TPG Q1 FY26 earnings call TPG

TPG views AI as both a disruption and an opportunity, particularly in software. The firm has evaluated its software portfolio using an offensive opportunity and defensive risk framework, concluding that most companies are well-positioned to benefit from AI. The software portfolio is relatively young, with an average hold period of three years, and TPG is investing significant capital and resources to leverage AI opportunities. Aggregate bookings in TPG Capital and TPG Growth software portfolios grew over 20% year-over-year in Q1, reflecting strong momentum.

Despite heightened scrutiny on private credit, TPG's portfolios are healthy, and the firm sees strong long-term growth. Institutional demand for enhanced yield is increasing, and TPG's credit strategies outperformed benchmarks in Q1. Twin Brook, their direct lending business, focuses on the lower middle market with strong lender protections and low loss ratios. The firm plans to launch a multi-strategy credit interval fund next year and has $19 billion of credit dry powder for deployment.

TPG raised over $10 billion in Q1, a 75% increase year-over-year, and remains on track to raise over $50 billion for the full year. This includes $4.4 billion in credit and $4.9 billion in private equity, with significant contributions from the Jackson Financial partnership and Impact funds. The firm is actively raising for new real estate funds and seeing strong inflows into private wealth products like TPOP, which saw monthly subscriptions increase throughout Q1, driving $545 million of inflows.

Deployment nearly doubled year-over-year to over $14 billion in Q1. Credit deployment was $5.7 billion, including $2.5 billion in asset-based finance and $1.8 billion in middle-market direct lending. Private equity deployed nearly $7 billion, with a focus on corporate partnerships and carve-outs offering downside protection. Real estate deployed $1.8 billion across various strategies, including senior housing, grocery-anchored retail, and office assets in Japan, capitalizing on market dislocations.

TPG realized nearly $9 billion in Q1, doubling year-over-year, anchored by strategic sales like One Oncology and Intersect Power's digital power business. These exits occurred less than four years after initial investment, generating attractive returns. The firm maintains an active pipeline of liquidity prospects across strategies, aiming for strong DPI for fund investors. The private equity portfolio saw strong LTM revenue and EBITDA growth in the mid-to-high teens, despite a 1% valuation decline due to multiple compression.

TPG continues to scale new businesses, having raised approximately $13 billion across new and emerging strategies over the past three years. Highlights include TPG Sports, which raised $1.1 billion and made its first investment in Learfield; Advantage Direct Lending, which deployed nearly $600 million; and Tika, their Asia growth equity strategy, nearing completion of its inaugural fundraise. These initiatives demonstrate TPG's partnership approach and focus on next-generation investment opportunities.

TPG is bullish on real estate, seeing renewed institutional interest and significant opportunities from market dislocations. The firm has been active in deploying capital into needs-based sectors like senior housing and grocery-anchored retail, and capitalizing on differentiated dynamics in Asia. They expect a multi-year major fundraising cycle for their real estate platform, with strong reception anticipated for opportunistic, Asia, and net lease funds.