Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TPG Inc (TPG, Financial) raised $6.3 billion in the second quarter, with $4.5 billion allocated to credit strategies.
- The company declared a dividend of $0.42 per share of Class A common stock.
- TPG Inc (TPG) ended the quarter with $229 billion in total assets under management (AUM), a 65% year-over-year increase.
- The firm has $53 billion of dry powder available for investment across private equity, credit, and real estate platforms.
- TPG Inc (TPG) reported fee-related earnings of $201 million for the second quarter, up 60% year-over-year.
Negative Points
- TPG Inc (TPG) reported a GAAP net loss attributable to the company of $14 million for the second quarter.
- Fee-paying AUM was relatively flat sequentially, despite significant capital raises and deployments.
- The company anticipates more muted capital markets revenue in the third quarter due to deal-specific factors.
- Exit activity remains muted for the industry and TPG Inc (TPG), with slower recovery compared to deployment.
- Integration expenses related to the Angelo Gordon acquisition are expected to persist through the balance of the year.
Q & A Highlights
Highlights of TPG Inc (TPG) Q2 2024 Earnings Call
Q: Could you help bridge the offsets in the quarter for fee-paying AUM in credit, and discuss the growth outlook for management fees and fee-paying AUM over the next 12 months?
A: Jack Weingart, CFO: The $4.5 billion raised in credit during the quarter was not fee-paying upon being raised; it turns into fee-paying AUM as deployed. We expect accelerated FAUM growth as we deploy the capital raised in the first and second quarters and continue raising in the back half of the year.
Q: Why didn't fee-earning AUM in credit grow faster in the quarter given the large fundraising and deployment numbers?
A: Jack Weingart, CFO: The $4.5 billion raised during the quarter was not fee-earning yet. The deployed capital was roughly offset by realizations during the quarter.
Q: Can you elaborate on the synergies realized from bringing Angelo Gordon into the franchise and the expected synergies over the next 12-24 months?
A: Jon Winkelried, CEO: We have seen significant crossover between our LP bases, particularly in international penetration. We are optimistic about continued fundraising efforts and have seen tangible synergies in distribution and operational integration.
Q: Were there any unusual items impacting compensation in Q2, and is delayed hiring expected to be resolved later this year?
A: Jack Weingart, CFO: Q1 had elevated RSU-related expenses, which stepped down in Q2. We expect hiring to kick in during Q3 and Q4, normalizing comp expenses. We have realized at least $30 million in cost synergies from the AG integration, which we are reinvesting in product development and distribution capabilities.
Q: Can you provide color on Twin Brook's risk management and performance in a decelerating economic backdrop?
A: Jon Winkelried, CEO: Twin Brook has deep relationships with middle-market sponsors, strong covenant protections, and a proactive risk management approach. The portfolio starts at lower leverage levels and higher coverage ratios, contributing to its strong performance and low loss rates.
Q: How should we think about the timing and potential demand for the next round of capital funds given the strong performance and deployment of current funds?
A: Todd Sisitsky, President: We are on track to deploy the current fund within the targeted three- to four-year period. We expect to start the next fundraise for TPG X and Healthcare Partners III in the first half of 2025.
Q: What is a reasonable expectation for margin expansion next year given the scaling of funds and transaction fees?
A: Jack Weingart, CFO: We expect FRE margin expansion driven by operating leverage and revenue growth. The activation of new funds and increased credit deployment will contribute to this growth. We aim to return to our original target of 45% FRE margin.
Q: Can you walk through the path of fee-paying AUM growth given the flat trend over the last few quarters?
A: Jack Weingart, CFO: We expect significant pickup in credit deployment and activation of new climate-related funds to drive FAUM growth. Realizations will be offset by these positive drivers, leading to overall FAUM growth next year.
Q: Can you discuss the opportunity for retail product development in the Rise Climate and Climate Infrastructure franchise?
A: Jon Winkelried, CEO: We are launching our first semiliquid private equity vehicle in early 2025, which will include climate-related opportunities. Jim Coulter, Executive Chairman, added that there is substantial retail demand for climate-related products, and we are expanding distribution channels.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
