TPG shoots for $4bn in launch of sixth growth equity fund

TPG is seeking $4 billion for its latest growth equity offering, as the firm perceives a fresh crop of opportunities, CFO Jack Weingart said.

“The opportunity set in growth equity investing has gotten much more interesting now and we think there’s plenty of interesting deal activity to warrant that kind of fund size,” he said in a second-quarter earnings call. “We have confidence that we’ll hit that target.”

TPG Growth VI was launched toward the end of the second quarter, Weingart said, and has not yet held a first close. It is expected to be in the market throughout 2024 and perhaps until early 2025.

Growth equity was wildly successful in the years leading up to 2022, propelling – and propelled by – historic technology adoption across the economy. Intense investing spawned record capital raising, with pioneers like General Atlantic, Summit Partners and TA Associates joined by a new wave of managers and funds.

The strategy faced its first major test last year, however, as economic uncertainty and rising interest rates pummeled tech stocks, inaugurating a correction. With growth-oriented companies unable to command the lofty valuations of the past, dealmaking slowed to a near halt.

Tech stocks have regained some lost ground of late, indicating the situation may be changing. In addition, for growth equity shops with capital on hand, there are value opportunities in a less competitive market.

“There are still ample opportunities to invest behind secular growth themes, but we are now able to do so at lower valuations than would have been possible in 2021,” David Trujillo, co-managing partner of TPG Growth, said in a recent column for Private Equity International. “That all suggests an attractive vintage is on the way.”

TPG was one of the first large buyout firms to wade into the growth equity space, launching a debut vehicle in 2007. The goal was to invest in companies that are earlier in their lifecycle, smaller in size or that have different features relative to those backed by the large-cap platform.

TPG Growth makes minority, control growth and specialty capital investments in North American and global companies with high-growth prospects, substantial cashflow, scope for operational improvements and IP or brand equity. Sectors of interest are software and enterprise technology, internet, digital media and communications, healthcare and business services.

Led by Trujillo and fellow co-managing partner Matthew Hobart, TPG Growth today oversees $24 billion of assets. The platform includes several affiliate strategies, such as technology adjacencies, which provides flexible capital solutions to the tech industry. TPG Tech Adjacencies II closed earlier this year at $3.4 billion.

Fund VI comes roughly two years after its predecessor, wrapped up at $3.6 billion, ahead of a $3.5 billion target. As of June, TPG Growth V was earning a 34 percent gross IRR and a 22 percent net IRR, the firm reported.

TPG declined to provide further comment on this story.