TPG Operating Group II, L.P. 6.950% Fixed-Rate Junior Subordinated Notes due 2064 Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Capital Formation: Raised a record $51 billion in 2025, a 71% increase over 2024, with 5 cross-platform and multi-fund strategic partnerships. Engaged in active dialogues for additional multibillion-dollar mandates.
• Diversification of Capital Sources: Made progress in private wealth strategy with new products and partners, insurance capital raised grew over 50% in 2025, and a strategic partnership with Jackson Financial was announced.
• Active Investing: Deployed a record $52 billion in 2025, with $19 billion in Q4 alone. Maintained strong portfolio performance with double-digit value creation across platforms and generated $23 billion of realizations.
• Franchise Expansion: Acquired Peppertree, launched new products like Tika, hybrid solutions, sports and Advantage Direct Lending, attracting over $7 billion of commitments in 2025.

Segment Performance

• Credit: In 2025, raised a record $21 billion of credit capital, with a 67% increase from 2024. Invested a record $25 billion, with software representing approximately 2% of credit AUM. Asset-based finance deployed $2 billion in Q4, Middle Market Direct Lending had $3.7 billion of gross originations in 2025.
• Private Equity: Software companies account for 18% of private equity AUM. Raised $28 billion in 2025, invested $21 billion. TPG Capital, Rise and Rise Climate funds were active, with significant investments in areas like power and utility services.
• Real Estate: Deployed $6 billion in 2025, platform appreciated 9%. Thematic Advantage Core-Plus strategy acquired a majority interest in Quarterra.
• Private Wealth: T-POP had $1.5 billion of total inflows through January, TCAP ended 2025 with $4.5 billion of AUM, private wealth fundraising grew 66% year-over-year.

Guidance

• Capital Raising: Expect 2026 to be a robust year of capital formation with aggregate capital raising expected to exceed $50 billion, driven by real estate, credit, private equity, Insurance Solutions, and private wealth initiatives.
• FRE Margin: Expect a full year FRE margin of approximately 47% in 2026, an increase from 45% in 2025.
• PRE: Expect strong and consistent pace of realizations to continue or accelerate, with $50 million of realized performance revenue expected in Q1 2026 from current pipeline.

Risks

• Market Volatility: Lending markets and software sector face uncertainties, with potential for capital loss and impact on performance.
• Direct Lending Performance: Uncertainty around long-term performance of direct lending portfolios, including potential amendments and liability management exercises in the upper middle market.

Question and Answer

Q: Glenn Schorr asked about direct lending performance and valuation. Jon Winkelried responded discussing the lower middle market's differences, rigorous portfolio valuation process, and how the market views the franchise.

A: Jon Winkelried explained the lower middle market's distinct dynamics, the firm's focus on sponsor-based, single-lender financing, and the tactile feel of monitoring borrowers through revolver draws.

Q: Benjamin Budish inquired about pickup in transaction fees. Jack Weingart responded discussing the growth of the capital markets team, engagement with portfolio companies, and correlation between capital deployment and capital markets fees.

A: Jack Weingart mentioned doubling the capital markets team, engaging across portfolios to optimize capital structure, and the correlation between deployment and fees.

Q: Kenneth Worthington asked about growth of capital markets capabilities. Jack Weingart responded on team expansion, engaging with portfolio companies, and correlation between capital deployment and fees.

A: Jack Weingart stated the capital markets team has more than doubled, engaging across portfolios to optimize capital structure and expecting correlation between deployment and fees.

Q: Alex Blostein asked about credit business outlook. Jon Winkelried responded on scalable credit business, growth in structured credit, ADL initiative, and capital markets opportunity in credit.

A: Jon Winkelried discussed scalable credit market, tripling of structured credit deployment, ADL's competitive advantage, and capital markets upside in credit.

Q: Craig Siegenthaler asked about software equity book. Nehal Raj responded on vertical market software, examples like Lyric and Delinea, and avoidance of horizontal and infrastructure-related software.

A: Nehal Raj highlighted vertical market software's proprietary data advantage, examples of companies benefiting from AI, and avoidance of horizontal/infrastructure software at risk of disruption.

Q: Michael Brown asked about software fund vintage and disruption timing. Nehal Raj responded on software fund vintages, exit activity in 2020-2022, and disruption already evident in results.

A: Nehal Raj mentioned software investment activity in funds 8, 9, 10, exit activity in 2020-2022, and disruption evident in current results.

Q: Brennan Hawken asked about fee rate tick down. Jack Weingart responded on mix of investments driving fee rate, TPG IX impact, and correlation between deployment and fee rate.

A: Jack Weingart explained fee rate driven by investment mix, TPG IX step-down in Q4, and correlation between deployment and fee rate.

Q: Arnaud Giblat asked about real estate fundraising. Jon Winkelried and Jack Weingart responded on real estate franchise confidence, TREP business demand, and fund over fund growth.

A: Jon Winkelried expressed confidence in real estate fundraising, strong demand, and fund over fund growth; Jack Weingart mentioned TREP business and high net worth channel interest.

Q: Brian Bedell asked about deployment and transaction fees. Jon Winkelried and Jack Weingart responded on correlation between deployment and fees, structural opportunity, and capital markets revenue margin.

A: Jon Winkelried discussed correlation between deployment and fees, structural opportunity, and Jack Weingart explained capital markets revenue margin and deal capital structure impact.

Q: Michael Cyprys asked about wealth channel initiatives. Jack Weingart responded on T-POP expansion, product set expansion, and bundled solutions partnerships.

A: Jack Weingart discussed T-POP expansion, product set including multi-strategy credit fund and nontraded REIT, and bundled solutions partnerships.