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Earnings

TPG reports decline in key profit metric

TPG reported a year-over-year drop in distributable earnings.

TPG posted a year-over-year drop in the firm’s distributable earnings—cash that can be returned to shareholders—due to the decline in realized performance allocations and higher expenses resulting from the acquisition of Angelo Gordon, according to its fourth-quarter earnings release.

Distributable earnings came in at $206 million after taxes, or 51 cents a Class A share, down from $227 million a year earlier.

However, the firm’s fee-related earnings increased to $226 million in the fourth quarter, a 62% YoY rise.

Shares of TPG fell by nearly 5% to close at $43.18 Tuesday after its earnings release.

Exit activity was subdued. “Realization activity last year reflected our bias in a volatile market to focus on building value in our relatively young portfolios,” said the firm’s CFO, Jack Weingart.

However, TPG did clinch several notable exits in the past several quarters, including the sale of Hollywood talent agency Creative Artists Agency to French tycoon Francois-Henri Pinault for $7 billion in the third quarter. It also monetized a portion of its investment in Nextracker, a solar-tech company that raised $638 million in an IPO last February.

But overall, TPG executed four exits totaling $11.2 billion in 2023, a noteworthy decline from the peak it set in 2021 when the firm completed 25 exits totaling $30.5 billion, according to PitchBook data.

“We do feel like there’s going to be an increasing number of opportunities to drive liquidity this year,” said Todd Sisitsky, president of TPG.

Executives also expect deployment for its credit platform will increase substantially, fueling the growth of TPG’s fee-earning AUM. They said the firm’s credit origination pipeline remains strong and anticipate a more active M&A deal pipeline—supported by steadier economic growth—will lead to new origination opportunities.

TPG invested over $22 billion throughout 2023, and its investment activity ramped up in the second half of the year. The firm currently has $51 billion of dry powder to deploy.

Fundraising also picked up the pace in Q4, when TPG raised $8.8 billion in capital commitments—more than half of the total capital it raised for the year.

TPG wrapped up its ninth flagship PE fund and second healthcare fund at the end of 2023, raising a combined $15.6 billion in capital commitments. The firm garnered $2.7 billion for its Rise Fund III and $1.1 billion for its sixth growth equity fund. It also expanded outreach to investors in the Middle East and Asia.

The firm’s AUM rose 64% from the previous year, reaching $222 billion by the end of 2023.

TPG is now preparing for the launch of a second climate PE fund and a new climate transition infrastructure strategy.

On the credit side, executives said they anticipate TPG Angelo Gordon will bring in more than $10 billion in capital commitments in 2024, more than doubling the amount raised last year, as it expands its offerings of credit and real estate funds to its LPs and raises capital through several vehicles targeting individual investors.

Featured image by PM Images/Getty Images

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