TPG seeks $24.5bn for recently launched funds amid ‘indigestion’ in PE fundraising

'In the short term, the industry is definitely experiencing some indigestion', said TPG CFO Jack Weingart on the firm's first public earnings, noting TPG expects to hit its targets quicker than it initially thought.

TPG, the world’s eighth-largest private equity firm, revealed during its first public earnings call Monday that it is seeking $24.5 billion for three funds launched earlier this year, despite a precarious fundraising environment.

The firm is seeking $18.5 billion between TPG Partners IX and the second dedicated healthcare fund, which are “attached at the hip”, said CFO Jack Weingart on the call. The firms is also targeting $6 billion for its eighth Asia-focused fund.

The $18.5 billion sought between the buyout and healthcare funds is a 30 percent increase from the $14.2 billion raised for the eighth flagship and its healthcare sidecar vehicle.

All three funds launched in January, according to Weingart, and, reflective of the accelerated pace of fundraising, could see first closes as early as late Q2 despite initially planning to do so in the second half of the year, he added.

“In the short term, the industry is definitely experiencing some indigestion,” said Weingart. He cited four factors: a potential slowdown in liquidity for LPs; faster than anticipated deployment during covid; numerator effect coming off of the success of private markets during covid; and denominator effect due to choppy markets and the public equity reset.

TPG will not have a problem with liquidity thanks to a pipeline of inked deals over the next couple of quarters, added Weingart, but for the industry, if choppy markets continue, liquidity will likely slow.

The numerator effect is not affecting LPs equally across geographic lines. US LPs are bumping against allocation limits to the asset class, which has been well-publicised, leading to same size re-ups for the firm. Weingart noted that international groups are increasing their re-up commitments to the firm’s funds, in some cases substantially.

In the long term, TPG continues to believe “the very positive secular growth drivers” for alternatives – the growth of investable capital; the larger allocations from most pools of capital; the desire from larger allocators to condense the number of relationships they have – will remain intact, said Weingart.

Secondaries, coming soon?

TPG expects to formally begin raising its inaugural secondaries fund within the next 18 months, Weingart shared on the call.

That fund could look to raise between $1.5 and $2 billion, affiliate title Buyouts reported last December. The firm did not provide updated guidance.

Last February, the firm announced it had taken a majority stake in Asian secondaries firm NewQuest Capital Partners, up from an initial minority investment in 2018.

On the call, referencing the tremendous amount of M&A activity in the area over the last year, Weingart indicated the firm could look to further expand the GP solutions strategy. TPG has already organically added teams in the US and Europe.

Were the firm to make another acquisition, it would not be the first to double dip. Ares Management completed its acquisition of Spring Bridge Partners in January after its $1.08 billion purchase of Landmark Partners in June.

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