meeting with LPs, what are some of the bigger themes that investors are trying to lean into in terms of their asset allocation trends? And how are you positioning TPG to execute against these themes?

Sure. Sure. Well, look, let's break it down maybe a little bit by asset class because I think the -- what's on LP's minds varies between private equity, credit, real estate, infrastructure, et cetera. Let's just start with private equity for a second. I think that private equity has evolved into a market where I think that there's been more dispersion in terms of performance. And it's also an asset class where I think there have been as a result of the lack of return of capital, there has been an environment where many of the largest pools of capital have been over allocated to private equity. So what's happened is that those that have had really strong performance and in our case, where we've also been very focused on not only investing well, but also return of capital. There's clearly been a kind of a divergence in terms of experience and capital formation. We have been fortunate to be in a position where we are essentially gaining share in the market. Just to give you an idea, to use our buyout fund as an example. We finished our first close for TPG Capital X and Healthcare Partners III. Our first close was $10.1 billion, which was a strong first close. Just to give people perspective, for those LPs that were re-upping to this fund that had been in our prior funds, the average allocation to our buyout fund went up by 12%. That's the average allocation. That's in an environment where, in most cases, institutions are trying to figure out where to pare back on their private equity exposure. So there's clearly a difference for those that have performed well but also have been disciplined about return of capital. And the way we've run our business has been very intentional in that not only are we focused on how we get into different opportunities, how we buy them, that whole process, but we're also very disciplined on looking at the process of where are we going to exit, which companies are we going to exit, how are we going to exit and essentially trying to set ourselves up for that in advance by thinking about the things that we're buying, our relationships with strategics, how do we exit the strategic. So that's been very intentional on our part. So overall, I would say that we're clearly in a position where we've gained share in the private equity space. What I'm hearing from -- when you move away -- and I would say, overall, LPs are still constrained in the private equity space, by and large. So we have this dynamic where fewer are raising more capital and many sort of kind of middle of the market type size funds are having trouble raising capital. So I would characterize the private equity environment is still pretty tight overall, but we've been a beneficiary. On the credit side, there's obviously been a lot of capital that's been raised and deployed on the credit side -- on the private credit side. Clearly, we're going through an environment right now where there are a lot of questions that are being raised about quality of underwriting, quality of diligence, et cetera. We can talk about that if you want to. But I would say that on balance, institutional LPs on balance are still allocating and still want to allocate to credit. I think, again, there are important questions being asked in terms of sort of how to think about dispersion among managers, how to think about diversification within credit strategies, which has become a bigger topic with LPs. But by and large, we continue to see the market leaning into credit as a result of where rates are, just nominal yields and the broader opportunity within credit as well. The interesting dynamic that we're also seeing is that we have a pretty big real estate business. Real estate has been an interesting space. Over the last several years, I would say it's been, by and large, reasonably out of favor as a result of what happened going through the rate rise, going through COVID, some of the pressure on the office space, et cetera. On balance, we're pretty excited about the opportunities in real estate. We see a lot of very interesting opportunities. We're in a position where we've had a lot of dry powder. We thankfully avoided most of the mess in the office space. And for the first time, over the course of 2025, as I've traveled around and met with LPs, I would say that LPs are really kind of waking up to the fact that there's probably an opportunity in real estate, particularly on the opportunistic part of the market. Core real estate is sort of dead. But I would say in the higher return opportunistic part of the market, people are really sort of zoning in on the fact that valuations of reset, valuations in real estate are probably 15% to 25% lower than they were. There are sort of some -- there are situations where, frankly, certain people who are stuck have to sell. So there have been assets that have come to market that have not -- that you probably wouldn't have seen come to market, and we've been able to be pretty offensive about that opportunity. And I would say that the conversations have really shifted where I think there's a much more interested engagement in that part of the -- in that asset class. So my expectation is that you're going to see people selectively lean in there, and you're going to see -- we're going to prove that out this year.

Yes. Look, the comments you just made about real estate are certainly encouraging. We heard it from a couple of people as well. And yes, I mean, that is the part of the market that's been really dormant for the last almost 3 years. So it will be great to see. As you're thinking about that opportunity for TPG, and I totally hear you on actually avoiding a lot of the problem areas within real estate, which should be helpful for the fundraise. How are you thinking about sizing the next flagship real estate funds, especially taking into account some of the feedback you're kind of starting to hear from the LPs. Could we be in a similar situation as private equity, where some of the LPs will just allocate more with you guys and there is a room to sort of grow same-store sales and therefore, get these funds to be a larger size despite some of the tightness in the market still?

Yes. Yes. I mean we're really encouraged that we're going to be able to upsize these pools of capital, which, frankly, by the way, I think, would be a great opportunity because I think we see a significant opportunity to deploy. And so just to quickly recap it, we're going to be in a market with our sort of flagship TPG opportunistic real estate strategy. The current fund, which is Fund IV is about $6.5 billion. We're looking to raise something in the vicinity of around $9 billion to $10 billion. That will be a very large fund, generally by real estate standards, but the opportunities, we think the -- we're convinced the opportunities are there to deploy really well. So our -- and we're just launching that fundraise now as we speak. We've been premarketing it, but we're just launching that now. We're going to be in the market with our -- we -- I think people may be aware of this, but when we acquired AG, we also acquired a real estate franchise there. Their strategy, their franchise is a bit different than the TPG strategy. They have regional funds, they have a U.S. fund, European fund and an Asia fund. They are sort of a value-add kind of real estate-focused player. Their strategy is a bit different than ours. So -- then the TPG classic strategy. So we're going to be in the market with the [Realty XII] fund. That's the 12th fund in the U.S. We're looking to upsize that from what -- it's prior size by, let's call it, about $1 billion. We're going to be in the market with the Asia realty fund, one of the attractive -- one of the interesting dynamics of the real estate franchise at AG was that they're one of the few U.S. managers that has a pre-established Asia franchise. And we're finding lots of really interesting opportunities in Asia to deploy into real estate. Part of that franchise is they have a dedicated Japan fund called the Japan Value Fund, which has been focused primarily on office and hospitality in Japan, which has been -- office has never gotten weak in Japan. So there's lots of demand for office space, acquiring buildings, retrofitting, improving and then essentially selling. It's been a strategy that's been very successful as the -- and Japan, as we all know. I mean, when you ask somebody, where they want to go on vacation? Everybody wants to go to Japan. So hospitality has been a very strong market there. So we've been on that theme as well. So we'll be raising capital for all 3 of those funds. We're going to -- and then as I said before, we're going to -- we are on the real estate credit side. We raised -- we finished raising a fund here in the U.S. called TRECO, which is an opportunistic credit strategy. Great opportunity, lending into the real estate space, by and large, pretty broken and generating returns that are mid-teens types of returns at kind of top of the capital structure. And we ended up raising in total between the fund and other vehicles about $2.5 billion for a fund that originally we were thinking we'd raise probably about $1.75 billion. So the market has come to sort of understand that, that opportunity is there. and it's being deployed pretty quickly. So by the end of 2026, we may be back into the market there as well.

Got it.

So a number of opportunities, but we're going to be busy in real estate.

Yes. No, that's great to see a diversification there as well for short. All right. Let's put it back to private equity for a couple of minutes. The industry broadly obviously struggled with DPI. We've heard about that at length for the last couple of years. TPG will clearly stand out there. And you've mentioned that a couple of times, both in terms of the IRRs and DPI metric across the private equity portfolio. Talk to us a little bit about the health of the investment portfolio today, across capital, Asia, growth and perhaps impact as well. There are definitely question marks around parts of the growth of your sectors and AI-related disruption that, that could create. Does that hit any -- check any other boxes for you guys? Is that a concern at all? And then leading into or really piggybacking on that, talk to us about monetization outlook as well because, presumably healthy portfolio companies are a little bit more ready to be exited as well.

Yes. Well, there's a lot there in that question. So let me try to just break it down. So first of all, in terms of health of the portfolio. Our portfolios are in very, very good shape. And the easiest measure to convey that with is looking at kind of top line growth, cash flow growth across our portfolios, generally across our buyout, our growth strategies. What we're looking at is we're looking at kind of low double-digit revenue growth across our portfolio and then high double digit, just under 20% cash flow growth across our portfolio. So our portfolios are growing very nicely. That dovetails by the way, into maybe part of the reason why I think we are somewhat differentiated in private equity. If you look at the value creation, the way we create value in private equity, we are very engaged sort of hands-on investors, right? We're buying companies that we think are good companies, that can experience secular growth, that ultimately when we're looking to exit are still growing. So there's something for the next buyer ultimately in terms of continuing to grow. But I just -- we did some interesting numbers recently where we did a decade's worth of work looking at what drives our returns. If you look at our returns over the last decade in private equity across the firm. About 80% of the value creation has been driven by top line and earnings growth. Very little of our value creation has been driven by multiple expansion. If you do the same analysis over the last decade for the S&P 500, about 45% of the value creation in the S&P 500 has been multiple expansion. So what we're clearly doing -- and this is part of the value proposition in private equity that I think it's important to keep in mind when people look at long-term returns, that are being generated in private equity and how those returns are being generated. And I'm not speaking for other firms. I'm just speaking for us, right? There's a big focus on trying to buy companies, continue to improve them, bend the curve in terms of growth. And that's what's driving what we're doing. So the portfolio is in very good shape overall. In terms of how we think about the exit outlook, I would say that overall, we're pretty constructive on the outlook. I mean when you think about what really drives sort of the ability to monetize, I would say overall sort of valuations trending up, and you can look at public markets, private markets, look at whatever you want, the valuations of the market are overall generally trending up. Number 2 is that the market from a financing point of view is still pretty flush with cash in terms of whether it's bank's financing, sponsor activity, whether it's private markets financing sponsor activity, so you can get deals financed and you can get deals financed in size. When you look at the desire on the parts of LPs for co-invest and wanting to participate in these deals, whether it's coming in or if you're trying to get the capital going out, there's a lot of capital there. There's a lot of dry powder on the part of other private equity firms that are looking to put money to work. So -- so I think that -- and you also have -- from a policy perspective in terms of rates, you have generally kind of accommodative kind of policy bias in the market right now. So overall, I think going into 2026, I think we feel pretty constructive. I think that, obviously, we're living in an environment where all of us, I think we wake up every day and like you're not -- you're sort of afraid to look at the news in terms of what's going to happen next. But -- so take all of this with sort of that in context, which is things could change tomorrow. But assuming we're on this general kind of trend line, which has been constructive, I think there's going to be actually a lot of PE activity and a lot of monetization activity. So -- and as I mentioned before, we are very focused and intentional about looking at our portfolio and figuring out within each of our sectors, what are sort of our target monetization opportunities because one of the things that we've realized and we realized it a while ago, and it's paid off for us is that our investors are very focused on our returns and very focused on DPI, very focused on return of capital. We've been disciplined about it. And if you look at the longer arc, like if you go back over to like sort of pre-COVID, right, on average, we've invested and returned about the same amount of capital over the arc of that time. So that's been very important in terms of the balance that in any given year, we either look like a net seller because we've returned more capital than we've invested or a net buyer because we've invested. But over the arc, we've returned as much capital as we've invested. So we're pretty constructive on that. On the growthy thing that you're talking about in terms of concerns down there, AI, pressure, et cetera. Look, I think there are certain parts of the market, there are certain sectors that I think are going to be impacted by that. And again, I don't want to take all the time on this, but we can talk more about it. But I think that particularly in tech and software, where you're participating, how you're playing, I think you better be sort of embedded in the space and not be a tourist in the space if you want to make sure that you get it right because it's having a big impact. And so I think that, that's something that we're quite focused on. And I think you're going to see it have impact both on the positive and the negative, depending on the company, depending on the business model.

Yes. More of that bifurcation and the dispersion of returns that we talked about earlier. That makes sense. Okay. Let's pivot to credit for a couple of minutes. It's been a really great story for you guys in terms of fundraising. I remember when you announced Angelo Gordon, one of the things you said in the beginning, like, look, we're going to be able to make a lot of introductions to our LP base to their investment capabilities to really accelerate that. And it's really nice to see that come through over the last kind of 12 to 18 months. It took a little bit longer for that to actually show up in the results because deployment of that sort of dry powder was taking a bit longer. But it finally feels like we're here. So if I look at your results in the last couple of quarters, pretty meaningful pickup in that deployment picture as well. So talk a little bit about both fundraising credit and opportunities to deploy over the next 12 to 18 months?

Yes. Well, look, I mean you're right. So we -- what we acquired is we acquired a franchise that we thought, number one was multi-strategy. We thought that the performance was very good. And we thought, in particular, the team was very capable and very talented. But what we knew is that we had to scale the capital base. They were generally undercapitalized, generally out originating what the capital base could support. And we felt like we could basically really transform that because we would buy -- we would acquire the business, we would integrate it into TPG in a real way, okay? So it's not some separate subsidiary. It's part of our firm. And then we would have the opportunity to talk to our relationships about it. The other thing I think if you -- you may remember this, is that believe it or not, we only had 10% overlap in our LP base...

That's right.

Right. So we -- and we have relationships with the largest pools of capital in the world. So there was clearly an opportunity there. It does take a little time to do that because if -- when you make an acquisition in a human capital related business, the first thing that happens is basically all the LPs freeze. Okay? They're like, what's going to happen to the business? What's going to happen to the people? Are you going to keep them? Are you going to change the investment strategy? All these natural questions. So our job was to basically get out there, tell the story, make sure that we were on strategy in terms of what we were doing and deliver what we said we would deliver. And we have done that, okay? And we're going to continue to do that into 2026. The capital formation curve has been quite steeply as you pointed out. We're raising a lot of capital for our credit business this year. The deployment pace has picked up meaningfully. This Credit Solutions Fund that I mentioned before, $6.2 billion capital raise, our target was $4.5 billion. We've already deployed 20% of the fund, okay? And we just closed the fundraising today. In our direct lending business, in Twin Brook, which is a lower middle market business. We've seen actively increasing deployment as the capital base has grown. We've increased the institutional following of the business because people want diversification across the direct lending business. And our BDC, TCAP is now up to $4 billion and is actually accelerating as people realize that this lower middle market strategy is actually a really interesting diversifier as it relates to people's exposure to direct lending. And this quarter is probably going to be our most active quarter of the year in terms of deployment. So that's another area where we're seeing a lot of acceleration of deployment. Our structured credit business, which essentially think of it as a noncorporate credit risk business, non-EBITDA risk business, things like ABL, resi mortgages, CRE, consumer, that's getting a lot of attention in the market now for 2 reasons. One is diversification for people. Institutions that are allocating a lot of private credit that want to get a bit away from just pure corporate credit exposure. And number 2 is insurance. And the number of insurance partnerships that we've established over the course of the last 2 years since we made the acquisition, has really accelerated, and that's an area where essentially more and more capital is flowing into private assets because insurance companies are looking to increase the general yield within their general account so that they can actually offer higher crediting rates and compete whether it's fixed annuities, whether it's RILA's whatever it might be. So the private market continues to get more and more capital flowing at it from the insurance space. So all of these areas are areas that are providing opportunities for us to grow. And our business is really has just hit its stride. It's hit a stride. I mean, many of the biggest relationships in the firm now are invested with us across all of our strategies, including credit. So it's -- and I think we're going to continue that trend into '26.

That's great. You mentioned insurance. I'm going to jump around a little bit. And I think it's interesting that for TPG, I think on the last call, you talked about 25% to 30% of credit fundraising came from the insurance channel. And to me, the observation is it's about actually the same as what you find with a lot of the alt managers that have a captive insurance relationship, whether it's Apollo, [Care Health] and some of the others in the world, right? So you guys are kind of doing that without having the explicit ownership of the insurance liabilities. I know you get asked on every earnings call. When are you going to buy an insurance company? And obviously, you guys have not done that. You were pretty thoughtful about the approach you've taken to that whole ecosystem. How important is it to ultimately own or have some sort of economic relationship with an insurance company, given that you guys seem to be doing just fine, raising capital the way you are?

Yes. Well, I think -- I don't think it's that important for us to actually own the liabilities and essentially, holistically kind of take an insurance company, put it on our balance sheet. I don't think it's that important. In fact, I mean, to your point, I think we've been -- we try to be careful and thoughtful about our model. I mean our model historically and classically has been sort of what we call kind of a balance sheet light model where our focus is asset management. That continues to be our focus. Now what we've done is -- I mean, so importantly, there's been a kind of a really interesting evolution in insurance, right? Because this convergence between alts and insurance has changed the competitive landscape. So one of the things that when we first kind of acquired AG, when we were first kind of looking at this, one of the things that I was constantly asking our team was, if this convergence is going on and there -- and not every insurance company is going to be owned by an asset manager, what will these other insurance companies do, right? And so my expectation was eventually, people would need to compete. They would need asset management expertise or relationships and that would sort of come back around to us. That's exactly what's happened. So I mean there are any number of insurance companies that we're in dialogue with that have reached out to us to talk to us about this question of how can we partner in order to lift our returns by using private assets, by using your investing capabilities, but without it being sort of we acquire them and sort of gobble them up and then own the liability side of it, which frankly, I'll just -- it's -- that's not our business. That's not a business we really kind of truly kind of own and understand in the same way we understand our asset management business. So the only thing I will say is that these partnerships are important because the more of that capital you have coming at your business and the more confidence and visibility that you have in that capital flowing in, the more you can build your sourcing capability, your product lines, et cetera. So one of the things that I think we will continue to look to do is to the extent that we can engage in some larger-sized partnerships with insurance companies, which might require us to use some economics, right, to secure the asset management relationship. It's kind of like the [IMA] style transaction where maybe we give an insurance company some capital for growth. And in return for that, we get committed long-term capital. Committed long-term capital is valuable. So that's how we continue to think about our insurance practice. And I think you'll see us continue to chop away at that.

Yes. Great. Look, another important channel for the whole space, obviously, has been the wealth market. By our numbers, that space is growing at like 30%, 40% management fees a year. Super critical to you guys, very important for the space as well. You guys are off to a really good start there with TPOP, your private equity vehicle. I think it's a little bit over $1 billion raised in the first 7 months or so. TCAP, you mentioned as well, getting traction nicely. Maybe give us a bit of a mark-to-market and kind of how widely these products are offered today. I think you guys were kind of patient and thoughtful about rolling it out not to the entire world, but kind of go and graduate from a capacity perspective. And ultimately, what do you envision the product lineup for TPG and wealth look like over the next few years?

Yes. Well, look, I think we -- I mean, this rollout of TPOP for us was sort of kind of a -- there were multiple opportunities for us. One was obviously sharing our private equity franchise and raising capital for our private equity franchise with the wealth market broadly, okay? We have a very strong franchise. Tapping into that market, obviously, was something that we felt would be important to us in terms of growing our fee base and growing our access to that market. But it was also an important opportunity for us to continue to position our brand, right? One of the things that we're finding in the wealth markets and the retail markets is that brand matters, right? People knowing who you are, feet on the street, getting out there with advisers, et cetera, and that matters. And the way we structured TPOP was simply essentially think of it as an equity product that effectively is participating as almost a co-investor in every sort of deal we do across all of our strategies. So it's a way of participating holistically with TPG and private equity. And it has resonated very, very well in the channel. We've gotten a lot of positive feedback. Again, we're just a touch over $1.1 billion now, and that's having rolled it out with 2 domestic partners, on international partner and an RIA partnership that we have. So there's more to come in terms of more breadth, distribution, et cetera. And we think it's a unique product offering in this space. So that was very important for those reasons. Secondly, our road map going forward is that we're also trying to be deliberate about how many vehicles we roll out into the wealth space and sort of how we tap into as much of the capital available as we can. So -- and you mentioned TCAP, obviously, TCAP will be sort of a core offering for us in the channel for our direct lending product. The road map going forward is going to be, I think, 2 more things on our agenda at least for now. One is there's been a reverse inquiry to us from a number of our channel partners for a multi strategy credit product. We already have a multi-strategy product institutionally in our credit business. And so leveraging off of that to create something that is a yield-oriented multi-strategy product that essentially is curated by us across the various strategies that we have is something that there's been demand for -- and so we are working on rolling that out. And we also have been in dialogue with a potential distribution partner as well that it's a little too early to talk about, but hopefully, we'll be talking about it not too long. Where that will give us another form of access for a product like that, which will be multicredit, multi-asset credit. And then secondly, leveraging off of our real estate franchise, which we've already talked about and kind of our real asset franchise. Real estate has been certainly out of favor now for a number of years and particularly in the retail channel because essentially, it's been a core real estate market, mostly and the core real estate market is kind of dead. There was a big queue of people trying to get out. It's kind of [debt]. What we're offering obviously is a higher returning, more interesting product -- and from a little bit -- from the -- some of the work that we've done with some of our partners, there's definitely interest in trying to figure out how to reintroduce a real estate product at a different point in the cycle that's going to generate a higher return. And we have now the breadth within our franchise across TPG's business, across the AG real estate franchise. And we also can think of it as maybe multi-asset class as well because we've talked about the idea of mixing some credit in with equity because of the opportunity and generating cash yield. So that's, I would say, a second target product for us on the go-forward road map. So that's how we're thinking about it.

Yes. Well, and especially at this point in the market cycle, it was great, hopefully. So that helps. Yes. Great. Well, look, we can keep having this conversation, unfortunately we're out of time. So Jon, thank you so much. Great insights.

Welcome.

Always great having you here. Thank you.

Pleasure.

Okay.