TPG shrugs off challenges to raising $18.5bn Fund IX, second healthcare fund

TPG is feeling confident about prospects for its latest flagship buyout offering and an affiliated healthcare vehicle, despite signs of a tougher fundraising environment.

Campaigns for TPG Partners IX and TPG Healthcare Partners II “continue to see good momentum,” CFO Jack Weingart said in the firm’s first-quarter 2022 earnings call. A first closing is for this reason expected “around mid-year.”

Weingart was responding to a question about factors roiling private equity fundraising, including a crowded marketplace and overallocated LPs.

From TPG’s perspective, he said, a key challenge lies with certain LPs. This is especially true of US pension systems, who are the “most overallocated” due to “outperformance of the alternatives in their portfolios combined with the sell-off in the public markets, causing the denominator effect.”

Cash-strapped LPs are “having to make choices for the first time in a while,” he said. “What we see happening is those choices are benefiting the largest, most established GPs with the strongest relationships,” such as TPG.

In addition, Weingart said, “anyone who has returned a lot of capital to LPs, as opposed to really just drawing down capital and coming back to ask for more, is also seeing a benefit. And we’re clearly in that camp.”

TPG launched fundraising for Fund IX and a second healthcare vehicle in January. They are together targeting $18.5 billion, up to $15 billion of which will be accounted for by Fund IX. Another major offering in the market is a third broad-based impact fund, Rise Fund III, which is seeking $3 billion.

Because of the challenges faced by certain LPs, Weingart is anticipating “a shift of the composition of our LP base.” This could result in more near-term representation by overseas investors.

TPG also plans to tap into new capital sources, such as retail. “It is an important growth area for us,” he said. “We expect to place more of our funds with the high-net-worth channel in this wave of fundraising than we did in the last wave of fundraising. And we’re building a team to address that opportunity.”

TPG Partners IX and TPG Healthcare Partners II are part of the firm’s capital platform, which today oversees assets of $57 billion. The platform is focused on large-scale, control-oriented investing in core sectors like consumer, healthcare and technology.

TPG secured $5.4 billion of fresh capital in the first quarter, helping to increase managed assets to more than $120 billion. Notable events in the period included the close of a debut climate offering, TPG Rise Climate Fund, at $7.3 billion, ahead of an original target of $5 billion.