TPG Operating Group II, L.P. 6.950% Fixed-Rate Junior Subordinated Notes due 2064 Q2 FY2025 earnings call

Good morning, everyone. TPG acknowledged the senseless act of violence at 345 Park Avenue and offered thoughts and prayers. TPG delivered outstanding Q2 results with after-tax distributable earnings up 30% y-o-y. On capital formation: second highest fundraising quarter in history, strong credit fundraising with $5.4 billion raised, including $11.3 billion total in Q2 with $5.4 billion from credit platform. In private equity: completed fundraising for TPG Growth VI ($4.8 billion), strong early support for second GP solutions fund, launched T-POP private equity product raising ~$430 million. In Credit: record fundraising quarter with $5.4 billion raised, Credit Solutions closed $1.4 billion for third flagship fund, Twin Brook held first close of $1.4 billion for sixth drawdown fund. In real estate: patient and disciplined approach with strong investments, TREP completed acquisition of high-quality office towers, and ended Q2 with record dry powder. Also, drove $6.5 billion of realizations during the quarter across platforms.

TPG reported GAAP net income attributable to TPG Inc. of $15 million and after-tax distributable earnings of $268 million or $0.69 per share of Class A common stock in the second quarter. Second quarter fundraising grew nearly 80% to $11.3 billion, deployment grew 36% to $10.4 billion and realizations grew more than 20% to $6.5 billion. In private equity, TPG Growth VI completed fundraising, exceeding the $4 billion target to raise $4.8 billion, representing a 35% increase over Growth V. In Credit, the second quarter was a record fundraising quarter with $5.4 billion of total capital raised, including $1.4 billion for Credit Solutions' third flagship fund and $1.4 billion in structured credit. In real estate, LTM value creation for TPG real estate was 14% as of the second quarter, and the firm ended the quarter with record dry powder of $63 billion.

Third quarter results will include financial contribution from TPG Peppertree. TPG Capital X was activated in early July, and Healthcare Partners III is expected to be activated in the first quarter of next year. FRE margin is expected to decline modestly in the third quarter but remain in the mid-40s for the full year. The effective corporate tax rate is expected to remain in the mid- to high single digits through the remainder of the year. The firm expects deployment pace to accelerate in the back half of 2025.

Market uncertainty, including macroeconomic factors, could impact fundraising and deployment. Also, the ongoing muted distributions and cautious client environment may affect future capital raising and investment decisions.

Q: Glenn Schorr asked about the private equity industry dynamic.

A: Jon Winkelried said TPG's private equity business is strong, with the firm gaining share among clients, and existing large LPs are increasing their commitments to TPG's funds.

Q: Ken Worthington asked about balance sheet heavy vs balance sheet light in insurance.

A: Jon Winkelried said TPG's core principles include FRE centricity and avoiding undue balance sheet risk, and the firm is evaluating insurance opportunities with these principles in mind.

Q: Alex Blostein asked about private equity fund size and P&L impact.

A: Jack Weingart said existing LPs are increasing commitments by north of 20% in the first close of TPG and Healthcare Partners III, and TPG IX fund will step down in the fourth quarter.

Q: Bill Katz asked about deploying $30 billion of AUM not yet paying fees and incremental margin.

A: Jon Winkelried said deployment opportunities are good across the business, and margin varies by asset class.

Q: Steven Chubak asked about capital markets.

A: Jon Winkelried said capital markets capabilities are growing with cross-firm collaboration, and it will be correlated with the firm's overall growth.

Q: Dan Fannon asked about retail opportunity and T-POP.

A: Jack Weingart said T-POP has partners lined up domestically and internationally, and the firm has a product road map including credit and real assets products.

Q: Brian Bedell asked about the Impact platform.

A: Jim Coulter said Rise IV is expected to have a first close in the fourth quarter, and the Climate franchise is busy with a robust pipeline.

Q: Michael Cyprys asked about cross-platform strategic partnerships.

A: Jack Weingart said the firm is engaging in dialogue with major partners for longer-term relationships to increase capital base duration.

Q: Kyle Voigt asked about the 401(k) opportunity.

A: Jack Weingart said the firm is addressing the 401(k) opportunity through partnerships and developing alternative investment structures for 401(k) plans