TPG ‘pleasantly surprised’ by dealflow, considers timing of second climate fund

TPG chief executive Jon Winkelried sees “substantial” opportunity to grow the firm’s impact platform, TPG Rise, across multiple different asset classes.

“We think there is substantial opportunity to expand the Rise platform in a number of directions,” Winkelreid said on an earnings call this week. “So, over time, we find interest within our client base for impact-related investing in infrastructure, impact-related investing in public markets, impact-related investing in the credit markets. All of those involved a build in the future, but I continue to think that this is a trend that, if anything, will accelerate.”

Having recently closed its first climate focused fund on $7.3 billion – making it the largest pool of capital on TPG’s $14 billion Rise platform. It is currently marketing its third generation “broad-based” impact fund, Rise III, and expects to hold a first close “around mid-year” on the way to its $3 billion target, CFO Jack Weingart said on the same call.

“We have, as you know, a large and growing percent of our assets in the impact
platform, and we would continue to see the opportunity for that to expand in future years,” continued Winkelreid.

On the climate fund specifically, Jim Coulter, TPG founding partner and lead on the Rise Climate strategy, said that the firm had been “pleasantly surprised” by both the scale of demand from investors for the product and the opportunity for deployment. The firm has so far committed around $2 billion of the $7.3 billion fund to deals.

“When we launched a little over a year ago, I think there were questions on both sides of what I’ll describe the two-sided marketplace,” said Coulter. “Would there be enough focused capital demand out of our investors for this type of product? And secondly, at a $7 billion scale, where we ended up, would there be investment demand?

“A year into it, as Jon Winkelried would say, ‘asked and answered’,” said Coulter. “In other words: there has been very substantial demand [on the product side] and we see that growing. And I have been pleasantly surprised by the scale and persistency of opportunity we’re seeing in the marketplace. So, as you noted, we’re seeing good deployment pace here. And that I think calls out an opportunity for both the opportunity to scale the strategy… brings forward some of our thinking in terms of when market opportunity return might be.”

TPG echoed sentiments expressed by other managers, warning of a congested fundraising market. “The market is crowded with managers raising capital, some sooner than their clients expected and certain segments of the market are temporarily over-allocated,” Weingart said, noting that fundraising campaigns industry-wide will likely take longer than usual to complete. The firm expects to see a shift of the composition of its LP base, with more growth from Asian, Middle Eastern and even European investors, Winkelried added.