TPG Inc. Class A Common Stock 2026 Q3 Earnings Call

Good morning, and welcome to TPG's third quarter 2026 earnings conference call. Currently, all callers have been placed in listen-only mode. Following management's prepared remarks, the call will be open for your questions. If you would like to ask a question at that time, please press star one on your telephone keypad. If you need to remove yourself from the queue, press star two. To get to as many questions as time permits, we ask that you please limit yourself to one question. At any time, if you should need operator assistance, press star zero. Please be advised that today's call is being recorded. Please go to TPG's IR website to obtain the earnings materials. I will now turn the call over to Gary Stein, Head of Investor Relations at TPG. Thank you. You may begin.

Great. Thanks, operator, and welcome everyone. Joining me today are Jon Winkelried, Chief Executive Officer, and Axel André, Chief Financial Officer. In addition, Jim Coulter, Executive Chairman and Co-founder, and Jack Weingart, CEO of TPG Global Wealth Solutions, are here with us for the Q&A portion of this call. I would like to remind you this call may include forward-looking statements that do not guarantee future events or performance. Please refer to TPG's earnings release and SEC filings for factors that could cause actual results to differ materially from these statements. TPG undertakes no obligation to revise or update any forward-looking statements except as required by law. Within our discussion and earnings release, we are presenting GAAP and non-GAAP measures, and we believe certain non-GAAP measures that we discuss on this call are relevant in assessing the financial performance of the business.

These non-GAAP measures are reconciled to the nearest GAAP figures in TPG's earnings release, which is available on our website. Please note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any TPG fund. Looking briefly at our results for the third quarter, we reported GAAP net income attributable to TPG Inc. of $100 million and after-tax distributable earnings of $265 million or $0.65 per share of Class A common stock. We declared a dividend of $0.55 per share of Class A common stock, which will be paid on November 23, 2026, to holders of record as of November 9, 2026. With that, I will turn the call over to Jon.

Good morning, everyone. Thank you for joining us. TPG's strong third quarter results reflect our broad-based momentum and the continued progress against our long-term strategic objectives. We have successfully scaled and diversified our franchise, and despite a challenging macro backdrop, our pace of growth has accelerated. Over the last five years, we have more than tripled our AUM and doubled our capital formation on an annual basis. Today's dynamic environment, including higher rates, increased geopolitical uncertainty, and rapid advances in AI, continues to add complexity to the investing landscape. However, periods of dislocation create some of the most attractive investment opportunities, and we are uniquely positioned to capitalize on them given our record $86 billion of dry powder and our flexibility to invest across the capital stack.

In my conversations with our clients, who are the largest allocators of capital globally, they are seeking partners with the discipline and track record to navigate uncertainty and source opportunities that generate alpha. These clients have significant visibility into our portfolios, investment pipelines, and performance, and they are increasingly choosing to deepen their partnership with TPG. The quality of these relationships is reflected in our robust capital formation this quarter. We raised more than $15 billion, bringing our year-to-date total to nearly $42 billion. We are tracking ahead of the expectations we set at the start of the year, and we view this as a powerful testament to the strength of our franchise. I will walk through some highlights across our asset classes. Starting with private equity, we raised $8.5 billion in the third quarter and more than $21 billion year to date.

We held a final close for our second Rise Climate Fund and the Global South Initiative, bringing aggregate commitments to $10.4 billion across the two funds and related vehicles. This highly successful outcome represents a 44% increase over our inaugural fund and further validates TPG's leadership in the climate sector. Notably, 31% of commitments came from investors who are new to TPG. Our clients recognize the powerful secular trends of rising power demand, the reindustrialization of major economies, and the reshaping of global supply chains, which together are driving an unprecedented need for capital. Our climate franchise is well-positioned to meet that need and build on the momentum within our portfolio. For TPG Capital X and Healthcare Partners III, we raised an additional $1.7 billion during the quarter, bringing our total to nearly $16 billion.

This represents an important milestone as commitments to date already exceed the size of our prior vintage. We also completed fundraising for TĒCA, our Asia growth equity strategy, surpassing our target with $1.3 billion raised for our inaugural fund. TĒCA is another clear example of our ability to successfully incubate and launch adjacent strategies. For our third Tech Adjacencies fund, we closed $1.6 billion during the quarter, bringing total commitments to $2.5 billion. This accelerating demand reflects both the expanding opportunity set and the strong performance we have delivered to date. AI has become an important pillar of the strategy, and we have continued to provide clients with differentiated access to AI-related investment. Finally, for Peppertree, since launching our 11th fund earlier this year, we raised $2.2 billion to date, including commitments through October.

The speed of this campaign has been driven by strong demand for Peppertree's specialized strategy focused on essential tower infrastructure, as well as our success in broadening its client base. More than 50% of commitments so far have come from investors new to the Peppertree strategy, including some of TPG's largest clients globally. This is another powerful validation of our ability to integrate and scale inorganic opportunities. Credit, we raised $5.8 billion during the quarter, bringing our year-to-date total to nearly $16 billion. We held a first close of $2 billion for our fourth Essential Housing Fund, which has already exceeded the size of its predecessor. This strategy, which provides bespoke land financing to leading home builders, is resonating with investors given its predictable, uncorrelated returns and the structural advantages relative to traditional fixed income.

For Advantage Direct Lending, our core middle-market direct lending strategy, we raised an additional $550 million, bringing total capital raised to $1.4 billion, including commitments that are signed but not yet closed. This represents approximately $3 billion of total buying power, including target leverage. To date, ADL has invested $1 billion of capital across 30 first-lien senior secured loans, selected from more than 425 opportunities sourced across our relationships with sponsors and corporates. Since acquiring Angelo Gordon three years ago, we have nearly doubled our credit AUM and continue to successfully expand into adjacent strategies. Our pace of capital formation has reached a structurally higher run rate, and we expect to double our credit AUM again to $200 billion by the end of 2029. As we have discussed, we are now in a significant fundraising cycle for our real estate platform.

We are currently in the market with four of our real estate equity funds in the U.S. and Asia, and expect our capital formation activity to build through year-end and into 2027. In the past week, we held a first close for our TPG Real Estate Opportunistic strategy, raising approximately $5 billion for our fifth fund and related vehicles. This includes strong support from both long-standing TREP relationships as well as important new partners for TPG Real Estate and the broader firm. We view this outstanding start as a testament to our leadership in real estate investing and our clients' confidence in our ability to continue delivering compelling results in a dynamic environment. Lastly, our experience in the private wealth channel remains differentiated from the broader industry. Inflows across our TPOP strategy were approximately $400 million in the quarter, bringing total AUM to $3.5 billion at the end of September.

We have continued to broaden our distribution footprint, adding several new international distribution partners this year, and we are also seeing subscriptions accelerate in the RIA channel. With annualized inception to date returns of 31%, TPOP continues to be a preferred solution among increasingly selective partners and advisors. TCAP, our non-traded BDC, saw gross inflows of $134 million in the third quarter, bringing total AUM to $5.6 billion, more than four times its size when we acquired Angelo Gordon three years ago. Notably, redemption requests declined to just 1.2% of total shares outstanding, well below industry averages, and TCAP has generated positive net flows every quarter since inception. In October, TCAP raised an additional $138 million, bringing year-to-date net inflows to $543 million, which represents approximately 24% of its NAV as of the end of last year.

Looking ahead, we now expect to exceed our original target of fundraising more than $50 billion in 2026, which Axel will discuss in more detail. Across our most recent cycle of fundraises, we have grown fund sizes by 30% on average and have welcomed more than 200 new clients to our firm since the beginning of 2025. Against a difficult fundraising backdrop, we continue to take share as many of the world’s largest and most sophisticated investors are increasingly partnering with TPG given our distinct strategies and consistently differentiated performance. Turning to deployment, we invested over $11 billion in the third quarter. While renewed interest rate volatility may temporarily impact the pace of transactions, we continue to identify compelling opportunities to deploy capital, and our pipelines remain robust. Our credit platform had its most active deployment quarter so far this year, investing $7.7 billion of capital across our strategies.

In credit solutions, a higher for longer rate environment continues to expand our opportunity set. Companies with strong fundamentals but stretched balance sheets are increasingly seeking bespoke capital solutions that offer both scale and execution certainty. As a result, our third credit solutions fund has deployed more than $5 billion of gross capital over the past two years, including recycled proceeds from several large early realizations. In middle market direct lending, Twin Brook generated $3.7 billion of gross originations, and 2026 is on track to be one of our most active years to date. Our leading position in the lower middle market, where we've built deep relationships over many years, has driven consistent deal flow even as activity in the upper middle market has slowed.

Our portfolio of over 300 companies continues to be an embedded source of origination, with add-ons accounting for more than 30% of this quarter's volume. In asset-based finance, we deployed more than $2 billion across our core sectors. This included a first-of-its-kind credit secondaries transaction, where we provided a liquidity solution for a GP's residential mortgage fund that was nearing the end of its life. Additionally, we continue to build out our investment-grade ABF capabilities with six transactions completed in the third quarter and a robust near-term pipeline. Our private equity strategies invested $2 billion in the quarter and $16 billion year to date. While higher rates may create headwinds for PE more broadly, our pipelines remain healthy given our growth-oriented investment approach focused on driving operational transformation. Over the past decade, more than 80% of the value creation within TPG Capital and TPG Growth has come from earnings growth.