Side Letter: TPG’s $39bn arsenal; LPs’ unplanned calls; PE’s ESG talent edge

TPG might unleash its $39 billion mountain of dry powder on public companies. Plus: IR professionals are fielding hours of unexpected LP calls in this heady fundraising environment; and why private equity has an edge in the ESG talent tussle. Here's today's brief, for our valued subscribers only.

Just happened

TPG’s Coulter: Inflation Reduction Act serves us well (Source: TPG)

TPG’s arsenal
What do you get by mixing one of the most active fundraising cycles in history with a rout in the public markets? Answer: take-privates. TPG is among those hoping to capitalise on this dynamic. The firm was sat on $39 billion of dry powder as of end-June – the most in its history – and is looking to the public markets to help deploy that, according to a second-quarter earnings call on Tuesday. “[Take-privates] are not easy deals to get done, but I think they will get done… Given the public market reset, there’s a number of clear opportunities there,” chief executive officer Jon Winkelried said on the call. “So, we are engaging in dialogue on deals like that.” TPG is also looking to seize opportunities presented by the pending US Inflation Reduction Act of 2022, which will be voted on this week. “Unlike traditional attempts in climate mitigation… this bill is almost 100 percent incentives,” executive chairman Jim Coulter noted. “It’s a carrot bill, driven to drive investment, and obviously that serves us well.” While the firm’s immediate focus is climate investing, it expects to grow into clear adjacencies across the likes of infrastructure, credit and public-private crossover investments. TPG’s dedicated vehicle, Rise Climate, closed on $7.3 billion early this year.

Here are some other highlights from the call:

  • TPG’s AUM reached $127 billion as of end-June, up 17 percent from last year.
  • This was driven by first closings for TPG Partners IX and TPG Healthcare Partners II, which together secured $10.6 billion, more than half of their combined target of $18.5 billion.
  • TPG is seeing a shift in its LP base towards a more international group of investors in the current fundraising cycle, CFO Jack Weingart noted, with the proportion raised from sovereign wealth funds and new LPs on the up.
  • Closing its Asia fund is a focus in the coming months, after which the firm could look into other opportunities, including real estate, credit and a strategy that mirrors its tech-adjacencies fund.
  • Life sciences and secondaries are also a focus, with initial closes on its latest offerings expected by year-end.

Speaking of fundraising…

In this challenging market environment, investor relations teams might want to earmark more time for their LPs. A recent survey of more than 100 business development and IR professionals by tech provider Backstop Solutions found that a quarter of working weeks are spent on unplanned interactions with their LPs; the average respondent spends 35 hours each week interacting with investors, 13 hours of which is off-calendar. Unsurprisingly, 58 percent said fundraising has become more of a challenge.

The report’s findings chime with what Side Letter is hearing in other corners of the fundraising landscape, with many executives finding it hard to balance the sheer number of vehicles in market at once. Some have found novel solutions: one senior fundraiser told us earlier this year that, due to time constraints, they’ve begun scheduling calls to partially overlap with one another. “I can have one going on my computer and one on my phone,” they said. “My team keeps notes while I’m speaking on one call, and I can switch to the other when I’m needed.” IR professionals, take note.


PE’s ESG hiring edge
It’s no secret that competition for ESG talent is running hot across the gamut of financial services and beyond. The good news, however, is that private markets firms appear to be winning this particular tug of war. As our colleagues at Responsible Investor noted last week, despite there being signs – in the UK at least – that economic uncertainty is taking some of the edge off demand, seasoned ESG professionals are still taking advantage of a shortage of supply to demand ever larger pay packages (registration required).

Compensation is where PE appears to be at an advantage. Lotti Hawkins, who focuses on private markets at specialist sustainability recruiter Farrell Associates, says private markets firms are generally further behind on ESG hiring than public markets managers – often they are making their first ESG-focused appointment – so recruitment remains an “absolute priority”. As one sustainable finance banker puts it: “The problem we have at the moment is that we get in junior ESG people, train them up, and then after two years they bugger off to private equity.”

ArchiMed’s capital injection
In the same week that Private Equity International‘s healthcare special report hit inboxes came news that healthcare specialist ArchiMed has returned with its latest buy-and-build vehicle. The Lyon-headquartered firm has raised a “substantial” but undisclosed sum for MED Platform II, which launched in January, per a statement this week.

Like its predecessor, Platform II will target European and North American mid-caps with potential for consolidation. It has an investor re-up rate of almost 100 percent, with European investors accounting for 50 percent of capital raised, North Americans for 40 percent and Asia-Pacific the remainder. Platform II will target 10 to 12 platform investments versus the seven targeted by its predecessor, which closed on €1 billion in 2020, and completed its first – a $1.1 billion take-private of Nasdaq-listed Natus – in July.

Today’s letter was prepared by Alex Lynn with Carmela Mendoza and Madeleine Farman.