LPs

TPG inks major commitment to $12 bln flagship fund, healthcare sidecar

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TPG, New Jersey State Investment Council, pension fund, private equity, Oregon Investment Council
Jim Coulter addresses New Jersey State Investment Council. Photo by Sam Sutton, Buyouts.
  • Fund VIII targets $12 bln, per Oregon docs
  • $2.5 bln healthcare fund to invest on a 50-50 basis alongside Fund VIII
  • Fund VII netting a 24.15 pct IRR

TPG picked up major commitments for its new flagship fund and a healthcare sidecar fund.

Oregon Investment Council approved a commitment of up to $500 million to the two funds at its June 6 meeting.

Council documents peg TPG Partners VIII’s target at $12 billion, with the healthcare fund raising another $2.5 billion. Buyouts in March first reported on TPG’s plans to raise an $11 billion fund.

Oregon, which committed roughly $4 billion to TPG since 1993, will proportion its commitments to the two funds based on their respective sizes. Meaning, should Oregon commit the full $500 million, a little less than $400 million would go to Fund VIII and the rest to the healthcare fund.

As with its last fund, TPG will use Fund VIII to acquire upper-mid-market North American companies, typically businesses that could benefit from strategic or operational adjustments.

TPG pursued larger investments with its fifth and sixth flagship buyout funds, taking stakes in club deals for Energy Future Holdings and Caesars Entertainment, both of which struggled in the years following the global recession.

Funds V and VI’s respective net internal rates of return were 5.2 percent and 11.3 percent as of Dec. 31, Washington State Investment Board documents show.

“You will, from time to time, make mistakes. The important thing is to learn from them,” TPG Co-CEO and Founding Partner Jim Coulter told the Oregon council in 2014, according to Reuters.

At the time, TPG was raising a $2 billion bridge fund that would enable the firm to invest before it marketed Fund VII, which ultimately closed on $10.5 billion in 2016.

Fund VII was netting a 24.15 percent IRR and 1.3x multiple as of Dec. 31, Washington investment board documents show.

“From 2009 onward, investment performance has improved and the GP’s loss ratio has plummeted relative to the preceding four years,” Oregon staff wrote in a memo. “Furthermore, the TPG healthcare team has generated, since inception, especially strong returns.”

The firm’s debut healthcare fund will invest in healthcare deals on a 50-50 basis alongside Fund VIII, according to Oregon documents. Both funds’ daily investment efforts are led by Managing Partners Todd Sisitsky and Jack Weingart.

TPG declined to comment.

Action Item: For more on TPG’s new funds, visit https://bit.ly/2kYwE6d