Private equity fundraising may get ‘a breather’ in 2024: TPG’s Winkelried

Fundraising by private equity firms could next year get respite from today’s knotty challenges, according to one of the industry’s top GPs.

“2024 is looking like a more interesting year in terms of who’ll be out there, who’ll be raising, and there might be a little bit of a breather,” Jon Winkelried, CEO of TPG, said at this week’s Morgan Stanley US Financials, Payments & CRE Conference. “In 2024-25, I see a sort of a reset going on in the market.”

Winkelried based this observation on several things he is seeing that indicate “how the environment might be changing.” They include a modicum of relief from tough supply conditions created by LP overallocation and reduced distribution flows.

“We’re hearing more from large LPs about increasing their allocation to private equity because they’re fully allocated but they don’t want to miss out on this vintage,” Winkelried said. “We’re seeing some people pro-actively increase their level of commitments.”

“It takes time for that to come through and manifest itself,” he added.

Investors are also “trying to sell older vintages” in the LP-led secondaries space, he said. “A number of large institutions have actually already completed sales of older vintages to free up capital for newer. We’re definitely seeing that as well.”

Along with a possible easing of supply, there may be a change in the mix of funds on offer, as GPs reach the end of their capital raising extensions. “Some LPs,” Winkelried said, “are basically saying, “Look, we’re not just going to give extensions forever. Call it, invest the money well.””

“I think what you’re going to see is a number of funds that are in the market tapering off by the end of this year,” he said.

Of course, a fundraising “breather” owing to shifts in demand-supply dynamics will depend on other factors. These include, Winkelried said, “valuations, volatility, what happens generally in terms of the market.”

Hard-fought

In a first-quarter earnings call, TPG said fundraising challenges would impede its ability to meet targets across a range of flagship vehicles.

Four flagships, among them the firm’s latest buyout offering, TPG Partners IX, are expected to wrap up a few billion dollars short of an aggregate target of $27.5 billion. However, this revised forecast means flagships would still see more than 10 percent growth over their combined predecessors.

TPG has several advantages when it comes to private equity capital raising, Winkelried said. “One is we stand out in terms of the return of capital that we’ve provided to our LPs. Our DPI has been very strong across our platforms. We’ve managed our businesses specifically with respect to that.”

“That has helped us a lot,” he added, with LPs “appreciating the fact that we have recycled capital to them.”

Fundraising nonetheless remains “hard-fought,” Winkelried said. “We’re trying to be very targeted on the commitments that move the needle.”

TPG has been especially active over the past 18 months. Early last year, it went public, securing $1 billion from an IPO on Nasdaq. Also in 2022, it brought in $30 billion of new capital, up 46 percent from 2021. And this year, the firm re-entered the private debt market with a $2.7 billion deal to buy Angelo Gordon.

A former member of Goldman Sachs’ leadership team, Winkelried joined TPG in 2015 as co-chief executive alongside co-founder Jim Coulter. Two years ago, he became the sole CEO, with Coulter taking the role of executive chairman.