TPG joins growing list of GPs dialing back expectations on targets

“We still expect each fund to grow compared to its predecessor, but in aggregate they may not grow as much as we previously expected,” CFO Jack Weingart said in a Q1 earnings call.

TPG, which struck a deal to buy Angelo Gordon, expects fundraising headwinds to impede its ability to meet targets across a range of flagships.

“We set our original flagship fundraising targets under different market conditions,” CFO Jack Weingart said in a first-quarter earnings call. “We still expect each fund to grow compared to its predecessor, but in aggregate they may not grow as much as we previously expected.”

Weingart was speaking in reference to four flagships: TPG’s latest buyout vehicle, TPG Partners IX, and an affiliated healthcare pool, TPG Healthcare Partners II, as well as Asia Fund VIII and Rise Fund III. Combined, he said, they were set to bring in $27.5 billion.

“While it is still too early to tell what the outcome of each fundraise will be,” he said, “we’re currently managing the business assuming that we will raise an aggregate of approximately $23 billion to $24 billion.”

The largest flagship is TPG Partners IX, which together with TPG Healthcare Partners II has been seeking $18.5 billion. As of the end of March, the pair had secured $9.3 billion and $2 billion, respectively, amounting to more than 60 percent of the overall target. However, much of this capital came in roughly a year ago.

To get to the revised aggregate of $23 billion to $24 billion, the four flagships would need to raise “approximately an incremental $7 billion,” Weingart said, something he believes is feasible.

“Based on our strong pipeline of LP engagement,” he said, “we have confidence in our ability to achieve this outcome.”

Slower fundraising since 2022, caused mostly by overstretched LPs, has upset the plans of many private equity GPs, compelling them to extend timelines and rethink ticket sizes. TPG is one of a growing number of large, multi-strategy firms to publicly recognize these circumstances by dialing back expectations on targets.

Another, Apollo Global Management, last week said it anticipates raising less for a 10th flagship buyout vehicle than the $25 billion targeted. In a final closing later this year, it projects committed capital “in the low-$20 billion range,” co-president Scott Kleinman said.

Similarly, Carlyle earlier this month said it is planning for a “lower buyout fundraising outlook.” Built into this is an assumption that a next vintage of buyout funds will no longer in aggregate “be the same size as their predecessors,” CFO Curt Buser said.

TPG’s $2.7 billion deal to buy private debt and real estate shop Angelo Gordon should support its fundraising campaigns, perhaps even in the near-term. This is because the client bases of the two organizations are quite distinct, CEO Jon Winkelried said in the earnings call.

“We have modest overlap in terms of our LP bases,” he said. “I think that presents a real interesting opportunity for us to introduce one another to important relationships we both have.”

The Angelo Gordon deal also provides a foothold in private debt at a time when the strategy is seeing burgeoning market opportunities along with robust LP demand. TPG, which in 2020 separated from its prior credit arm, Sixth Street, will gain a $55 billion platform focused on areas like corporate credit, direct lending and structured credit.

Assets managed by TPG totaled $137 billion at the end of the March, up 14 percent year over year. Assuming Angelo Gordon was bought as of December 31, 2022, it estimates their combined assets would have stood at $208 billion.