TPG plans to continue fundraising for its second Rise Fund targeting $3.5 billion, even as it grapples with the potential fallout from charges against William McGlashan for his alleged role in a college admissions bribery and money laundering scam.
No key person provisions in the $2 billion first Rise Fund have been tripped, relieving immediate investor concerns, according to a source familiar with the fund.
Fund I is already 80 percent committed, and it has made 25 investments worldwide, the source said.
TPG went into rapid damage control to retain investor confidence. It placed McGlashan on indefinite administrative leave effective immediately after the scandal broke and installed Jim Coulter, co-CEO of TPG, as interim managing partner of TPG Growth and The Rise Fund. Two days later, TPG terminated Bill McGlashan’s services ‘for cause’ from his positions with TPG and Rise, effective immediately – although some reported back-and-forth ensued as to whether McGlashan resigned first, according to Bloomberg.
“Bill McGlashan has been terminated for cause from his positions with TPG and Rise effective immediately. After reviewing the allegations of personal misconduct in the criminal complaint, we believe the behaviour described to be inexcusable and antithetical to the values of our entire organisation. As we stated in the previous announcement of Mr. McGlashan’s administrative leave, Jim Coulter will take over managing partner responsibilities for TPG Growth and Rise,” a TPG statement said.
In a bid to reassure investors, TPG is giving those that participated in Fund II’s first close the opportunity to reaffirm their commitments, according to multiple sources.
“We’re working closely with our limited partners as Jim Coulter steps in as managing partner to lead the senior teams of these platforms and we’re very confident in our go-forward plan,” a TPG spokesman said.
The spokesman could not confirm whether TPG had filed documents with the SEC to remove McGlashan from the key person provision in The Rise Fund II LP as the fund is known.
TPG senior managers had been speaking with big investors, and the fund itself goes well beyond one person, the first source confirmed.
But the timing couldn’t be worse. Even though investors respect TPG and are happy to see Coulter take charge, Rise II’s fundraising may be a challenge, several investors told Private Equity International.
LPs will be concerned with the internal due diligence process of large fund managers and their governance structures, so there will inevitably be discussions on this point at upcoming investment and board meetings, one investor who has invested in TPG, but not in either Rise Fund, said.
Another investor suggested that most LPs will wait to see whether their peers participate in the fundraising before committing.
It is unclear what investors who have already committed to Rise II will choose to do. New Jersey Division of Investment, which agreed to commit $125 million did not respond to a request for comment.
In a statement, Washington State Investment Board, which agreed to commit $250 million to Rise II, said it is monitoring TPG’s handling of the situation.
“The Washington State Investment Board (WSIB) has had a long and successful investment relationship with TPG since 1999. Our board and staff were deeply disappointed and concerned to learn of allegations that point to serious legal, ethical and integrity issues involving a TPG principal. Our investment partners understand that the WSIB places integrity among the highest possible priorities in our investment program. We will be seeking more information, will keep our Board members informed, and will be closely monitoring TPG’s handling of this situation.”