Tpg Inc Class A Aktie

All right. Let's go ahead and get started here. Good afternoon, everyone. I'm Mike Cyprys, equity analyst covering brokers, asset managers and exchanges from Morgan Stanley Research. And I'm thrilled to have with us for our next session, Todd Sisitsky, President of TPG. Todd, thanks for joining us here today.

Thanks for having me.

So TPG, as many of you know, is a leading global alternative investment manager with over $300 billion of assets under management. So a lot to get through today.

I thought maybe we could start with the current backdrop, Todd, deal environment. It seemed like the market had finally found its footing when we came into this year and then there was some momentum coming in. And then obviously, a lot has happened since. So let's talk about the deployment volume, which has generally been maybe a bit more sluggish than people had expected. Tell us about TPG's experience, how it differs maybe from others there and your ability to deploy in this current backdrop?

Absolutely. Well, we've actually been very busy, and I'll come to that in a moment. I think from an overall market standpoint, I think the way we've looked at it is, if you step back and you think back to the -- I'm surprised to say this, even to hear myself say it, to the relatively easy days of Brexit. There was a disruptive event every year or 18 months, maybe 2 years. Now there's Liberation Day, there's the war in Iran, there's Russia. There's the quickest rate increase and prior to that COVID and rate decrease. And so it feels like the volatility in the macro environment has accelerated. It's like the world has become predictably more unpredictable. And I think in a business like ours that does take time to create opportunities, that just has an implication for really all aspects of the business, including the origination side and the new investment side.

At TPG, we've actually been able to stay quite busy. If you look at our first quarter, we were up actually 74% year-over-year. Actually, all of our business units, all of our asset classes were up. Private equity up actually 100% plus. And I think one of the reasons is that -- on the scale of sort of the flow side of the market where larger deals would come with financing, a chaperoned meeting with the CEO, and they tend to be there when multiples are good, there's a steady environment. If that's on one side of the continuum, we're sourcing most of our investments in the much more customized, I'd say, sourced part of the market.

And so much longer dated, lower probability of success when you start the dialogues. But when you get them done, they're a little more resilient and a little less impacted by some of the macro factors. And I think that's true really across the board for the various businesses that we're in. On the private equity side, if you look at our flagship fund, 2/3 of the investments in the TPG IX portfolio were either structured partnerships with corporates, the vast majority of which were proprietary, several of which actually had downside floors, so put call provisions or carve-outs, in many cases, carve-outs where the parent maintained an ownership stake. So those are much more customized in terms of how you get into those. And we have different flavors of that in real estate, in credit. And I think that, that has reflected itself in a really steady pace. So if you look at our major funds, we've been investing in that sort of 3- to 4-year cycle that we advertise. And we've continued to find really interesting things in today's environment.

And frankly, on an aggregate basis, if you look at credit, our deployment was up 56% in the first quarter. But if you look at just the AUM and the rate of investment since the combination of Angelo Gordon and TPG, that acquisition about 2.5 years ago, the AUM has grown from $60 billion to $95 billion. So it's been a really healthy pace. And our activity flows actually has followed.

Great. Why don't we shift and talk about realizations. There's been a lot of discussion about exit time lines getting pushed out. What would you say needs to happen to change for exits to become more durable in your view? And are you expecting a pickup here, particularly given IPO markets seem to be reopening here and -- but at the same time, maybe supply risk builds, too?

Well, I think the exits are certainly really across private capital, particularly across private equity, they are a big area of focus for our partners. And actually, I think going back to the original comment I had about the world becoming predictably more unpredictable, it means you really have to hit the exit windows when you see those opportunities. And the implications of that environment are different if you are more oriented towards IPOs as you exit as opposed to strategic exits as opposed to sponsor and sponsors, which may require a more robust financing environment.

And so from our standpoint, we have looked at this world and said, we have to approach the exit strategy with the same intentionality, the same focus and the same sort of centralized engagement as we do the investment decision. I don't know that, that was true 15 years ago, but it's true today. And so we push one another. I actually think it was one of my most important jobs as President to sort of make sure that we're pushing one another because delivering DPI, I think, has been a differentiator for us, and it's very important for our partners.

So our results, I think, have shown that. We had a $25 billion -- $28 billion in LTM and $9 billion in the first quarter, and that reflects a lot of intentionality. If you look at some of the drivers of the exit in the first quarter, you also see a sale of OneOncology to Cencora. That was a structured deal with a corporate partner that we've subsequently partnered with in other ways, where we had a put call. So you sort of have more certainty around your exit, you have more certainty around the timing, the partner, in some cases, even a minimum valuation. So I think that has a big impact.

Intersect Power with Google, again, a partner deal that Google ended up buying us out of. So our portfolio construction has a big impact on our ability to exit. And if you look at the sort of various avenues that we've used to drive liquidity over time, focusing on the TPG Capital business, the flagship fund in the U.S. and Europe, about half of our exits have been to strategics. So I think that, again, is a little bit more of a resilient part of the world in terms of exits.

IPOs can be compelling. And in fact, if you look in India where it's been particularly compelling, I think we have to be the leading sponsor of IPOs. We have 14 exits over the last couple of years that have been through an IPO route. But they do require more time. They require -- they often take years to actually exit once it's really a path to liquidity, it's not liquidity. And so we've been very focused on creating businesses that are interest to strategics and in many cases, again, entering into investments with clarity around how we're going to exit those investments.

And how is that pipeline looking so far here into the second half?

The pipeline continues -- from a liquidity standpoint?

From a liquidity standpoint.

I think it continues to feel like there are opportunities. We have businesses that we've had a couple of years with that have really shown nice inflection in their growth. We feel like there's a particular opportunity. In some cases, the dialogues have been -- the conversations have been inbound. So I think that the volatility in the broader marketplace is always going to be a headwind for exits, but we've been very intentional. We do feel like we have a number of shots on goal. So we continue to feel like there's an opportunity for meaningful liquidity in the second half.

Okay. Great. So why don't we shift gears talk about fundraising. You recently reiterated your guidance for capital raising to exceed $50 billion this year with a pickup in the second half of the year. And you guys are in the market with a number of several important campaigns. So maybe you can bring us up to date on the funds that are in the market that are raising the expected timing there. And just if you could also touch upon how LP conversations are progressing in this environment today as there are ongoing DPI pressures that continue to assert, how is that impacting the LP conversations and what you're hearing?

Absolutely. Well, I think you're right. The LPs in a world of volatility are thinking increasingly about particularly in illiquid investments, what's the appropriate liquidity premium. The translation of that, I think, has been -- we've heard about the selection and the down selecting of large allocators of capital globally. We've heard about that for years. We're seeing it real time and I think in a very intentional and immediate fashion. So I think you have a set of GPs that folks feel have strategies, portfolios that meet their strategies have been delivering DPI. We've gone from most of our careers being in an environment where interest rates were declining and multiples were increasing to a world where -- we're modeling multiple headwinds. We're modeling multiple compression between -- in our base case is now for the last 2.5 fund cycles. And so you have to have a way to drive the growth and to drive those returns. It's sourcing and it's what you do with the portfolio companies when you own them.

I think that the broader group of LPs, particularly the global asset allocators are looking at the range of options out there, and they're coming up with that list of folks that they really want to lean into. And we feel like we've been a real beneficiary of that. And we've seen that in the significant growth we've seen in credit, the growth we've seen fund over fund cycle and things like TREP on the real estate side, and I'll come back to real estate in a moment, and in growth and in our private equity platforms. And we continue to feel that we have a lot of support from our LPs.

You also see that in an environment like where fundraising is not easy, it's hard to raise first-time funds. We've actually had a lot of success. That's been a core strength. It's been part of our DNA for the whole 23 years I've been here and before that. But if you look at the last 3 years, we've raised, I think, $13 billion of capital for essentially new strategies and the sports fund that I've been involved with, we're at $1.1 billion. These are really interesting businesses on their own, and they have a lot of scalability opportunity. And you have our big institutional partners excited about the idea of building businesses together.

So I think it's a tale of different quadrants here in terms of the experience that people are having with fundraising. There is still capital available. We've never lived through a period where it's easier to measure investors, where it's easier to measure absolute performance and to compare it on a relative basis. And so results really matter as does strategy, as does the continuity of the organization. So I would not -- I would say it's not an easy environment, but I do actually feel like the breadth and depth of our relationships with our most important strategic partners has really increased in the last few years. And it's why we continue to have confidence.

You mentioned the $50 billion. I mean I remember a time, and I don't know whether this is -- whether I'm just nostalgic for it or glad it's behind. We have -- this year, we're going to have a big flagship fundraise and then we'll have a quiet couple of years. That's not how things are now. They're always on. So we have -- what has been a real step function in credit, which I think is a testament to the cross-selling and the ability for the interest and excitement rather for the historical traditional LPs on the TPG side to see this great talented group that came in with the Angelo Gordon acquisition and to back these successively larger funds. And that's sort of continuing -- it's continuing to pace. But we had a big first close in TPG Capital. We'll finish that up this year. It's an important year for real estate.

So our TREP business, which is an excellent performer is -- it had a $6.8 billion fund, the fund that's just been invested. We have confidence for -- that we'll see a meaningful step-up in that subsequent fund. So we're really pushing on all fronts. And in a sense, you're always on in terms of the existing funds. And as I said, we're seeing a lot of uptake in new funds and new strategies as well.

You mentioned an interesting point that in prior years or years ago, at some point in the past, you would raise your flagships and then you'd have a quiet period. Why not -- why is that not going to repeat this time?

Well, the reality is that we have more strategies in the sense that we have credit -- they're shorter fund cycles. TPG Growth is out of the market. It had its close in 2025, but TPG Capital is in the market and TPG Asia will come over the next couple of years. So within asset classes and across asset classes, we have a robust set of offerings, and we're adding new offerings all the time. So Advantage Direct Lending; TICA, our growth fund in Asia; sports, these are -- these have gotten a lot of traction on their own.

So the reality is that that's what our partners want. They're always investing. They want to understand the broader array of strategies that we have and how they can fit their own objectives and needs with what we have coming to market, not just this year but in years to come. So we came off a very important year in terms of our $51 billion, I think, in '25, a little more on an LTM basis through the first quarter. And we have another year where we're looking for $50-plus billion. And I think that will continue.

One of the other areas that you have added is private wealth, arguably one of the biggest growth opportunities across the industry. You have a private equity strategy, T-POP. I think it's now over $2 billion of AUM in under a year. So how are you managing the trade-offs there between growth, liquidity, valuation discipline as this evergreen capital scales?

Absolutely. And I knew we're going to come to this, but the other aspect of fundraising for us are these new channels. So as you say, retail, I think maybe we'll talk about insurance for a minute after as well.

That's my follow-up question.

Absolutely. There we go. So that's a perfect lead [indiscernible] But on the private wealth side, I think this is a natural for us. And there's 2 sort of -- we have retail in our drawdown funds, and there was a substantial increase of 2/3 increase in sort of overall private wealth in the LTM period relative to the prior period. But these evergreen vehicles are really important. So there's sort of -- there's 2 vehicles I probably want to spend a minute on. T-POP, as you said, is our foray into evergreen private equity fund. For us, it is a greatest hit. It's across our 14 strategies. It's had really exciting traction. We're at $2-plus billion, $2.5 billion. And this is a strategy for us that allows -- we have -- we feel like we have a real right to win in private equity, and it allows the private investors and the wealth managers to participate in the -- in all of our private equity strategies on the same basis, on the same time frame in the same investments as our core institutional funds, mostly institutional funds. And that's really appealing to people. There's excellent alignment.

So when you ask about how do we adjust our liquidity, how do we adjust our strategy. The shorter answer is we really don't. The appeal for this is to look at over the 30 to 15 -- inception to date, 30-, 15-, 10-, 5-year periods. Our returns in private equity have gone up our gross and net returns over that time period. This is not something -- there are some of our -- some competitors are sort of have deemphasized private equity. This is a core business for us. We really do feel like we have a right to win, and it's resonated.

These are sort of interesting businesses. This gives the investor an opportunity to participate across that spectrum of private equity. And they like the fact that we're not going to sell from the institutions to them or from them to the institutions. They're going to go in, and they're going to exit as though they were an SMA on the same basis. And so that's sort of part of the appeal. And we've started with 2 really strong relationships on the wirehouse side, 2 sort of international private banks. We're adding another this summer. We have a really exciting pipeline of dialogues around additional platforms. We've had a lot of success internationally.

I probably would have expected more of a concentration in the U.S., but in Europe and Asia, it's actually resonated and we've had a lot of uptake. And for us, we've taken it very seriously because it's our opportunity to introduce ourselves as a firm in a very intentional way to this broader market, and we feel great about the reaction. So behind that, we'll have TREP which some folks call Trep. I'm going to keep it TREP. We already have T-POP, too many cute names is not a good thing. And that will come in the near immediate term. Multi-strategy credit fund, I think, is also a natural addition.

So we're going to keep driving this platform. We really feel like we have an incredible set of relationships on the institutional side, and we have an opportunity to translate that into the high net worth retail side, and that's exciting for us.

If you look at TCAP for a moment, which is our non-traded BDC, we've had a pretty different experience than some of the other folks in the market. We -- because I insisted -- we filed yesterday, our latest results. And we had -- I think it was $181 million of net of inflows and -- of gross inflows and then it was at 2.1% in terms of redemptions, so well under the 5% cap.

And I think that reflects a number of different things. This is the lower middle market strategy. These are 100% credits with a covenant in the revolver for -- so you really see what's happening relatively early. 40% loan-to-value, very strong credit results, which have been stable quarter-over-quarter. I think 1%, 1.2% PIK, which -- no PIK at the outset. So a really healthy portfolio with strong results, very little software, zero ARR-based loans. So I think that the world has discerned among different strategies. And this has been, I think, a source of a lot of pride for us. This is a 10-plus percent performer over the last year. It's a very good product and folks are excited about it and not trying to redeem.

So beyond private wealth in terms of emerging sources of flows for you guys in the years ahead versus in years past, insurance is another one.

Yes.

So why don't we talk about the Jackson partnership, how that's progressing, key learnings so far? And how are you thinking about expanding to additional partnerships over time...

Absolutely. Overall -- I mean, we have a lot of insurance relationships that participate in different vehicles. But we've tried to become a lot more strategic in building those. And the Jackson example is a great one. That partnership is excellent. There's a tremendous amount of dialogue. It feels very natural. It feels like a real partnership. And there's -- at the outset, there was $2 billion allocated to our asset-based strategy.

Among the many things that's exciting about this for us is it's helping us build out other capabilities that are really important for our insurance clients. So we're putting a lot of energy and resource behind investment-grade ABF. That's -- one might wonder whether the other insurance clients would be concerned when you have [indiscernible] In this case, it was quite the opposite. It was a view that we are going to increasingly focus and expand our product set to address the needs of the insurance partners. And so we have a number of other dialogues. We feel like there are a lot of other opportunities to keep expanding.

And the Jackson relationship, I think, will continue to expand. We're talking about a host of different strategies that I think have a lot of traction that are appealing to their book. We're looking at one-off opportunities together. We're sort of doing things that are essentially unlocking by virtue of the partnership between Jackson and ourselves. And we think there's the opportunity to do that again with other partners. I think the insurance side is another area that should represent a big opportunity for us go forward. We've tended to look at things more on the asset light side. But again, that doesn't, in any way, connote less of an integrated strategic relationship with partners like Jackson.

Great. Why don't we shift gears and talk about AI. It's reshaping both investment opportunities, operating models. For you guys, it's -- there's implication for the portfolio at the operating company level and also a deployment theme. So if we kind of break it into three. I'll start with the first question out of three there. So portfolio company side, right? So talk about how it's impacting your portfolio companies. To what degree does AI represent a disruptive threat versus an alpha creation opportunity as you think about your toolkit, right, working with portfolio companies, and how do you sort of get confidence on the underwriting side as you're making new investments as well?

Sure. I think on the question of whether it -- AI represents a disruptive threat or an alpha creation opportunity, the answer is definitely yes. It is both. And it is a dramatic transformation that is -- it's not limited to software. It's really flowing through all of the industries that we invest in. And I think that the first reaction, whenever there's new technology, I think, is this perception that the incumbents are going to get overwhelmed and it's going to be all the disruptors. I think as people spend more time on it, you realize that there are certainly situations where that's the case, but there are also a lot of incumbents that benefit.

And one of our jobs, both in our existing portfolio and as we look at new investments is to figure out both the situations, the phenotypes of companies, particularly if you look at software, for example, where you're positioned to benefit from AI as opposed to be impacted by it. So these are companies that have perimeters on their data are volumetrically exposed in the case of many companies in cybersecurity to the rising threats associated with AI are physically integrated into the work streams and the operations on the ground, areas of manufacturing software are like that.

So there's a number of different systems of record where you're really very hard to displace. So there's a number of different models. But the second side is what you do with that -- what you do with the resources that you have and how you drive it. So we have been very intentional, as I said, about selling over time. If you look at where our -- for example, software as a proxy, sits for us, the average portfolio company in our software portfolio is 3 years old, so very recent. In 2021, when a lot of folks were buying, we were selling. And we sold everything in TPG VII and prior, including all of our remaining software companies at great prices, I might add. And so we have a young portfolio.

Our recent TPG Capital IX and the very recent TPG Capital X, which is just starting, we feel excellent about those are all in full view of Agenic software -- excuse me, GenAI. So it really leaves us with one fund that was the 2019 vintage fund that has about I think at this point, half of the fund has been returned. 60% of that portfolio looks like it's in a -- is outperforming and has very strong momentum. And we look at 7% as in that mitigate category in terms of exposure. But we're working hard on sort of all of those companies as well as many companies that are using AI to their advantage. And the overall portfolio is performing very well, mid- to high teens in terms of revenue and EBITDA growth as we shared in the earnings call. But even within software, the first quarter alone, was showing north of 20% bookings growth, which was better than 3 to 4 quarters in the prior year. So in some ways, we're seeing actually a nice acceleration. And I do think part of that is where we sit with these companies, but also how we're pivoting to try to benefit from AI.

So we actually think that -- as you step back from -- you have to keep focused on the risk, but as you sort of step back, these moments of change have changed there have been enormous opportunities for folks like us in private investing. And we have a very deep team. I mean it helps that we live in San Francisco and can throw a rock at 60% of the -- if you had a good enough arm, I guess. 60% of the AI companies that are moving things in the world. And we've taken full advantage of that. I mean you saw that with the recent investment on the -- you mentioned on the deployment side, the OpenAI DeployCo, where we were really the founding partner. That is trying to address the biggest bottleneck right now in AI, which is the tremendous limitation in forward deployed engineers who can help to implement and sort of make the AI dream a reality. This is the company that's sort of set up to do that because you really need these folks to be able to get back into the code and to see where the development is going. So we feel extremely well positioned by virtue of our technology heritage, our proximity and just the sort of depth and breadth of AI savvy resources we have sitting inside of the firm.

And maybe we could talk about your approach to it at the management company level, right? So how are you using AI to operate the firm differently, more efficiently? What are some of the use cases you've identified? What are your plans around implementing new use cases over the next 12, 24 months? And what sort of, I guess, improvements have you seen so far?

Well, there's a lot of exciting work going on in that front. We've had since 2019 an internal AI team that's our lab, as we call it, that's been focused on a number of these opportunities. And in each part of our business, there are different sort of -- there are different opportunities to uncover. In the front office, we have -- the tools are incredible. But one of the things that's most important is the proprietary data. I mean we have hundreds of companies over time. I think we have a last count, I think it may be private equity alone, 5 million pages of proprietary research over time.

In health care, we -- over the last 15 years, we've looked at 6x the number of companies that are publicly traded. And so trying to sort of leverage that data pool for insights to do our job better to sort of take people away from some of the mechanical, also and to focus on the judgment part of the business. That's an enormous opportunity, which I think we're still in the early innings of tapping into. And we have AI synthesis of all the materials we have, but the ability to look across this much broader data pool, all the results that are coming in from our hundreds of companies. It's really powerful.

And again, it's an extraordinary proprietary opportunity to sort of leverage the things that we do and all this work that we create. On the credit side, we have the ability to look across tens of thousands of properties for risk scoring for RMBS market. And that's something we're doing. I think that increases the flow -- the workflow by two or threefold relative to what we were doing if we were doing it personally. So that's an opportunity to do a job better probably to take some costs out as well.

At the operating company in the middle and back office, we have a host of opportunities that we're piloting and that we're executing on. We probably started by saying how can we do what we're doing more efficiently. But we've migrated to the other question of what are the things we can do that with AI that we just couldn't have done with people at all. And that's -- because I think we were kind of limiting ourselves on how we were framing the question.

So I think there are a lot of things that we are doing today and that we are piloting that will have a big impact. And if you look at our -- the longer arc of TPG, we went public not that long ago, 4.5 years ago with $100 billion of AUM. We're now well north of $300 billion. So as you think about different ways to leverage AI to sort of affect the rate of growth or the trajectory of your cost base as you grow the AUM as you grow your revenues, it could have a really profound impact, I think, on our business model.

And then lastly, maybe AI as a deployment theme. You touched on this I did a moment ago a little bit. Can you just expand on that? And just more broadly, how are you thinking about the opportunity set? What areas of stand out as most attractive to you?

I think it's a very exciting opportunity set. So we've invested directly in Anthropic, directly in SpaceX, directly in OpenAI. We've created, as I mentioned, this sort of tool, which leverages our operating capability and our ability to sort of help stand up companies in DeployCo. But we've also invested across our platform. So I think we had really one of the first credit investments in and around the AI space with XAI through our credit solutions fund. That was a very successful deal. We've invested in Intersect Power and Google. That was one of our exits in the first quarter. Our real estate team started investing in 2019 in data centers. So we see actually a lot of different opportunities across the firm.

We also are using AI because we have this sort of -- you got to understand TPG, half of our partners on the capital side, half of the folks above the associate level are operating people. So we have a very deep bench of expertise and operating expertise, and that's been everything through the lens of AI. And so we just underwrote a business services deal, which had 1,000 basis points of margin improvement built in through leveraging AI to redesign workflows. So AI has a lot of impact, both on discrete opportunities, some of the many, whether it's energy and power and the use of clean energy to supply this ever-growing need for energy or its infrastructure some of these derivative plays that I think are very appealing. And then AI has a big impact on sort of these sectors that we've been in for 2 and 3 decades in terms of creating tools that now allow us to look at a totally different set of numbers than you would otherwise be looking at when you're underwriting these businesses.

So we talked about fundraising across a whole different number of channels and opportunities as we think about organic growth. So final question here on the inorganic side, Angelo Gordon was the largest acquisition that TPG has done. So how are the M&A conversations evolving today versus, say, a year or 6 months ago? And from here, is the focus more on filling capability gaps or continuing to scale existing verticals?

We have a very ambitious strategy for the future. We really want to grow. Again, we've tripled our AUM plus since we went public. We feel like there's a lot of opportunity ahead of us. And I think that, that will come both in the form of organic growth, continuing to grow our flagship funds and our existing funds. New organic growth, which has been a core skill set of ours forever. I mean, that's from the earliest days. We've had this culture, this entrepreneurial culture of going off, creating new funds and building them -- and these are businesses that might be a $1 billion or $1.5 billion of AUM today. You look at TGS, our secondary business that was $1.9 billion in the first fund has an opportunity to grow materially. And so those will have a big tailwind for us as we think about growth.

The inorganic growth aspect is also very important for us. Some of that, again, is in distribution. But as you look at new platforms, I think it falls into two categories, big scale acquisitions like Angelo Gordon, Peppertree has been another exciting opportunity for us that feels more like a tuck-in that is an excellent business in its own right and works very well and sort of increases the view of us as a strategic in the digital infrastructure space. We have opportunities across both. We've always felt very capable on the organic growth side. I think with the Angelo Gordon acquisition, which to us has been a tremendous success is -- it's given us confidence that we can also identify, execute and then integrate these businesses in a way where we make both sides of the equation a lot better.

So I think you'll see us look for new capabilities. I think we want to continue to grow in areas like secondaries. That could be organic. I think it could certainly be organic. It could also be inorganic in areas like infrastructure, likewise, organic plus inorganic potentially in geographies. We have an excellent business in Europe. I'm going to be spending a lot of time in the summer to try to support the team as we grow it. I could see opportunities to expand inorganically there as well. And with more tuck-ins as we think about ways to sort of keep building out the -- and really logically grow from the platforms that we have in place, I think that we're seeing a lot. And again, I feel like we feel very confident in our ability to do that and to do that in a way that is accretive to both TPG and the business that we acquire.

Great. I'm afraid we're out of time. Todd, thank you so much for joining us today.

Thank you. Really enjoyed it.

Good morning, and welcome to the TPG's First Quarter 2026 Earnings Conference Call. [Operator Instructions] 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. You may begin.

Great. Thanks, operator, and welcome, everyone. Joining me today are Jon Winkelried, Chief Executive Officer; and Jack Weingart, Chief Financial Officer. In addition, our Executive Chairman and Co-Founder, Jim Coulter; and our President, Todd Sisitsky, are here with us for the Q&A portion of this call.

I'd 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're presenting GAAP and non-GAAP measures. 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 first quarter, we reported a GAAP net loss attributable to TPG Inc. of $123 million and after-tax distributable earnings of $282 million or $0.70 per share of Class A common stock. We declared a dividend of $0.59 per share of Class A common stock, which will be paid on May 26 to holders of record as of May 11.

I'll now turn the call over to Jon.

Good morning, everyone. Thank you for joining us. TPG entered 2026 with strong momentum following a record year of capital formation and deployment. Our first quarter results reflect the continued acceleration of our growth objectives across the platform. Our fee-related earnings grew 36% year-over-year and exceeded $1 billion on an LTM basis for the first time in TPG's history. Our after-tax distributable earnings per share grew 46% compared to the first quarter of last year, and total AUM grew 22% to $306 billion.

Our capital formation, deployment and realization activity each delivered a step function increase year-over-year, growing 75%, 96% and 103%, respectively. Our performance this quarter is particularly notable given the complex macro backdrop. The convergence of AI disruption, private credit stress and geopolitical conflict has created significant market uncertainty; however, our business is intentionally built to be resilient through cycles. Our long-duration capital base provides earnings stability and embedded growth, and we've delivered some of our best-performing vintages during periods of dislocation.

We view the current environment as an opportunity, and we have never felt more confident in the positioning of our franchise and our ability to successfully execute on our growth drivers. Our clients are leaning in and looking for additional ways to partner with us, and the momentum across our business continues to accelerate. Before I review the quarter, I want to provide additional context on two areas that are top of mind for our investors. First, the AI transformation and its implications to our investing business; and second, the state of private credit through the lens of our portfolio.

I'll start with AI. AI has created significant disruption as well as opportunity across sectors, particularly in software. As we assess the impact of AI, we continue to see meaningful value in certain enterprise software models and the strong performance across our software portfolio reinforces this view. We've evaluated each of our software companies through a framework based on offensive opportunity and defensive risk and have high conviction that the vast majority are well positioned to benefit from AI.

Our software portfolio today is relatively young with an average hold period of approximately three years. We are investing significant capital and specialized resources to ensure that these companies take full advantage of the opportunities that AI unlocks. Overall, our software companies continue to deliver strong results and are increasingly leveraging agentic solutions. This momentum was clearly reflected in the first quarter with aggregate bookings in our TPG Capital and TPG Growth software portfolio growing more than 20% year-over-year.

Looking ahead, the impact of AI remains dynamic across industries and will continue to be an important input into our disciplined investment approach. TPG's relationships and differentiated access to leading AI companies gives us real-time visibility into how business models are evolving. These insights directly inform our investment decisions and value creation plans, and we remain highly confident in our ability to continue delivering strong performance for our investors. Turning to private credit. While the asset class has been under heightened scrutiny more recently, our credit portfolios are healthy, and we have strong conviction in the long-term growth outlook for our business.

Private credit has become an integral part of the global financing ecosystem as borrowers with increasingly complex capital needs seek speed, flexibility and execution certainty. Although some retail-oriented credit vehicles are experiencing elevated redemptions in the current environment, institutional demand for enhanced yield continues to increase. As we look across our credit business, we're seeing accelerating growth driven by several dynamics. First, our strong performance. During the quarter, each of our credit strategies outperformed their respective benchmarks.

Our returns remain at or above our targeted ranges, and we continue to maintain very low and stable loss ratios. Additionally, given our de minimis software exposure and credit, our portfolios are well insulated from broader industry concerns. Second, our differentiated credit strategies are resonating with clients who are increasingly looking to diversify their private credit exposure. Our direct lending business, Twin Brook, operates in the lower middle market, which is characterized by strong lender protections and more favorable competitive dynamics.

Twin Brook strategy is built around rigorous underwriting and cash flow lending with no ARR loans or PIK at origination. Its portfolio largely consists of senior secured first lien loans with financial covenants. In addition, as the revolver lender, Twin Brook benefits from an embedded early warning system to proactively identify and manage company-level stress. Third, while private wealth represents a relatively small portion of our capital base today, we continue to experience strong demand for our products in this channel.

In the first quarter, TCAP, our nontraded BDC, reported gross inflows of $193 million and redemption requests of $31 million, representing just 1.3% of total shares outstanding, well below the industry average. TCAP ended the quarter with $4.7 billion of AUM, up 33% year-over-year. Additionally, given our attractive mix of credit strategies and strong performance, our clients have expressed interest in a TPG multi-strategy credit interval fund, which we plan to launch next year. And finally, current market dynamics are creating a compelling deployment opportunity in private credit.

Having successfully scaled our capital base through 2025, we're well positioned with $19 billion of credit dry powder to execute on a broad range of opportunities. Now I'll review our activity in the quarter. Coming off a record 2025, we raised more than $10 billion of capital in the first quarter, which increased 75% year-over-year. In credit, following last year's positive inflection point, our baseline capital formation has fundamentally re-rated higher, and we raised $4.4 billion in the quarter.

Notably, in February, we closed our long-term strategic partnership with Jackson Financial, which is off to a strong start and tracking ahead of our plan. We received $2 billion of initial commitments into our asset-based finance business, which we've started to deploy. And last week, we closed the Jackson rated note feeder in our middle market direct lending business. Looking ahead, we're focused on continuing to expand our credit capabilities across the return spectrum to serve our broader base of clients. In private equity, we raised $4.9 billion in the quarter, including $925 million towards a rolling first close for Rise IV, our impact fund.

We also raised additional capital for TPG X and Healthcare Partners III, bringing total capital raised for these two funds to nearly $13 billion, including commitments that are signed but not yet closed. In real estate, we recently began raising for our fifth [ TREP ] opportunistic fund and second Japan Value fund and expect to launch our sixth Asia real estate fund in June. Additionally, in our net lease business, we established several new strategic partnerships, raising $1 billion for our fifth fund through April, and we expect to complete fundraising in the second quarter.

Within the private wealth channel, in addition to TCAP, we continue to see strong inflows into T-POP, our perpetual private equity product. Across the T-POP strategy, monthly subscriptions increased throughout the first quarter, driving $545 million of inflows and bringing total AUM to $2.1 billion at the end of March, just 10 months after our initial launch. Overall, we remain on track to raise more than $50 billion this year, supported by the strength and stability of our institutional client relationships. As this complex environment drives a wider dispersion of performance across the industry, we believe we're well positioned to continue taking market share given the differentiated returns we've delivered for our clients.

Moving to deployment. We continued our robust pace with more than $14 billion invested in the quarter, which nearly doubled year-over-year. In credit, we've deployed $5.7 billion of capital, up 42% year-over-year. This includes $2.5 billion in our asset-based finance business, where we continue to expand our market-leading position in home equity-related mortgage finance. We also completed several transactions in equipment finance receivables as well as a new or upsized flow arrangements in both consumer and home improvement lending. In middle market direct lending, despite the macro headwinds, Twin Brook generated $1.8 billion of gross originations in the quarter.

Twin Brook's existing portfolio continues to be a powerful source of embedded origination with add-on acquisitions representing approximately 50% of deal flow in the quarter. We also added a dozen new borrowers, bringing our portfolio to more than 310 companies. In Credit Solutions, we're seeing a growing demand for flexible, customized capital solutions as borrowers are increasingly seeking execution certainty amid heightened volatility. Stresses in certain parts of the credit market are creating attractive opportunities to lend to high-quality companies facing balance sheet pressure.

During the quarter, our credit solutions team led a $450 million financing for a new joint venture with Xerox to manage and unlock value from certain IP assets. This deal demonstrates TPG's ability to provide creative, liquidity-enhancing solutions to address long-term capital structure needs. Across our private equity strategies, we deployed nearly $7 billion of capital in the first quarter, which represents 2.5x the capital invested in the prior year period. As we've highlighted previously, our approach to investing and portfolio construction continues to be a differentiator for TPG.

By leveraging our proprietary sourcing engine, deep operational capabilities and extensive experience in structured partnerships, we've built a distinctive private equity portfolio. In our two most recent TPG Capital funds, IX and X, approximately 2/3 of our investments have been corporate partnerships or carve-outs with meaningful downside protections, including several with put rights. These features provide increased transparency into exit timing, counterparty certainty and in some cases, minimum return thresholds, which are particularly compelling in the current environment. Complex corporate carve-outs are a core strength of our platform and have generated strong historical returns for us.

Our corporate partners often retain an ongoing equity ownership stake, creating strong alignment and shared incentives around long-term value creation. In March alone, we closed four carve-out transactions in TPG Capital. Across our GP-led secondaries business, our investment pipelines are accelerating as sponsors increasingly use solutions-oriented capital to drive liquidity. We expect industry deal volumes this year to exceed 2025, which was a record year for single asset CVs. During the quarter, our GP Solutions and Life Sciences funds partnered to close a $3.8 billion continuation vehicle for Curium Pharma, which is a global leader in nuclear medicine and diagnostics.

Curium exemplifies the power of TPG's platform as one of the few scaled investors in GP-led secondaries with deep health care and life sciences expertise. The deal was sourced and completed through the close collaboration of our investment professionals across four platforms and three geographies. We believe this is the largest single asset CV ever completed in Europe. Within our impact platform, the opportunity set continues to expand globally, driven by powerful and evolving market dynamics. Rising residential and industrial electricity demand, together with rapid scaling of AI and data centers is placing unprecedented strain on power systems around the world. At the same time, the ongoing disruption across global energy supply chains, driven by geopolitical conflict is accelerating the push for greater energy independence and security.

Against this backdrop, we see a substantial and growing need to modernize and expand critical energy infrastructure and services, and TPG is playing a leading role in meeting these significant long-term capital requirements. In the first quarter, Rise Climate announced the acquisition of Sabre Industries, a leading provider of highly engineered infrastructure for power utilities, data centers and telecom. Sabre's mission-critical solutions are needed to support the modernization and reliability of America's electrical grid and to meet the increasing demands of large-scale data center development.

Turning to real estate. We had an active deployment quarter across our strategies with $1.8 billion invested. TPG Real Estate closed six investments in the quarter, including a high-quality senior housing portfolio as well as a scaled grocery-anchored retail platform. Both are in needs-based sectors benefiting from recession resiliency and limited supply growth. Additionally, in Asia, we continue to capitalize on differentiated supply-demand dynamics and demographic shifts. We recently acquired a number of office assets in Japan, where office fundamentals remain strong with low vacancy rates. We also initiated a multifamily development project in Seoul. South Korea's rental housing market is undergoing a structural transformation driven by smaller households and rising homeownership prices.

Finally, we're off to a strong start for monetizations in 2026 with nearly $9 billion realized in the first quarter, which doubled year-over-year. This included the sales of OneOncology to Cencora in TPG Capital and Intersect's digital power business to Google and Rise Climate. These two strategic exits were both achieved less than four years after our initial investment, generating highly attractive returns and demonstrating the power of TPG's corporate relationships and innovative deal structuring.

Before I hand it over to Jack, I want to highlight our continued momentum in launching and scaling new businesses. Organic innovation remains a core tenet of our growth as we strategically expand into areas where we believe we have a right to win. Over the past three years, we've raised approximately $13 billion of capital across our new and emerging strategies, and we expect to meaningfully scale that over time. To share a few highlights, first, in TPG Sports, we raised $1.1 billion for our inaugural fund through the end of April and recently announced our first investment to acquire Learfield, a leading media and technology company powering college athletics.

Second, Advantage Direct Lending, our new core middle market direct lending strategy, has deployed nearly $600 million of capital across 16 investments through April, and we continue to receive strong investor interest. And lastly, [indiscernible], our Asia growth equity strategy has built a compelling portfolio across health care and technology, capitalizing on the opportunity set across Australia and Southeast Asia. We expect to complete our inaugural fundraise over the summer. The success of these strategies and other new initiatives is a testament to our long-standing partnership approach in identifying and building next-generation investment opportunities with our largest institutional clients.

I'll now turn the call over to Jack to walk through our financials.

Thank you, Jon, and thank you all for joining us today. TPG had a very strong start to the year, driving significant year-over-year growth despite a volatile macro backdrop. I'll begin by reviewing our financial results in the quarter and then provide an updated outlook for the remainder of 2026. We ended the quarter with $306 billion of total assets under management, which grew 22% year-over-year. This was driven by $56 billion of capital raised and $22 billion of value creation, partially offset by $28 billion of realizations over the last 12 months. Our fee-earning AUM grew 23% to $175 billion at the end of March.

AUM subject to fee earning growth totaled $45 billion at the end of the quarter, including $33 billion of AUM not yet earning fees with the largest component coming from our credit platform. Following a very successful credit fundraising period, we're well positioned to deploy capital into an expanding set of compelling opportunities in the current environment. Our credit platform generally earns fees on deployment, and we have visibility into approximately $140 million of annual revenue opportunity as this capital is put to work.

We reported fee-related revenue of $557 million in the first quarter, up 17% year-over-year. This was driven by management fee growth of 15% and transaction and monitoring fee growth of 33%. Excluding catch-up fees, management fees grew 3% sequentially and 18% year-over-year. On the capital markets side, our revenue opportunity has continued to grow due to our robust deployment pace as well as the broadening of our capabilities across all platforms and geographies. In the first quarter, we generated fees from 25 different transactions across 9 strategies, demonstrating our continued success in diversifying this revenue stream. We believe our Capital Markets business will continue to be a significant contributor to our [ FRR ] growth over time.

Fee-related earnings for the quarter were $247 million, which grew 36% year-over-year. As Jon mentioned, on an LTM basis, our FRE crossed $1 billion for the first time in our firm's history. This is a significant milestone for TPG and represents a 31% annualized growth rate since our IPO. Our FRE margin was 44.3% in the quarter, which is a 620 basis point expansion from the first quarter of '25. As expected, cash comp and benefits were seasonally elevated in the first quarter due to a $15 million employer tax expense associated with the annual vesting of RSUs. We continue to realize the benefits of greater operating leverage across our firm and remain confident in our ability to achieve a full year 2026 FRE margin of 47%.

We generated $68 million in realized performance allocations in the quarter, exceeding the $50 million we had previously guided to. This was anchored by the strategic sales of OneOncology and Intersect Power. Looking ahead, while the current market volatility may impact the timing of realizations across the industry, we maintain an active pipeline of liquidity prospects across each of our strategies and expect to continue generating strong DPI for our fund investors. Moving to our balance sheet. We used our revolver to fund $500 million investment in Jackson common stock in connection with the closing of our strategic partnership in February.

We subsequently issued $500 million of senior notes and used the proceeds to pay down our revolver. Consequently, our interest expense increased to $26 million in the quarter. And as of March 31, we had $2.3 billion of net debt and $1.7 billion of available liquidity to fund additional growth initiatives. The seasonal RSU vesting, I discussed earlier, also generated tax deductions, resulting in an effective corporate income tax rate of 8.3% in the first quarter. We expect our tax rate to remain in the high single digits to low double digits until we utilize our remaining deductions. Altogether, we reported first quarter after-tax distributable earnings of $282 million or $0.70 per share Class A common stock.

Moving on to value creation in our investment portfolios. In private equity, fundamentals across our portfolios continue to be strong. While valuations for certain companies experienced multiple compression, reflecting broader public market valuation resets, underlying financial performance remains healthy. Our portfolio companies across our capital, growth and impact platforms generated LTM revenue and EBITDA growth in the mid- to high teens, continuing to outperform the broader market. During the quarter, the value of our PE portfolio declined 1%, reflecting generally lower average valuation multiples, partially offset by strong earnings growth.

Turning to credit. The performance of our portfolios across strategies continues to be strong, resulting in attractive returns relative to public benchmarks. Our credit platform appreciated 2% in the first quarter and 11% over the last 12 months. Digging a bit deeper, in middle market direct lending, we continue to see the benefits of our disciplined underwriting and our focus on the senior most part of the capital structure.

Our portfolio has maintained a conservative average loan-to-value of 42% at closing, and our borrowers continue to generate healthy organic EBITDA growth. As a result, nonaccruals remain extremely low at just over 1%, and our average interest coverage ratio has held steady at over 2x. Credit Solutions, we continue to deliver significant alpha by providing highly negotiated bespoke financings focused on senior secured cash pay instruments often attached to specific assets and collateral. In the first quarter, our second and third flagship funds generated time-weighted net returns of 2.4% and 6%, respectively. Both funds meaningfully outperformed the U.S. High-yield Bond Index, which was negative for the same period.

Our strong performance was driven by broad-based appreciation across our portfolios and the successful monetizations of several positions, including xAI, [ DISH DBS ] and Optimum Communications. Lastly, in asset-based finance, our portfolios are anchored by strong structural protections and collateral support across our high conviction investment themes. Our first ABC fund's net IRR since inception remains in the top half of its target range at 11.6% at the end of the first quarter. Our Mortgage Value Partners Fund generated net returns of 1.3% in the quarter, bringing LTM returns to 8.2%, outpacing many broader credit indices with significantly less volatility.

Our real estate platform appreciated approximately 2% in the first quarter and more than 8% over the last 12 months. These returns were driven by the continued strength of our data center, industrial and senior living portfolios in the U.S. and hospitality and office investments in Asia. Turning to our fundraising outlook. We continue to expect capital raising to exceed $50 billion this year. Following the $10 billion we raised in the first quarter, we expect our remaining fundraising to be weighted toward the back half of the year, driven by the following: In private equity, first, the completion of our TPG Capital X and Healthcare Partners III campaigns by the end of the year; second, final closes for our Rise Climate private equity funds, TRC 2 and the Global South initiative.

As of the end of April, we've raised $9 billion across the two funds and related vehicles, including capital that's been committed, but will close at a later date. We expect to complete our campaign in the third quarter. Third, continued progress across our climate infrastructure, GP Solutions, tech adjacencies, Rise, Sports and Asia growth equity funds. And fourth, initial closes for our next-generation funds for Peppertree and TPG NEXT. In credit, I would highlight the following: further commitments from our long-term strategic partnership with Jackson to our middle market direct lending platform, final closes for our sixth Twin Brook direct lending and second asset-based credit drawdown funds, an initial close for our fourth essential housing fund, additional closes for hybrid solutions, continuous fundraising across our evergreen vehicles, including Advantage Direct Lending and the formation of additional CLOs in various SMAs.

In our real estate platform, we continue to expect 2026 to mark the beginning of a multiyear major fundraising cycle. This includes the next vintages across our TPG Real Estate Partners, Asia real estate, Japan Real Estate Value and TPG AG U.S. real estate strategies. Finally, I'd like to share some thoughts on private wealth and our progress and priorities in the channel. Retail investors remain underallocated to the private markets with less than 5% penetration today and significant runway for future growth over many years. We view the near-term industry headwinds in credit retail vehicles as cyclical rather than structural and continue to see strong demand across the industry in private equity, infrastructure and secondaries with early signs of renewed interest in real estate as well. At TPG, we believe we are well positioned to grow in the private wealth channel.

I spend a meaningful amount of my personal time on our wealth efforts and the feedback I've received from distribution partners and financial advisers has been overwhelmingly positive. Our differentiated investment style and strong performance are truly resonating, and demand continues to grow for TPG's products. As a result, our private wealth inflows in the first quarter grew more than 130% year-over-year. Looking ahead, we see a clear path to accelerating inflows as we continue to grow with our existing partners and expand our distribution network globally. Earlier this week, in fact, we formally launched T-POP with an important new international distribution partner, which will begin contributing capital in June. And we have several additional distribution partners in the pipeline for T-POP in the coming quarters as we continue to strategically build out our global distribution footprint.

In addition to expanding distribution for existing evergreen products, we're actively working on launching new products, including a nontraded REIT as well as a multi-strategy credit interval fund. Similar to T-POP, these funds will provide investors with exposure to the full breadth of our investing strategies across each asset class. Overall, we expect our private wealth franchise to be a significant contributor to TPG's long-term growth. The strong financial and operating results we reported today, including crossing the $1 billion LTM FRE threshold this quarter are a direct result of our multiyear focus on scaling our investment platforms and driving meaningful operating leverage across our firm. As we head into the balance of 2026, we have clear line of sight into continued growth and margin expansion and creating meaningful long-term value for our investors.

With that, I'll turn the call back to the operator to take your questions.

[Operator Instructions] We'll take our first question from Glenn Schorr with Evercore.

With so much good stuff going on, forgive me, I'm going to pick at one issue that I can possibly find. So I'm curious if you could help us think through the marks in PE in the quarter. It seemed to be very focused on the 2020 and prior vintage, which is a good chunk of the net accrued. So the question is just how broad are those -- a few specific names, how broad it is? Obviously, we want to know if there's how much software related. And then how you feel about now with the markets up and these fresh remarks, how you feel the exit environment is for that piece of the portfolio? Very much appreciated.

Glenn, thanks for the question. I would characterize this, as I mentioned in my comments on the call, the overall private equity valuation change during the quarter was really driven by us choosing to take down our valuation multiples consistent with what we saw in the public markets. Like we always do in our valuation process, we take into account multiple factors. We rerun DCF analysis. We do look at public market comps, private market comps, transactions in the company's equity. And overall, I would characterize it as a broad-based decision to reflect market changes during the quarter, which as of March 31, we don't refresh that during the month of April because we value as of the end of the month.

Obviously, things have bounced back a bit during the month of April, but we did take multiples down broadly, and it was offset by very strong earnings growth. To give you a little more color behind that, in the TPG Capital portfolio, the overall impact of earnings growth was an increase -- would have been an increase in values by $1.2 billion. The impact of multiple reductions was negative $2.4 billion. So it really was strong earnings growth, offset by broad-based changes in our valuation multiples. In our growth platform, it would have been an increase of $600 million from earnings growth, offset by $1.1 billion of value decline from bringing valuation multiples down. So that's kind of the overall characterization of what drove the changes. Obviously, if market conditions continue to improve, we'll reflect those increasing valuation multiples, and it was company by company, bottoms...

Yes. I mean each one of these valuations is also company by company. And Glenn, the thing I just want to make sure I added here, I'm really excited about this portfolio. We live through different cycles, good markets, bad markets. This is a portfolio across private equity, I think we'd be excited about in any environment. And it's continued to perform very well. It's been very steady quarter-over-quarter. Some of those leading indicators, the software bookings, as Jon mentioned, actually are stronger still. The other thing I just would point out, we had two strategic exits in the context of the quarter, which were important, one to Google and one to Cencora. And both of those exits happened at premiums to our marks. So I think our track record of trying to be down the middle, but also create opportunities for upside around strategic exits is pretty consistent.

Our next question comes from Alex Blostein with Goldman Sachs.

I was hoping to dig a little bit more into the credit business and how it's positioned for current environment. We've seen accelerating fundraising from you guys there for the last couple of quarters. And to your point, the dry powder remains quite elevated. As you look out into the opportunities that are likely to present themselves in the next 12 months, which part of the credit verticals do you expect to be most active? And are there any implications on the fee rates we should consider as well because I think those do differ quite a lot by different verticals, like I think credit solutions tends to be a little higher, some others tend to be a little lower.

So kind of deployment outlook and the blend of that on the fee rates.

Thanks, Alex. Yes I think as you can tell from the quarter and our results, deployment opportunities have been healthy. And I think we continue to see that the case as we continue through the year. I would say that just to start with where you ended, looking at our Credit Solutions business, based on what we see going on in the markets overall, the increased volatility, there are areas where there's balance sheet stress in the market. There's much more dispersion in terms of how certain names in the credit markets are being valued.

And with the the interconnectivity, besides, obviously, the quality of our capabilities and our team in credit solutions with the interconnectivity that we have also across the firm, the connectivity with our private equity franchise, what we're seeing is opportunities being sourced on both the credit side of the house and on the equity side of the house that are providing really interesting financing opportunities for us in credit solutions. And I would say the pipeline of opportunities there has never been stronger. And we're trying to do exactly what you would expect we would do, which is to sift through what the opportunity set looks like to find things that are going to be the most interesting to us and that we choose to execute on.

You're right that, obviously, that tends to be with it being sort of a value-add part of the market, that is -- that obviously tends to be a higher fee construct pool of capital. But I think that overall, I think we're going to continue to see a lot of interesting opportunities there. And I would say that the -- we feel like we're in a category of very few firms in terms of our capability set there, both looking at historical capability and returns. And the -- in this environment, as our LPs are looking around for opportunities to deploy capital, where should they be shifting? I mean, I think that over -- between the fourth quarter of last year and the first quarter of this year, the conversations we're having with LPs, I would say, are distinct in the sense that people are really trying to find the areas where premium returns will be available in the market as a result of what's going on.

So I would say that the kind of questions that we're getting from our LPs is creating an increased focus on people wanting to partner with us to deploy capital in those kinds of opportunities. And then the second area, I would say, is in our asset-based finance business and in structured credit broadly. I would say if there's an area where I see the opportunity for us, both as a result of both our insurance relationships as well as large institutions looking to diversify exposures, looking to diversify exposures away from EBITDA risk. We continue to see that as a very substantial growth area for us across a number of different verticals in that space, whether it's whole business securitization, whether it's the residential mortgage market, nonqualified mortgage market, things like that. So I would say that those are the two areas where I would point you to.

Our next question will come from Craig Siegenthaler with Bank of America Securities.

I wanted to follow up on a comment you made earlier on the call relating to your software [indiscernible]. Jon, you talked about investing significant capital and specialized resources to ensure that these companies take full advantage of the opportunities that AI unlocks. Should we assume that this could include follow-on investments? And does that mean that Fund X could invest in a Fund VIII portfolio company? And then separate from your existing portfolio companies, what is your appetite to lean into cheaper public software valuations today and take privates over the near term?

Okay. I'm going to let Todd handle.

Yes. First, just on the more specific question, the way that we really -- unless it starts at the outset when we have an investment at the end of a fund life, we do not start to cross and come in from new funds. What we do at the end of a fund cycle is that we maintain reserves in order to be able to support companies for, hopefully, offensive and also for defensive reasons. And so we feel comfortable with the reserves we have and the funds that we have in the ground. I think your broader question is, do we see opportunities? And the answer is yes. We're very selective. There are a series of characteristics of things that we look for in software companies. And from our perspective, we have seen some really interesting opportunities.

So if you look at what we've done recently, just to give two quick examples and maybe give some color to that, both of what I'm going to describe are sort of fall in that carve-out and corporate partnership dynamic that has been such a rich area for us as a private equity franchise. The first is Velotic, which is essentially the merger of two carve-outs at very attractive multiples for market leaders in the industrial software space, something we've studied for years. It's a software space that's very closely integrated with operational systems and real-world workflows, which is -- makes it quite defensive. And we see a lot of opportunity from an AI application standpoint. These have been companies that really haven't got that degree of focus and investment that we have to your question about the resources we bring to the table, partnered with an A+ management team.

So those were two of the carve-outs actually that were completed in March. Another one we just finished carving out, we've owned for about a month. is Optum U.K. It's a health care IT business, again, playing to both our strength in software and health care. It's a data asset with a firm perimeter, so a clear data moat. It's deeply embedded across the U.K. health care system. Again, we've owned it for about a month. We've already launched our first AI-based product. Both of these businesses are very defensive. We feel comfortable and excited about the entry multiple, and we have great teams to drive them. So we feel like there's a lot of opportunity out there.

Jim Coulter, Craig, I'd just note also that having watched disruption cycles over time, what's interesting to me about this one is that the early discussion has been all on defense, which is probably appropriate. But I suspect about 9 months from now, there's going to be a shift in tone to the second question you asked, which is where can firms like ours play offense on AI.

I personally believe this will be the most positive weapon that we've seen in a long time in private equity because we are, and particularly at TPG, we are change agents, and this is going to be a great opportunity for change. So I suspect we'll be talking about defense for the next 3 to 6 months. By the end of this year, I think we'll probably be talking about offense and which firms can play that in this environment.

Our next question comes from Brian Bedell with Deutsche Bank.

Maybe just to shift the conversation a little bit back to the impact franchise. I appreciate your comments, Jon, on the need for higher -- with the higher electricity demand given the AI data center build-out. Maybe if you guys could comment on how you see this playing out over the next 1 to 2 years, both on the data build-out and also the supply chains that you mentioned that's distressed from geopolitical issues and the stress on fossil fuels and whether you see this as being a re-acceleration of the energy transition theme? And then how can you position TPG to benefit from that, specifically on deployment and then also more fundraising within the climate franchise broadly?

Thank you for that question. It's Jim Coulter. We haven't touched on this for a few calls. So it's probably a good time to check in because it's been both a fascinating and quite positive period in particularly the climate portion of our impact platform. As Jon mentioned, fundraising has picked up after what was a natural pause in the middle of last year. And we're over $11 billion now fund cycle versus a fund cycle last time of $7 billion, and we're heading towards our final closes. But what's more interesting is what's happening on the ground because while the discussion of decarbonization has gone down, maybe crowded out by other concerns, climate has gotten worse and the actual activity has gone up.

Spending was up quite substantially globally. And even in the U.S. last year, as we talk about electricity, over 90% of the electricity addition was renewables, and it should continue in that direction for the next few years. And it's not just about decarbonization, it's obviously about electrification. And as you think about energy, fossil fuels are advantaged for heat, renewables are advantaged for electricity. And finally, energy security, the Strait of Hormuz may be bad for many things, but it's good for our business here, which is people are concerned about their -- on the climate side because people are concerned about their energy supply chain and renewables is one way to address that around the world.

So if you take that into our business, if you look at our last year, in spite of the lower discussion of this part of our business, it was our biggest deployment year and our biggest realization year. And if you look underneath that, you find quite interesting activities of $6 billion data center initiative with [ Tata, ] India, a $5 billion sale of our digital power business to Google. At the same time, we're launching the largest battery project in the world in California, grid services at Pike. So a real pickup, I think, overall in what's happening in the business and a pickup that I think should accelerate in future years. So we have a product that's on the right side of this trend and frankly, on the right side of carbon, which long term, I think, is a good place to be.

And I think that will bode well. Our clients have figured that out also. The private market has figured that out. And it's interesting, the public market has figured that out. A lot of discussion in the MAG 7, but the Clean Energy Index absolutely [indiscernible] the Mag 7 last year. So this kind of activity level, I think, bodes well for the future with the understanding that these markets are always fascinating and complex.

Our next question comes from Ken Worthington with JPMorgan.

So it was a good deployment quarter. Transaction fees and capital market fees were strong this quarter. You've got some pretty big deals in pipeline. I think Hologic just closed, Curium, VM, kinetic. How should we think about some of these bigger deals translating into capital markets and transaction fees as the time comes?

Ken, it's Jack. Look, as you know, the translation of deal flow into capital markets fees will be deal dependent. On larger deals, we're more likely to use the syndicated loan markets, which don't translate quite directly as through to us placing the entire debt capital structure. On Hologic, we did play an important role, but it was a more broadly syndicated debt capital structure.

We do, as I mentioned on the call, continue to believe that capital markets is a real business that we continue to build. We've built it across the entire firm. We're just starting to see the benefit of that in areas like the credit business. So there's like kind of a long-term growth trajectory to that business, Predicting in one quarter is hard. We don't have visibility into a quarter like Q4, where we had a massive quarter based on a handful of very concentrated large deals, but we do have visibility into continued long-term growth of that business.

Okay. So nothing to call out for 2Q? No.

Our next question comes from Brian McKenna with Citizens.

Okay. So what are you hearing from your larger LPs as it relates to your lower middle market direct lending strategy. Performance at Twin Brook remains quite healthy and differentiated. TCAP returned 2.5% net in the first quarter, 10.5% net last year. So I'm wondering if there's a -- if this differentiation is starting to accelerate institutional flows into the strategy?

Good question. The answer is yes. I think that -- and I think the performance combined with the fact that we -- one of the interesting aspects of the market over the last several years is that there's been very little dispersion within the lending space, whether or not you're looking at upper middle market or lower middle market. And it's been sort of very consistent, steady and spreads generally quite compressed in the market. We're starting to see that change. Portfolios are not all acting the same. And as a result of that, we're seeing differences in terms of how we're performing relative to perhaps other pools of capital.

And so as a result of that, it goes back to -- I think I mentioned it just briefly before, the conversations that we're having with our institutional clients are all focused on how to think about diversification across the space. And I would say that this -- the dislocation to the extent there's been some dislocation and nervousness about certain parts of the market, I think that has woken up a number of institutional LPs to look at their allocations and think about diversification and what parts of the market haven't they paid as much attention to. And naturally, lower middle market is now getting more attention as a result of that.

The structure of the business, as I mentioned in my comments, is quite different. In the upper middle market, you're competing essentially -- upper middle market direct lending is competing directly with banks and broadly syndicated loans. Our business does not compete with banks. In our business, we also are usually the only lender or certainly the lead lender. And as I mentioned in my comments, we're also controlling the revolving -- the revolver within the context of the relationship. And so that gives you certain advantages in terms of understanding what's going on inside these companies on a real-time basis. So our clients are really figuring this out. And we're seeing quite a bit of interest in the space, and I think it's going to continue to grow.

The other thing, I guess, I would say, which is important in terms of the dynamics of the flow is that, again, a substantial portion, almost half of our flow is internally generated by the existing portfolio in terms of add-ons. So that's also when you think about a risk-controlled way of allocating capital, you know your portfolio, obviously, intimately well and have relationships with the sponsor.

So as a result of that internally generated flow, the risk dynamics of how we're allocating capital also are slightly different. So I think it's an area where we've got clearly increased interest. You also are seeing the -- on the BDC side, you're also seeing differentiation there now, just by virtue of the flows that I talked about as it relates to TCAP you're also seeing differentiation in the market there as well. So we're very encouraged by what's happening.

Our next question comes from Mike Brown with UBS.

I believe you guys have exposure to some of the large AI LLM companies in your private equity portfolio, some of which could be candidates for the public markets over time here. Can you maybe just outline where those positions sit from a fund perspective? Is it the growth or maybe tech adjacency fund? And how those are currently marked and maybe how you would think about that realization strategy and pacing if and when some of those companies ultimately go public?

Yes, absolutely. Thanks for the question. We have, as you said, a portfolio of AI-focused companies, and they are primarily in our tech adjacency fund in T-POP. They include Anthropic and OpenAI and SpaceX. We have a few other investments that we've been doing a lot of work on that would end up in capital and hybrid. So it actually -- it's a pretty broad exposure across our private equity platform. And our view is that's been great, not only for the investments, which continue to move in the right direction for us, but also for the connectivity to all the OpenAI players, which has been very helpful for us, both in creating opportunities and engaging with our own portfolio companies and building our own expertise.

So I think that will continue to be a vibrant part of what we're doing, and it certainly helps that we have our team on the private equity side based in San Francisco. And then on the exit front, I think it's hard to tell -- of course, we're not in control of a number of those companies. So you're reading the headlines won't be that much different -- that different from what we know. I do think that we should expect somewhere between 1 and 3 of the large companies to go public over the course of the next year to 18 months and probably 1 or 2 of those in a shorter time frame.

Our next question will come from Ben Budish with Barclays.

I wanted to ask about some of your upcoming fundraising and thoughts on what the sort of distribution environment means. Over the last few years, there's sort of been an increasing trend towards flagship fundraisings taking longer, smaller first close, bigger final close. I'm curious, near term, it sounds like you've got pretty good line of sight, but how are you thinking about the potential cadence of the real estate funds, which you indicated are about to come back in size and be raising over the next couple of years?

How does LP appetite look like -- look for that asset class? And what sort of macro factors should we be looking at that will inform whether or not we get back to a more normal fundraising cadence or what we've seen lately, the sort of elongated cadence?

Well, let me just comment on the real estate part of it. Maybe then Jack could give a little color on sort of the kind of pattern of fundraising. But on the real estate front, we've talked now for probably the better part of the last 1.5 years about both the kind of kind of the renewed interest that we're seeing from institutional LPs in the asset class. We've been in a fortunate position that we've had quite a bit of dry powder in the space. And as a result of that, have been pretty active in terms of taking advantage of opportunities that have been created as a result of the interest rate cycle that we went through and some of the other dislocation factors, whether it was COVID and the dislocation in office and then obviously, the spike in interest rates. That created a dynamic where there were a lot of assets that were frozen.

There were a lot of managers, I think, in the space that basically were kind of handcuffed in terms of their ability to be proactive. We have fortunately not been in that position. So as a result of that, the last -- I'd say the last year plus, we've seen some of the best opportunities that we've seen in a very long time. And we see a sort of a structural shift in the market in terms of the competitive dynamic as well as who has capital to solve problems in the space. I mentioned in my comments a couple of really interesting deployment opportunities that we've had, for instance, things like grocery-anchored retail, where we've made a big investment, opportunities that we see in Asia, Japan, as an example, with office and hospitality.

We're seeing global opportunities across the space. And as we've begun to roll out our fundraising progress in our opportunistic fund, in our Asia fund, our net lease fund, I think we see significant increase in interest across both the high-return opportunistic space as well as what you would think of as kind of income-oriented opportunities in real estate. Jack mentioned briefly in his comments, some -- the beginnings of what we see as retail demand in the space as well, not surprising that some form of real assets that generate income would be interesting in this environment. So I think we're quite bullish, knock on wood, that these fundraises are going to be -- we're going to get very strong reception in the market.

Yes. And alongside real estate, I would think about Peppertree, the infrastructure business focused on cell towers, where a lot of the same dynamics exist and we've launched the next-generation fund from Peppertree and are seeing equally strong demand there. When I talked in my comments about the backloading of the remainder of our fundraising for the year, I'd say there are really two things behind that. One is that most of these -- most or all of the real estate and Peppertree fundraising that we're talking about is really going to have closings for the first time in the back half of the year. So that's going to be a natural kind of kicker to fundraising in the back half of the year.

The other dynamic is the barbell effect in private equity. We continue to see very strong demand. I think you asked about realizations. We continue to be differentiated with LPs in our consistent production of DPIs. That's not a limiter for us in demand for investing with us in private equity. We did have an unusually successful start to the TPG Capital campaign. With TPG 1 and Healthcare Partners raising over $12 billion last year. The remainder of that fundraising, we have good visibility on, but it's going to have the natural typical barbell effect, where the remainder of the capital chose not to come in the first close because they want to come in towards the later end of the close, which will be the back half of this year.

Our next question will come from Steven Chubak with Wolfe Research.

So I wanted to ask on AI risk across the broader portfolio. You spoke of the comprehensive review of the software book, noted the vast majority of the portfolio companies in software are arguably beneficiaries of AI. But just wanted to see if you've done a similar review assessing AI risk across the broader private equity portfolio beyond software. And just given the negative PE marks that you noted were largely attributable to changes in multiple versus any signs of deteriorating fundamentals, whether that change was a function of multiple contraction in the public markets or just internal expectations for EBITDA growth to potentially moderate across the broader portfolio?

Yes. Just to start on the last part of your question, it was distinctively just the public marks coming down and us feeling like you need to flow those through. As Jack pointed out, that was -- the end of the quarter was a particular low point, at least recent low point in the market. But it was -- there's no change in our view of the prospects for these businesses. And in fact, again, there's some leading indicators that feel like they picked up. To your broader question, we have done a systematic review of the risks in and outside of software. Software does feel like the area that's most exposed to AI. When we look across our private equity portfolio, the TPG Capital business is the one with the most software exposure.

As we told you before, we sold everything in TPG VII in the 2015 vintage fund. So there's -- all the software businesses are out of that fund. TPG IX and X is a very -- those are two recent portfolios. 10 is really just being built. We feel very good about those portfolios. The businesses are really well positioned relative to AI. That was a core part of our deal underwritings in all of those cases. So it leaves us with TPG VIII. As a reminder, we've now returned half of that fund in cash. And of the remaining value of $13.7 billion, I think our work showed us that we had 7% that we would characterize in the mitigate category where we do perceive some material risk from AI.

So we're, of course, supporting the companies in the mitigate category. We see a lot of upside in the broader portfolio in that fund. In fact, over 60% of that fund is in what we characterize as outperforming strong momentum. And within that group, we see a number of companies that we do believe have breakout potential of the upside. So in any event, that's how we've done our work as it relates to AI exposure.

Our next question comes from Arnaud Giblat with BNP Paribas.

A question on FRE margin guidance. Given the strong fundraising pipeline you have, the deployments and the likely impact on positive development on transaction fees and considering the fact that cost just grew 5% core year-on-year this quarter, I'm just wondering how I square this up with your 47% guidance for FRE margins. Is there something to be aware of in terms of cadence of cost growth? I'm just trying to reconcile the potential upside I see here.

Yes, thanks for the question. Look, we've been consistent in talking about the fact that we are going to drive FRE margin expansion over time. We are going to keep investing in our business, too. We're going to keep -- we see lots of areas that we've talked about on the call that we're investing behind growth.

The other thing I'd point out is assuming we hit our 47% margin target this year, it was 45% last year. It was 40% on a blended basis when we closed the Angelo Gordon acquisition. And the 45% margin last year had that unusually strong fourth quarter with the transaction and monitoring fees driving FRE margin up to 52%. So a 47% margin this year, I think, would be very healthy and would reflect continued operating leverage.

Our next question comes from Bart Dziarski with RBC Capital Markets.

Just wanted to ask around the fundraising outlook. So you maintained your sort of $50 billion plus guide, gave lots of color on the back half ramp and the products that will drive that. But I wanted to ask more around from the client perspective, like are there any geographic regions that are driving that? Is it re-ups, share of wallet expansion, new LPs? I would love additional color on that front with regards to fundraising.

Yes. I'll start. It's Jack. I wouldn't call out anything notable in terms of changes in mix. We've got, as you know, a very broad and deep set of institutional clients. And the same geographic mix we've experienced in prior funds, we see about the same in the current set of funds. I mentioned private wealth. Private wealth will be a part of that. It will be a bigger part of it this year than it was last year, but it won't be a main driver. This will still be driven primarily by our large institutional relationships around the world and by our effective success at cross-selling and doing more across businesses with our biggest relationships.

The only thing I would add is that we have talked over the course of the last year plus about the growing number of strategic partnerships that we have, large strategic partnerships with institutional clients that have been partners of ours for a long time. And we've talked also about the fact that we continue to see the largest pools of capital in the world wanting to do more with fewer and selecting us as a core institutional partner.

And in a number of cases, we have created strategic partnerships where we have, to some extent, I would say, enhanced visibility in terms of their partnership and their intent to partner with us across a range of strategies. And so that also is a growing source of confidence as we go into these -- as we go into periods where, obviously, there's volatility in the world, et cetera. But I would say that, as Jack said, it's not a mix shift, but it's helpful that we're a partner of choice for the largest pools of capital in the world and they want to do more with us.

Our next question comes from Michael Cyprys with Morgan Stanley.

I wanted to ask about AI. I was hoping you could update us on how you're deploying AI across the firm today, where it has meaningfully materially improved your processes? What sort of ROI you're seeing? And if you could talk about some of the use cases that you're looking to put into production over the next 12 to 24 months?

Thanks, Mike. Well, a couple of things. I mean, I think we have had for a while now, and I think we've communicated this when we have a group of engineers and a team within our tech group that has been developing tools that have been rolled out systematically to the firm. built on some of, obviously, the large language models, but customized for what we're doing here at the firm. We have very high engagement across the firm in terms of productivity tools, probably something approaching 80% of the firm now is using -- are using these tools on an active daily basis. So that's obviously a productivity tool, and we're strongly focused on continuing to train people to use those models very effectively.

So we have coaches that are roaming around the firm actually helping people figure out how to be more productive. The second thing I would say is that within our services organization, we are beginning to look at our -- we're beginning to look at headcount, if I can use that term, both on a kind of a human and also a agentic basis. And where are there opportunities for us to enhance productivity and in some cases, limit headcount growth as a result of using AI agents in certain seats to do functions that we think currently we can do in an accurate and effective and efficient way. And so that's already part of our planning process as we continue to think about our use of the tool.

I think the other thing, and Todd alluded to this before, is that we have -- remember, we're -- our firm in many respects, is centered in San Francisco. We are basically walking distance from the large LLM companies. And we have invested in them. We have ongoing important relationships with them, which will probably end up creating -- you'll probably see us creating ongoing types of -- some ongoing interesting partnerships with a select group of those companies.

And so I think we have very good access to understanding how to engage and use the tools and also get the resources, frankly, because resources are, in some respects, the scarce commodity right now in terms of engineering talent or people that really understand how to implement enterprise engagements in these models. And I think we feel like both doing that internally here as well as for our portfolio companies is something that we feel we're very well positioned to do.

Operator?

And it appears that we have no further questions at this time. I'd like to turn the call over to Gary Stein for any closing remarks.

Great. Thank you all very much for joining us today. If you have any follow-up questions, please feel free to reach out to the Investor Relations team. Otherwise, we'll look forward to speaking to you again next quarter.

And that was Gary Stein.

Ladies and gentlemen, that will conclude today's call. Thank you for your participation. You may disconnect at this time, and have a wonderful rest of your day.

Thank you all for joining us, and welcome to BofA's 35th Annual U.S. Financial Services Conference. This is Craig Siegenthaler, North American Head of Diversified Financials at Bank of America, and I'm pleased to introduce Jack Weingart.

Jack is the Chief Investment Officer of TPG and joined TPG back in 2006 and prior to his appointment as CFO, he was a co-managing partner at TPG Capital since 2017. Jack is also the Board of Directors of Viking Holdings and previously served on the Board of several private companies, including J. Crew, Chino and Chobani. Jack, thanks for joining us.

Thanks for having me, Craig.

So TPG was founded -- I have here 1992, but the legacy was sort of before that. So officially, was it '92?

The founding of TPG was '92. Obviously before that, David Bonderman and Jim Coulter, we're managing the Bass Family Office down in Texas. And that was really the roots that dated way back before '92.

Okay. So I saw the '92, and thanks for clarifying that. I thought it might have been a mistake at first. But -- so it went public in 2022. It's a leading global alt manager with about $290 billion in AUM. The firms, roots are in its West Coast-based offering and its family office heritage, as Jack just shared. Maybe just starting with earnings because you just reported 4Q '25 earnings on Thursday. For those who haven't had a chance to see the results or listen to the call, what were the highlights were the key takeaways in the call?

Sure. Well, first of all, if you missed it, it's not your fault. We pulled a fast one on you. We were planning to announce yesterday, Monday, and with some of the questions in the market being raised about software exposures and some of the reactions of our stock, we were getting questions last week from shareholders and analysts saying, what can you tell us? Of course, our answer was nothing because we're in a quiet period.

But we thought rather than wait until Monday, we would accelerate and announced on Thursday of last week, which is what we did. So on the call, we talked about the quarter and the year last year. We also wanted to be -- to proactively address some of the questions we were getting. And the short answer on the software side, is that about 11% of our total AUM is in software. And that breaks down 2% in credit, so almost no exposure in credit and about 18% of our private equity AUM is in software companies.

And then we spent a fair bit of time on the call, and I encourage you to listen to it or look at the transcript, talking about how we think about investing in software in the private equity business as control investors who are trying to use things like generative AI and a lot of other ways to help our companies improve what they're doing and how we see the portfolio breaking down between those who might benefit from utilizing generative AI to grow more efficiently or more effectively. And those might be more at risk.

And I'm happy to talk about more about that. But that was one of the topics that we addressed on the call. The other topic was the purpose of the call, which was earnings. And we had an excellent year last year. We called it a breakout year on the call. We raised about $51 billion of capital, up from $30 billion in the prior year. So about 70% increase in fundraising. We had set out the year saying our goal was to raise substantially more capital in '25 than we raised in '24. We hadn't forecast a 70% increase, but we were pleased with really every element of the engine firing well on the capital raising side last year.

Likewise, on the investing side, we had an excellent year of investing, deploying about 50 -- a little more than $50 billion on the deployment side as well. FRR grew to $2.1 billion. FRE grew for the year to about $950 million. And as you mentioned, we went public in 2022. At that time, our LTM FRE was a little more than $300 million. So it's been a substantial period of growth for us. And I would say during the course of the year last year, our momentum accelerated. So Q4 was the strongest quarter of the year and really a record quarter for us in a lot of respects.

Great. Well, congrats on that growth. You have grown very quickly since the 2021 IPO, and you're well positioned for multiple secular themes. Now looking forward, what is the growth outlook today? And how much of a role were your flagship -- your flagship funds play versus product innovation and things we haven't seen yet.

Well, if you think about the journey we've been on, which you've been -- had a front row seat to, when we went public again 4 years ago, about 80% of our AUM was in private equity. And we talked openly at the time about one of the reasons we were going public was to create a public currency to create a balance sheet to use, to expand our business into new asset classes to get back into private credit to expand what we do in real estate to grow into infrastructure.

And today, a short 4 years later, about 50% of our AUM is in private equity. And that private equity business has grown substantially. So we haven't shrunk our way from 80% to 50%. We've been growing. We've been growing in other asset classes even more quickly. So almost by definition, the answer to your question is our growth going forward will be less reliant on the big flag ship fund and more diversified.

And I talked about that on the call that over time, the growth of our business into new asset classes. The growth of the credit business we bought from Angelo Gordon into a much larger and broader business than it was even when we bought Angelo Gordon just a couple of years ago gives us now a much more diversified platform with less reliance on kind of the cyclicality of large private equity flagship fund growth and more diversified growth.

So think about a much bigger base with the same growth opportunity we have for our existing businesses that we had at the time of IPO with just a lot more existing businesses. The other thing I'd say is in addition to expanding our existing -- at IPO, we talked about our growth having kind of a horizontal component and a vertical component with the vertical component being, take what we're doing and expand that each business the horizontal component being expanded in new asset classes, both inorganically and organically.

We've had a long history as a firm of successfully growing organically. Taking what we're doing, seeing a new market opportunity, we think we had a right to win in and building a new fund with a new team and expanding in that category. We've continued that organic innovation, whether it's growing into the GP-led secondaries market, expanding into hybrid solutions with the Angelo Gordon team. Now with the credit platform growing into areas like investment-grade asset-backed finance, growing into a different part of the direct lending market from what Twin Brook has done historically.

So through that, the historical -- the horizontal axis has grown significantly. We still have horizontal room to grow and we have vertical room to grow across a much bigger x axis, if you will. The only thing I'd add to that is, in addition to assets class-driven growth, there's kind of channel growth. So we, as you know, have been very focused on expanding our worldwide insurance clients and expanding our private wealth business.

Great. Let's talk on your strategic priorities for a moment. Can you update us on what they are for 2026, including a refresher of the targets for fundraising and FRE margin?

Sure. Actually, the strategic -- before I get to the financial targets, I think about the strategic priorities being very aligned with what I just talked about as our growth pillars. What I mean by that is scale existing businesses, finish the campaigns we're in the market with right now and generate fund over fund growth like we have consistently across our businesses. We're in the business -- in the market with our big new flagship buyout fund, TPG Capital 10 and Healthcare Partners III. We had kind of accelerated success in that fundraise.

Last year, I would say, but we have more work to do to finish those fundraises this year. And that's true across a number of existing funds. So complete existing fundraises successfully continue to launch and grow and scale new businesses. And on the channel side, drive continued success on the private wealth side, and continue to expand in insurance and then continue to consider inorganic opportunities as appropriate. Translating that to targets that we articulated on the call, on the capital -- on the fundraising side, again, we had grown from $30 billion of fundraising in the prior year to $51 billion last year.

And I made the comment that we don't consider that to be a cyclical peak. To your question on reliance upon kind of the cyclicality of large flagship fundraises, we feel like we've gotten now to this diversified base that I talked about, and we've hit on the level of fundraising. And despite the fact that we pulled forward demand into things like the TPG Capital campaign, that became more loaded towards last year than this year. We expect this year to be another robust year for fundraising. Raising another in excess of $50 billion, again, up from $30 billion just 2 years ago.

When we went public, we wouldn't have had that consistency. So over $50 billion of fundraising this year. And then on the FRE margin side, we've been very focused on kind of systematically increasing our margin since IPO, the FRE margin. And we've been successful since IPO, we've expanded our FRE margin about 800 basis points. We do see continued opportunity to generate operating leverage through the growth levers that I talked about. Despite the fact that we're continuing to invest in building our team, building our private wealth business, building out new capabilities like expanding our asset-backed finance business, building our fundraising team. Despite those investments in growth, we do expect continued FRE margin expansion. Our margin last year was 45%, and we expect a margin this year about 47%.

So let's stick with fundraising. Several of your big capital and climate funds in the market right now. Also, many credit strategies are also fundraising apparel and also real estate. So what segue do you think investors are underestimating from a fundraising standpoint, as you continue to grow these platforms?

I don't know about who is estimating what, but I would just -- I would tell you that just to give a little more color behind the $50 billion last year, $50 billion this year. Last year, if you leave aside things like SMAs, which we're doing more with our biggest clients, we were in the market last year for about 25 different products. We'll be in the market this year for about 35 products. So even relative to last year, less reliance upon larger campaigns and more diversification across businesses.

The -- I think it's kind of well understood last year was a particularly strong year in fundraising for us on the credit side, right? We raised more than $20 billion for our credit businesses of the $50 million. So I think our ability to scale the TPG Angelo Gordon credit businesses, I think, is now pretty well understood. And we'd expect this year to be another robust year of credit capital raising. I think our ability and success at raising and deploying capital on the private equity side is pretty well understood. I think if there's an area that the biggest new entrant to our fundraising campaigns this year and maybe one that's not quite appreciated yet is our real estate business.

We'll be in the market with at least four different real estate funds. During the course of the year this year. And our real estate track record is very, very strong, and we're already early dialogue with LPs, seeing really strong support for us to grow fund over fund in real estate just like we have in private equity inlay.

So let's talk about realizations now. Over the last few years, the realization backdrop has been challenging for both private equity real estate due to several headwinds. Do you see this environment changing this year with the expected pickup in IPO and M&A? And how does this also impact when you bring it down to the TPG level?

Well, I guess our lens is a little bit different on realizations than some in the market. I mean you know from following us closely, Craig, we've been very systematic about our approach to driving realizations. If you look over the past 5 years, we probably averaged 25-ish billion of realizations every year. And that was across different mixes of businesses. We did spike in 2021 when the market was more focused on driving new investments. The accelerated deployment environment in 2021 in a 0 rate environment, a high multiple environment.

At that moment in time, we were significant net sellers. We just took a point of view that those multiples would not be sustainable, and it was a good time to crystallize gains in our portfolio. So we sold, for example, in Fund VII, which was our mature private equity fund at the time, we sold every software company in the fund by the end of 2021. Since then, we've been systematic about realizations. We hear all the time from our LPs, that we're one of the most consistent generators of DPI for them.

So having been a consistent seller, we have -- we do expect this year if market conditions stabilize a bit to be a pickup from last year, but it won't be as much of a pickup because we've already been consistent over the years.

Okay. Let's talk about your insurance business. Earlier this year, TPG announced an insurance strategy partnership with Jackson Financial to establish a long-term investment management agreement. Can you comment on why Jackson was the right partner for TPG in your first major push in the insurance channel?

Yes. I guess I would step back and say it's not really our first major push in the insurance channel. It's our first kind of structured partnership. But if you look, one of the real opportunities you saw when we acquired Angelo Gordon was to expand our business with insurance clients. And we had -- I know personally from having relationships with many of them since I joined the firm 20 years ago. We have a great set of insurance relationships on the TPG side, by definition, because most of what we've done in private equity, we can only address a small part of their book if we're investing private equity.

A much bigger part of their book is invested in credit with a leaning toward investment-grade credit for obvious reasons. So with Angelo Gordon, with their ability -- with our now ability to invest across private credit from direct lending to asset-backed credit, which we used to call structured credit to credit solutions to CLOs. We've got a great tool kit to expand what we're doing with our pre-existing insurance relationships. And that's already been happening one relationship at a time, one insurance client at a time, through SMAs, through rated node structures, through lots of different kind of capital structure capital-friendly access points for insurance clients.

So we had taken our insurance business up by a multiple -- by multiple factors. Before announcing Jackson, now we also had -- just like we were relatively clear in articulating an IPO, or desire to acquire a credit platform. We also have been pretty clear about our desire to -- our willingness to entertain structured relationships with insurance clients. Lots of that has gone on in the industry. It's ranged from asset-light SMAs to equity swaps to create alignment to full acquisitions. We also have been pretty clear that preference was to maintain a balance sheet-light approach and not to acquire an insurance company in its entirety.

We wanted -- if we were going to announce a partnership like the Jackson partnership, we wanted to find a partner who was looking for what we do well, be a great investment management partner for them, someone that we could partner with to help them succeed to create a real win-win between the two of us and to do it in a balance sheet light way, not balance sheet zero, but balance sheet light. And we had known Jackson for quite a while at the top of the house. their CEO, our CEO, gets to know each other through looking at deals together, lots of different dialogue. And that just kind of naturally strengthened over time.

And it turned out, Jackson is very focused on growing their fixed annuity business. They're creating a reinsurance business alongside what we're doing with them. We can be a very powerful investment management partner with them to help them enhance the returns in their book to drive that business. We use some of our capital to help invest in Jackson equity with $500 million that they can use to help capitalize that new vehicle. And in return, we got a very long -- very long duration, very high-quality investment management agreement that starts at $12 billion, we scale to that over time with a the potential that, that can expand to $20 billion, which is just the right size for us.

It gives us long-term visibility into guaranteed FAUM. The initial focus is on direct lending and investment-grade asset-backed finance, which are both areas that we feel like we can grow substantially from what Angelo Gordon has done historically. So it gives us a great partner to grow in that area.

Jack, let's move into the private wealth channel. You've had a very successful launch of T-POP last year. So maybe talk about how that's gone? And then maybe also share with us what is your strategy? What's next for that channel?

Sure. This one is near and dear to my heart because in addition to continuing to be the CFO of TPG, I've been -- I am the CEO of T-POP, having spent my whole career around the private equity business at TPG and seeing over the years, we had been placing kind of one closed-end fund at a time with the private wealth market. And when you -- when that's all you're doing, you're kind of episodic in your engagement with the channel you're offering kind of one fund every 3 years. And it's -- and the cumbersome nature of having the capital drawn down over a 3- or 4-year period as we invested and then returning capital once we start selling companies, is an inefficient way for individual investors to invest in private equity.

So we felt like we have this very strong, high returning, importantly, diversified set of private equity businesses at the firm, we built over a 33-year -- a 33-year period. Our goal with T-POP was to create a single access point for individual investors to invest with us across everything we do in private equity in a fully funded vehicle. So -- and to enable that, we spent the better part of a year creating a seed portfolio on our balance sheet and then transferred that portfolio in as we begin accepting inflows, which we did in June of last year with really just two anchor partners on the private wealth side who wanted to be our initial partners in that business.

We've added one international private bank since then. And just across that relatively limited distribution strategy, by the end of January, we've raised about $1.5 billion, which is quite a strong start. And I would say we're still relatively early in our penetration of those initial partners. So going forward, we'll be expanding those and adding additional distribution partnerships to T-POP. We've got three to five already lined up for the year this year, with kind of a weighting toward international distribution.

So we're very optimistic that T-POP with this strong start also had various turns in the early months of the launch. We've got a long way to go in growing that product. But equally importantly, it's been really important to the establishment and growth of our brand in these partners financial adviser -- in the financial advisory community with these partners.

If you take the two anchor partners of ours, we're doing business now with multiples in a number of financial advisers as we had ever worked with in the 30-year history of our firm. because the product we've created is so much more accessible to a bigger universe of their clients. So that is now creating a foundation for us to grow off of, not just by growing T-POP but by expanding across asset classes. So again, I think on our earnings call, I mentioned a multi-strategy private credit interval fund and a non-traded REIT would be kind of the next two pillars in our product suite, which would kind of think about a credit interval fund looking a little bit like T-POP in private equity does for us, kind of feeding off of everything we do in private equity.

Credit interval fund would co-invest with us across the asset classes that we invest in, in private credit and deliver a yield vehicle with the same kind of seating approach the same kind of ease of access across this broader base of advisers who now kind of know and trust our brand.

So Jack, it's been 2 years since you've closed Angelo Gordon. How has your credit -- your real estate business evolve kind of to date? And also what's next for that business?

Well, I talked about this a little bit. think about that horizontal access and vertical access that I talked about. The first step after acquiring Angelo Gordon as we talk to their portfolio managers during the decision, we all came to about whether to partner together. The biggest thing we heard was we are opportunity rich, and capital starved. Because their fundraising team wasn't keeping up with their -- the opportunity they saw in the marketplace on the investing side.

So the first step, the first opportunity for us. We said, we think we could help with that. We've got a pretty good LP presence in the market, and we see a lot of our bigger LPs looking to allocate more capital to the private credit space. And as it turns out, we only had a 10% overlap between RLPs and Angelo Gordon's historic LPs. So we had a real opportunity to help them scale their existing businesses, keep doing what they're doing, but raise more capital to fund the growth of their existing businesses. And I'd say we're midstream in that. We definitely took a step function changed. When we raised $20 billion last year, most of that went to fund their existing businesses. The next step for us is more -- is both horizontal and vertical, but we've announced two new businesses that we're creating off of the chassis of Angelo Gordon.

One of those elements that chassis was the structured credit business. And everything we did in structured credit prior to the acquisition was targeting higher return portions of the market. Think about a 10% to 13% kind of return category. So none of that capital was going into the higher-rated portions of the market, the investment-grade space being the biggest, most scalable portion of asset bank finance that we didn't play in at all. We created a lot of it and held the junior pieces with a higher return profile and sold off the investment-grade pieces to others in the market. So why shouldn't we develop a capital base to hold those opportunities that we were already sourcing.

So that's where Jackson comes into play. That's where the other insurance clients we're working with come into play, take the structured credit, asset-backed finance business and expanded horizontally across a bigger risk return spectrum. The other business we announced on the earnings call was what we're calling TPG Advantage Direct Lending. So focus on the direct lending business, what Angelo Gordon had done historically was their business is called Twin Brook, and it's an exceptionally strong, very well-positioned business in the lower middle market. We lend to companies with less than $25 million of EBITDA.

It's kind of what direct lending used to be, lending to smaller companies who can't access the syndicated loan market and getting paid more for that. Of course, it requires good credit underwriting. But with that comes much more control, one or two financial covenants and every loan, controlling the revolver, being the bank to that company. But because of that focus, what would happen would be that the most successful companies that Twin Brook would lend to, maybe they start with $20 million EBITDA and grow to $50 million, $60 million of EBITDA, and that sponsor would sell the company to the next owner.

And we have Twin Brook has the incumbent lending relationship. But walks away from the relationship because it's no longer part of their defined universe that they lend to. Nobody has gotten bigger, the terms of the loan change and they walk away. So we've got this great incumbency with an inherently positively -- positive selection bias universe of companies, because of the ones that have grown most effectively to grow out of our target lending range. So we think about creating a direct lending business that sits right on top of Twin Brook and build our direct lending business. Much like in structured credit, we're building across a bigger swath of the market. Same thing is true on the direct lending side. So that's how we've been thinking about evolving and growing and strengthening the already strong credit business that we bought is both horizontally and vertically. And there's more to come.

Great. Well, let's hit a private credit. We got a lot of media attention last year even though U.S. GDP growth was pretty solid. Credit quality also look stable-ish across the industry. With that in mind, can you give us an update on the credit quality of your businesses and also your view on net flow trends.

Sure. So -- and we've talked about this on our call, but the credit quality within the twin -- really direct lending for us today is Twin Brook, that 0 million to 25 million EBITDA range. What comes with that, I just alluded to this a little bit, is lower leverage levels than you would find at the high end of the market. They're smaller companies. They're inherently -- they shouldn't have as much leverage. But our entry leverage levels in Twin Brook tend to be in the kind of 3.5x, 4x range, as opposed to the very upper end of the direct lending market, you see leverage ratios of 5x, 6x, 7x as direct lenders are competing with a syndicated loan market for borrowers to use them. So if you layer on top of that the kind of private equity investment wave that we went through in 2020, '21 in a 0 rate environment, and some of those loans to the larger companies were made with skinnier coverage ratios to start with.

Then you layer on top of that, an increase in rates as we've seen. And in some cases, businesses that have not performed to the sponsor's expectations, it shouldn't be too surprising that some of that cohort is flowing through to higher pick rates as a sign of strain in some of the direct lending portfolios. Twin Brook's really seeing none of that. I mean our PIC rates are very, very low. Credit quality is high. Of course, you -- and what risk does come up in -- as companies evolve, we have a front rate to managing that risk. We're the first -- if a company draws on their revolver unexpectedly, that's always a sign of something happening. So when that happens, we're there revolver over. So we see it right away.

And the next day, we're on the phone with the company and the sponsor and talking through what's happening and bringing them back to table. So because of the lower leverage, higher coverage ratios and more active credit management, we feel very good about the exposures in Twin Brook's book.

Great. We're going to end it there. Jack, on behalf of all of us at Bank of America, thank you very much for joining us.

Thank you.

Good afternoon, and welcome to the TPG's Fourth Quarter and Full Year 2025 Earnings Conference Call.

[Operator Instructions]

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 Jack Weingart, Chief Financial Officer. In addition, our Executive Chairman and Co-Founder, Jim Coulter and our President, Todd Sisitsky, are here with us for the Q&A portion of this call. Nehal Raj is also joining us today for the Q&A session, given his role leading the Software Sector at TPG and as Co-Managing Partner of TPG Capital.

I'd 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're 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 fourth quarter, we reported GAAP net income attributable to TPG Inc. of $77 million and after-tax distributable earnings of $304 million or $0.71 per share of Class A common stock. We declared a dividend of $0.61 per share of Class A common stock, which will be paid on March 5, 2026, to holders of record as of February 19, 2026.

With that, I'll turn the call over to Jon.

Good morning, everyone. Thank you for joining us. We look forward to discussing our strong results for the fourth quarter and full year. 2025 was a breakout year for TPG, and we entered 2026 with strong momentum. Before we turn to our results, I did want to briefly touch on a topic that has been top of mind for investors around the intersection of software and AI. This is an important question, but not a new one for us at TPG.

As a firm who's been investing in AI solutions for over a decade, the question of where AI is an opportunity in technology and where it poses a risk is deeply embedded in our investment approach. Let me put our software investing activities in context and talk about our approach across our asset classes. Today, software represents 11% of our total AUM with the majority in private equity and minimal exposure in credit.

Starting with credit, within our direct lending business, we focus on sponsor-backed companies with strong cash flow profiles, and lend at the top of the capital structure with strong financial covenants that give us a seat at the table. Given our approach, we have not invested heavily in the software sector and have not offered ARR-based loans. Today, software represents approximately 2% of our credit AUM. In private equity, you've consistently heard from us on how important our sector-focused and theme-based approach is to our investment activities and we've invested in software for more than 20 years.

Today, software companies represent 18% of our private equity AUM. Our long-standing presence in the software space has enabled us to develop deep expertise and nuanced perspectives on the sector to the companies into which we ultimately invest. As a result, we're highly selective in our investment approach, recognizing that not all software companies are created equal. Some companies will be disrupted by the AI evolution while others will be empowered and accelerate.

As veteran software investors, our decisions focus on characteristics that will determine whether AI is an opportunity versus a threat. Examples of areas where we believe AI is an opportunity include software businesses that are systems of record deeply embedded in workflows, where AI enhances the customer experience, vertical software companies that have developed a proprietary data perimeter where the application of AI creates incremental revenue opportunities and cybersecurity firms, which stand to be net beneficiaries due to the increased threats to enterprise data security from AI.

As a result of our focused and selective investment approach, we believe we've built a robust and resilient software portfolio that reflects our disciplined framework. We would also note that as long-term focused investors, market dislocation generally creates compelling opportunities. With valuations resetting across the board, we believe we're well positioned to capitalize on attractive investments by continuing to apply our disciplined approach to this important sector.

Now turning to our results. 2025 was an outstanding year for TPG. We entered the year with a clear set of strategic priorities and executed across the board, setting new records in capital raising and deployment. Our performance in 2025 is a powerful proof point of our growth strategy, demonstrating the strength of our global franchise and our ability to generate differentiated outcomes for our clients and shareholders. First, on capital formation. We set an ambitious goal to raise significantly more capital in 2025 than in 2024.

We delivered on this objective, raising a record $51 billion, an impressive 71% increase over the prior year. This reflects the strong upward trajectory of our capital formation efforts as our franchise has scaled and diversified. We continue to gain share among the world's largest allocators of capital who are choosing TPG given our strong performance across a broad set of strategies.

In 2025, we formed 5 cross-platform and multi-fund strategic partnerships, representing more than $10 billion of total commitments that are flowing in over time. As we enter 2026, we're engaged in active dialogues around several additional multibillion-dollar mandates. Second, we successfully diversified and extended our capital sources across key distribution channels. In 2025, we made meaningful progress in our private wealth strategy as we expanded our presence in the channel through new products and distribution partners, which I'll discuss in more detail shortly.

In insurance, our capital raised in the channel grew more than 50% in 2025, driven by our strong origination capabilities and the increasing demand from insurers for enhanced yield. Last month, we announced a long-term strategic partnership with Jackson Financial, marking a significant milestone for our Insurance Solutions business. This partnership is structured to provide us with long duration, highly predictable fee revenue to further scale our credit capabilities and strengthen our position as a preferred partner for insurers.

Third, we had an extremely active year of investing as we leaned into our high conviction thematic areas and continue to deliver strong performance for our clients. Our investment pace accelerated throughout the year, reaching a record $19 billion in the fourth quarter, up 88% year-over-year. Total capital deployed in 2025 climbed to $52 billion, the highest annual deployment in TPG's history. This reflects the continued scaling of our capital base and product set, combined with our differentiated sourcing capabilities.

Importantly, throughout this period of robust capital deployment, portfolio performance remained strong, resulting in double-digit value creation across nearly all of our platforms in 2025. We also maintained a consistent and disciplined focus on monetizations and generated $23 billion of realizations in 2025. We recently announced several significant exits and are off to a strong start for DPI in 2026, which Jack will discuss.

And finally, we expanded our franchise, both organically and inorganically, targeting adjacent areas that are highly complementary to our existing strategies. In July, we acquired Peppertree, broadening our digital infrastructure investment capabilities and providing us with immediate scale in the wireless communication sector. We're pleased with the integration of the Peppertree platform and are pursuing several attractive growth opportunities, including extending the duration of Peppertree capital.

We also continue to drive organic innovation, launching and scaling several new products in 2025. These include Tika, our Asia growth equity strategy, hybrid solutions, sports and Advantage Direct Lending, our new core middle market direct lending strategy, which I'll discuss shortly. Collectively, our new and emerging strategies attracted over $7 billion of commitments in 2025, underscoring our ability to effectively identify and scale high potential opportunities across the TPG ecosystem.

We ended 2025 with over $300 billion in AUM and [indiscernible] year-over-year and are experiencing a fundamental increase in our earnings power. Against that backdrop, I'd like to highlight each of our platforms, starting with credit. 2025 was a breakout year for our credit franchise. We successfully expanded many of our long-standing client relationships into our credit strategies and raised capital strategically through a variety of fund types, channels and customized solutions.

After setting ourselves up with substantial dry powder, our credit investment pace has begun to accelerate as we access a broader set of opportunities, which is driving management fee growth. We raised a record $21 billion of credit capital during the year, up 67% from 2024 with a record $9 billion raised in the fourth quarter alone.

In Credit Solutions, we held the final close for our third flagship fund, bringing total capital raised to $6.2 billion. This exceeded our initial target of $4.5 billion by nearly 40% and it's double the size of its predecessor. In connection with this campaign, we welcomed a number of new leading institutional investors to the Credit Solutions platform and to TPG. We also extended our existing credit capabilities into adjacent areas where we have a right to win.

We recently launched TPG Advantage Direct Lending, or ADL, our new core middle market direct lending strategy. ADL leverages TPG's corporate credit and private equity franchises to originate proprietary investment opportunities. This includes lending to companies that graduate from Twin Brook lower middle market portfolio as well as sourcing directly for ADL through our network of companies, sponsors and intermediaries. Early client engagement has been strong. And during the quarter, we held the first close of $875 million of equity, which translates to over $2 billion of total buying power, including anticipated leverage.

We've already built a portfolio of more than 10 first lien loans, and our near-term pipeline remains robust. Notably, ADL is structured as an evergreen vehicle. And over time, we expect to expand its product set to serve clients across key channels, including insurance and wealth. Our success in expanding our credit capital base has enhanced our investment capabilities, enabling us to lead and participate in a wider range of transactions. Our credit platform invested a record $25 billion in 2025, which represents a 54% increase year-over-year.

In asset-based finance, we deployed $2 billion of capital in the fourth quarter, including our residential whole loan strategy, where we continue to be a market leader. Over the course of the year, we further expanded our capabilities and closed notable transactions in consumer investment-grade ABF, residential and second lien mortgages, and bank synthetic risk transfers.

In Middle Market Direct Lending, Twin Brook had its most active quarter of the year with $3.7 billion of gross originations in 2025. Twin Brook established new lending relationships with more than 50 companies bringing its portfolio to more than 300 unique borrowers. As a result of our leadership in the lower middle market, we entered 2026 with a very active pipeline. And in Credit Solutions with public high-yield spreads remaining near historic tights, we continue to focus on customized private financing solutions, which offer a more attractive risk return profile.

In the fourth quarter, Credit Solutions deployed $1.4 billion of capital to support the scaling of existing investments and to fund several new financings. Turning to private equity. Our franchise continues to meaningfully outperform the broader market. While overall industry fundraising for PE declined 11% in 2025, we grew our private equity fundraising by over 80% to $28 billion in the year.

Amidst the flight to quality and scale, our clients continue to choose TPG for our track record of delivering differentiated returns and DPI. In the fourth quarter, we closed an additional $2.2 billion for TPG Capital X and Healthcare Partners III, bringing the total capital raise to $12.2 billion, including commitments that are signed but not yet closed. Momentum in the Capital and Healthcare Partners campaign continues to be strong.

We also held a first close for TPG Sports in the fourth quarter, raising $750 million of third-party capital, including commitments from several of our leading institutional investors. We're evaluating a robust pipeline of investment opportunities ranging from sports-related operating companies to essential picks and shovels service providers. Across our private equity strategies, we invested $21 billion of capital in 2025, double the prior year.

In TPG Capital during the fourth quarter, we announced the carve-out of the manufacturing, connectivity and data business from PTC. This investment is consistent with our deep expertise in sourcing and executing corporate carve-outs and structured partnerships.

Our investment teams have been very active across our Rise and Rise Climate funds with $5 billion of signed or closed investments in 2025. Given the global scope of our strategy and the unprecedented growth in energy demand, our opportunity set continues to expand. In the fourth quarter, TPG Rise Climate acquired a majority stake in Pike Corporation, a leading turnkey infrastructure solutions provider for electric utilities in the U.S. in partnership with the case.

Power and utility services is a core thematic focus for us, supported by considerable tailwinds in utility spending. TPG Rise Climate's Global South initiative announced a $1 billion investment in the AI data center business of Tata Consultancy Services. We're partnering with Tata to collaborate with hyperscalers and AI native businesses to build data center capacity to meet India's accelerating demand. This proprietary opportunity stems from our long-standing partnership with the Tata Group and builds on our successful investments in both Tata Motors and Tata Technologies.

Additionally, our GP-led secondaries business continues to differentiate itself as an attractive liquidity provider and strong partner for best-in-class assets. In the fourth quarter, TPG GP Solutions was a lead investor in a EUR 2 billion continuation vehicle for Wireless Logic, a leading global Internet of Things solutions provider. We believe this investment is the largest single asset CV completed in Europe in 2025.

Moving to real estate. We continue to build out and drive value creation across our investment portfolios ahead of a major fundraising cycle. In 2025, we deployed $6 billion of capital, and our real estate platform appreciated 9%, which we believe is among the highest in the industry. During the fourth quarter, our Thematic Advantage Core-Plus strategy or TAC+ acquired a majority interest in Quarterra, an established national developer of high-quality multifamily communities.

TAC+ carved out Quarterra from Lennar, one of the nation's leading homebuilders and an existing partner of TPG and through our essential housing strategy. We are excited to partner with Lennar and Quarterra to help address the critical need for attainable, high-quality rental housing in the U.S. The deal pipeline across our platforms remains robust. We ended the year with $72 billion of dry powder and given our ability to source proprietary opportunities coupled with an improving transaction environment, we expect our deployment pace to continue to accelerate.

Turning back to Private Wealth. I'd like to provide additional detail on this important growth area for TPG. We expanded our retail product suite, which is now anchored by T-POP and TCAP and continue to capitalize on the growing demand for our differentiated investment capabilities. T-POP has had one of the most successful launches for a private equity evergreen vehicle. T-POP has delivered an inception-to-date return of 23% the TPO strategy has generated $1.5 billion of total inflows through January.

We're actively expanding investor access to T-POP, including our geographic region to regions like Asia. Inflows for TCAP, our nontraded BDC continue to grow and ended the year with $4.5 billion of AUM. Despite the recent volatility and uncertainty in the BDC space, TCAP has had positive net subscriptions every quarter since inception, with redemption requests of less than 1% of total shares outstanding in the fourth quarter.

Our distinctive focus on lending to the lower middle market, supported by conservative capital structures and active portfolio management continues to attract strong demand. Across these private wealth products, we've meaningfully grown our brand and distribution network. Our private wealth fundraising grew 66% year-over-year and we're now partnered with over 40 platforms globally. As we deepen our engagement in the channel, we are encouraged by the traction we are gaining with both new and prospective partners.

Taking a step back, as I reflect on the 4 years since our IPO, it's clear that we've driven transformational growth and reached a new level of operating scale. We've tripled our AUM, expanded our FRE margin by almost 800 basis points, and grown our fee-related earnings at a 31% compound annual rate. As we look ahead, we continue -- we expect to continue driving outsized growth by scaling our existing and newer strategies, deepening the integration of our capital markets capabilities across the full breadth of our franchise, driving additional margin expansion and operating leverage, further penetrating the private wealth and insurance channels, extending the duration of our capital base and selectively capitalizing on inorganic opportunities.

We entered 2026 with significant momentum that reflects the strength of the franchise we've built. Our increased diversification, scaled investment strategies and strong returns have created a powerful flywheel effect across the firm, and we look forward to continuing to deliver sustained growth and value for our clients and shareholders.

Jack will now walk through our financial results and provide more details on our outlook.

Thank you, Jon, and thank you all for joining us today. As Jon noted, 2025 was an outstanding year for the firm. We've been executing on our growth strategy and translating our fundraising momentum and investment performance into strong financial results. We reported full year fee-related revenue of $2.1 billion, including $628 million for the fourth quarter, which grew 36% year-over-year. Our management fees reached $475 million for the quarter up 18% from the prior year, as we continue to successfully drive both fund over fund growth across our private equity strategies and fee earning deployment in our credit platform.

Additionally, fourth quarter transaction and monitoring fees more than tripled from the prior year to $122 million. This resulted in full year 2025 transaction and monitoring fees of $249 million which grew nearly 70% year-over-year. This step function increase was driven by our accelerated deployment pace, as well as the further integration of our strong capital markets capabilities across our platforms and geographies. We also generated $29 million of fee-related performance revenues in the fourth quarter as a result of strong fund performance by both T-POP and TCAP.

We reported fee-related earnings of $326 million for the quarter and $953 million for the year, which increased 25% from 2024. As a result of our significant capital markets revenue at the end of the year, our fourth quarter FRE margin reached a record 52% and our full year FRE margin was 45%, a 340 basis point expansion from 2024.

I would note that even if we normalize our fourth quarter results to reflect the lower level of capital markets revenue, we would still have exceeded the year above the mid-40s margin target we had guided to previously. Turning to PRE. In the fourth quarter, we generated $48 million of realized performance allocations driven primarily by our credit platform, bringing the full year total to $205 million.

We ended the year with a net accrued performance balance of $1.3 billion and have good visibility into near-term PRE, which I'll discuss in a few minutes. Our accelerated earnings in the quarter drove a higher marginal tax rate as we utilize the tax benefits from our RSU vesting more quickly than anticipated. This resulted in a higher tax rate in the fourth quarter. As a reminder, our annual RSU vesting occurs each January, which drives the seasonal employer tax expense in our cash-based comp and benefits line item that impacts our FRE margin. This expense generates tax deductions, resulting in a seasonally low first quarter tax rate.

In Q1 '26, we expect approximately $20 million of employer tax expense associated with this year's vesting and a tax rate in the high single digits to low double digits, and we expect that tax rate to remain until we utilize our tax deductions. Our fourth quarter after-tax distributable earnings increased 17% year-over-year to $304 million or $0.71 per share of Class A common stock, our highest level since becoming a public company. We finished 2025 with $303 billion of total AUM which increased 23% from 2024. This was driven by $51 billion of capital raised and $24 billion of value creation, partially offset by $23 billion of realizations over the last 12 months.

Our fee-earning AUM grew 20% in 2025 to $170 billion at year-end. Even with our strong investment base, our dry powder increased 26% year-over-year to $72 billion at the end of 2025, representing 43% of FAUM. This positions us well to continue capitalizing on an increasingly active market. AUM subject to fee earning growth was $40 billion at year-end, including $29 billion of AUM not yet earning fees, which increased nearly 50% over the past year. This was primarily driven by strong fundraising across our credit platform which generally earns fees on invested capital, as well as capital committed for certain funds that have not yet been activated such as Healthcare Partners III.

Notably, we ended the year with $19 billion of credit AUM subject to fee earning growth, which represents approximately $130 million of annual fee revenue when deployed. We're well positioned to drive accelerated growth in credit fee earning AUM going forward, due to our ability to effectively pursue credit opportunities across the full size and return spectrum. Our AUM growth continues to be underpinned by the strength of our investment portfolios with double-digit value creation across nearly all of our platforms in 2025.

Our private equity strategies in aggregate, appreciated 3% in the fourth quarter and 11% over the last 12 months. Across our capital, growth and impact platforms, our portfolio companies have consistently outperformed the broader market with revenue and EBITDA growth of approximately 17% and 20%, respectively, over the past 12 months. Our credit platform also appreciated 3% in the quarter and 11% over the last 12 months.

In middle market direct lending, our rigorous underwriting standards have resulted in continued strong credit quality across our portfolios. Nonaccruals remain extremely low at just over 1%, while our average interest coverage ratio has held steady at more than 2x. In Credit Solutions, our second flagship fund generated net returns of 4% in the fourth quarter and 11% for the full year, which continued to meaningfully exceed the U.S. high-yield bond index.

Lastly, in asset-backed finance, our first ABC fund's net IRR since inception, remains above its target range at 13.2% at the end of 2025. Additionally, our MVP fund with $6.8 billion of AUM, generated a net return of 9.4% for the year with significantly less volatility than the broader market. Across our real estate platform, our portfolios appreciated 3% in the fourth quarter and more than 9% for the year. This strong performance was driven by particularly robust value creation in TREP's data center holdings as well as appreciation across our hotel, residential and office portfolios.

As Jon mentioned, we believe our real estate performance has outpaced the industry as a result of our portfolio construction and deep thematic conviction in sectors with positive secular demand and resilient operating fundamentals. Now I'd like to walk through our outlook for 2026. First, regarding fundraising. 2025 was clearly a breakout year for us, with fundraising increasing 71% year-over-year to a record $51 billion.

Importantly, we do not see this as a cyclical peak. In fact, given the growth and diversification of our business over the past few years, our strong investment performance and the continued build-out of our fundraising team, we believe we have reached a new level of expected annual fundraising with less volatility and less cyclicality. As a result, we expect 2026 to be another robust year of capital formation with aggregate capital raising expected to exceed $50 billion.

Our fundraising will be driven by the following key building blocks. In real estate, we expect 2026 to mark the beginning of a major fundraising cycle and a multiyear period of growth. We expect to begin fundraising for TPG Real Estate's next fund, TREP V as well as our Asia fund, our Japan Value Fund and our TPG AG U.S. real estate fund. In credit, we expect to further scale our capital base across all of our existing strategies and to expand into adjacent areas and fund types.

This includes growing our investment-grade ABF business and raising additional capital for our CLO platform as well as our newer strategies, such as Advantaged Direct Lending and hybrid solutions. In private equity, we expect several drivers, including the completion of our flagship fundraises across our capital and climate private equity funds, additional closes for our GP Solutions, tech adjacencies and our Asia growth equity fund, our sports fund and our transition infrastructure fund and initial closes for our next Rise and Peppertree funds.

In our Insurance Solutions business, we expect our strategic partnership with Jackson to close this month. As we noted on our call earlier this year, we structured the agreement with a minimum requirement of $4 billion of FAUM and after 2 years and $12 billion of FAUM by the end of year 5.

In addition to our Jackson relationship, we expect insurance solutions more broadly to continue to be an important growth driver for the firm. And in private wealth, we expect our inflows to inflect further in 2026 as we broaden our distribution networks globally. We expect to onboard several significant distribution partners for T-POP over the next few quarters with a particular focus on expanding our international footprint.

Additionally, we intend to grow our suite of wealth dedicated products to showcase TPG's differentiated investment capabilities with a multi-strategy credit interval fund and a nontraded REIT as our near-term priorities. We're also actively engaged in several discussions with potential partners on strategic, innovative public-private products and we'll have more to say here in the coming quarters.

Next, on our FRE margin. We remain focused on driving greater operating leverage across the firm even as we continue to invest in a number of long-term growth opportunities. In 2026, we expect a full year FRE margin of approximately 47%. This would represent an increase from 45% in 2025, which was somewhat elevated and an increase of approximately 700 basis points from 40% in 2023 pro forma for the Angelo Gordon acquisition.

Turning to PRE. We've been active on the realization front, and assuming market conditions remain favorable, we would expect our strong and consistent pace to continue or even accelerate. Based only on our current pipeline of signed monetizations, including the strategic sale of OneOncology to Cencora, which closed earlier this week, we expect to generate realized performance revenue of more than $50 million for public shareholders in the first quarter.

On the noncore expenses included in our realized investment income and other line, we expect the expense associated with the build-out of our New York office at Hudson Yards to continue through 2026. We plan to consolidate our New York offices and take full occupancy of the space in the first half of '27. Lastly, at the end of the fourth quarter, our net debt was $1.6 billion, and we had $1.75 billion of undrawn capacity on our revolver. At the time of closing of our strategic partnership with Jackson, we will invest $500 million into Jackson common stock, which will be funded through our revolver. Pro forma for this, we expect our net debt balance to be $2.1 billion.

In closing, 2025 was an exceptional year as we successfully executed on our growth objectives and demonstrated the growing earnings power across our global platform. The strong financial and operating results we reported today are a direct result of the strategic building blocks we've been putting in place over the last several years to drive the next phase of growth. With a clear road map for the year ahead, we're confident in our ability to continue delivering differentiated value and growth for our stakeholders. Now I'll turn the call back to the operator to take your questions.

[Operator Instructions]

We'll take our first question from Glenn Schorr with Evercore ISI.

Well, you're fourth on the list, so I apologize if I'm going to try something different. I think I don't know, why not, right? So I feel like you and others have put up good performance. You have a lot of diversification. You're raising capital, the institutional channels unbothered and your stocks fall like rocks because people think it's looking in the rear view, particularly direct lending. So I'm trying to think of -- it must be that they don't believe the performance will sustain and that the stats that you've given can't hold up.

So do you think there are either any actions to be taken by you and the industry to solidify belief and confidence on the direct lending side and/or maybe you could talk about what the process is of valuing the portfolio and coming up for performance because I'm finding hard to believe you just pick numbers out of the hat, like maybe bring that side to life if there aren't actions to take because I appreciate that you're doing everything else that you can?

Well, good question, Glenn. I think just to start with maybe the back half of your question and then maybe kind of coming back around to the front part of your question with respect to sort of the performance and then how it plays out with respect to how it affects growth or how it affects our performance. But from our perspective, I think the market is well familiar with our franchise as being directed and focused to the lower middle market. And the lower middle market is fundamentally different than the upper middle market. So -- and we can talk about the upper middle market, if you want to, but the lower middle market is fundamentally different in that our business is a -- it is also a sponsor-based business in terms of the companies that we're financing.

But we're doing that as generally the only lender and in that process also have a different dynamic with respect to the terms with which we lend. And I think that we're not competing again -- importantly, we're not competing against the BSL market. We're not competing. It's not -- unlike the upper middle market where direct lenders are actively competing against the banks and it's a race to the bottom with respect to terms, spreads, covenants, et cetera. That's not the case in the space that we're lending in. And so I think as the data suggests, our coverage ratios are generally higher.

Our loans are not picking. Our spreads are generally higher, and we have a discipline of always applying at least 2 financial covenants to our loans within the Twin Brook franchise. We also control the revolver. So one of the things that gives us going to your question of how do we monitor performance and how do we value these loans, is that we have a very unusual window, frankly, into what's going on with our borrowers and the underlying performance dynamics.

For instance, if you are watching the draw of revolvers, that's a very good leading indicator of credit quality within the lower middle market and allows you to get -- essentially allows us a seat at the table with the sponsors with our borrowers to understand what's exactly happening inside these companies. So it gives us a very kind of tactile feel with respect to what's happening across our portfolio.

And as a result of that, our ability to establish -- like all lenders should, establishing watch lists to understand what companies -- how companies are performing where we need to spend more time where we're paying attention, et cetera, where we're engaging with our sponsors, it gives us a much more tactile feel for that. So in terms of our ability to value our portfolio and really be in touch with performance, I think it is quite enhanced as a result of that relative to what you might have if you were financing, let's say, a much bigger buyout as an example, where it's a cov-light loan or -- and essentially, you don't have any of those similar types of controls. There is a difference.

So I think that hopefully, the market can draw some comfort from the fact that we're very in touch with our borrower base. In addition to that, I think we've said before that about half of our originations have been add-ons to our existing portfolio. So it's companies that we know, we've underwritten, we're closely in touch with. We're working with the sponsors.

And those add-ons, essentially, they're coming directly to us and working on a one-on-one basis to structure whatever the amendments might be to structure whatever the expansion of the facilities might be. And we also get paid whenever we do that as well. So hopefully, that provides some clarity as it relates to how we think about valuing the portfolio. It's a very rigorous process and it gets a lot of focus and a lot of attention.

On the issue of kind of the sort of direct lending space more broadly speaking and how the market is sort of reacting right now. I think maybe the -- I mean, in terms of how we will we sort of track and what will performance look like over time? I mean I think we're only going to know over time, okay? It's just the nature of sort of the lending markets. And I think, as you know, the lending markets in order to maintain performance, the key issue, obviously, is avoiding capital loss.

The key issue is avoiding capital loss and managing to the extent you can your exposures. And we're only going to know that obviously, over time as things evolve. What you have seen in the upper middle market, as you have seen a move toward amendments and liability management exercises LMEs, a reasonably significant increase in certain borrowers picking.

And so I think it's going to play out over time in terms of sort of underlying company performance and we'll see. I think that with respect to how it impacts also our business in terms of flows, I think that's another important dynamic because the BDC world, obviously, is sort of consistently in the market raising capital. So confidence is a very important thing, both in terms of inflows as well as outflows, right, in terms of the redemption cycle and then are people still going to be allocating as a result of being nervous or scared.

I think that for TCAP, just as I think I mentioned it in my comments, but just to give you an idea, I mean, we've had quarterly -- essentially quarterly subscriptions going back to 2024 that have been sort of have essentially been increasing every quarter, and we've had very, very low redemption requests. That's obviously not the same necessarily across the entire market.

And so I think that -- the other thing to, I think, consider is sort of where the sourcing of capital and where capital is coming from and will it slow down the growth of the lending markets, the direct lending markets overall. And I think wealth markets, retail markets, it's not surprising that people get nervous and either want to lower their exposure to the sector. or just slow down their allocations to the sector.

We're not experiencing that within our business at this point because of the strong performance and what we're actually seeing is we're seeing some level of movement of capital, both from the wealth market as well as institutionally into this part of the market, the lower middle market, to diversify their exposures because of these characteristics that I described. So I don't know that's a little bit of a framing if that's helpful.

Glenn. Jim Coulter here. To your first question on what we can do, it's been my experience, and I'm sure you said that over time that when the market gets happy or worried, it tends to move things together. And the second step is usually differentiation, understanding where there are differences. So I think at this moment, it's not really so much software or no software, it's which software, and so trying to help that understanding. The second point I would look at is LP flows. You can assume that issues around valuation and momentum are well understood in the LP market as they're doing work on new funds.

And as Jack said, you see a very substantial gap in our fundraising versus the market. And I think you can assume that these issues have been thought about in the LT community for a while and watch the LP flows as a way of kind of getting some comfort on that.

We'll take our next question from Ben Budish with Barclays.

I was wondering if you could unpack a little bit more the pickup in transaction fees in the quarter. I think, Jack, during your prepared remarks, you talked about on the fundraising side, you expect to see things sort of structurally step up. It looks like that's kind of the direction of travel there as well. You've got growing dry powder. It feels like the deployment activity is really picking up. It also looked like in the quarter, your transaction fees relative to deployment were a little bit higher than average. I know things like monetization and transaction fees are hard to forecast even just a couple of quarters out, but just given this step-up and maybe kind of your line of sight, how should we be thinking about revenues there for 2026?

Thanks for the question. Good question. Look, we've been talking for several years now about the efforts we've been undertaking to broaden and grow our capital markets business. and our view that, that would be an outsized grower for us. It's obviously, as you point out, going to be a bit lumpy. But as I pointed out in my remarks, the growth that we're seeing is really driven by the growth of deployment but also the broadening out of this business across the entire firm. If you could look back 3, 4 years ago, it was very TPG capital-centric and now it's much more diversified.

To give you a little more color behind Q4, the transaction fees that we recorded in Q4 were across 26 different transactions. Of course, there were a little concentrated toward the biggest but 26 different transactions broadly spread across the Impact platform, the capital platform, the growth platform, the credit platform. And I would say that growth across the firm and the growth of capital markets fees in new businesses, we're only in the beginning innings of that. So while it will be lumpy and while the fourth quarter was above trend, we continue to view capital markets as a long-term growth opportunity for us.

Our next question comes from Ken Worthington with JPMorgan.

Maybe just following up on that, how is the baseline of your capital markets capabilities changed over the last year. So again, it's going to be volatile. We get that. But is there a way to sort of help us figure out how what you've invested in has actually grown and should translate into revenue, all else being equal? And then if we look out another year, how should we expect that baseline to have changed a year from now? Does this question make sense?

Yes, I'll start on that. If you look at what we've done to grow the business, I would start with our team because in order to be delivering capital market services across our portfolio, in a way where management teams want to hire us to drive their capital structure evolution. We need to have smart people engaging with our portfolio of companies, engaging with our deal teams in greater numbers across businesses, and we've done that. I think over the past 2 or 3 years, we've more than doubled our capital markets team.

So we're actively engaging across all of these portfolios, and looking for opportunities to help our management teams drive capital structure optimization, drive efficient exits, that kind of thing. There's no good way to model this other than in the private equity businesses there should be a correlation between capital deployment and capital markets fees. There's also a second prong, which is kind of regular way balance sheet optimization of existing deals.

So the sources of income in capital markets in private equity oriented businesses will be both funding new deals and financing and refinancing existing portfolio company balance sheets to optimize them. And I guess the third piece would be add-on acquisitions for existing companies, which would usually have equity capital deployment associated with them. On the credit side, it will be different across different credit businesses, but kind of flows of deployment should also be probably the most important metric to measure capital markets opportunity. Hopefully, that helps.

We'll take our next question from Alex Blostein with Goldman Sachs.

When we think about the credit business at TPG, you guys have done a really sizable build out there over the last year, 1.5 years, lots of fundraising. So maybe talk a little bit about the outlook for net deployment across various verticals within credit as a source of management fee growth for TPG into 2026?

Yes. Thanks, Alex. Look, I think that obviously, there's been an important relationship between capital formation and putting ourselves in a position where we can do more. As you know, I mean, the credit business can be quite scalable as it relates to identifying and sourcing transactions and then and the size of those transactions? And how much of it we can deploy into it ourselves versus how much of it we're syndicating away to other participants in the market. And so our underlying base has gone up and grown a lot as a result of the pools of capital that we're now investing.

I think if you look at -- I think the other related opportunity for us in terms of deployment across our business is as a result of the coming together of TPG and Angelo Gordon, and the collaboration and the synergies that we're seeing between our equity franchise and our credit franchise, I think our ability to -- the breadth of our sourcing capability our relationships with companies, our relationships with sponsors, the ability to do really interesting things at scale, particularly in our Credit Solutions franchise as an example, I think it's going to provide us with a continued upward trend and perhaps even a step function in terms of sort of opportunities for us.

And so on the back of raising a meaningfully larger fund there, we're going to have an opportunity to deploy a lot more capital. On the structured credit side, which I think obviously has a lot of tailwinds with respect to private capital financing that part of the market, whether it's IGA [indiscernible] or the residential mortgage market, consumer finance, et cetera, we're seeing a big step function in terms of deployment there. I mean, obviously, just to give you sort of an idea in structured credit from 2023 to '24 to '25, we've seen almost a tripling of our deployment there to just under $10 billion of capital in 2025.

And in other parts of the business are experiencing similar growth. I think the introduction of ADL for us, which is going to attack borrowers that we know or we have a competitive advantage. I think that's going to give us an opportunity to deploy capital more aggressively and bigger size.

And then to the point we were just talking about on the capital markets side, the development and evolution of our broker-dealer and the capital markets opportunity, capital markets is not only a financing enabler and a syndication function. It's also a sourcing function as well. And we're seeing that more and more. And if you look at our capital markets revenues, the amount of capital markets revenue now coming out of our credit business on a relative basis, is still modest.

And so there's a lot of upside there as well for us. So I think that we're set up well with scaling pools of capital, the insurance capital that's coming in, and the opportunity set that, that's going to give us where we have clear visibility on capital coming at us and our ability to build our product set there, and just do it at scale. It's a very scalable market, whether it's resi mortgages, whether it's consumer credit or other structured finance opportunities for companies. It's a very scalable market.

We'll go next to Craig Siegenthaler with Bank of America.

I had a follow-up to Glenn's question, which I thought was a good one, but I wanted to ask it on the software equity book, not the debt book. And I think you pointed out, not all software companies are created equal. But I was hoping you could walk us through some of the qualities of your software buyout and growth books that make you feel more comfortable when you think about future returns. And also, what type of companies have you generally avoided? And what type of companies do you own that you think are not impacted at all from AI disruptions?

Craig, this is Nehal Raj. Great questions. Let me start by saying we've got a very informed perspective on this topic, having invested in the software space for over 20 years to AI space for over a decade. And this experience has really served us well over lots of tech transitions; the on-premise to cloud transition, [GFC], COVID, we navigated all those transitions with strong returns and low loss ratios, so we'd expect the same with respect to AI. As Jon mentioned in his remarks, we've identified a number of characteristics that we believe will largely determine AI winners from AI losers, where there's opportunity and where there's threat.

And to your question, let me double-click a bit on where we're seeing opportunities first, both in the market and our portfolio. The first area is vertical market software. Vertical market companies tend to reside on a lot of proprietary data that's generated over decades. This data is typically managed in a closed system. So third-party AI can access this data. And it can really only be monetized by internally developed AI, which works to the benefit of these companies. I'll give you an example maybe to bring it to light. In our TPG Capital portfolio, we own a company called Lyric. Lyric processes the majority of medical claims in the U.S. and over a period of decades has built up a very, very unique data set.

This data is not available to third-party AI firms and that makes Lyric really uniquely positioned to apply AI to this data set to create new value for its customers. We're the control owners of Lyric. So we've been really driving new AI products under our ownership, and this has actually resulted in a significant acceleration in the revenue and revenue growth of this company.

I'll give you one other example to the positive, which is in cybersecurity. Many of these companies stand to benefit and be net beneficiaries of AI adoption. Another example to bring this to light also in our TPG Capital portfolio is a company called Delinea. Delinea is a provider of identity-based cybersecurity for enterprises. And what its core functionality does is it determines and manages the level of access that an employee could have to corporate systems and corporate data.

And what's really interesting is as AI agents proliferate, they need identity and access too. And so what we're seeing in our business is net new demand for Delinea's products and new revenue growth opportunities that are coming out of this. So these are just a few examples of both spaces and companies, but this is the framework that's really guided and as a result, the vast, vast majority of our software portfolio falls into these categories where we think AI is going to be a strong tailwind and benefit to our companies.

I'll mention a little bit on the areas that have the potential to be more impacted also to answer that part of your question. And I would say, in general, these would be horizontal applications, not vertical sort of record that maybe sit on top of other systems of record. Those are much more prone to AI-based disruption, and I'll also say infrastructure related software that may not be supporting new AI technology architectures. Those are also more at risk. Our overall level of exposure and investment because of this framework that we've been using over the last several years is pretty minimal to these areas of AI risk.

Our next question comes from Mike Brown with UBS.

Maybe just kind of build on the last question. So another question for Nehal here. So great color on the different types of exposure and kind of breaking that down for us. Could you maybe also break down a little bit more about the funds? And what is kind of the vintage mix here of the software investments? And specifically, how much of the exposure would be from that 2021 cohort?

And then I'd love your thoughts on how to think about the broader software industry here? Like what's -- how does this potentially play out in terms of disruption? When would that ultimately come through in terms of maybe timing here, just given some of these contracts have a bit of a long life to them. Like when do we start to really see some of this come through?

Yes. Let me start by maybe framing a little bit our last 5 or 6 years of software investment and realization activity. In that 2020 to 2022 period, we were bigtime net sellers in our software portfolio. Part of that was due to the valuation environment at that time. Part of it was due to the value that we've already created in our portfolio of companies. And so I remember very distinctly during that time period, we exited every one of our software companies in TPG VII and before, if you're looking at our fund vintages. So those funds have been ex software for the better part of 5 years as a result of that activity.

So that means most of our software investment activity really has resided in funds 8, 9 and now 10. And the benefit of that is we've had pretty good visibility into what's happening in AI over that time period. So I think where you will see more risk is in companies that were underwritten 2018, 2019, 2020 prior to the advent of generative AI. And those vintages are more susceptible to risk and disruption. The great part about our setup is having exited those companies, we were able to underwrite with the knowledge of what's happening in generative AI, and I think have generally adhered to this framework that I mentioned earlier.

I'd also maybe answer the second part of your question in terms of when does the disruption play out? I understand your point about long contracts, but we're starting -- where there is disruption. I think it's starting to become evident in results. If you think about a CIO's budget in an enterprise, it's being inundated with requests for AI-oriented purchases and expenditures.

As a result, some tough choices are having to be made. If you're spending more on AI, what are you spending less of to stay within your budget and that's really creating already winners and losers. Now some of that is maybe more in bookings than revenue. But because we are control investors, we have the opportunity to really look under the hood of the companies that we're investing in, and we can look at leading indicators. We can look at retention rates. We can look at detail that you may not get if you're just a lender, and that's giving us really good insight as to where winners and losers are residing in this market. But I would answer your question, the disruption when it is happening is happening now.

Our next question comes from Brennan Hawken with BMO Capital Markets.

Like we snuck in right under the wire here. So was curious, it looked like the fee rate adjusting for catch-up fees ticked down quarter-over-quarter. Can you speak to maybe what drove that? And how we should be thinking about the fee rate going forward, whether there are any funds coming off the holidays and whatnot?

Yes. It's Jack. Obviously, fee rates are blended across lots of different funds and different fee structures are kind of have lots of things impacting them. I would tell you that the biggest thing impacting at the highest level, our firm-wide average fee rate is the mix of where we're investing. Because if you think about some of the businesses we've been growing most actively credit, some new areas of credit, those generally have lower fee rates than our traditional private equity business.

So you'll see that mix drive fee rate just blended across the businesses. If you look at each fund, one at a time, each business line, we're not seeing material fee rate degradation in any one business. So it's more a question of the mix.

The other thing that was going on in the fourth quarter is we saw a step down in TPG IX. So if you simply calculate, for example, the average fee rate in the TPG Capital or private equity business, we had our FAUM step down in the fourth quarter while we activated Fund X in the third quarter. So the average fee rate in our capital business was a little elevated in the third quarter because we're charging fees on both of those funds and that one TPG X, which is big, it was a $3 billion step-down occurred in Q4. So that may be what you're seeing.

We'll go next to Arnaud Giblat with BNP.

I've got a question on real estate, please. Since that's a big part of your fundraising for 2026, I was just wondering if you could talk a bit more about the confidence around that, in particular in the context of maybe performance in the broader real estate market and maybe the outlook still being softer. How confident are you run from resin real estate?

Yes, sure. But we feel great about the outlook for our real estate franchise and for this fundraising cycle. And I think we have a fair amount of confidence based on the strong performance that we have had. Obviously, you can see our value creation numbers which have been very, very strong and, frankly, industry-leading. And we have some distinct elements of our franchise that I think that our investors are I think, quite interested in, particularly when you look at what's going on in various markets and the return opportunities that people are looking at.

Real estate obviously has gone through a pretty tough run over the last number of years, and I think we've been consistently talking about this on our calls and in our communication that we've seen a distinct change in terms of the opportunity set on the real estate side. And for us, I think, in terms of our deployment and taking advantage of those opportunities. I think for us, it started, frankly, more than a year ago where we started to see, as a result of stress in the real estate community, opportunities felt were very defensible and had a lot of upside. And so if you look at the deployment opportunity and where we've taken advantage of those opportunities, it's obviously ticked up over the course of 2025 in a meaningful way.

So we feel like what we're coming to market with in 2026 is a good, diverse set of opportunities for our LP and about the fundraising cycle and about the real estate opportunity more broadly. And I think that there is more interest from the LP community today in real estate than I think we've seen in several years. So I think we go into this with a lot of enthusiasm about this fundraising cycle, our ability to raise capital. And I think relative to what we expect fund over fund, we do expect growth on a fund over fund basis in all of these strategies. And so we're pretty excited about it.

Arnaud, I would just add, it's Jack, that the biggest tentpole in real estate for us this year is going to be the TREP business. And as John indicated, with our institutional LPs, we're already in different stages of dialogue and seeing very strong demand. The other thing I would say is that's a business where we've never offered that product to the high net worth market, and we have one of our most strategic channel partners there despite the fact that demand is moving more toward the evergreen market, who believes that our performance in that TREP business is so strong, they want to offer that closed-end fund to their system, and we expect material take-up there.

Our next question comes from Brian Bedell with Deutsche Bank.

Maybe just to go back to the connection between the deployment and transaction fees. And obviously, you've been pretty clear that the deployment opportunities broadly across the platform are continue to improve as we move into 2026, and that structurally augurs well for the transaction fees. But just it's been improving throughout 2025, sequentially every quarter. And obviously, we have a step -- major step up here in 4Q.

So I appreciate that it was a broad-based good mix in 4Q and lumpy. But was there a vast improvement from 3Q to 4Q in the structure of what you did in terms of the teams in place? And then maybe another way to look at this would be if we were to quarterize or annualize that number in 4Q, which I know is unbelievably lumpy what kind of upside would there be to the FRE margin for '26 in that type of scenario?

I'll just start and then Jack will add in. But I think that I don't think there was anything that was structurally different about what we're doing other than what Jack described earlier. Just I think it's important that you understand sort of the way we execute on this, which is that we feel it's very important to have capital markets capability that essentially is embedded in each of these different businesses because being early in the transaction cycle being involved in the financing discussions and structuring deals early in the transaction cycle is very important because you're gaining the confidence of your management teams, et cetera.

And in terms of the value add that we bring to bear as a result of being inside of these companies and really understanding them and being able to position the company the best we can with respect to structuring financing around it and bringing capital to bear and attracting capital to it.

So this is something that Jack mentioned before that we've consistently built out over the course of time across our businesses. We're continuing to do that. And so of course, I think transaction and financing revenue is going to be correlated to deployment and transactional activity. There's no question about that. And I think there will be other overlaying factors depending upon sort of where other capital is coming from. But I think that it will continue to be correlated to that.

However, structurally, it is -- if you think about sort of what is the baseline embedded structural opportunity the structural opportunity continues to go up for us as we think about how we're doing this. And of course, as I mentioned before, on the credit side, as we continue to build our credit platform and embed capital markets capability and our broker-dealer capabilities in that business, I think that's a structural upside for us in terms of something that I think we'll realize over the next couple of years. So I think of it that way.

I think that if you looked at the capital markets revenue flow and you went back from 2024 through where we are today, you can almost look at sort of like progression. If you try to smooth the line, you can almost look at a progression on a quarter-by-quarter basis of the expansion of the opportunity set for us and kind of develop a little bit of a baseline that way because you're right, there will be sort of lumpy, chunky opportunities like we saw in the fourth quarter.

The only thing I'd add to that, Brian, is one factor that determines the revenue opportunity in any given deal is how the capital structure is put in place. What I mean by that is, simplistically, if you think either broadly syndicated loan that's underwritten and distributed to the marketplace or a private lending, a direct lending solution in a broadly syndicated loan, our participation will be a percentage of the total fee opportunity. In a directly placed capital structure we are usually doing all of the work and placing the entire capital structure.

And it did so happen that in the fourth quarter, there were a number -- it wasn't just one deal, there were a number of larger transactions that closed in the quarter. where the deal was funded with a private capital structure, and our team did exceptional work to design those capital structures. So that will also determine a little bit of lumpiness. Now on your margin question, capital markets revenue is very high, think about like 85% to 90% contribution margin on incremental revenue. So if we have very strong capital markets quarters like we had in Q4, that's what drove the FRE margin up in Q4.

Our last question comes from Michael Cyprus with Morgan Stanley.

Just a question on the wealth channel. It seems T-POP is off to a good strong start. I was hoping you could elaborate on some of the initiatives and steps you're going to be taking across the wealth channel here in '26 to accelerate growth across the existing vehicles? And more broadly, how are you thinking about scope for new product development vehicles, potential partnerships to bring more of what you do to the private wealth channel and to ease point of access for retail?

Yes. Good question, Mike. We're spending a lot of time on that. Job 1 for us as we started down this path several years ago was we got to get T-POP right. This has got to work well. It's got to be viewed as a high-quality product. It has to help us build our brand much more broadly in the channel than we had in the past, just placing one closed end fund at a time. And I would say we're off to a fantastic start there. T-POP on the platforms that we are on, we are one of the top and in some cases, the top performing and top capital raising, private equity evergreen product on the shelf.

So step 1 is continue that expansion and continue to use this premier product to broaden our brand awareness and our active engagement with financial advisers across more platforms. And that will lead to accelerated growth in T-POP this year. I think we talked about the growth rate we had this past year. I would expect T-POP to more than double this year and that will be the result of continuing to penetrate the existing channel partners.

And as I mentioned in my prepared remarks, we have several additional channel partners who have already selected T-POP in some cases -- in many cases, in competition with every other private equity evergreen product out there as one to add to their shelf this year. So expanding on existing platforms, growing across new platforms. On both T-POP and TCAP, by the way, we talked about flows in TCAP, we expect TCAP to continue to grow as a very sizable direct lending option in the private wealth market. that's step 1.

Step 2 is expanding our product set as you talked about. And we are actively working on both a multi-strategy for us, effectively investing across all of our different credit businesses in Angelo Gordon. And then the third -- the next product is an nontraded REIT. And as Jon indicated, we are seeing a resumption of real interest in real estate, not just in institutional LP land, but also on the high net worth channel partners. We have a couple of our biggest channel partners who are eager to partner with us on a nontraded REIT that reflects everything we do in real estate without an older portfolio with a newly seeded portfolio. So working on both of those.

And then the final piece, I would say, is the market is really moving in part toward what I would call bundled solutions that require partnerships with partners more on the liquid side, the public side of the market. Obviously, a couple of our peers have announced those. And we have very active discussions going on with interesting partners who I think will open up more market opportunity, more mass affluent opportunity and eventually the 401(k) market.

Thank you. This concludes the Q&A portion of today's call. I would now like to turn the call back over to Gary Stein for closing remarks.

Great. Thank you all for joining us today. We know it's an extremely busy earnings day. So we appreciate you choosing to spend time with us. If you have any questions, as always, feel free to follow up with the Investor Relations team. Otherwise, we'll look forward to speaking with you again next quarter.

This concludes today's TPG's Fourth Quarter and Full Year 2025 Earnings Call and Webcast. You may now disconnect your line at this time, and have a wonderful day.

Hello, and welcome, everyone, to Jackson's Strategic Development Call. My name is Becky, and I will be your operator today. [Operator Instructions]. I will now hand over to your host, Liz Werner, Head of Investor Relations, to begin. Please go ahead.

Good morning, everyone, and welcome to our investor call on strategic development. Today's remarks may contain forward-looking statements, which are subject to risks and uncertainties. These statements are not guarantees of future performance or events and are based upon management's current expectations.

Jackson's filings with the SEC provide details on important factors that may cause actual results or events to differ materially. Except as required by law, Jackson is under no obligation to update any forward-looking statements if circumstances or management's estimates or opinions should change. Today's remarks also refer to certain projected non-GAAP financial measures, a numerical reconciliation of those measures to the most comparable U.S. GAAP figures has been amended as noted in our presentation.

Presenting on today's call are our CEO, Laura Prieskorn; and our CFO, Don Cummings. Joining us in the room are our President of Jackson National Life Insurance Company and Interim CEO of PPM America, Chris Raub; and Dean Scott, Jackson's Senior Vice President of Corporate Development and Treasury. At this time, I'll turn the call over to our CEO, Laura Prieskorn.

Thank you, Liz. Good morning and happy new year to everyone. Thank you for joining our call to review an exciting set of strategic announcements that we expect will accelerate Jackson's growth by leveraging our leading retirement services business. I will begin by providing an overview of Jackson's growth strategy and discuss 2 significant actions that further support our strategic execution.

The first is a long-term strategic partnership between Jackson and TPG, which is designed to provide access to attractive investment management strategies that are complementary to PPM's capabilities. The second is the creation of Hickory Brooke Reinsurance Company, an innovative onshore captive reinsurance entity that will enable us to offer more competitive fixed and fixed index annuity products in a capital-efficient manner.

Following my remarks, Don Cummings will provide further details on these 2 transactions. Beginning on Slide 3, as we've discussed before, a key aspect of our strategic focus has been to capture opportunities to grow profitably while diversifying our sales mix and earnings. Jackson's strong brand innovative products and deep distribution relationships have enabled our growth for many years.

Four years ago, shortly after becoming a public company, Jackson launched its first registered index-linked annuity. Over the last few years, we've enhanced our RILA and other spread-based products, which has led Jackson to be recognized as one of the top RILA providers in the industry. In 2024, we focused on improving our multiyear guaranteed annuity offerings. In 2025, we continued our product enhancements by launching a new RILA product and an updated fixed index annuity with guaranteed minimum withdrawal benefit features. Today's announcement allows us to further accelerate this growth trajectory by continuing to enhance our asset management capabilities and offering more competitive spread-based products.

Turning to Slide 4. We have 2 very important initiatives that will support Jackson's efforts to further increase our presence in the spread-based annuity space that we anticipate will have positive impacts across our businesses. As I shared a moment ago, we are entering into a long-term strategic partnership with TPG, a leading global alternative asset management firm. This is our first and only strategic partnership with an alternative asset manager, and we believe TPG brings unique capabilities in private asset classes that are well suited for insurance company portfolios, including investment-grade asset-based finance and direct lending.

Growing these asset classes within Jackson's portfolio will further enhance our investment yields, providing us with meaningful opportunities to continue to increase the attractiveness and returns of our spread-based products. TPG's capabilities in these investment strategies are highly complementary to the value that PPM delivers in managing Jackson's broader investment portfolio.

As part of this strategic partnership, TPG will invest $500 million in JFI common shares and will issue to Jackson $150 million in TPG common shares, providing strong alignment between both firms. TPG and Jackson will benefit from the continued growth of their respective businesses and we see significant opportunity going forward to further collaborate with TPG on future strategic initiatives.

We are also excited to announce the formation of Hickory Re, Jackson's new wholly owned Michigan-based captive. Hickory Re is an innovative solution that will serve as a capital-efficient way for Jackson to accelerate the sales growth of fixed and fixed index annuity products. We intend to initially capitalize Hickory Re with $650 million, which includes $500 million from TPG's investment in JFI and $150 million of excess cash from JFI.

This initial capital from JFI into Hickory Re will primarily provide capacity to support future spread-based annuity sales as well as support the reinsurance of an existing in-force block of fixed and fixed index annuity business. We expect these 2 actions to enable us to further increase sales of spread-based products and drive a step change in our growth profile while importantly also maintaining our strong capital position and balanced approach to capital management.

On Slide 5, I'd like to highlight the strategic benefits of these transactions. Since becoming a stand-alone public company in the fall of 2021, we've worked diligently to create a track record of success. Each year, we met or exceeded our key financial targets with a specific focus on diversifying sales, ensuring balance sheet strength and consistently providing capital return to shareholders. We increased our dividend each year since becoming a public company and also increased the total capital we returned to shareholders.

As we highlighted in our third quarter 2025 earnings call, we have now returned more capital to shareholders than our initial market capitalization. I am proud of all that we have accomplished to build a track record of success and deliver on our strategic initiatives.

While we are proud of what we have accomplished in the last 4 years, we are excited for the future and our growth strategy, where we will continue our efforts to diversify beyond traditional variable annuities. The TPG partnership is expected to further strengthen our investment capabilities within Jackson's general account, which creates additional opportunities to achieve enhanced investment returns and supports our ability to offer more competitive spread-based products.

We plan to take advantage of the increased attractiveness of our product offerings by leveraging our best-in-class distribution to drive further annuity sales growth. This growth will be supported by the additional capital from TPG's investment which with our new captive will be utilized in an efficient manner to drive a more diverse earnings profile and higher profitability and capital generation for our shareholders.

The partnership with TPG also complements PPM's existing strength in fixed income capabilities and will significantly grow AUM at PPM as our general account growth. Finally, the alignment of interest between Jackson and TPG will create long-term value for our stakeholders as both organizations grow through this partnership.

Turning to Slide 6. I'd like to highlight why TPG is an ideal strategic partner for Jackson. TPG is a leading global alternative asset manager with $286 billion of assets under management. As Jackson and PPM evaluated what type of partnership and additional investment capabilities would support Jackson's growth strategy, it was critically important that we selected a partner with a strong track record and cultural alignment with our firm.

The initial focus for our partnership will be within TPG credit where we will deploy assets into their investment-grade asset-based finance and direct lending strategies. This decision is supported by TPG's unique origination and structuring capabilities which provide differentiated access to attractive asset classes as well as their track record of strong performance.

TPG maintains a broad proprietary origination network that provides robust direct lending deal flow from over 1,000 middle-market sponsors and access to over 50 origination partners to drive securitization volumes for its asset-based finance strategy. Their long-tenured team have the extensive structuring, asset class and sector expertise that comes with the experience of investing through many market cycles. It's these aspects as well as their partnership mindset that give us strong confidence in our strategic relationship and our teams are very excited to begin working together. At this time, I'll turn the call over to Don, who will provide more details on our partnership with TPG and on Hickory Re.

Thank you, Laura. On Slide 7, I'll cover the key terms of the partnership with TPG, which we believe is an attractive strategic relationship, as Laura mentioned earlier.

TPG will be investing $500 million into JFI's common equity at a price per share equal to the trailing 30-day volume weighted average price. This stake will represent an approximate 7% ownership interest in Jackson, and we anticipate TPG will be Jackson's third largest shareholder following closing of the transaction. The shares will be subject to a lockup and standstill with TPG able to monetize gains after the first 2 years.

Beyond the lockup period, TPG has agreed to certain sell-down restrictions as well as committed to retain at least $100 million of Jackson stock throughout the duration of our partnership. As we have discussed, the funds from the $500 million common equity investment will be used by JFI to help capitalize Hickory Re and support the sales of spread-based products. Jackson will receive $150 million of TPG common equity at close in connection with the partnership.

We have agreed to similar lockup and sale restrictions in connection with this stake. This stake will allow Jackson to participate in the ongoing growth of TPG and create strong alignment between the 2 organizations. In addition, with $20 billion of AUM is achieved under the partnership by the tenth anniversary of the closing of the agreement Jackson has an opportunity to elect to receive an additional $150 million of TPG common equity.

In connection with these transactions, we will enter into an investment management partnership with TPG with a 10-year initial term and automatic 1-year renewals through year 15. We have committed to deliver $4 billion of AUM by the end of the second year and $12 billion by the end of year 5, which will be deployed into investment-grade asset-based finance and direct lending securities.

The agreement has a 50 basis point minimum fee with asset management fees set at competitive market rates by asset class. Jackson and PPM will retain full oversight of Jackson's investment portfolio, including asset liability management and risk management. PPM will continue to manage the majority of Jackson's general account, and we expect PPM's AUM to grow significantly as Jackson's general account grows. We would anticipate closing the transaction in the first quarter of 2026, subject to customary conditions.

Turning to Slide 8. I'd like to cover our new onshore spread-focused captive Hickory Re. Hickory Re has reinsured an initial block of in-force fixed and fixed indexed annuity products and will support future sales through a flow reinsurance arrangement. We intend to capitalize Hickory Re with $650 million of capital from JFI, including $150 million of excess cash contributed in December as well as the proceeds from TPG's $500 million investment in JFI's common equity that will be contributed upon closing of the transaction with TPG.

Hickory Re will use an economic reserving framework similar to offshore entities reinsuring spread-based business, which will enable us to optimize capital efficiency, reduce strain and improved returns on these products. Brooke Re's ownership of Hickory Re also allows us to holistically manage our variable annuity guarantees and fixed and fixed index annuity business under a single risk and capital framework. As Laura covered earlier, we've made tremendous progress since becoming an independent public company, and we believe that the strategic partnership with TPG, combined with the formation of Hickory Re, will allow continued growth in our spread-based business while improving overall capital generation and accelerating free cash flows.

With the Hickory Re reformation, we now have multiple streams of capital generation and cash flows as illustrated on Slide 9. Our Jackson National Life our strong excess capital position and reduced capital strain from fixed annuity and fixed index annuity sales allow for enhanced distributions going forward. The large and profitable variable annuity-based contracts along with RILA and institutional spread-based businesses are capital-light, contributing to our overall capital efficient new business model.

At Brooke Re, the addition of fixed and fixed index annuity liabilities further stabilizes and diversifies the liability and capital profile of Brooke Re's consolidated balance sheet. We continue to anticipate that Brooke Re will generate capital from variable annuity fee-based earnings sufficient to provide distributions to the holding company over the long term. Hickory Re's spread-based earnings profile will be supported by the higher yield of assets from the partnership with TPG and allow Jackson to continue to be competitive in the marketplace. Our optimized capital efficiency at Hickory Re is estimated to allow for distributions in the medium term as new business generates capital.

Overall, and as I mentioned before, the combination of these factors stemming from the strategic partnership with TPG in formation of Hickory Re allows for growth in our spread-based business while improving overall capital generation and accelerating free cash flows.

Slide 10 highlights the compelling strategic and financial profile that Jackson will have as a result of the execution of its strategy, including the predicted impact of these 2 transactions.

First, we plan to accelerate our efforts to grow and diversify our business into spread-based products. Such efforts are already supported by the strong growth we have achieved and continue to anticipate in our RILA and institutional business. We believe our partnership with TPG and formation of Hickory Re will provide us with the capacity to write $10 billion to $15 billion of cumulative fixed and fixed index annuity sales over the next few years in a capital-efficient manner that reduces the strain from this growth on the broader Jackson enterprise.

Second, we expect to have a greater share of our earnings from spread-based products while earning attractive returns at the product level. From an earnings perspective, we estimate these transactions will be accretive to adjusted operating EPS in 2027.

Finally, we anticipate enhanced capital generation and free cash flow to result from this strategy. The capital efficiency of Hickory Re and higher investment yields will help to drive improved free capital generation with minimal impact to excess capital at Jackson National Life. As a result, we expect free cash flow to exceed full year 2025 levels with further growth thereafter. Further detail will be announced in connection with our fourth quarter earnings call.

On Slide 11, I'd like to provide a brief update on our annual actuarial assumption review. The after-tax impact on our consolidated net income was less negative than the comparable impact in 2024. We expect the after-tax negative impact on brokery equity will be about $350 million. This largely reflects increased reserves from updated policyholder behavior assumptions such as lapses. The reserve increases were partially offset by the positive impact of updated mortality assumptions and model enhancements.

Throughout 2025, Brooke Re equity has proven resilient despite periods of heightened volatility and elevated policyholder behavior activity. We believe this result was attributable to our effective risk management efforts and disciplined hedging approach. As a result, Brooke Re continues to be well capitalized relative to our regulatory minimum operating capital and is expected to be above our internal risk framework.

No capital contributions were required from the actuarial assumption update. We plan to discuss and take any questions regarding the results of our fourth quarter assumption unlocking and model enhancements in more detail when we report our earnings in February. I'll now turn the call back to Laura.

Thank you, Don. I will conclude our presentation today on Slide 12. As I reflect on the progress Jackson has made in the 4 years since becoming an independent public company in September of 2021, I'm proud of what we have accomplished to execute on our strategy and create a track record of success.

Over the last 4 years, we've continued to enhance and broaden our product offerings, driving higher new business volumes with greater levels of diversification. We have strengthened our balance sheet and reduced our leverage ratio and we have cumulatively returned $2.5 billion of capital to shareholders, an amount exceeding our initial market capitalization.

Importantly, we've positioned ourselves for significant growth. Today's announcement represents another important step in creating long-term value for our stakeholders by continuing to execute on our strategy of profitable growth while diversifying our sales mix and earnings.

At this time, I'll turn it over to the operator for questions related to this exciting strategic update.

Thank you. We will now begin our Q&A session. Our first question comes from Suneet Kamath from Jefferies.

Just a question on the $500 million equity raise, I guess. I had thought that your excess capital as of the end of the third quarter was pretty high, ordering on maybe $2 billion. So it feels like maybe you could have funded this on your own. So just curious if that number is reasonable, the close to $2 billion and then why go raise external equity if you could have done it on your own.

Suneet, it's Don. I'll take that question. So first of all, I would say having a relationship with a global alternative asset management firm like TPG gives us a great deal of confidence in our future growth strategy and kind of further validates our ability to grow this business in the near to medium term. And we believe the investment by TPG creates very strong alignment between our 2 firms. So that's sort of point one.

I think the other thing that I would tell you is we do continue to have significant levels of excess capital at JNL, as you mentioned. And we believe this incremental growth capital will really facilitate the accelerated growth and diversification of our business. It will also enhance our go-forward free capital generation and free cash flow conversion. And it's also going to allow us to continue to maintain a lot of capital flexibility at JNL while also increasing our capital return to shareholders.

And while we haven't finalized our targets for 2026 at this point in the quarter, we will be sharing an update on the fourth quarter earnings call. We do expect that our growth in capital return will be about 20% above 2025 levels kind of in a range around $1 billion and that includes both share repurchases and dividends.

Okay. That's helpful. And then I guess just a comment about free cash flow expected to exceed 2025. Is that free cash flow, is that going to stay within the captives? Because you say on the one slide that Hickory will be more of a near-term distributor of capital. Brooke Re is a little bit longer term. But if Hickory is under Brooke, does that capital essentially get trapped at Brooke from Hickory and -- or does it get up to the holding company in some other way?

Yes. So the way that I would think about it, and I think the slide that you're referring to is a good one to reference. But as we just talked about, we have a strong level of excess capital that exists at JNL. And going forward with this transaction and the investment from TPG funding the growth of these spread-based products, in particular, fixed index annuities, including those with income benefits and fixed annuities, kind of the multiyear guarantee type annuities, funding the growth of those products is somewhat capital intensive.

So we don't have to fund that entirely now from JNL. So we anticipate that there will be capital that will be available to distribute up. So that's point one. In terms of the capital coming up over time from Hickory, we do expect this business will be generating capital pretty quickly. And over time, we would -- in the kind of medium term, we would expect to be able to distribute capital up through our ownership chain to JFI.

Our next question comes from Tom Gallagher from Evercore ISI.

Let's see a few questions for me. I guess first one is, I guess, the FA and FIA competition is really intense right now. When I look at both alternative managers and mutuals, is there anything particular about your strategy or product design that you feel like is going to help you stand out, make that either higher margin or give you better momentum or just help you stand out in a crowded field as you now are going to be emphasizing growth in those areas more?

Thank you for the question. we have been focused on growing sales across all of our product offerings, including fixed and fixed index where we do have history in serving these markets. I'll let Chris talk about the competitiveness in those markets and our thoughts around how we will continue to approach sales with fixed and fixed index.

Sure. Thanks, Tom. We view the market for fixed and fixed index annuities to be attractive right now. And obviously, the dynamics in the annuity industry are very strong. MYGA, as you noted, is a competitive marketplace. And our fixed index product that we launched in August has been very well received. With our competitive advantages in leading industry customer service, and our best-in-class wholesale in force, we're confident we're going to be able to grow those products in the near term.

Yes. Tom, the other thing I would just add is that the formation of Hickory Re really and combined with the partnership with TPG sort of levels the playing field for us. PPM, our own asset manager has done a lot of work over the last couple of years to be able to source higher yielding assets to support these spread-based products that, as you mentioned, are highly competitive now with Hickory Re in place and a more economic reserving framework. We are able to offer these products and achieve competitive returns as well as having competitive product features.

Got you. And then another question writing it out of Hickory Re, I assume the main difference is less on front strain from new sales. But can you talk a little bit about the -- Don, I think you mentioned the 20% increase in free cash flow dollars in '26, which is a good increase. Maybe how much of that -- is that mainly driven by lower required capital that we were seeing being a drag at JNL that's now being pushed down to Hickory Re. Is that the main driver of that?

Yes. So just when you think about these products generally and it's kind of more so the case with the FIA products, particularly those that have income benefits, there is a fairly sizable redundancy in the statutory reserving framework. And with the establishment of Hickory Re, we won't have to fund that requirement at JNL and we'll have a more kind of economic reserving framework at Hickory. So yes, that frees up capital at Jackson that we can use to increase the cash flows up to the holding company. Hopefully, that answered your question.

It did. And just -- sorry, if I could slip one more in, just on the balance sheet review charge. The -- should I think about the $350 million charge being netted out against the net MRB asset and that you would still have approximately $700 million of hard assets down at Brooke Re or maybe just any further color you can give us on the capitalization of Brooke would be helpful.

Yes. So first of all, I would just reiterate that we'll be providing some additional detail on the actuarial assumption review in our fourth quarter earnings call. But on a consolidated basis, which I know people tend to focus more on Brooke Re. But on a consolidated basis, the impact of our review this year was less negative than it was in 2024, in terms of the $350 million impact at Brooke Re, probably not a surprise, it related primarily to lapses. There were some partial offsets from updated mortality assumptions as well as model enhancements each year, we make enhancements to our models. And net-net, resulted in a reserve increase.

So you can view that as a smaller asset. I would say that just in terms of Rookery, throughout 2025, the capital there has been quite resilient despite periods of heightened volatility early in the second quarter, that we observed in the marketplace as well as an elevated level of policyholder behavior kind of related to higher equity markets.

So we believe the fact that the capital at brokery has been resilient is attributable to the effective risk management process that we have in place as well as our more disciplined hedging strategy post the establishment of Brooke Re. So Brooke Re continues to be well capitalized -- or well above our regulatory minimum operating capital. And at this point, expect to be above our internal risk capital framework as well.

Okay. And can you comment on the hard assets at all at Brooke Re?

We'll provide some additional information related to brokery in connection with our fourth quarter earnings call. But it's -- I think we'll provide that information in a few weeks.

Our next question comes from Alex Scott from Barclays.

I was hoping you could opine a little bit more on how much new business stream do you have right now? Like what was it in '25? And how do we think about the amount it's reduced by? And what I'm really trying to get at is you opine on operating EPS accretion. I'm really interested in when this transaction becomes accretive on a cash flow basis, like on a free cash flow per share it sounds like cash flow is going up a good amount. So I'm just trying to understand how much of that is from the transaction over what period of time could you also say it's accretive from a cash flow standpoint?

So first, just let me just clarify my comments around the increase in cash flow and our anticipated increase in capital return to shareholders. So the 20% that I mentioned is specifically related to kind of the capital return to shareholders relative to the level will end up at for full year 2025. So just wanted to clarify that.

In terms of the impact of reinsuring the business over to Hickory Re, as I mentioned earlier, the primary impact is related to the FIA business. And if you look at kind of generally the reserves that we would be required to hold on a statutory basis, there's about a 20% redundancy for that particular product, and this is an FIA contract with income benefits.

So we haven't finalized our full year statutory results at this point. So I can't give you a number on the impact for full year 2025. But just in terms of kind of thinking through the impact, the benefit that we get with Hickory in place, it's about 20%.

Got it. Okay. And then my follow-up was just interested in if you could provide a little bit more on what could be the future opportunities? I think that was mentioned a couple of times that this is a new partnership, but there's further opportunity for collaboration. What could that entail?

Yes. So we've obviously spent a lot of time with TPG over the last year, getting to know them, and we think they're a great fit with Jackson's culture, and I might just hand it over to Dean Scott, who runs our corporate development team to chime in there in terms of some potential opportunities that we see going forward with TPG.

Alex, I think in terms of future opportunities, I guess I would start by saying we're initially going to be very focused, I think, on getting the investment grade ABF and direct lending efforts up and running and successfully contributing to improving the yields in our general account. We think over time, there's more to do with we certainly have a very broad set of offerings, both from a VA perspective as well as in our across our broader platform. So I think more to come there. But initially, we'll be very focused on getting these 2 strategies up and running.

Thank you. We currently have no further questions. I'll hand back over to Laura for closing remarks.

Thank you all for joining us this morning. We realize it was short notice, and we appreciate your time.

This concludes today's call. Thank you for joining. You may now disconnect your lines.

Welcome to TPG's conference call regarding its long-term strategic partnership with Jackson. [Operator Instructions] 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. Thank you, operator, and welcome, everyone. Joining me on today's call are Jon Winkelried, Chief Executive Officer; and Jack Weingart, Chief Financial Officer, who will discuss the long-term strategic partnership with Jackson we announced this morning. In addition, Josh Evans, Partner and Head of Corporate Development, is here and will be available during the Q&A portion of this morning's call.

Earlier this morning, we issued a press release and posted a presentation to the Investor Relations section of our website. We'd also like to remind you that Jackson will be hosting an investor call this morning at 9:00 a.m. Eastern Time. You can access that call through the Investor Relations section of Jackson's website.

I'd like to advise you this call may include forward-looking statements that do not guarantee future events or performance. Please refer to TPG's 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.

With that, I'll turn the call over to Jon.

Good morning, everyone. Thank you for joining us, and Happy New Year. Today, we're excited to announce that we have established a long-term strategic partnership with Jackson Financial, a leading U.S. retirement services firm. For our call today, I'll share the highlights of this partnership before turning it over to Jack to review the key terms and financial impact.

Over the past several years, we've focused on diversifying and scaling our credit platform and expanding the breadth and duration of our sources of capital. We've also been intentional about building our capabilities to serve insurance clients at scale. Partnership with Jackson is an important step in the evolution of our insurance strategy. This announcement follows TPG Credit's breakout year in 2025. On our fourth quarter earnings call next month, we expect to report approximately $20 billion of credit capital raised for the full year. This would represent a 60% increase from 2024 as we continue to achieve significant growth for our credit strategies. Through this partnership, TPG will manage a portion of Jackson's general account as their alternatives partner, further scaling our strong origination capabilities while delivering enhanced returns for Jackson. The strategic arrangement further positions TPG to be the partner of choice for our clients as they seek customized asset management solutions. Looking ahead, this partnership is an important step in the next leg of growth for our credit and insurance strategies.

Turning to the partnership details. TPG has established a long-term investment management agreement to serve as a strategic alternative asset manager for Jackson's general account. The IMA includes a minimum allocation of $12 billion with strong economic incentives to scale to at least $20 billion. The initial mandate will focus on investment-grade asset-based finance and direct lending with opportunities to expand to additional strategies over time. Additionally, in connection with the IMA, TPG will invest $500 million into Jackson common stock and issue to Jackson $150 million in TPG common stock, creating strong alignment between our firms. Jack will share more on the specifics in his remarks.

Over the past year, we've developed a strong relationship with the Jackson team, and it's clear that our cultures are closely aligned. Jackson is a top 10 U.S. retail annuity provider with $350 billion in assets under management and a nearly 65-year track record as a leading provider of retirement income solutions. Jackson has developed robust distribution capabilities with over 500 broker-dealer partners and 120,000 appointed advisers in its network. Since becoming an independent public company 4 years ago, Jackson has delivered significant value for shareholders, returning nearly $2.5 billion via dividends and share repurchases.

We view this transaction as being highly advantageous to our firm in several ways, particularly to the expansion of our capital sources and continued scaling of our credit franchise. To share a few of the benefits, first, as we continue to grow our firm, we've consistently reiterated our focus on maintaining a balance sheet-light and FRE-centric growth model. This partnership aligns closely with these objectives while enhancing our ability to provide flexible, customized asset management solutions to the insurance industry and our broader base of clients. This partnership is an important step in how we are evolving our credit capabilities to meet the needs of an increasingly diverse client base.

Second and relatedly, our IMA with Jackson is structured to generate long duration, highly predictable fee revenue and serves as a cornerstone for the continued build-out of our origination engines. In particular, it will accelerate the growth of our investment-grade asset-based finance capabilities, enabling us to deliver larger scale, capital-efficient solutions. This increased capacity will further position us to be a preferred partner for clients seeking differentiated origination capabilities and strong investment performance. As clients continue to consolidate their GP relationships, we believe we will continue to take market share as a scaled total solutions provider across the full risk return spectrum.

And finally, following deep proprietary engagement with Jackson over the last year on this agreement, it became clear to us that this partnership presented significant opportunities for both our organizations. By leveraging the power of our highly complementary capabilities, we are confident this partnership will strengthen both firms and unlock additional avenues for growth over time.

Jackson's selection of TPG as their alternatives partner is a testament to the power of our franchise, our differentiated credit capabilities and the investment expertise that we've built over decades. Our scaled strategies across asset-based finance, middle market direct lending and credit solutions have consistently delivered proprietary opportunities and differentiated returns for our clients through many market cycles.

Specifically, in our asset-based finance business, we built a market-leading franchise over the past 20 years, which we believe offers unique value to Jackson's business. Our ABF platform has participated in over $150 billion of investment activity since 2014, the relationships with over 50 origination partners and other counterparties. The platform has maintained a consistently strong track record across all major segments of the asset-based finance market, including non-agency residential mortgages, consumer finance and specialty assets. In particular, the strength of our ABF platform has played a key role in our increased penetration of the insurance channel, where we've driven significant organic growth. Over the past 2 years, our total firm-wide commitments from insurance clients have increased more than 60%.

Capital raised from insurance clients comprise approximately 20% of our total credit fundraising since the start of 2024, including 40% of our asset-based finance business. Importantly, our partnership with Jackson provides us with committed capital that will further accelerate the flywheel effects as we continue to penetrate this channel. Going forward, we're excited to continue providing flexible solutions to a broad range of insurance clients.

We consistently shared our long-term strategic objectives with our stakeholders, and this partnership represents another exciting step in TPG's growth trajectory. We're continuing to scale our credit franchise, grow our insurance practice, source longer-duration capital opportunities and expand our origination capabilities. We're proud of the significant progress across our franchise in 2025, and with this exciting announcement, we're confident in our strong momentum heading into 2026. Now I'll turn the call over to Jack.

Thank you, Jon, and thank you all for joining us today. We believe Jackson is an ideal partner for TPG, and our strategic relationship is structured to drive meaningful long-term growth for both organizations. The terms of our agreement underscore the differentiated nature of this partnership and the benefits to both TPG and Jackson. First, we're entering into a long-term nonexclusive investment management agreement with Jackson where TPG will manage a minimum of $12 billion for Jackson's general account with economic incentives to scale to at least $20 billion. We've structured the agreement to allow for a ramp-up over time with a minimum requirement of $4 billion after 2 years and $12 billion within 5 years of closing. Importantly, all of this will be fee-paying AUM. TPG will receive market-based fees for each asset class, and we've agreed to a minimum management fee of 50 basis points that will apply throughout the duration of the partnership.

The IMA has a 10-year initial term with automatic 1-year renewals through year 15. Second, to support Jackson's growth initiatives, TPG has agreed to invest $500 million in Jackson's common stock based on the unaffected VWAP during the 30 days preceding the signing, which will represent approximately 6.5% pro forma ownership. We expect to fund this investment through our revolver, which had undrawn capacity of $1.75 billion at the end of the fourth quarter. Third, our investment in Jackson's common stock is structured to provide flexibility for us to recycle our capital over time. Following the second anniversary of closing, TPG may begin to monetize any gains in our position. And following the fifth anniversary, we'll be able to begin selling down our initial stake. Given our confidence in Jackson's differentiated positioning and growth outlook, we've agreed to hold at least $100 million of Jackson's stock for the duration of the partnership.

Since becoming a public company, Jackson has delivered impressive annualized returns of approximately 40%, and we believe Jackson is well positioned to continue generating long-term value for its shareholders, including TPG. Fourth, to further align incentives, TPG will issue $150 million of common stock to Jackson. If the total fee-earning AUM managed by TPG for Jackson reaches at least $20 billion by the 10th anniversary of closing, Jackson will be eligible for an additional $150 million issuance of TPG common stock.

In aggregate, we expect this partnership to be accretive to TPG's fee-related earnings per share beginning in the fourth quarter of 2026 and accretive to after-tax DE per share beginning in fiscal year '27. More importantly, this partnership provides long-term predictable fee revenue that will enable us to continue investing in our credit capabilities, further strengthen our origination engines and become an even more effective partner to our clients. This partnership is subject to customary closing conditions, and we expect to close the transaction in the first quarter of this year.

To wrap up, the structure of this balance sheet-light partnership creates meaningful alignment between our organizations. We're confident the partnership will deliver sustained growth and value creation for both TPG and Jackson, and we look forward to working together to capitalize on the significant opportunities ahead. With that, we can open up the call to questions. Nikki?

[Operator Instructions] We will take our first question from Mike Brown with UBS.

So I wanted to start on the management fee rate here. So the 50 bp minimum that the deal is structured with, how will the AUM be allocated across funds? And I guess as capital is deployed into some of your funds where you earn the full fee rate on that, such that, that 50 bps could blend higher over time and is that incorporated into the accretion numbers that you've laid out?

Mike, it's Jack. I'll start on that. I think as we mentioned on the call, we expect the initial allocation to be to investment-grade asset-backed finance and to direct lending. That may evolve over time, will expand over time, but that will be the initial allocation. And we will earn effectively -- think of it as market-based fees for each asset class. So the effective fee will be a weighted average of the management fees and promote, if applicable, to each allocation. Across that, there will be an overall minimum of a 50-basis-point management fee. In some of those more investment-grade type asset classes, management fees are sometimes below 50 basis points, but the relationship has a contractual minimum of 50. So to your question, yes, it could blend higher over time depending upon the mix of allocations. In our accretion dilution calculations, we're assuming just a 50-basis-point minimum.

Our next question comes from Glenn Schorr with Evercore.

So a question on -- do you feel that you have the origination capacity today to fulfill, say, the $12 billion and the $20 billion if it comes quicker? And then very curious to get your thoughts on does this ramping up of your presence in the channel give yourself an ability or do you have the desire to build/buy more platforms to make sure that the origination capacity is there to fulfill what is hopefully higher demand?

Yes. Thanks, Glenn. It's Jon. I think that on the first part of your question in terms of our capacity to originate, I think the answer to that is we feel highly confident in our ability to originate for this IMA as well as for the broader set of relationships that we have. I think that we've talked about this from the very start when we acquired Angelo Gordon, we had a platform that had, at that time, a 16- or 17-year track record in the structured credit side. And we were out originating our capital base.

And over time, over the course of the last couple of years, we've obviously made significant strides in growing our capital base meaningfully. And as we've been doing that, that's allowed us to essentially continue to expand our relationships on the origination side and size up the opportunity set that we're prosecuting in the market. And I think, as you know, there is a relationship in the market between sort of size in a lot of respects, beget size in terms of the capital base that you have available to you, the counterparties you can interact with. And frankly, the amount of capital you can speak for on each of those individual opportunities. So that has been steadily increasing for us as our capital base has increased.

And as you've heard, this is a relationship that scales over time. And the visibility and certainty of having that capital flow coming at us is also very important in how we position ourselves with counterparties and with other financing enterprises in the market that will position us to be able to do more and more with them because if you have the capital flowing in, that positions you more strategically.

As far as acquiring other platforms or acquiring origination platforms, what I would say is, I don't think we have any specific plans to go out and acquire a series of various types of finance companies to secure origination because I don't think we feel we need to do that. I think we have good enough and strong enough relationships and strong enough presence in the market. That's not to say that we wouldn't evaluate some kind of a flow partnership with somebody to the extent that it made sense for us economically. So the answer to that question is, I wouldn't rule anything out, but I think that, that's not something that I think we absolutely have to do in order to generate the flow and the origination that we will continue to grow over time.

Our next question comes from Brian Mckenna with Citizens.

So there's clearly going to be a lot of focus on direct lending in the partnership. I'm assuming most of these assets will flow directly into Twin Brook to leverage those capabilities in the lower middle market. I'm curious though, is there also an opportunity to begin moving upstream a little bit with some of these assets and begin building out a larger cap direct lending strategy?

Yes. Well, I think -- this is a good question, and I think that in our last earnings call, I think we alluded to the fact that we continue to see opportunities to build into the slightly larger part of the market. I think that the way we will continue to think about doing that is where we have an angle or sort of a reason to win, if you will, in the market, such as, for instance, following many of our borrowers from Twin Brook up as they've grown over time or sourcing top of the capital structure opportunities, for instance, through our Credit Solutions business.

We'll probably talk more about this on our next earnings call and give you a little bit of a perspective on the launch into that part of the market and be a little bit more specific on it at that time. But you're right about your assumption that this will -- this capital will begin to flow into Twin Brook. And over time, working with Jackson, we think that there will be potential opportunities for this capital to support the growth into that next level of lending, and we will talk more about it on future calls.

We will move next with Steven Chubak with Wolfe Research.

So I wanted to ask about the incremental margins. I know you mentioned the accretion timing, but just wanted to gauge how we should think about incremental margins on the capital manage as part of the Jackson IMA? Given you have the infrastructure in place or the existing infrastructure for credit solutions, DL, ABF, figure you don't necessarily need much incremental investment to support that future growth. So I was hoping if you could speak to how you plan on scaling in relation to the capital that you've just sourced?

Yes. Thanks for the question. It's Jack. I think your assumption is correct that as we've been talking about, one of the attractive things about Angelo Gordon to us was they had pretty fully built out the operational platforms behind each of the asset classes. So scaling should provide good incremental contribution margins. And we definitely see that being the case with this business. We're not announcing expected margins in connection with this partnership, but your assumption there should be high contribution margins and accretive to our FRE margin objectives over time is accurate.

We're certainly going to be investing, as we said in our comments, to continue expanding our credit business, but there's relatively little operational investment needed to support this. So the -- you can imagine the contribution margins as the FAUM scales here being high and accretive to our FRE margin overall.

Our next question comes from Ken Worthington with JPMorgan.

Maybe talk about the path from $12 billion to $20 billion. You mentioned in the prepared remarks a collaboration. So talk about how you're thinking about product development and what you sort of anticipate there?

Yes, this is Josh. Happy to take that. As mentioned, we expect this strategy could allow for expansion beyond $12 billion. There's strong economic incentives to reach at least $20 billion over time. And as part of the agreement, there will be an auto renewal feature with a 10-year initial term that will auto renew through year 15. And starting with the IG ABF and direct lending asset classes, we've already started having conversations about other activity in other pockets and areas of the market we're investing in that could be included here within the framework and the overall agreement, and we'll continue to do that over time.

Our next question comes from Craig Siegenthaler with Bank of America.

So we were curious on both the mix of Jackson's general account base and duration. And I think it's probably mostly fixed annuity and index annuity and probably about 7 years of surrender.

Yes. So Jackson has a highly diversified VA portfolio, totaling about $250 billion in account value. And through our access to private side diligence, we were able to gain insight into the company's robust hedging strategy, the substantial excess capital they have and the strong liquidity position. Importantly, outside of that, they've also established a broad suite of products and demonstrated the strength of their distribution capabilities through not only being in the VA market, but scaling into the spread-based market through their position as a top 5 player in the RAILA business. So we think that will position them for continued growth and diversification into the spread market, which they'll talk more about later today, and that will importantly be further enhanced by our origination capabilities as they pivot more into the fixed space.

I think the partnership has a lot to do with their next stage of growth. And you'll hear that from them when they do their call. But I think what [ Bill ] outlined is a multipart strategy that allows them to continue to diversify the types of annuities that they are generating. They clearly see the opportunity in spread-based product for fixed annuities, fixed indexed annuities. We're obviously a leader in RAILA. And importantly, I think this partnership with us is for them a lot about helping to increase returns in their account and continue to be more competitive in that part of the market.

Our next question comes from Alex Blostein, Goldman Sachs.

This is Anthony on for Alex. Could you talk through kind of the cadence of AUM growth from the $4 billion by the end of year 2 to the $12 billion by the end of year 5 and ultimately to the $20 billion number? Like what drives this rotation and what can maybe accelerate this pace or decelerate this?

Yes. As you heard in the call earlier, there are set targets for $4 billion at the end of year 2 and $12 billion at the end of year 5. That will be a fairly linear ramp from the $4 billion to the $12 billion. But importantly, as you pointed out, what could cause an acceleration is as Jackson is able to scale their business and continue driving flow in sales and bringing more capital into the platform, and we're able to expand our origination capabilities, as Jon mentioned earlier, they certainly have the opportunity to flow more capital to us in a faster ramp than that linear progression would imply if they are successful in the fixed market and we're originating the appropriate assets. And so we expect there's opportunity for that, but all of our accretion and otherwise communication has been assuming a fairly linear ramp between the $4 billion and the $12 billion.

We will move next with Brian Bedell with Deutsche Bank.

Congrats on the partnership. My question would be, to what extent does this provide a template for doing more of these types of deals with other insurance partners over time? Is it -- would you rather see how this one works out first? Or do you view the potential to announce more of these types of deals even over the next, say, 12 to 24 months?

Yes. Thanks for the question. Look, I think that every time you do something like this, you gain a lot of knowledge and continues to build out your capabilities. I think the thing I want to stress as it relates to that is this partnership is a nonexclusive partnership. So it's very important that we continue to grow and build out our franchise with our insurance clients. And we have a number of bespoke relationships already, not of this scale, of course. And one of the things that we've committed ourselves to, which we've talked about a lot, is pursuing balance sheet-light, FRE-centric types of opportunities. And our expectation is that other opportunities like that will come along, and we will enthusiastically pursue them. So I don't know if it will be in the next 12 months or whatever time frame you talked about, but we will continue to pursue those opportunities and continue to scale our business.

Thank you. And this concludes the Q&A portion of today's call. I would now like to turn the call back over to Gary Stein for closing remarks.

Great. Thank you, operator. Thank you all for joining us this morning, particularly on such short notice. If you have any additional questions, please feel free to follow up with the Investor Relations team directly, and we look forward to speaking with you all again shortly.

Thanks everyone.

Thank you. And this concludes today's call and webcast. You may disconnect your line at this time, and have a wonderful day.

All right. Great. Well, thanks, everybody. I'll give it a second for everyone to settle in.

But look, next, I'd like to welcome Jon Winkelried, CEO of TPG. TPG's global alternative asset manager with over $280 billion in AUM across a diverse set of strategies. Over the course of 2025, the firm's been -- the firm has seen significant amount of momentum across the franchise really with accelerating fundraise and deployment, realization and of course, really good investment performance. With several major strategies in the market for 2026, it looks like this is going to be another busy year for you guys.

So really happy to have you here. Always good to spend some time with you at this time of the year. So welcome to the Goldman's Conference, and looking forward to the chat.

Thanks, Alex. I always love coming back to Goldman. And thank you for all the support that you give us as well. So great.

No, pleasure.

So let's start with 2026 and just thinking about some of the priorities for you guys. Since becoming a public company really just a few years ago, TPG has really evolved quite a bit, both organically and inorganically. As you look out, what does the business look like over the next 3 years? And what are some of the main priorities and guideposts really for you and your team in '26 to get you to where the vision is a few years from now?

Good. Well, look, I think just to frame it, I mean, because you mentioned it, 2025 has been a really active and busy year for us, and we came into 2025 in an environment which was -- there were some questions about the overall sort of macro environment in terms of capital formation. We had an ambitious plan and agenda for 2025 in terms of capital formation really across a number of our flagship funds, across our credit business. And it's turned out to be a very busy and very active and very successful year for us in terms of both how much money we've been able to raise as well as just the deployment environment. The deployment environment has clearly picked up across all of our strategies.

To your point, going into 2026, I think we have another busy year. We are just -- as a firm, I think, as a result of our investment performance, as a result of the franchise that we've been able to fortunately develop and the following that we have, we are just going through a very significant expansion of our platform, frankly. And that's in the form of really scaling strategies that we have organically developed, as you talked about. Some of our really core large strategies that continue to be in the market and that we have to finish raising capital for us or for instance, our buyout fund as an example, continuing to raise capital across our credit platform. But this is also going to be a really important year for us in 2026 as we go into it.

We're going to rotate into on the real asset side and our real estate franchise, in particular, we're going to rotate into a significant capital formation period in all of our real estate businesses. So our opportunistic funds are the funds that we inherited from Angelo Gordon. And so I would say that probably the biggest difference in '25 versus '26 is really the real assets and real estate program for us in terms of capital formation. But we have a bunch of things to finish up, like finish our buyout fund. We have several strategies that are newer strategies where we're sort of moving into a position of scale like what we're doing. We're raising our secondaries fund, we call it TGS. It's single name, secondaries, it's continuing to scale our real estate credit franchise.

And then across our credit businesses, in particular, and you may have seen the announcement today, we actually announced the completion of our Credit Solutions fund, which essentially doubled vintage over vintage. We raised $6.2 billion of capital. It's already 20% deployed. And we have a number of new insurance partnerships that we're raising -- that have helped us drive our structured credit franchise. So we've got a lot on our plate. So -- and I think we're going into it clearly from a position of strength, in terms of our performance. So we're optimistic.

Yes. Great. Well, look, as you said, lots going on. So I was hoping to zone in on a couple of fundraising themes because you guys have been in the market over the course of this year. To your point raising capital across predominantly your larger private equity strategies, and that's obviously been an area where there's probably been relatively more concerns when it comes to what does the future private markets sort of look like here.

But also, you feel free to expand that a little bit more broadly, right? When you're out on the road, you're meeting with LPs, what are some of the bigger themes that investors are trying to lean into in terms of their asset allocation trends? And how are you positioning TPG to execute against these themes?

Sure. Sure. Well, look, let's break it down maybe a little bit by asset class because I think the -- what's on LP's minds varies between private equity, credit, real estate, infrastructure, et cetera. Let's just start with private equity for a second. I think that private equity has evolved into a market where I think that there's been more dispersion in terms of performance. And it's also an asset class where I think there have been as a result of the lack of return of capital, there has been an environment where many of the largest pools of capital have been over allocated to private equity.

So what's happened is that those that have had really strong performance and in our case, where we've also been very focused on not only investing well, but also return of capital. There's clearly been a kind of a divergence in terms of experience and capital formation. We have been fortunate to be in a position where we are essentially gaining share in the market.

Just to give you an idea, to use our buyout fund as an example. We finished our first close for TPG Capital X and Healthcare Partners III. Our first close was $10.1 billion, which was a strong first close.

Just to give people perspective, for those LPs that were re-upping to this fund that had been in our prior funds, the average allocation to our buyout fund went up by 12%. That's the average allocation. That's in an environment where, in most cases, institutions are trying to figure out where to pare back on their private equity exposure.

So there's clearly a difference for those that have performed well but also have been disciplined about return of capital. And the way we've run our business has been very intentional in that not only are we focused on how we get into different opportunities, how we buy them, that whole process, but we're also very disciplined on looking at the process of where are we going to exit, which companies are we going to exit, how are we going to exit and essentially trying to set ourselves up for that in advance by thinking about the things that we're buying, our relationships with strategics, how do we exit the strategic. So that's been very intentional on our part.

So overall, I would say that we're clearly in a position where we've gained share in the private equity space. What I'm hearing from -- when you move away -- and I would say, overall, LPs are still constrained in the private equity space, by and large. So we have this dynamic where fewer are raising more capital and many sort of kind of middle of the market type size funds are having trouble raising capital.

So I would characterize the private equity environment is still pretty tight overall, but we've been a beneficiary. On the credit side, there's obviously been a lot of capital that's been raised and deployed on the credit side -- on the private credit side. Clearly, we're going through an environment right now where there are a lot of questions that are being raised about quality of underwriting, quality of diligence, et cetera. We can talk about that if you want to.

But I would say that on balance, institutional LPs on balance are still allocating and still want to allocate to credit. I think, again, there are important questions being asked in terms of sort of how to think about dispersion among managers, how to think about diversification within credit strategies, which has become a bigger topic with LPs. But by and large, we continue to see the market leaning into credit as a result of where rates are, just nominal yields and the broader opportunity within credit as well.

The interesting dynamic that we're also seeing is that we have a pretty big real estate business. Real estate has been an interesting space. Over the last several years, I would say it's been, by and large, reasonably out of favor as a result of what happened going through the rate rise, going through COVID, some of the pressure on the office space, et cetera.

On balance, we're pretty excited about the opportunities in real estate. We see a lot of very interesting opportunities. We're in a position where we've had a lot of dry powder. We thankfully avoided most of the mess in the office space. And for the first time, over the course of 2025, as I've traveled around and met with LPs, I would say that LPs are really kind of waking up to the fact that there's probably an opportunity in real estate, particularly on the opportunistic part of the market. Core real estate is sort of dead.

But I would say in the higher return opportunistic part of the market, people are really sort of zoning in on the fact that valuations of reset, valuations in real estate are probably 15% to 25% lower than they were. There are sort of some -- there are situations where, frankly, certain people who are stuck have to sell. So there have been assets that have come to market that have not -- that you probably wouldn't have seen come to market, and we've been able to be pretty offensive about that opportunity.

And I would say that the conversations have really shifted where I think there's a much more interested engagement in that part of the -- in that asset class. So my expectation is that you're going to see people selectively lean in there, and you're going to see -- we're going to prove that out this year.

Yes. Look, the comments you just made about real estate are certainly encouraging. We heard it from a couple of people as well. And yes, I mean, that is the part of the market that's been really dormant for the last almost 3 years. So it will be great to see.

As you're thinking about that opportunity for TPG, and I totally hear you on actually avoiding a lot of the problem areas within real estate, which should be helpful for the fundraise. How are you thinking about sizing the next flagship real estate funds, especially taking into account some of the feedback you're kind of starting to hear from the LPs. Could we be in a similar situation as private equity, where some of the LPs will just allocate more with you guys and there is a room to sort of grow same-store sales and therefore, get these funds to be a larger size despite some of the tightness in the market still?

Yes. Yes. I mean we're really encouraged that we're going to be able to upsize these pools of capital, which, frankly, by the way, I think, would be a great opportunity because I think we see a significant opportunity to deploy. And so just to quickly recap it, we're going to be in a market with our sort of flagship TPG opportunistic real estate strategy.

The current fund, which is Fund IV is about $6.5 billion. We're looking to raise something in the vicinity of around $9 billion to $10 billion. That will be a very large fund, generally by real estate standards, but the opportunities, we think the -- we're convinced the opportunities are there to deploy really well. So our -- and we're just launching that fundraise now as we speak. We've been premarketing it, but we're just launching that now.

We're going to be in the market with our -- we -- I think people may be aware of this, but when we acquired AG, we also acquired a real estate franchise there. Their strategy, their franchise is a bit different than the TPG strategy. They have regional funds, they have a U.S. fund, European fund and an Asia fund. They are sort of a value-add kind of real estate-focused player. Their strategy is a bit different than ours. So -- then the TPG classic strategy.

So we're going to be in the market with the [Realty XII] fund. That's the 12th fund in the U.S. We're looking to upsize that from what -- it's prior size by, let's call it, about $1 billion. We're going to be in the market with the Asia realty fund, one of the attractive -- one of the interesting dynamics of the real estate franchise at AG was that they're one of the few U.S. managers that has a pre-established Asia franchise.

And we're finding lots of really interesting opportunities in Asia to deploy into real estate. Part of that franchise is they have a dedicated Japan fund called the Japan Value Fund, which has been focused primarily on office and hospitality in Japan, which has been -- office has never gotten weak in Japan. So there's lots of demand for office space, acquiring buildings, retrofitting, improving and then essentially selling. It's been a strategy that's been very successful as the -- and Japan, as we all know. I mean, when you ask somebody, where they want to go on vacation? Everybody wants to go to Japan. So hospitality has been a very strong market there. So we've been on that theme as well.

So we'll be raising capital for all 3 of those funds. We're going to -- and then as I said before, we're going to -- we are on the real estate credit side. We raised -- we finished raising a fund here in the U.S. called TRECO, which is an opportunistic credit strategy. Great opportunity, lending into the real estate space, by and large, pretty broken and generating returns that are mid-teens types of returns at kind of top of the capital structure.

And we ended up raising in total between the fund and other vehicles about $2.5 billion for a fund that originally we were thinking we'd raise probably about $1.75 billion. So the market has come to sort of understand that, that opportunity is there. and it's being deployed pretty quickly. So by the end of 2026, we may be back into the market there as well.

Got it.

So a number of opportunities, but we're going to be busy in real estate.

Yes. No, that's great to see a diversification there as well for short.

All right. Let's put it back to private equity for a couple of minutes. The industry broadly obviously struggled with DPI. We've heard about that at length for the last couple of years. TPG will clearly stand out there. And you've mentioned that a couple of times, both in terms of the IRRs and DPI metric across the private equity portfolio.

Talk to us a little bit about the health of the investment portfolio today, across capital, Asia, growth and perhaps impact as well. There are definitely question marks around parts of the growth of your sectors and AI-related disruption that, that could create. Does that hit any -- check any other boxes for you guys? Is that a concern at all? And then leading into or really piggybacking on that, talk to us about monetization outlook as well because, presumably healthy portfolio companies are a little bit more ready to be exited as well.

Yes. Well, there's a lot there in that question. So let me try to just break it down. So first of all, in terms of health of the portfolio. Our portfolios are in very, very good shape. And the easiest measure to convey that with is looking at kind of top line growth, cash flow growth across our portfolios, generally across our buyout, our growth strategies. What we're looking at is we're looking at kind of low double-digit revenue growth across our portfolio and then high double digit, just under 20% cash flow growth across our portfolio.

So our portfolios are growing very nicely. That dovetails by the way, into maybe part of the reason why I think we are somewhat differentiated in private equity. If you look at the value creation, the way we create value in private equity, we are very engaged sort of hands-on investors, right? We're buying companies that we think are good companies, that can experience secular growth, that ultimately when we're looking to exit are still growing. So there's something for the next buyer ultimately in terms of continuing to grow.

But I just -- we did some interesting numbers recently where we did a decade's worth of work looking at what drives our returns. If you look at our returns over the last decade in private equity across the firm. About 80% of the value creation has been driven by top line and earnings growth. Very little of our value creation has been driven by multiple expansion.

If you do the same analysis over the last decade for the S&P 500, about 45% of the value creation in the S&P 500 has been multiple expansion. So what we're clearly doing -- and this is part of the value proposition in private equity that I think it's important to keep in mind when people look at long-term returns, that are being generated in private equity and how those returns are being generated. And I'm not speaking for other firms. I'm just speaking for us, right?

There's a big focus on trying to buy companies, continue to improve them, bend the curve in terms of growth. And that's what's driving what we're doing. So the portfolio is in very good shape overall.

In terms of how we think about the exit outlook, I would say that overall, we're pretty constructive on the outlook. I mean when you think about what really drives sort of the ability to monetize, I would say overall sort of valuations trending up, and you can look at public markets, private markets, look at whatever you want, the valuations of the market are overall generally trending up.

Number 2 is that the market from a financing point of view is still pretty flush with cash in terms of whether it's bank's financing, sponsor activity, whether it's private markets financing sponsor activity, so you can get deals financed and you can get deals financed in size.

When you look at the desire on the parts of LPs for co-invest and wanting to participate in these deals, whether it's coming in or if you're trying to get the capital going out, there's a lot of capital there. There's a lot of dry powder on the part of other private equity firms that are looking to put money to work. So -- so I think that -- and you also have -- from a policy perspective in terms of rates, you have generally kind of accommodative kind of policy bias in the market right now.

So overall, I think going into 2026, I think we feel pretty constructive. I think that, obviously, we're living in an environment where all of us, I think we wake up every day and like you're not -- you're sort of afraid to look at the news in terms of what's going to happen next. But -- so take all of this with sort of that in context, which is things could change tomorrow.

But assuming we're on this general kind of trend line, which has been constructive, I think there's going to be actually a lot of PE activity and a lot of monetization activity. So -- and as I mentioned before, we are very focused and intentional about looking at our portfolio and figuring out within each of our sectors, what are sort of our target monetization opportunities because one of the things that we've realized and we realized it a while ago, and it's paid off for us is that our investors are very focused on our returns and very focused on DPI, very focused on return of capital.

We've been disciplined about it. And if you look at the longer arc, like if you go back over to like sort of pre-COVID, right, on average, we've invested and returned about the same amount of capital over the arc of that time. So that's been very important in terms of the balance that in any given year, we either look like a net seller because we've returned more capital than we've invested or a net buyer because we've invested. But over the arc, we've returned as much capital as we've invested. So we're pretty constructive on that.

On the growthy thing that you're talking about in terms of concerns down there, AI, pressure, et cetera. Look, I think there are certain parts of the market, there are certain sectors that I think are going to be impacted by that. And again, I don't want to take all the time on this, but we can talk more about it. But I think that particularly in tech and software, where you're participating, how you're playing, I think you better be sort of embedded in the space and not be a tourist in the space if you want to make sure that you get it right because it's having a big impact.

And so I think that, that's something that we're quite focused on. And I think you're going to see it have impact both on the positive and the negative, depending on the company, depending on the business model.

Yes. More of that bifurcation and the dispersion of returns that we talked about earlier. That makes sense.

Okay. Let's pivot to credit for a couple of minutes. It's been a really great story for you guys in terms of fundraising. I remember when you announced Angelo Gordon, one of the things you said in the beginning, like, look, we're going to be able to make a lot of introductions to our LP base to their investment capabilities to really accelerate that. And it's really nice to see that come through over the last kind of 12 to 18 months.

It took a little bit longer for that to actually show up in the results because deployment of that sort of dry powder was taking a bit longer. But it finally feels like we're here. So if I look at your results in the last couple of quarters, pretty meaningful pickup in that deployment picture as well. So talk a little bit about both fundraising credit and opportunities to deploy over the next 12 to 18 months?

Yes. Well, look, I mean you're right. So we -- what we acquired is we acquired a franchise that we thought, number one was multi-strategy. We thought that the performance was very good. And we thought, in particular, the team was very capable and very talented. But what we knew is that we had to scale the capital base. They were generally undercapitalized, generally out originating what the capital base could support. And we felt like we could basically really transform that because we would buy -- we would acquire the business, we would integrate it into TPG in a real way, okay? So it's not some separate subsidiary. It's part of our firm. And then we would have the opportunity to talk to our relationships about it.

The other thing I think if you -- you may remember this, is that believe it or not, we only had 10% overlap in our LP base...

That's right.

Right. So we -- and we have relationships with the largest pools of capital in the world. So there was clearly an opportunity there. It does take a little time to do that because if -- when you make an acquisition in a human capital related business, the first thing that happens is basically all the LPs freeze. Okay? They're like, what's going to happen to the business? What's going to happen to the people? Are you going to keep them? Are you going to change the investment strategy? All these natural questions.

So our job was to basically get out there, tell the story, make sure that we were on strategy in terms of what we were doing and deliver what we said we would deliver. And we have done that, okay? And we're going to continue to do that into 2026.

The capital formation curve has been quite steeply as you pointed out. We're raising a lot of capital for our credit business this year. The deployment pace has picked up meaningfully. This Credit Solutions Fund that I mentioned before, $6.2 billion capital raise, our target was $4.5 billion. We've already deployed 20% of the fund, okay? And we just closed the fundraising today.

In our direct lending business, in Twin Brook, which is a lower middle market business. We've seen actively increasing deployment as the capital base has grown. We've increased the institutional following of the business because people want diversification across the direct lending business. And our BDC, TCAP is now up to $4 billion and is actually accelerating as people realize that this lower middle market strategy is actually a really interesting diversifier as it relates to people's exposure to direct lending. And this quarter is probably going to be our most active quarter of the year in terms of deployment. So that's another area where we're seeing a lot of acceleration of deployment.

Our structured credit business, which essentially think of it as a noncorporate credit risk business, non-EBITDA risk business, things like ABL, resi mortgages, CRE, consumer, that's getting a lot of attention in the market now for 2 reasons.

One is diversification for people. Institutions that are allocating a lot of private credit that want to get a bit away from just pure corporate credit exposure. And number 2 is insurance. And the number of insurance partnerships that we've established over the course of the last 2 years since we made the acquisition, has really accelerated, and that's an area where essentially more and more capital is flowing into private assets because insurance companies are looking to increase the general yield within their general account so that they can actually offer higher crediting rates and compete whether it's fixed annuities, whether it's RILA's whatever it might be.

So the private market continues to get more and more capital flowing at it from the insurance space. So all of these areas are areas that are providing opportunities for us to grow. And our business is really has just hit its stride. It's hit a stride. I mean, many of the biggest relationships in the firm now are invested with us across all of our strategies, including credit. So it's -- and I think we're going to continue that trend into '26.

That's great. You mentioned insurance. I'm going to jump around a little bit. And I think it's interesting that for TPG, I think on the last call, you talked about 25% to 30% of credit fundraising came from the insurance channel. And to me, the observation is it's about actually the same as what you find with a lot of the alt managers that have a captive insurance relationship, whether it's Apollo, [Care Health] and some of the others in the world, right?

So you guys are kind of doing that without having the explicit ownership of the insurance liabilities. I know you get asked on every earnings call. When are you going to buy an insurance company? And obviously, you guys have not done that. You were pretty thoughtful about the approach you've taken to that whole ecosystem. How important is it to ultimately own or have some sort of economic relationship with an insurance company, given that you guys seem to be doing just fine, raising capital the way you are?

Yes. Well, I think -- I don't think it's that important for us to actually own the liabilities and essentially, holistically kind of take an insurance company, put it on our balance sheet. I don't think it's that important.

In fact, I mean, to your point, I think we've been -- we try to be careful and thoughtful about our model. I mean our model historically and classically has been sort of what we call kind of a balance sheet light model where our focus is asset management. That continues to be our focus.

Now what we've done is -- I mean, so importantly, there's been a kind of a really interesting evolution in insurance, right? Because this convergence between alts and insurance has changed the competitive landscape. So one of the things that when we first kind of acquired AG, when we were first kind of looking at this, one of the things that I was constantly asking our team was, if this convergence is going on and there -- and not every insurance company is going to be owned by an asset manager, what will these other insurance companies do, right?

And so my expectation was eventually, people would need to compete. They would need asset management expertise or relationships and that would sort of come back around to us. That's exactly what's happened. So I mean there are any number of insurance companies that we're in dialogue with that have reached out to us to talk to us about this question of how can we partner in order to lift our returns by using private assets, by using your investing capabilities, but without it being sort of we acquire them and sort of gobble them up and then own the liability side of it, which frankly, I'll just -- it's -- that's not our business. That's not a business we really kind of truly kind of own and understand in the same way we understand our asset management business.

So the only thing I will say is that these partnerships are important because the more of that capital you have coming at your business and the more confidence and visibility that you have in that capital flowing in, the more you can build your sourcing capability, your product lines, et cetera. So one of the things that I think we will continue to look to do is to the extent that we can engage in some larger-sized partnerships with insurance companies, which might require us to use some economics, right, to secure the asset management relationship. It's kind of like the [IMA] style transaction where maybe we give an insurance company some capital for growth. And in return for that, we get committed long-term capital. Committed long-term capital is valuable. So that's how we continue to think about our insurance practice. And I think you'll see us continue to chop away at that.

Yes. Great. Look, another important channel for the whole space, obviously, has been the wealth market. By our numbers, that space is growing at like 30%, 40% management fees a year. Super critical to you guys, very important for the space as well.

You guys are off to a really good start there with TPOP, your private equity vehicle. I think it's a little bit over $1 billion raised in the first 7 months or so. TCAP, you mentioned as well, getting traction nicely. Maybe give us a bit of a mark-to-market and kind of how widely these products are offered today. I think you guys were kind of patient and thoughtful about rolling it out not to the entire world, but kind of go and graduate from a capacity perspective. And ultimately, what do you envision the product lineup for TPG and wealth look like over the next few years?

Yes. Well, look, I think we -- I mean, this rollout of TPOP for us was sort of kind of a -- there were multiple opportunities for us. One was obviously sharing our private equity franchise and raising capital for our private equity franchise with the wealth market broadly, okay? We have a very strong franchise. Tapping into that market, obviously, was something that we felt would be important to us in terms of growing our fee base and growing our access to that market.

But it was also an important opportunity for us to continue to position our brand, right? One of the things that we're finding in the wealth markets and the retail markets is that brand matters, right? People knowing who you are, feet on the street, getting out there with advisers, et cetera, and that matters. And the way we structured TPOP was simply essentially think of it as an equity product that effectively is participating as almost a co-investor in every sort of deal we do across all of our strategies.

So it's a way of participating holistically with TPG and private equity. And it has resonated very, very well in the channel. We've gotten a lot of positive feedback. Again, we're just a touch over $1.1 billion now, and that's having rolled it out with 2 domestic partners, on international partner and an RIA partnership that we have.

So there's more to come in terms of more breadth, distribution, et cetera. And we think it's a unique product offering in this space. So that was very important for those reasons.

Secondly, our road map going forward is that we're also trying to be deliberate about how many vehicles we roll out into the wealth space and sort of how we tap into as much of the capital available as we can. So -- and you mentioned TCAP, obviously, TCAP will be sort of a core offering for us in the channel for our direct lending product.

The road map going forward is going to be, I think, 2 more things on our agenda at least for now. One is there's been a reverse inquiry to us from a number of our channel partners for a multi strategy credit product. We already have a multi-strategy product institutionally in our credit business. And so leveraging off of that to create something that is a yield-oriented multi-strategy product that essentially is curated by us across the various strategies that we have is something that there's been demand for -- and so we are working on rolling that out.

And we also have been in dialogue with a potential distribution partner as well that it's a little too early to talk about, but hopefully, we'll be talking about it not too long. Where that will give us another form of access for a product like that, which will be multicredit, multi-asset credit.

And then secondly, leveraging off of our real estate franchise, which we've already talked about and kind of our real asset franchise. Real estate has been certainly out of favor now for a number of years and particularly in the retail channel because essentially, it's been a core real estate market, mostly and the core real estate market is kind of dead. There was a big queue of people trying to get out. It's kind of [debt].

What we're offering obviously is a higher returning, more interesting product -- and from a little bit -- from the -- some of the work that we've done with some of our partners, there's definitely interest in trying to figure out how to reintroduce a real estate product at a different point in the cycle that's going to generate a higher return.

And we have now the breadth within our franchise across TPG's business, across the AG real estate franchise. And we also can think of it as maybe multi-asset class as well because we've talked about the idea of mixing some credit in with equity because of the opportunity and generating cash yield. So that's, I would say, a second target product for us on the go-forward road map. So that's how we're thinking about it.

Yes. Well, and especially at this point in the market cycle, it was great, hopefully. So that helps. Yes. Great. Well, look, we can keep having this conversation, unfortunately we're out of time. So Jon, thank you so much. Great insights.

Welcome.

Always great having you here. Thank you.

Pleasure.

Okay.

Good morning, and welcome to the TPG's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] 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 this morning are Jon Winkelried, Chief Executive Officer; and Jack Weingart, Chief Financial Officer. Our President, Todd Sisitsky, is also here and will be available for the Q&A portion of this morning's call.

I'd 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're 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 $67 million and after-tax distributable earnings of $214 million or $0.53 per share of Class A common stock. We declared a dividend of $0.45 per share of Class A common stock, which will be paid on December 1, 2025, to holders of record as of November 14, 2025.

I'll now turn the call over to Jon.

Good morning, everyone. Thank you for joining us today. TPG delivered strong results in the third quarter. Our total AUM grew 20% and quarterly fee-related earnings grew 18% year-over-year. The flywheels across our business continued to accelerate, led by robust capital formation across all asset classes and a record quarter for deployment. I'll spend a moment on each of these important areas.

This was an outstanding fundraising quarter. We raised a near record $18 billion of capital, up 60% from the second quarter and 75% year-over-year. This was driven by a successful first close in our flagship private equity funds and strong credit fundraising, where we continue to experience a step function increase in capital formation. We've made substantial progress against our previous guidance of raising significantly more capital in 2025 compared to 2024. Year-to-date, we've raised over $35 billion of capital, which already exceeds our full year 2024 fundraising.

In private equity, we raised $12.3 billion in aggregate across our strategies. This was primarily driven by $10.1 billion raised in the first close for our flagship buyout funds, TPG Capital X and Healthcare Partners III, including commitments that are signed but not yet closed. We received strong support from our existing clients who increased their commitments by 12% on average over the prior vintage.

These results reinforce our confidence that TPG is positively differentiated within the private equity market where fundraising has been perceived as challenging in the current environment. Our clients continue to lean in and look for more ways to partner with us in private equity given our distinct and highly disciplined approach and consistently strong performance. As a result, we believe we are outperforming in private equity fundraising relative to the broader market and gaining share.

In credit, after reaching an inflection point last quarter, we maintained our strong fundraising pace and closed $4.8 billion of credit capital in the third quarter. In middle market direct lending, we announced the closing of a $3 billion continuation vehicle, which we believe is the largest-ever private credit CV. This unique transaction enabled us to extend the duration of our capital base for a portfolio of high-performing senior loans in collaboration with several strategic partners.

In structured credit, we raised $1.4 billion across the strategy and launched our new liquid securities-focused open-ended fund. And in Credit Solutions, we continued fundraising for our third flagship fund, bringing the total capital raised to date to $4.3 billion. We expect to hold a final close in the fourth quarter and for the fund to be meaningfully larger than its predecessor.

Year-to-date, we've raised nearly $12 billion of credit capital in what has been a breakout year for our franchise. As a result of our fundraising momentum, we ended the quarter with record credit dry powder of over $16 billion. Credit AUM not earning fees stood at nearly $11 billion, which represents over $100 million of annual revenue opportunity that we expect to flow into management fees over time.

In real estate, we held a final close for our inaugural real estate credit strategy, bringing total commitments across the main fund and related vehicles to $2.1 billion, which exceeds our initial $1.5 billion target by more than 35%. We raised approximately $1 billion of capital in the final close driven by the strength of TRECO's initial portfolio.

TRECO adds to our long track record of expanding into adjacent strategies through organic innovation. Early in the current cycle, we identified a compelling opportunity to invest in real estate credit at attractive risk-adjusted returns given the significant contraction in valuations and available leverage. We're seeing our thesis prove out with a fund outperforming its initial return projections and generating double-digit cash-on-cash yields. TRECO is an important extension of our investment capabilities in both real estate and credit, and we expect to scale this strategy over time.

Additionally, our fundraising success has been amplified by our increasing penetration into the fastest-growing distribution channels, including insurance and private wealth. First, we've grown our capital from insurance clients by more than 60% over the last 2 years. Insurance represented 40% of TRECO's final close and over 25% of the capital raised for our credit platform in the third quarter.

We're continuing to create innovative access points and cross-platform solutions for our insurance clients. For example, we've closed more than $600 million of insurance capital in our first rated note feeder for credit solutions which we believe is one of the few rated access points for this type of strategy in the market.

Second, we're making strong progress in the private wealth channel, where we raised over $1 billion of capital across our drawdown and evergreen funds in the third quarter.

T-POP, our perpetually offered private equity product, continues to gain momentum of approximately $900 million of inflows since its launch 5 months ago, including $250 million in October. This accelerated pace was supported by the launch of T-POP on a leading international private bank platform in September. We are experiencing strong traction in Europe and Asia and plan to launch on several additional domestic and international platforms over the next few quarters.

Private wealth is an important growth driver for us, and we remain focused on further expanding access to our products across geographies and investor types, which Jack will touch on further.

Moving on to deployment. As discussed on our last call, we expected our investment pace to accelerate into the back half of the year. In the third quarter, we deployed a record $15 billion, up over 70% year-over-year, and our activity was well diversified across the firm.

Our credit platform drove over half of the capital deployed during the quarter with $8.3 billion invested across our strategies more than doubling year-over-year. In structured credit, we deployed $3.6 billion of capital, half of which was driven by residential whole loan investments where we continue to be a market leader. In asset-backed finance, we closed notable transactions across several of our verticals, including nonbank credit card origination.

We also completed a meaningful upsize of our joint venture with Funding Circle and Barclays in the U.K. In middle market direct lending, Twin Brook generated $2 billion of gross originations in the third quarter, our highest volume so far this year. Importantly, given the steady increase in overall M&A activity, 70% of our origination was driven by new investments, bringing the total number of companies in our portfolio to over 300. Our pipeline remains robust, and we expect the fourth quarter to be our most active quarter of the year.

In Credit Solutions as spreads remain at historic tights, our flexible mandate continues to create opportunities to provide tailored solutions in the private market. As an example, last year, we formed a proprietary joint venture with Bluestar Alliance and Hilco Global to finance and acquire consumer brands and intellectual property.

Our unique partnership brings together significant sector, operating and financing expertise, enabling differentiated access to attractive opportunities. This was most recently highlighted by the JV's announced acquisition of the iconic Dickies apparel brand in September. Despite some recent concerns in the broader credit markets, including certain allegations of fraudulent activity, our portfolios continue to perform well.

We've maintained a disciplined and highly selective approach to credit underwriting with a focus on fundamentals and risk management. As a result, our annualized loss ratio since inception has remained stable at only 2 basis points for Twin Brook, 3 basis points for our private asset-backed credit business and less than 40 basis points for Credit Solutions. We continue to uphold the same rigorous standards as we evaluate new investment opportunities, and Jack will share more details in his remarks.

Across our private equity strategies, we maintained a healthy pace of deployment with $4.6 billion of capital invested in the third quarter, up nearly 40% year-over-year. At TPG Capital, we announced the carve-out of Proficy, GE Vernova's manufacturing software business. This transaction is a culmination of the relationship we've built with GE Vernova over 7 years across both our capital and climate strategies. Proficy aligns well with our expertise in corporate carve-outs and structured partnerships which comprise 11 of the 16 most recent investments in TPG Capital.

Additionally, just a few weeks ago, we announced the take private of Hologic, a leading provider of diagnostic imaging and surgical products focused on women's health, for up to $18 billion. We're excited to partner with one of the premier scaled platforms in the women's health space, which has long been a thematic area of focus for us.

In tech adjacencies, we closed minority investments into several leading large language model developers, expanding our exposure to Gen AI development and providing us with differentiated insights into this rapidly evolving area of the technology ecosystem. These investments follow the innovative debt financing that our Credit Solutions business recently anchored for xAI. We continue to evaluate opportunities to capitalize on the robust growth in the space and a partner with leading AI companies across each of our asset classes.

In Rise Climate yesterday, we announced the acquisition of Kinetic, a leading international operator of zero emission transport and infrastructure based in Australia. Kinetic aligns closely with our deep expertise in clean electrification and mobility and represents the second investment by our transition infrastructure strategy.

In real estate, we had our most active deployment quarter so far this year with $1.9 billion invested across TPG and TPG AG real estate. During the third quarter, TREP completed the acquisition of the former Broadcom office campus in Palo Alto's Stanford Research Park. This investment is consistent with TREP's continued focus on selectively investing in office markets where we see compelling green shoots emerging, such as the San Francisco Bay Area. We believe the Bay Area is reaching an inflection point in demand, driven by the growth in AI-focused tenants.

In TBG AG real estate, we've maintained an active investment pace with nearly $2 billion deployed year-to-date across our dedicated regional funds. We're identifying and capitalizing on improving supply-demand dynamics in certain sectors, including senior housing and hospitality in the U.S. and office markets in Japan, Korea and London, which have low vacancy rates and attractive rental growth.

Before I wrap up, I want to share what I'm hearing from my conversations with our clients across the world and how it's shaping our business and the opportunities in front of us.

In private equity, institutional clients continue to face liquidity constraints and are consolidating their relationships among fewer GPs. Against this backdrop, we believe TPG is gaining share due to the consistently strong returns we've delivered. This has been driven by our focus on investing in deeply thematic areas and partner with our portfolio companies to drive growth.

Over the past decade, across our TPG Capital and TBG growth funds, more than 80% of our value creation has come from earnings growth compared to less than half for the S&P 500, where over 40% of the value was driven by multiple expansion. This differentiation is resonating with our clients and driving continued fund over fund growth across our private equity strategies.

Additionally, we continue to see increasing allocations into private credit. Investors are diversifying their exposure into areas such as structured credit, lower middle market direct lending and middle of the capital structure opportunities where we built scaled investment strategies. Our clients are expanding their relationships with us across our credit platform, including through multi-fund partnerships and seeding new strategies. As a result, our credit AUM has grown 23% year-over-year and it continues to be one of the fastest growing areas within our firm.

And finally, in real estate, we are well positioned to play offense with over $12 billion of combined dry powder and continued positive value creation across our portfolios. Over the past 2 years, we've capitalized on the substantial market dislocation to acquire high-quality assets that are not typically available for sale. We believe the real estate market has stabilized and transaction activity is accelerating.

Our clients are expressing a growing interest in real estate as demonstrated by the success of TRECO's recent fundraise. Given the strength of our distinctive portfolios, we remain confident as we prepare to launch fundraising campaigns for several of our real estate strategies in the coming quarters.

We made significant progress against our strategic priorities for 2025, and I'm pleased with the strength of our business across all key metrics. Our increased scale and diversification positions us well to deliver accelerated growth and generate long-term value for our shareholders.

I'll now turn the call over to Jack to discuss our financial results.

Thanks, Jon, and thank you all for joining us today. As you can see from our strong third quarter results, we've been successfully executing on our growth strategy. On our last call, I discussed several key building blocks we've been putting in place to drive our next leg of growth. These include scaling our credit platform, launching our next series of private equity and real estate funds and building on new products and businesses. Our Q3 results demonstrate that we're tracking well against these objectives. Our capital formation and credit is on pace for a record year in 2025 and credit deployment through the third quarter of nearly $17 billion already exceeds our full year 2024 total.

Fundraising for TPG Capital X and Healthcare Partners III is off to a great start and with more than $10 billion raised in the first close. And we continue to expand through organic innovation. As Jon mentioned, we raised $2.1 billion of capital for TRECO, our opportunistic real estate credit fund, including related vehicles, and approximately $900 million today for T-POP, our new perpetual private equity product, which I'll expand on later.

Additionally, earlier this year, we launched fundraising for our second GP-led secondaries fund which is tracking to be significantly larger than its processor. We ended the third quarter with $286 billion of total assets under management, up 20% year-over-year. This was driven by $44 billion of capital raised and $24 billion of value creation, partly offset by $26 billion of realizations over the last 12 months. Fee earning AUM increased 15% year-over-year to $163 million. These figures include TPG Peppertree, which closed on July 1 and added $8 billion of AUM and $4.5 billion of fee-paying AUM.

As a result of our strong fundraising in recent quarters, our dry powder has grown to a record $73 billion. This represents a real strategic asset at a time when, as Jon indicated, our teams are sourcing very interesting investment opportunities. AUM subject to fee earning growth was $35 billion at the end of the quarter, which included $24 billion of AUM not yet earning fees. This represents a revenue opportunity of more than $220 million on an annualized basis.

Our management fees grew to $461 million in the third quarter, driven by the activation of TPG Capital X and the addition of TPG Peppertree to our Market Solutions platform. We generated $38 million of transaction and monitoring fees in the quarter and $163 million over the last 12 months. We continue to invest in building our capital markets franchise. And as we look to the fourth quarter and into 2026, we expect to drive further growth in transaction fees.

We reported quarterly fee-related revenue of $509 million, fee-related earnings of $225 million and a 44% FRE margin, which tracks well against our previous guidance of exiting the year with a margin in the mid-40s. Our distributable earnings for the third quarter were $230 million, which included $30 million of realized performance allocations, driven by our full exit from Sai Life Sciences, which has traded up nearly 70% since its IPO in the India Stock Exchange last December and the full sale of Samhwa, a leading cosmetics packaging company in Korea. This marks a strong first exit in TPG Asia VIII less than 2 years after our additional investment in the company and is a great outcome for our Asia franchise.

I'd like to take them on explain the relationship between our monetization activity and our generation of performance-related earnings for shareholders. During the quarter, we continued to drive strong realizations across our portfolio, which increased nearly 40% year-over-year to $8 billion. The reason that PRE did not increase commensurately relates to the timing of profit allocations early in a fund's life.

In addition to Sai Life Sciences and Samhwa, realizations during the quarter included early exits in several other funds, such as our highly successful sale of Elite in TPG Capital IX. These exits drove attractive profits and DPI for our fund investors, but did not result in significant performance allocations as the gains went to repay fees and expenses, which is typical for the first exits in the fund. Looking forward, this sets us up for increased performance allocations from the next series of exits in these young funds.

On an LTM basis, we've generated $262 million of performance-related earnings for shareholders, which is 140% increase compared to the prior 12-month period. Our clients recognize the differentiated DPI we've delivered and we've continued to drive monetization activity since quarter end. In October, we completed our first major liquidity event in our GP-led secondaries business, TGS through a partial realization of CR Fitness, a leading fitness franchisee at an attractive valuation.

Since our initial investment, our sponsor partner, North Castle and the management team have driven exceptional growth at the company, more than doubling both the number of active clubs and EBITDA. And just last night, our Rise and Rise Climate portfolio company Beta Technologies, which has developed electric aircraft capable of vertical takeoff, successfully priced a $1 billion all primary IPO. This IPO was very well received, allowing the company to upsize the offering and price above the filing range.

Moving on to our balance sheet. We drew on our revolver during the quarter for several growth initiatives, including funding the cash consideration for Peppertree and seeding the portfolios for new businesses such as T-POP. We issued $500 million of senior notes during the quarter and used the proceeds to pay down our revolver. As a result, our net interest expense increased to $23 million in the third quarter.

As of September 30, we had $1.7 billion of net debt and $1.8 billion of available liquidity, giving us ample flexibility to continue pursuing new growth initiatives.

Given our increased diversification and strong financial profile, during the quarter, we did receive an upgrade in our credit rating from Fitch to A-. The fundamentals across our portfolios remained strong, and we delivered positive value creation in each of our platforms for the third quarter and over the last 12 months.

As Jon mentioned, recently, there's been a heightened focus in the market on credit quality due to a few high-profile defaults. Importantly, we have no exposure to those events, and the underlying health of our credit portfolio remains strong. In aggregate, our credit platform appreciated 3% in the third quarter and 12% over the last 12 months.

In middle market direct lending, our portfolio comprises exclusively first-lien loans with maintenance financial covenants. And we are a lead lender in nearly all of our transactions. We've built in significant downside protection and take an active approach to portfolio management. As a result, our portfolio of more than 300 companies continues to perform well. Nonaccruals remain extremely limited at less than 2% and our average interest coverage ratio has remained very stable at approximately 2x.

In structured credit, our asset-based credit funds net IRR since inception remained above its target range at 13.5% and at the end of the third quarter. In addition, our flagship structured credit fund MVP continued to outperform credit benchmarks and returned 3% in the third quarter.

Recent stress in the structured credit market has been evident in the subprime auto space. Several years ago, we identified weakening fundamentals in auto finance and our structured credit funds proactively rotated out of the sector. As a result, we currently have zero exposure.

Looking at Credit Solutions, our funds generated net returns ranging from approximately 5% to 6% in the quarter, which far outpaced the U.S. leveraged loan and high-yield bond indices. In addition, our second essential housing fund generated a net return of nearly 4% during the quarter and more than 11% year-to-date.

Turning to private equity. Our portfolio in aggregate appreciated 3% in the quarter and 11% over the last 12 months. Overall, the companies within our capital, growth and impact platforms continue to meaningfully outperform the broader market with revenue and EBITDA growth of approximately 17% and 20%, respectively, over the last 12 months.

TPG's real estate portfolio appreciated 3.5% in the quarter, nearly 16% over the last 12 months. We continue to see strong performance and value creation in our data center, residential and industrial investments. TPG AG's real estate portfolio appreciated by 2% in the third quarter and 3.5% over the last 12 months.

Our net accrued performance balance grew by nearly $200 million in the quarter to reach $1.2 billion, driven by our strong value creation in addition to $100 million of accrued carry acquired through Peppertree.

Turning to fundraising. We raised more than $18 billion during the third quarter, including more than $12 billion in private equity and nearly $5 billion in credit. Year-to-date through the third quarter, we've raised more than $35 billion across our platforms, which already exceeds the $30 billion we raised in 2024. As Jon noted, private wealth is a strategic priority and an important growth driver for TPG. I'd like to share some additional detail on our progress in increasing our penetration within this channel.

During the third quarter, we raised over $1 billion of capital in the wealth channel and approximately half of these inflows came from our evergreen solutions, which continue to gain momentum as we widen our distribution partnerships globally.

TCAP, our nontraded BDC, raised $235 million in the quarter and continues to grow, reaching over $4 billion of AUM at the end of September. TCAP is actively distributed by 3 of the largest U.S. wirehouses, and we recently launched on one of the largest independent broker-dealer platforms. Twin Brook's focus on the lower middle market, conservative lending standards and high credit quality is continuing to differentiate TCAP relative to other credit options available to wealth clients. We're actively expanding TCAP's distribution network and expect inflows to continue to accelerate.

T-POP, our perpetually offered private equity vehicle has been very well received in the channel, exceeding our high expectations. T-POP has raised approximately $900 million in its first 5 months, and we're experiencing increasing momentum as we grow our distribution footprint and investment portfolio. From its activation date in June through September 30, T-POP has delivered net returns of approximately 12%, and as of quarter end, provided exposure to 41 individual TPG portfolio companies. We're very focused on expanding our distribution for this strategy globally in 2026.

Finally, we continue to expand our partnerships with global banks and wealth platforms, adding more than 20 new relationships in the third quarter. Additionally, we're actively structuring several innovative partnerships to extend our brand and increase the accessibility of our products for the wealth community, including in the RIA channel. We look forward to providing updates here in the coming quarters.

Before I wrap up, I'd like to provide an update on our fundraising outlook. During the course of this year, as we anticipated, we've been experiencing a step function increase in the pace of our capital formation with a particularly robust third quarter, driven by the strong first close for our TPG Capital and Healthcare Partners funds. Most of the remaining capital for these funds will be raised next year. Nonetheless, we still expect the fourth quarter to be an active period for fundraising across asset classes.

Looking at 2026, we expect to have another robust year of fundraising similar to this year, driven by a number of ongoing and new campaigns. In credit, we expect continued capital raising across all of our existing businesses. In addition, we're working on launching several new strategies to further expand our credit platform. In private equity, we'll continue to be in the market with our capital and climate campaigns. We expect to launch fundraising for the next vintage of our flagship Asia fund as well as our fourth Rise fund.

On the real estate side, we expect 2026 to be an important and significant year for our franchise. We'll begin fundraising for the next vintage of TPG Real Estate's flagship fund and TPG AG real estate funds in both the U.S. and Asia. We also remain highly focused on diversifying our sources of capital and further penetrating the fastest-growing distribution channels.

In Private Wealth, we expect to grow our distribution network in the U.S. and internationally and launch additional semi-liquid and yield-oriented products across asset classes. Additionally, we continue to organically expand our insurance relationships and evaluate broader strategic partnerships and inorganic opportunities.

Based on the increased cadence and consistency of our capital formation efforts over the last few years, we've clearly been successful in expanding and diversifying our business. We're excited to continue building on this momentum and delivering differentiated results for our clients and shareholders.

Now I'll turn the call back to Madison to take your questions.

[Operator Instructions] And we'll take our first question from Glenn Schorr with Evercore.

I appreciate the color you gave us on the relationship between monetizations and PRE and some monetizations early in funds life. What's interesting is 69% of your net accrued performance is now in funds at 5 years are older. So I'm just curious, really good monetization backdrop according to the banks, brokers, you guys. So just how does that inform us about the realization pipeline that you're looking at given the age, timing and all the other comments?

Yes, good question, Glenn. Let me start just by explaining that vintage page a little bit because I don't think we've done that in the past, and then Todd will expand a bit more on our outlook for PRE. But on that vintage chart, when we say vintage, the category vintage is before 2020 and earlier, that refers to the vintage of the fund itself not to the underlying portfolio of companies. So the biggest category there, for example, is TPG VIII, which is 2019 vintage fund. So those investments were made largely in 2021, '22 before we raised TPG IX. And then growth 5, the 2020 vintage fund, that's another big category in that kind of aged vintage bucket. And that's a 2020 vintage fund where most of those deals were done in 2021, '22, '23. So despite 2020 sounding like an earlier vintage, the vintage of the underlying investments are actually still pretty young. So that being said, that's what that page means. And Todd will expand more on our approach to monetization.

Yes. I think just to echo what Jack said, these are a lot of newer deals. We are folks who drive growth in those investments that takes sometimes a couple of years, but we feel like we're at the appropriate cycle in terms of the liquidity in those funds. And I'd say that without repeating much of what Jack said, I do feel like DPI and liquidity has been a real differentiator for us. We approach it with a lot of intentionality. I think we bring the same level of focus and intensity that we do the investment decisions, which I think has been a differentiator for us, which is part of the reason we were net sellers in capital and growth in 2021, '22. We were net buyers in '23 when market pulled back and then net sellers again in '24.

As I look forward, I feel like we are constructive on the liquidity prospects and feel like we have -- at present, we have a number of assets we're exploring liquidity around. Jon mentioned actually the majority of TPG Capital's investments in the last fund have been carved out and structured relationships. In many of the structural relationships, we actually know who the buyer of the business will be. In many of those cases, we have put call relationships, which I think is another interesting feature and a pretty unusual set of opportunities.

The majority of the deals in capital over the last many years have been sold to strategics. The strategics, I think, are perking up and are active. We've also mentioned some IPO -- recent IPO as in yesterday. We've had more than 13 IPOs in India in the past few years. So we're taking advantage of those market opportunities as well. But overall, we feel good about the momentum in the portfolio. We feel good about the dialogues we're having, and we're constructive on the liquidity environment.

Glenn, my comments on the call were meant to basically indicate that we are still aggressive on the monetization front. The timing issue I described is how that flows through to PRE. If the sales were made in more mature funds that had already had exits pay down the fees and expenses, which is the normal way a waterfall works, the PRE during the quarter would have been probably twice the $30 million.

And so now eventually, we've cleared the decks. The next exit out of those funds should be -- should flow through to PRE.

And our next question comes from Craig Siegenthaler with Bank of America.

We also have a question on realizations, but aggregate realizations, not PRE. For the first time since you IPO-ed almost 4 years ago, it is once again raining IPO and M&A announcements. If this continues, can you help us frame the level of realization potential out of your PE and growth capital businesses over the next year? And the reason I'm asking TPG this is the last time we had this backdrop in 2021, TPG was arguably the most active in the industry of monetizing. And it sounds like your commentary today is constructive, but maybe not super bullish.

Maybe I'll start on that, Craig. It's Jack. The way I think about that, as you know, we don't forecast realizations and PRE for a good reason. We're going to sell companies when it's the right time to sell companies, and we have all the complicated waterfall mechanics that I just talked about. That being said, the way I think about it from the top down is our accrued but unrealized PRE performance allocation balance is now up to $1.2 billion, right? We acquired some PRE from -- accrued PRE from Peppertree. That was half of that increase. The other half was -- so we're seeing that balance start to grow again.

And as you and I have talked about, one way to frame it is through a cycle, you would expect that we would monetize that balance over, call it, a 3- or 4-year time period. And the more attractive the market gets, the more we'll tend to lean into that. But the most important question is what are the underlying companies? Have we achieved our value creation plan? And is it the right thing to do for our funds and our investors to sell that business? And that will be our framework for thinking about each exit through the course of the year next year.

Craig, it's Jon. I think your interpretation of it is slightly off. I think that what -- when we were talking about this, I think what we were trying to communicate is this intentionality around what we do and how we do it. And when you look at how we built our portfolios across Capital VIII, Capital IX and now into Capital X, again, Todd just mentioned this, the dynamics of the strategic partnerships that we have in a number of cases, actually having strategics work alongside of us to know essential -- because they want an opportunity to acquire an asset. I think that what we've done is try to set up our portfolios in a way where we have multiple pathways in terms of exit opportunities.

You look at the size of our companies, the size of our businesses. One of the things that we focus on, obviously, is creating value, which I mentioned in my comments, in terms of revenue growth, EBITDA growth and also trying to be intentional about where in the life cycle of that value creation, we actually start to think about selling or monetizing assets so that there is more in the tank as we think about who's ultimately going to buy the asset.

And I think that if you look at our portfolios, I think we're actually overlaying that, by the way, is sort of a perspective on where valuations are. You made the point about '21, '22. We leaned in, obviously, and we sold our entire software portfolio back then because of the way we perceive valuations in the market. That turned out to be a very good decision. I would say that the -- what we meant -- what we're meaning to communicate is that we're as focused on how we think about making decisions around the buy in our portfolio as we are on the sell. And I would say that you should expect us to be active as it relates to how we think about monetizing our portfolios. And so I just wanted to clarify because I think your interpretation is a little bit off.

Just the last thing I would add and both Jon and Jack have referenced it. One of the reasons I think we're constructive on the exits is just the strength of the portfolio performance. We have a portfolio on an LTM basis across private equity that's growing EBITDA at 20% plus and none of the platforms on an LTM basis are below 15%. They're all really performing well. And that is, of course, when we think about the strategic exits, but also IPOs, that's the best leading indicator.

And we'll take our next question from Ken Worthington with JPMorgan.

We're seeing far more concern about AI disrupting certain parts of the software technology and business services area. Two parts here. One, as you think about your investment portfolio, do you see any risks in the investment as that theme plays out? And then maybe hopefully more interesting, how do you feel about being on the winning side of this technological shift either through Peppertree or elsewhere in your various business verticals?

Sure. Thanks for the question, Ken. We've been very early investors in AI. We started over a decade ago with C3 AI and had a number of the early predecessors to today's company as well as a number of the companies that are in the headlines today. And actually, some even limited to the equity side. Credit Solutions actually what I think is the first substantial debt investment in AI by leading the race for xAI last quarter. It helps that we're based in San Francisco. And with a good arm, you can probably hit more than half of the AI companies from our building. And we've invested significantly in AI capabilities. So we have an AI center of excellence in which our operations and business building team drive AI adoption on each of the portfolio companies. We have a lot of investments recently in AI specific human capital, the former Chief Technology Officer at Accenture, one of the co-heads of McKinsey software business. So AI is really part of everything we're doing now. It's moving quickly. It's part of every underwriting decision.

Technology, in general, software, in particular, are certainly in our power alleys. I think you were specifically focused on the impact of AI there. Our software portfolio is growing earnings at 22%, 23%. And I do think it's having a meaningful impact, but that is having a meaningful in both directions. There's some real opportunities and net beneficiaries from AI. So for us, we've been spending time in areas like vertical market software, fintech, cybersecurity. We've seen that in a number of our recent investments. We've probably been a little more cautious on some of the broader horizontal themes in infrastructure software, where we see AI changing the landscape very quickly.

And again, every single underwriting decision, not just in software, but particularly in software, has a high intensity focus on the impact of AI. Even in companies like health care IT, just to use one example, one of our largest investments in the last few years is a business called Lyric, which we bought out of UnitedHealthcare. It looks at 60-plus percent of the primary claims in the U.S. health care insurance industry.

And so you would think as an algorithm-based business, you would have a big impact from AI. But for years and years, we have been the only ones on an aggregated basis that have a proprietary look at all that data. So AI really isn't a threat. Instead, it's an opportunity for that business to expand its footprint beyond the primary claims editing space. So it's really a very company-by-company analysis. And in the companies that I think we lean into, we really feel like it's an opportunity.

To your point, AI has a huge impact on health care. It has a huge impact outside of equity in -- on the credit side as well. And we feel like we have assembled the right team and the right internal rigor to make sure that we're thinking quite dynamically and in an intentional way about how to make sure that we're on the right side of AI and then leveraging AI to drive performance in our portfolio companies.

And we will take our next question from Alex Blostein with Goldman Sachs.

I wanted to spend a minute on credit. It feels like momentum in that business is finally starting to take off. We saw it with fundraising for the last couple of quarters, but it looks like deployment is also starting to catch up. So maybe spend a minute on how you see the growth evolving from here, where the incremental benefits on fundraising are coming from. And I think one of the items you highlighted also launch of new products when it comes to credit into 2026. And I was hoping you could expand on that as well.

Yes, sure. Thanks, Alex. It's Jon. Look, I think as we said in our comments, this has been the underlying thesis of when we acquired the Angelo Gordon business was that it was a platform that had a multi-strategy approach in terms of across lending, structured credit solutions, total return opportunities. And that inside of this firm, it would essentially step to the next level, both from the perspective of capital formation, but importantly, in terms of the overall ecosystem to originate and source transactions. And I would say that it's hitting on every cylinder in terms of the ability to scale the businesses.

If you recall, one of the things that we said early on in the acquisition was that the businesses were out originating the capital base, essentially being undercapitalized and that's fundamentally changing now. You can see it in the scale of our capital formation across all of those businesses. You can see it in the uptick in relevance of our open-ended vehicles as well like TCAP that Jack talked about in terms of the acceleration. If you look at the inflows, for instance, into TCAP, our inflows are -- the slope of the line is steepening in terms of our inflows and the relevance of that product in the market. Same thing is happening in MVP in our structured credit business.

What we've done is we have begun now also to really think about sort of the next level with respect to the various cost of capital -- the cost of capital of various investment strategies, particularly to serve our insurance company clients. I mentioned in my comments, the substantial increase in engagement with insurance clients. That is continuing -- continued in this past quarter. It's continuing again and really structuring various types of vehicles for our insurance company clients, whether they're funds of one or SMAs and moving now into things like IG risk in terms of being able to serve the insurance client across a range of assets and across a range of returns, which is obviously what is necessary in order to serve that market.

We continue to have -- one of the things that we're observing in that part of the market is that I think there is an increasing awareness on the part of most of the life and annuity players in the market, but it's also getting broader than that, that not being -- not having partnerships in the alternative side of the business is very dangerous from a strategic competitive position.

So as a result of that, because we don't own a captive at this time, we continue to see that dialogue increasing with respect to various forms of partnerships with a variety of different insurance clients, both here as well as internationally. And so I think that that's going to be -- I believe that what will happen over the course of the next number of quarters, over the course of the next year or so is we're going to continue to see sort of step function increases in the engagement that we have in that market. Likewise, I think we're working on expanding our capabilities with respect to the kind of retail wealth markets.

And one of the things that we've been focused on is how do we access that part of the market more effectively, more efficiently in much bigger size. And Jack alluded to this in his comments, but I think that hopefully, we'll have some things to talk about over the next couple of quarters where we've had some meaningful progress and that's really all we can say about it at this time. But we're very focused on the ability to deliver return streams that, in many cases, are a combination of liquid and illiquid or liquid and alternative products. And so we're putting ourselves in a position and growing our capabilities to be able to deliver that.

Lastly, I would say that other areas of growth for us there -- we've talked about this before, and I think you'll recognize this, but we have a best-in-class lower middle market lending franchise in Twin Brook. And one of the things that we have identified as a result of the sourcing capability that we have in both Twin Brook as it relates to our relationship as well as from Credit Solutions, where we're seeing larger kind of bespoke transactions and sourcing in some cases, even that's coming through relationships we have with sponsors from our private equity business, we are building into the next level of lending. We like to call it sort of graduating companies. It's a little bit broader than that, but we'd like to call it graduating companies where we have companies, over 300 portfolio companies in Twin Brook.

They start life as companies that are generating $25 million of cash flow and less. And then they end up life at $40 million, $50 million, $60 million, $70 million, $80 million of cash flow, and we've been the lender to those companies for 3, 4, 5 years. We know those companies better than anyone. And so the risk dynamics of us extending into that part of the market is something that we have a reason to win. And so we are -- and we'll have more to say on this again also over the next quarter or 2, where we'll formalize this, but we are building into the next leg of growth in that, and we're already seeding a portfolio and we already have some traction with respect to some LP partners of ours that will anchor the strategy for us. But it's just a little bit too early to kind of roll it out, but we will be rolling it out over the next couple of quarters. So hopefully, that gives you a sense for sort of what the growth drivers are.

I think, Alex, when you cut through all that, we're basically early in a multiyear period of growth in fee-earning AUM in credit, right? As -- you alluded to the fact that we're starting to see deployment pickup and fee-earning AUM. While that's been happening, our dry powder in credit over the past year has also increased by 35% or more percent. And as Jon said, we have multiple channels for additional fundraising and AUM growth that will flow into FAUM. So we expect the next several years to be attractive growth years for our credit business.

We can move next to Steven Chubak with Wolfe Research.

Can you guys hear me okay?

Yes. Can you hear us?

Yes, loud and clear. So I wanted to ask on FRE margin lever. It came in above expectations in 3Q, 69% incremental margin, certainly a market improvement versus a 51% in 2Q. So while you reaffirmed the mid-40s FRE margin exiting the year, thinking about this longer term, just given prior comments supporting meaningful upside to FRE margins as the business scales, whether that higher mid-60s incremental margin is, in fact, a sustainable run rate, even with all the investments you had spoken of and how it informs your outlook for the FRE margin trajectory next year and beyond?

Yes. Good question. We are reiterating our guidance to exit this year in the mid-40s. As I've said all along, that is not an end point for us. I think you're exactly right to be looking at the incremental margins in connection with growth in FRR. And we do see that to be well above the mid-40s. How far above will depend because we are investing and building what we want to grow in the next 5 or 10 years as a business. We're investing in things like building out our private wealth distribution business and many other areas. And we're going to continue to invest in our business.

That being said, I would expect continued FRE margin expansion in the next couple of years. We have not yet given guidance on when we might get, for example, 50%. But 45% is a step along the way.

And we will move next to Brian Bedell with Deutsche Bank.

Great. Maybe just to go back to your comments on fundraising outlook. Great to see the really strong momentum here. I think, Jack, you mentioned '26, you obviously expect to be a robust year similar to '25. Just in terms of the new funds that you're bringing to market, just wanted to -- it seems like '26 should be even stronger than '25. I just wanted to make sure if I understand that correctly. And the reason I'm asking is because I think you've got Asia coming. Real estate, obviously, is a large stem function of Rise IV is coming to the market. You still have capital in the market and then probably continued growth in credit and wealth. So I just wanted to understand if that's the case.

And if I could just throw in a question on the deployment and the transition infrastructure fund with Kinetic. Is that continuing to increase that deployment capability in terms of how you're seeing that form for fundraising for the Rise Climate segment of funds?

Yes, thanks for the one question, Brian. We -- look, on the outlook, I was intentional in my words. I think next year will be a continued robust year. There are some puts and takes versus this year. Obviously, we had a very large initial close for TPG Capital and Healthcare Partners. We do expect to raise some more money for that in the fourth quarter. So that next year will be likely less capital risk because we've already raised well over half of our target we will have by the end of this year.

On the growth side, we had a big final close for growth earlier this year. And our growth franchise in the U.S. won't be in the market next year. On the real estate side, one of the things that might be throwing you off, I think when I talked about our flagship real estate launch being an important launch next year, the way we're currently thinking about it is the majority of that capital will probably raise the following year because we probably won't have our first close until the back half of '26. So -- and you're right that we absolutely do expect continued robust fundraising on the credit platform, as Jon mentioned.

So when you cut through all that, we see some puts and takes. But this year being as strong a year as it was, up more than 50% over last year, some might have expected a step down next year. We don't expect that.

Just on your sneak in second question on deployment around TI and climate, I guess, generally. I think, first of all, we're -- across the strategies, I would say that we are seeing really unique deployment opportunities, really unique. And we like what we're seeing. We think we're going to generate differentiated returns. And again, we've said this before, but we think that across these various types of climate strategies between private equity and infrastructure that it's a generational investment opportunity, and it's a global opportunity as well.

So I think that we've been quite active. Just to give -- just to put a pin in that, I think we've deployed $2.3 billion of capital this year across those strategies. And obviously, Kinetic being the most recent on the TI side, that was our second investment in TI. And so that continues to be a portfolio that we're building, and we're fundraising alongside of it contemporaneous with that. And I think when you look at the trends going on around in the world in terms of the demand for power on a global basis, electrification, colocation opportunity, storage, et cetera, we're seeing really interesting opportunities. And again, we're seeing it on a global scale. So we're very enthusiastic about what that ultimately will look like, and we're -- it's a very active strategy.

And we will take our next question from Michael Cyprys from Morgan Stanley.

I wanted to ask about M&A. You guys have done a number of inorganic transactions already over the last couple of years. So just curious, as you look at the platform today, what's left to fill in to accelerate one scale or presence? Where might inorganic activity be helpful? I'm just curious what you're seeing on that front. And how do the recent transactions inform your approach as you look forward?

Yes, sure. Thanks, Michael. Look, I think, first of all, I would say that we have been -- as you know, we've been very focused and intentional about the type of inorganic activity that we've engaged in. And we feel like where we have executed, we're executing really, really well. And there's a lot -- there's -- I think you have an appreciate -- we've talked about this before. You have an appreciation for the fact that it begins with the deal and -- but that's sort of like the tip of the iceberg and most of it is underneath from there in terms of execution, integration and really making it work, cultural engagement and then growth. And we feel like we have been very successful at it, and we feel like we've devoted a lot of skills in terms of understanding how to do it. So it's something that we feel will be a kind of arrow in our quiver in terms of growth on an ongoing basis.

One of the other things that I think we see happening is that because of the overall trend line in our industry, which is, I think, the kind of the bigger getting bigger, a trend towards consolidation, I think that one of the things that we see happening is we -- because of our having established our bona fides and being able to do this well, I think we are the recipient of a lot of incoming across a range of different strategies. And that is very helpful because obviously, we have a good look at what's going on. And in many cases, what we're finding is that potential targets or counterparties want to engage with us on a proprietary basis which is also an attractive way to kind of at least evaluate whether or not it's something that makes sense for us. And if so, then execute on it on terms that make sense.

So we're -- I would say that our overall kind of business development effort is pretty active just in terms of seeing opportunities and evaluating them. We're going to be picky as you would expect. There are areas that I think, without getting into too much detail, I think there are areas in the market that continue to be interesting to us. Obviously -- and there's not only product strategies, but also geographies as well. I think that we're continuing to focus on how to continue to broaden our footprint in Europe, as an example. And there may be sort of opportunities there that develop for us. Nothing to do right now today, but I mean that's just an area that interests us because we are a global firm.

We could find opportunities that I would describe as kind of tuck-ins or fill-ins in our credit strategy that might be interesting to us. There are areas potentially related to the build and infrastructure that might be interesting to us because obviously, we have 2 pieces to that now, TI and then also Peppertree. And I think we want to continue to think about how does that part of the market expand for us. There's a lot of interesting developments going on in the market as it relates to secondaries in our market. As the primary markets across all the asset classes grow, I think the secondary flows are going to become more and more important to the market. So that's another really interesting area.

We'll take our next question from Bill Katz with TD Cowen.

I appreciate all the guidance and discussion so far. Maybe just 2 areas of growth seems still being the wealth and the capital markets areas. So I wondering if you can maybe update us on maybe where you see the incremental spend. And then on the wealth side, in particular, just sort of curious, you mentioned a number of times, new products, new geographies, maybe unpack that a little bit in terms of where you see the greatest opportunity in the near term.

Jack, why don't you start with wealth?

Sure. Bill, thanks for the question. Look, wealth is a multiyear build for us, right? The starting point was launching T-POP alongside our existing products and the existing evergreen products, MVP and TCAP and getting kind of the flagship private equity product in the wealth channel on the evergreen side launched effectively. And that, as I mentioned, is off to a great start with lots of room to grow from here. The $900 million is the latest AUM number we've announced there, and we see substantial continued growth through the rest of this year and next year.

Part of that growth, all of that so far has been almost entirely on 3 platforms. In the platforms in which we are selling T-POP, we are one of the most attractive or high volume private equity evergreen products, if not the most active. That -- so it's extremely well received, but we're very early in the expansion across additional distribution partners. So through the course of next year, you'll see that. You'll see us expanding partnerships to broaden out and globalize effectively the placement of T-POP.

Along with that, there are several additional products that we feel like we're well suited to bring to market. The first would probably be a multi-strategy credit interval fund. We talked about how well received TCAP is as a direct lending BDC. The other businesses, as we've talked about, that we have in credit through Angelo Gordon are also distinctive businesses in structured credit, Credit Solutions, et cetera. So having a credit interval fund that much like T-POP feeds on all of our private equity deal flow that benefits from all of the flow across our credit platform, we're seeing on demand for that in early -- I'd say, mid-stage discussions with potential channel partners who want to see that product.

And then the next tent pole would be in real estate. We have no nontraded REIT at this point. We have an excellent real estate business that's diversified across lots of different components. So we're in active discussions with channel partners who would like to see a real estate product from us. So that's kind of a near-term road map with more to come.

I think on capital markets, I think that you should expect that our capital markets business will continue to grow. Obviously, it's a transactional business. So the general flow of opportunities is correlated -- capital markets will be correlated to that. But one of the things that has happened over the course of -- I'm sure you've seen it in the trajectory of our revenue over the course of the last several years is that as we have been embedding our capital markets capabilities into each of our platforms in each of our product areas, we're involved in as a capital provider, as a capital arranger across almost all of our businesses now. And with the addition of our credit franchise, it's taken sort of a next step with respect to our ability to use the broker-dealer and use our capital markets capabilities to distribute and to source. So I think that our outlook for that is that as the firm grows, it will continue to grow.

This concludes the Q&A portion of today's call. I would now like to turn the call back over to Gary Stein for closing remarks.

Great. Thanks, operator. Thank you all for joining us today. If you have any additional questions, please feel free to follow up directly with the IR team.

This concludes today's TPG's Third Quarter 2025 Earnings Call and Webcast. You may disconnect your line at this time, and have a wonderful day.

Good morning, and welcome to the TPG's Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's call is 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 this morning are Jon Winkelried, Chief Executive Officer; and Jack Weingart, Chief Financial Officer. In addition, our Executive Chairman and Co-Founder, Jim Coulter; and our President, Todd Sisitsky, are also here [indiscernible] earnings call.

I'd 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. PPG undertakes no obligation to revise or update any forward-looking statements except as required by law. Within our discussion and earnings release representing 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 and interest in any TPG fund. Looking briefly at our results for the second quarter. We reported GAAP net income attributable to TPG, Inc. of $15 million and after-tax distributable earnings of $268 million or $0.69 per share of Class A common stock. We declared a dividend of $0.59 per share of Class A common stock, which will be paid on September 2, 2025, to holders of record as of August 18, 2025.

I'll now turn the call over to Jon.

Thanks, Gary. Good morning, everyone. Before we begin, we want to acknowledge the senseless active violence that occurred at 345 Park Avenue last week. Our thoughts and prayers go out to those impacted by this tragedy, and we stand in solidarity with our friends at Blackstone, Ridden Management, New York Police Department, the NFL and KPMG during this difficult time. To the first responders who acted swiftly and courageously, thank you.

Moving to earnings. TPG delivered outstanding results in the second quarter, reflecting the strength and durability of our franchise. Our after-tax distributable earnings for the quarter increased 30% compared to last year, driven by our strong operating metrics. On a year-over-year basis, our second quarter fundraising grew nearly 80% to $11.3 billion and deployment grew 36% to $10.4 billion and realizations grew more than 20% to $6.5 billion.

After quarter end, we completed our acquisition of Peppertree, and the integration process is well underway. We're excited to welcome our Peppertree colleagues to TPG and to introduce our clients to this compelling digital infrastructure strategy. This morning, I'll discuss our momentum across fundraising, deployment, and realizations before turning the call over to Jack to cover our financial results.

On the capital formation front, we had the second highest fundraising quarter in our history and the strongest credit fundraising quarter ever. On our last call, I highlighted the strength of our credit fundraising pipeline and that we were at an inflection point in our client dialogues. In the second quarter, we converted that momentum to $11.3 billion of capital raise, of which $5.4 billion was from our credit platform. Importantly, our second quarter numbers do not include any commitments for our flagship buyout funds, TPG Capital 10 and Healthcare Partners 3. We're seeing an acceleration of fundraising into the third quarter and are increasingly confident that we will raise significantly more capital in 2025 than last year.

I'll share some updates across our campaigns. In private equity, during the quarter, we completed fundraising for TPG Growth 6, exceeding our $4 billion target to raise a total of $4.8 billion for the fund and affiliated vehicles. This represents a 35% increase over Growth 5, which is consistent with our track record of driving fund over fund growth across our strategies. In addition to continued support from existing clients, we meaningfully expanded our investor base outside of North America, particularly in the Middle East, Asia and Latin America. Additionally, we are seeing strong early support for our second GP solutions fund, which we expect to be significantly larger than its predecessor.

As a reminder, TGS is our GP-led secondary strategy focused on North America and Europe, and it's experiencing significant demand as GPs look for creative ways to drive liquidity for their strongest performing assets. We recently launched the TGS 2 campaign and closed on $1.3 billion in the quarter. This early momentum is driven by the strong deployment and performance in our inaugural fund, which is now fully committed across 14 investments. In May, we also launched [indiscernible] our new perpetually offered private equity product on 2 of the largest wire houses in the U.S. The initial feedback has been very positive, and we raised approximately $430 million across our first 2 closes in June and July. The TPG brand is resonating in the channel, and we are establishing a strong following with more than 560 individual financial advisers participating in these closes. This is a great foundation to build upon as we scale [indiscernible] and launch additional products over time.

In credit, the second quarter was a record fundraising quarter with $5.4 billion of total capital raised across our strategies. In Credit Solutions, we closed an additional $1.4 billion of capital for our third flagship fund, bringing the total raise [indiscernible] to $4 billion. Our market leadership and the opportunistic credit space further enhanced by our strong cross-firm collaboration continues to resonate with clients and our fundraising pipeline remains robust. In middle market direct lending, we held a first close of $1.4 billion for our sixth drawdown fund during the quarter.

Due to Twin Brook's leadership position in the lower middle market and a continued steady pace of originations. We launched fundraising for our next vintage fund just 7 months after the final close of its predecessor. Twin Brook's differentiated portfolio, disciplined underwriting and stable returns continue to resonate with both existing and new clients. resulting in a very strong initial close. And in structured credit, we raised $1.4 billion across our ABC drawdown and Evergreen Funds as well as a number of SMAs.

Demand for structured credit is high and continues to grow as clients are generally underweight and looking to diversify their exposure beyond corporate credit. Additionally, we continue to expand our product set to key areas such as private investment-grade asset-backed securities. In aggregate, we are seeing significant broad-based momentum in credit fundraising, and we expect 2025 to be a breakout year.

I also want to highlight the meaningful progress we've made in the insurance channel. Insurance contributed nearly 30% of the credit capital we raised in the second quarter, primarily through our structured credit and credit solution strategies. Our scaled and diversified credit platform has enabled us to deepen relationships with our existing insurance partners while also establishing new ones. As we continue to organically grow our insurance client base and commitments.

We are also actively evaluating broader strategic partnerships and inorganic opportunities within the channel. While I'm very pleased with our capital formation during the second quarter, I'm even more enthusiastic as I look ahead. For TBC Capital 10 at Healthcare Partners 3, we are in the midst of a rolling first close where we expect to receive total commitments of approximately $9 billion. This strong result during a challenging private equity fundraising environment is a testament to the trust we've built with our clients through our distinct investment approach and excellent performance.

While clients remain cautious and highly selective amidst ongoing macro uncertainty and muted distributions. Our market leadership and differentiated value proposition in private equity have driven strong absolute and relative fundraising results. Moving on to deployment. We had a robust quarter with more than $10 billion of capital invested, which increased 36% year-over-year.

In TPG Capital, we announced the $2.2 billion take private of Avid Exchange, a leading provider of AP automation software and payment solutions in partnership with Corpay. This is another example of accretive win-win corporate partnership that offers significant downside protection. And after the quarter end, we closed a carve-out of Sabre Corporation's Hospitality Solutions business, a leading technology solutions provider to the hospitality industry.

Given our focus on vertical market software and the travel and leisure space, we are excited to drive transformational growth in the newly separated business. In Rise Climate, we recently announced a number of investments across Europe and Asia, representing over $10 billion of total enterprise value. This includes [indiscernible], a pioneer in sustainable agriculture; Aurora Energy Research, a U.K.-based provider of data and analytics for the global energy markets; and Techem, a leading digital-first provider of sub-metering solutions.

In credit, we deployed $4.3 billion of capital across our strategies in the second quarter. In structured credit, we continue to be a market leader in residential mortgage securitizations as one of the few managers who are vertically integrated in this space. We placed 5 issuances in the quarter across home equity, nonqualified mortgage and agency eligible collateral types to bring year-to-date securitizations to 8.

Twin Brook generated $1.2 billion of gross originations in the second quarter. Add-ons made up nearly half of the activity in the quarter, demonstrating the power of Twin Brooks incumbency within its existing portfolio. And in Credit Solutions, we continue to see a growing pipeline of companies looking for solutions capital at scale. In July, we completed a $1 billion asset-backed term loan facility for Altice USA in partnership with Goldman Sachs. This is a first-of-its-kind transaction in infrastructure backed financing, secured by Altice's Bronx and Brooklyn network assets. We also recently anchored an innovative multibillion dollar debt financing for X AI, which is one of the world's leading AI companies. We believe this represents one of the first large-scale credit solutions to be provided in the AI space, where we expect demand for creative financings to grow significantly given the immense funding requirements. Both of these financings are great examples of our ability to deliver customized, scaled solutions to address the complex capital needs of corporates similar to the Dish transaction last year operation.

Our credit solutions, private equity and real estate teams work together seamlessly to execute these highly bespoke solutions within our core thematic areas. In real estate, we continue to take a patient and disciplined approach to capitalize on the dislocation within the asset class. Over the last 2 years, we have acquired a number of high-quality assets that are typically unavailable from sellers facing liquidity pressure. These investments are performing well with strong operating fundamentals, driving LTM value creation for our TPG real estate of 14%.

As we look ahead, we expect to see a growing pipeline of attractive investment opportunities. Shortly after quarter end, [indiscernible] completed the acquisition of 2 adjacent high-quality office towers located on a full block of Park Avenue South. This is a top submarket in New York City, where favorable supply-demand dynamics have led to a significant improvement in office fundamentals. As a result of strong fundraising, we ended the quarter with record dry powder of $63 billion, representing 43% of fee-earning AUM.

Our investment pipelines remain very active and we expect our deployment pace to accelerate in the back half of this year. Finally, we continue to successfully execute on important exits and liquidity events driving $6.5 billion of realizations during the quarter across a number of our platforms. We realized nearly $2 billion of total proceeds from public market sales during the quarter. This included fully exiting from biking cruises, [indiscernible] technologies and Service Titan and selling down our positions on lifetime fitness and Side Life Sciences.

TPG Growth also completed the full company sales of [indiscernible] and Crunch Fitness. We've generated $2.3 billion of liquidity in TPG growth year-to-date including signed but not yet closed transactions, putting us on track to reach one of our highest years for realizations for this strategy. And this week, we announced our first exit from TPG Capital 9 with the sale of Elite, which we carved out of Thomson Reuters 2 years ago. This investment marks a strong early outcome for the fund and is a great example of our ability to drive meaningful top line growth through disciplined operational transformation.

Looking across the firm, we continue to experience strong momentum in scaling our business and deepening and broadening our client relationships. In private equity, despite persistent headwinds in the fundraising environment, we continue to differentiate ourselves with strong investment performance and DPI. We believe we are being positively selected by clients and continue to gain market share. driving fund over fund growth across both our existing and newer strategies. In credit, we've reached an important inflection point in establishing our credit franchise with our institutional clients. We are now in the process of significantly expanding the capital base across each of our credit businesses, including partnering with our clients to develop and seed new strategies.

In Private Wealth, TPO and KCAP have provided us with a strong foundation to build our presence in the channel, where we believe our differentiated brand and track record are resonating with advisers and their clients. We continue to build out our sales team, infrastructure servicing capabilities and suite of products given the long-term growth opportunity in wealth. Lastly, as the largest pools of capital globally continue to consolidate their relationships with fewer GPs. We are actively engaged in a number of cross-platform strategic partnership discussions. These partnerships position us to grow with our largest clients across multiple strategies and asset classes while also increasing the duration and continuity of our capital base. We're entering the back half of the year with significant strength across each of our platforms and look forward to continuing to deliver outstanding results for our clients and shareholders.

I'll turn the call over to Jack to discuss our financial results.

Thank you, John, and thanks to all of you for joining us today. As many of you know, last year, we focused on putting the building blocks in place to support our next leg of growth. These included: one, scaling our credit businesses through a successful fundraising year, expecting that this capital would flow into fee-paying AUM as we invested this year in the future; two, preparing for the launch of our next series of private equity funds; and three, continuing to innovate, building new products and businesses, including GP solutions, climate infrastructure and TPO that we expect to scale into greater profitability over time.

Through these levers, we expected to begin a new wave of growth this year. Our strong second quarter results highlight our early success in executing this growth strategy, and we expect our momentum to accelerate from here. We ended the second quarter with $261 billion of total assets under management, up 14% year-over-year. This was driven by $36 billion of capital raised and $21 billion of value creation, partly offset by $23 billion of realizations over the last 12 months.

Fee-earning AUM increased 7% year-over-year to reach $146 billion as of June 30 These figures do not include TPG Peppertree, which closed on July 1 and added approximately $8 billion of AUM and over $4 billion of fee-paying AUM. AUM, subject to fee earning growth, was $30 billion at the end of the quarter, which included $23 billion of AUM not yet earning fees and represents a revenue opportunity of nearly $200 million on an annualized basis. This shadow FAUM has been scaling with our credit businesses. And as John indicated, our deployment pace has begun to accelerate. At the end of the quarter, our net accrued performance balance remained at $1 billion and strong value creation and realizations largely offset each other during the quarter.

Our fee-related revenue in the second quarter increased to $495 million and included $43 million of catch-up fees primarily associated with the strong final close of TPG Growth 6. We reported quarterly fee-related earnings of $220 million. Our FRE margin benefited from the catch-up fees as well as a step down in cash compensation expense this quarter. After-tax distributable earnings for the second quarter increased 30% year-over-year to $268 million. or $0.69 per share of Class A common stock, which included $87 million of realized performance allocations.

As Jon noted, our strong pace of monetization has been a significant point of differentiation for us. which continues to benefit our fundraising discussions with clients. Looking at the back half of the year, we expect to drive additional realizations, particularly as the broader market backdrop continues to improve. As a result of our strong quarter, we declared a record dividend of $0.59 per share.

Looking at our non-GAAP balance sheet. During the quarter, we further enhanced our liquidity and by upsizing our revolving credit facility from $1.2 billion to $1.75 billion. We've drawn on our revolver to fund several growth initiatives, including seeding TPOP's investment portfolio as well as funding the cash portion of the Peppertree acquisition in July. Pro forma for the Peppertree funding, the outstanding balance on our revolver is $570 million and our available liquidity is more than $1.3 billion.

Turning to our portfolio. We continue to drive positive value creation across all our platforms for the second quarter and over the last 12 months. In private equity, the fundamentals across our portfolios remain strong and we continue to see robust growth that is outpacing the broader market. The portfolio of companies within our capital growth and impact platforms grew revenue and EBITDA by approximately 16% and 23%, respectively, over the last 12 months. Our private equity portfolio in aggregate appreciated 2% in the quarter and 11% over the last 12 months. In credit, our portfolio appreciated 2% in the quarter and 12% over the last 12 months. In middle market direct lending, all our funds remain at or above their target return ranges as of quarter end.

Within our portfolio, our average interest coverage ratio has remained stable at approximately 2x and our annualized loss ratio is approximately 2 basis points. Our structured credit strategies also continued to perform well, our first private asset-based credit funds net IRR since inception was above its target range at 13% at the end of the second quarter.

TPG's real estate portfolio appreciated approximately 3% in the second quarter and 14% over the last 12 months. We continue to see strong performance and value creation in our data center, industrial and residential investments. In addition, TPG AG's real estate portfolio appreciated by 20 basis points in the second quarter and nearly 3% over the last 12 months.

Turning to fundraising. We raised over $11 million during the second quarter, as Jon noted, this was the second highest fundraising quarter in the firm's history and the highest fundraising quarter ever for our credit platform. As a result of our strong fundraising momentum, we remain very confident that will raise significantly more capital this year than last year.

Looking at the remainder of the year, we'll be in the market with approximately 25 different products across most of our platforms. The biggest contributors to our fundraising in the back half of the year include the following: one, the rolling first close for our next flagship buyout funds, TPG Capital and Healthcare Partners. As Jon mentioned, we expect to receive total commitments of approximately $9 billion during our rolling first close in the third quarter; two, continued strong capital raising across all of our credit strategies in drawdown funds, perpetual vehicles and SMEs; three, formal first closes for our second GP Solutions Fund and our third tech adjacencies fund as well as additional closes for [indiscernible], our new Asia growth buyout strategy. We continue to make strong progress with TCA and have already raised more than half our target. And four, increasing our penetration within private wealth and insurance. On the topic of private wealth, I'd like to provide a bit more information on our strong progress in this important business.

As Jon mentioned, TPOP is off to a great start, raising approximately $430 million in June and July alone and we expect strong continued expansion within our -- with our 2 initial launch partners. We also have several additional partners lined up domestically and internationally over the next several quarters. including expanding into the RIA channel. On the credit side, Twin Brooks nontraded BDC TCAP had its highest organic fundraising quarter yet in the second quarter with more than $200 million of inflows. TCAP is now actively distributed on 3 major wire houses, and we expect further expansion in the near future. Across our private wealth business more broadly, we continue to grow our distribution network.

We're now partnered with over 30 firms globally, which has increased more than fourfold just since the AG acquisition. We're also focused on expanding our suite of evergreen offerings across asset classes having created a strong foundation with TPO and TCAP. We're actively working on additional products across credit and real assets. Private Wealth is a high priority growth area for the firm, and we continue to invest in broadening our capabilities to serve the growing needs of financial advisers and their clients.

I'd like to provide a few important points regarding our near-term financial outlook. Beginning with the third quarter, our results will include the financial contribution from TPG Peppertree within our Market Solutions platform. As we noted when we announced this transaction, we expect TPG Peppertree to be immediately accretive to FRE and after-tax DE per share. Following the completion of our DIRECTV investment, TPG Capital 9 is now fully invested and reserved, and we already activated TPG Capital 10 in early July. We expect catch-up fees to step down in Q3 and then pick back up throughout next year as we hold subsequent closes in our capital and climate campaigns.

Following the step-down in compensation expense in the second quarter, we expect this line item to begin trending back up starting in the third quarter. We continue to invest in our teams in strategic growth areas such as private wealth and climate infrastructure. Although we expect our FRE margin to decline modestly in the third quarter, consistent with our prior guidance, we continue to expect to exit the year with an FRE margin in the mid-40s. And finally, we expect our effective corporate tax rate to remain in the mid- to high single digits through the remainder of the year.

Before I wrap up, I'd like to highlight the significant progress we've made in enhancing the liquidity in our stock since our IPO. Two recent events have contributed to this meaningfully. First, in May, [indiscernible] sold 21 million shares of TPG stock in order to satisfy certain obligations, including estate tax payments. And second, in connection with the closing of the Peppertree transaction last month, we issued and registered 2.9 million Class A shares as partial consideration. These shares, which were not owned by employees of Pepper try have already been fully liquidated in the public market. This supply was well received in the market, broadening our shareholder base and allowing many of our largest existing shareholders to further build their positions. Primarily as a result of these 2 events, the percentage of TPG Operating Group equity owned by TPG Inc. Class A shareholders has increased from 22% to approximately 40% in just 18 months.

Taking a step back, we are very pleased with our strong second quarter results and the progress we continue to make driving growth and diversification across our business. We're experiencing substantial momentum as the pace of activity across the key drivers of our business, fundraising, deployment and realizations continues to accelerate, and we look forward to creating additional value for all of our stakeholders. Now I'll turn the call back to the operator to take your questions.

[Operator Instructions] And we'll take our first question from Glenn Schorr with Evercore.

So I wonder if you could help us. You are the last of the -- I think, the big [indiscernible] to report. And we've seen -- you guys had good performance across privat equity. You've raised a lot of money, you've returned a lot of money yet the aggregate details across private equity are still stock portfolios, low DPIs. And I see some surveys that show almost half of LD saying that they're their overweight with maybe potential to cut some allocations. So like is it that the big get more successful and you're seeing more -- I'm curious to get your thoughts on the on the highest level of industry dynamic because you're clearly not seeing the same PE stuck in the mud that a lot of the bigger picture surveys would have you believe. So I'm just looking for you where we're at in that private equity cycle right now?

I think it's a good question. And I think that our -- what we're experiencing, I think, is a little bit different than sort of the general kind of theme that you characterize as it relates to private equity I think it starts, just to be honest with you. I mean, I think that we -- first of all, at a high level, I mean, allocations obviously are fuller and higher in PE than maybe in some of the other asset classes. But with respect to the broader market, I think we still have a lot of confidence in the importance of the PE asset class as a return driver for the cross-section of larger institutional accounts. And also, I think some of the reaction that we've gotten as we've gone out in the market to continue to penetrate the wealth markets. I think there as well, because of the nature of the public markets and where the returns are being driven in the public markets, I think that there is a clear perception and a clear, I think, interest in alpha creation from private companies that are driven by the private equity industry. So we still feel very strongly that the private equity asset class is going to be very important and durable for a lot of those reasons going forward. I think what we're seeing for our -- in our own situation is it starts fundamentally with performance and how we've managed our business and how we've managed our funds. And if you look at those 2 categories of things, I think that we feel very good about our performance across our fund families consistently. And then the other thing, I think we also have been doing, I think we've talked about this before, is we've been very intentional and deliberate with respect to how we've been managing our funds from the perspective of how we've deployed, how we've composed our portfolios. And we've been very intentional as it relates to not only on the entry on the buy, but we've been very intentional on how we think about exits and the importance of managing the process of exiting companies, returning capital and how that also influences the returns people are experiencing with us. in a holistic sense, both from a return perspective as well as from sort of flow of funds kind of back and forth. And it's just very clear that with the largest pools of capital, I mean, I think you could probably say that the largest players in the industry are gaining share, we think we are gaining share disproportionately. We've done -- we've looked at some of the numbers. We've looked at sort of our incremental growth with our largest LPs. And since our IPO, if you look at the top 100 relationships that we have, we have grown very meaningfully with all of those institutions across the portfolio of private equity as well as our credit and real estate businesses. But since your question is focused on private equity, we have a number of major relationships that are not going down with us, they're going up. They're incrementally adding to their commitments to our funds. And that's not to mention, obviously, relationships that have kind of -- that we've either restarted that over the course of the last 4, 5 years or brand-new relationships in other parts of the globe that we've been able to initiate. So I think we feel like our private equity business is very strong, very durable and I think that there are going to be -- if I could say it, I mean, they're going to -- I think they're going to be sort of haves and have nots as it relates to how the industry is evolving, and we feel like we're in a strong position.

And we will take our next question from Ken Worthington with JPMorgan.

I wanted to maybe dig into the build-out of insurance. Can you talk about your view on balance sheet heavy versus balance sheet light? I think the preference has generally been partnerships and balance sheet light. You called out a number of times you don't want to be an insurance company. What would you want or need to see in something more balance sheet heavy that might change your mind in terms of what could be a good fit for TPG. Is it size? Is it price? Is it all the above? Is there some other nuance on mix that ultimately makes a different structure a good idea for TPG?

Thanks for the question. I think let me sort of come at it this way, which is that I think that what is first and foremost, just in terms of how we think about how insurance or insurance related transaction might fit into would be a couple of sort of core principles. One is that it's important to us to maintain what we think of as sort of FRE centricity. That's what we -- that's kind of like top of mind for us in terms of driving our asset management business and driving core fee-related earnings growth. And so that's kind of front and center as we think about what does a potential transaction do for us. Additionally, I think as we've talked about sort of not turning out ourselves into an insurance company, I think that could be maybe a little bit more specific. I think we are very sensitive to what types of liabilities we assume in the context of doing some kind of an insurance transaction. So -- that's not to say that we wouldn't use our balance sheet because we've talked about that before, obviously, and we would do it in the context of I think size is a little hard to judge depending on the situation. Ken. But I think that we're -- I think we're very focused on not putting ourselves in a position where we assume risks that we don't feel either good about or that we're not expertized in as it relates to certain types of insurance liabilities. And so that's something that's also been top of mind for us. So when we've looked at some transactions, what we've tried to do is we've either looked at how does it impact our ability to grow our asset management franchise, grow our FRE without taking undue risk as it relates to the balance sheet. And in certain cases, what we've done is we've looked at a couple of opportunities where we've actually looked at partnering with some strategic partners within the insurance business, which would allow us to essentially try to acquire the portions of the business, particularly as it relates to distribution capabilities that expand our ability to accumulate capital, but not take on the parts of the business that are probably better left in the hands of an insurance business. So that's -- those are our core principles [indiscernible] continue to see the industry evolving in terms of what it takes to compete in the industry, and we continue to be in -- we continue to evaluate opportunities, and we -- and I think that if we do something, it will be with those core objectives in mind.

And our next question comes from Alex Blostein with Goldman Sachs.

maybe going back to Glenn's question around private equity. Obviously, very impressive on raising numbers with the first close here. I was hoping you could help us think through how you might sort of think about the ultimate size of these funds now, I think, like in the past, you talked about 40% to 50% typically comes in, in the first close of the 9 that you raised potentially puts you quite above, I think, than certainly prior funds, but also maybe what we were thinking before. And then also, Jack, maybe just kind of walk us through the P&L impact on management fees in the third quarter as you started to earn management fees and lease funds and perhaps any step down things we need to consider.

Yes. Alex, thanks for the questions. Just a little more color on what John said just qualitatively about the market. I think when we look at the institutional LP market globally, we really don't see reducing allocations to private equity as an ecosystem globally, I think we're still seeing increases in allocations to private equity, different in different parts of the market. I think there's an overlay of the liquidity HLP has to work with and how they manage that's compressing certain parts of the market, really mostly in the U.S. institutional market. But there is -- I think there is a sorting out going on. as John alluded to. And I think we're benefiting from the conclusions of that sorting out. If you look at this first $9 billion, we said we expect to close on [indiscernible] 10 and health care partners 3. Almost all of that is re-ups from existing LPs and on average, in that first close process, the existing LPs are increasing their commitments to us by north of 20%. So we are clearly gaining share with those LPs. And then the longer tail of the fund raise will be driven by additional re-ups in addition to new LPs coming into our ecosystem. In terms of the size, I agree with you that, that kind of size in the first close is a higher percentage than many are achieving in this market. Look, our goal remains what we've been talking about, which is in each of our private businesses to increase the fund size kind of in each sequence. We obviously did that in growth, as we talked about, growing 35% versus the prior fund. I think in TPG 10 and Healthcare Partners 3, we have not set a target for those 2 funds collectively, but I would expect at least the same kind of growth rate over the prior vintage as we did in the prior sequence for the same fund complex, which tells you that the start we're off to in the first close is very strong. Now the impact on management fees, we will see -- I mentioned in my comments that we activated TVG1 last month in July. We have not yet activated Healthcare Partners 3 because we still have a little bit of investing to do in health care partners, too. If I had to estimate, when we'd activate that fund, it will probably be maybe the first quarter of next year. So step-downs obviously occur as you activate the next fund. What that means in TPG 9, 10, is TPG 9 fund, low step down next quarter -- in the fourth quarter.

And our next question comes from Bill Katz with TD Cowen.

Just you mentioned the sort of flywheel accelerating to the second half of the year and great to see the significant jump in AUM not yet paying fees, -- how quickly do you think you can sort of deploy that $30 billion? And then the second part of the question is, I think you mentioned a significantly high level of revenues on that. How much incremental margin might be against that incremental revenue?

Well, I think what we said is that we are feeling good about deployment opportunities across our business. And obviously, somewhat related to how the markets act overall. But when we look at our pipelines across really all of our businesses, our pipelines have been increasing quarter-over-quarter over the course of 2025 so far. So we feel like deployment should continue to advance and on balance. I think our expectation is that our outlook is a deployment will pick up a bit and then we'll see what happens into 2026. So we're feeling pretty good overall all about the opportunities that we're seeing. When you look across the firm, as a result of the breadth of our business and the variety of strategies and the flexible capital that we have across our funds, I think we can respond to a lot of really interesting bespoke opportunities. And I think that's inherent in our strategy, which is to be able to be active across the variety of opportunities that present itself to us across the capital structure. So from that perspective, I think we're -- we continue to be reasonably bullish on deployment opportunities. The second part of the question was, I think you had [indiscernible]

Margin on incremental employment.

I mean, obviously, that's going to [indiscernible] asset class.

And we will take our next question from Steven Chubak with Wolfe Research.

One opportunity that maybe hasn't gotten as much airplay on the call is within Capital Markets. And I was hoping you could speak to, given some of the improvement in deployment in 2Q, certainly encouraging to hear expectations for continued acceleration in the back half, what the potential windfall could be on the capital market side? And are there any remaining gaps in terms of your capabilities? And just longer term, how large could this business grow over time?

Yes. Look, I mean we've talked about capital markets pretty consistently over the last few years and the importance of the business to the firm and the continued build-out of our business. And I think what we have done is we are continuing to -- we've done a few things, and we continue to. One is we continue to build out our capital markets capabilities across all of our strategies. And simply what we've done is we've added capital market expertise really embedded in each of our strategies so that they are connected to and close to the deal making process, which gives us the opportunity to finance deals, it gives us the opportunities to refinance balance sheets. And and also provide interesting solutions and extend our capital base as well to the extent that we are going to do larger and larger transactions. The second thing that's happened, which is material, is that as a result of the coming together with our credit business and the level of collaboration that we are able to to execute on across the firm, there is increasingly interesting opportunities across asset class with respect to our capital markets capability. And so when you see some of these deals that we're doing some of these investments that we're making and some of these deals that we're doing that I mentioned earlier, like the Altice deal, the Dish deal that we had last year, the XAI deal. Those transactions are really being executed by some collaboration of our investment teams across credit and private equity in those cases, actually in the -- and in a couple of cases, our real estate team as well, but also involving our capital markets capability and all of them, again, to extend our capital base or either syndicate risk et cetera. I think that as we move forward in the future, as the firm continues to grow as a number of strategies continue to evolve obviously somewhat subject to -- of course, subject to deal pace and deployment pace, capital markets should just generally grow. It should be correlated to the growth of the firm and the transactional activity overall. So we feel very good about it. And it will -- I think it will continue to be an important driver for us.

Yes, I would just say that, that transaction monitoring and other fee line item that was about 150 or so last year. We can -- as Jon said, we continue to expect that to grow over time, not just with the pace of our overall growth, but ahead of the pace of our growth because we are penetrating additional segments of our business that we hadn't [indiscernible] by growing our capital markets team. So we continue to expect that line item to grow this year over last year in a healthy way and even faster next year.

And our next question comes from Dan Fannon with Jefferies.

I wanted to follow up on the retail opportunity and the initial rollout of TPO. So you talked about, I think, broadening distribution. Maybe if you could expand upon what that looks like. And then also the product road map for other products for this channel and how you see that proliferating in the coming quarters?

Sure. Thanks for the question. First of all, on TPO, really, the first couple of closes we alluded to with our -- we've said we've had 2 large U.S. wirehouses as our launch partners. So really, most of that capital came from those 2 partners. As we look in the future, we certainly have a lot of penetration that we continue to expect through those core partners. But we have several additional partners lined up, both domestically and internationally. We're launching in a couple of months with a large international bank with a focus on the Asia market. We have a product -- we have a focus on the RA market. It's been publicly disclosed that Capital has filed a registration statement for a TPG branded fund that they will be managing that's going to look a lot by TPP, but focused on the RIA market.

And then what was the second part of the question?

The product road map beyond private equity. So we've got a lot of growth ahead of us in this core private equity product, TPO. While we're accomplishing that, we're also in the middle of designing the next wave of products, which will include something broader in credit, like a multi-asset class credit interval fund, something in real assets as well. we've described a lot about our broad-based real estate platform, and we're in the middle of designing a product there as well.

And our next question comes from Brian Bedell with Deutsche Bank.

Great if I can squeeze in a 3-parter on the impact platform.

We'll take the first part.

At least I'm telling you it's 3 before. All related, but just, I guess, the fundraising pipeline on the impact platform and the 3-quarter is first RISE, looks like that's 70% invested. So commentary on the next vintage there. Secondly, the climate franchise, Rice Climate on 80% invested. It looks like on your front tables. And so if you can wrap together the -- I know there's a bundling of the Global South initiative with the last final close of Rise Climate 2 coming in. So just if you can update us on the timing of the incremental fund raise there. And then just 3, just the Tangen strategies to to the impact platform by climate infrastructure, for example, expectations of that into '26.

Sure, this is Jim. Let me take those. And let me step back and talk a little bit about what's happening in that area generally. So first of all, specifically on RISE we expect to be holding first closes for RISE 4 probably in the fourth quarter. So that -- you're right in saying that we are heading into the market and that we'll have more to report going forward. And the climate discussion, I think, requests requires a step back to what's happening in the climate world generally. So let me do that. First of all, it's very, very helpful. to have the bill passed. So the policy landscape is relatively clear. As I travel on the world before I jump in the U.S., let me make a general comment, as I travel on the world, there's a lot of discussion of tariffs. The rest of the world is not that bus with U.S. energy policy. And as John noted, we've been very active in the climate franchise in the first half of this year, 5 deals, all international as the market in the U.S. has paused for a bit to see where a policy would land [indiscernible] didn't land. The bill landed in a place that was better than people expected. The way to think about that is to probably watch the Clean Energy Index, S&P Clean Energy Index. And back April and May, there was a lot of concern. But as the bill which came out, that index board back. In fact, it is above where it was at the election at this point and subsectors are actually doing much better. within the bill, the area that probably got hurt most was EVs where we have -- in the U.S., which where we have been very vocally not an investor. But if you go deep on the policy, -- the way to look at it is, where are we versus where we were before the IRA because the IRA was never fully implemented. And generally, the picture there is quite surprising. In most areas, there's more support than there was in 2022 when chat GPT dropped. For example, on batteries, which are critically important now the new build kept the IRA provisions for very substantial incentives and added U.S. incentives to that. So underneath the noise in the U.S. market, I think the clarity we now have is really interesting in our pipeline as a result, is very very busy. The 2 big factors to look at going forward is that we are a way short energy in the U.S. and that the fastest way and cheapest way to add energy is still renewables. Yes, there will be more gas, but gas was only 7% of the market this year. And secondly, adaptation will continue to be very robust. [indiscernible] that into fundraising. As you know, we had strong first closes, well above those 50% targets we were talking about. In spite of all the noise in the market, the first half of this year in the Rise Climate franchise, we closed on $1.5 billion capital. And in the barbell world, we now live, we're now moving into the back half. of those campaigns well over where we were in the last bump cycle. So in terms of capital committed, some of which still to be activated, we are well over where we were in the last fund cycle. And so with clarity in the market, we're now looking forward to the back part of the fund cycle for [indiscernible] and the -- really the initiation after our anchor commitments of TI and the opportunity set for those is robust. So I think we're kind of on track in these areas with understanding that there was a pause as the market tried to figure out where the bill was going to land and a likely elongation from our original intentions. But I think that's probably consistent with what you're seeing in fundraising generally in the market. So the impact franchise should have a busy next 6 to 9 months.

And our next question comes from Michael Cyprys with Morgan Stanley.

Just wanted to [indiscernible] back to an earlier comment that was made around your engagement and cross-platform strategic partnership discussions to increase duration and the continuity of the capital base. I was hoping you could elaborate a bit on your aspirations there, the strategy, how you're approaching this? What this could look like and how it might contribute over time for TPG?

Sure. Thanks, Michael. I think we alluded to an example of a strategic partnership. I think it was on last quarter's call. But I think that -- the general approach is consistent with the theme that we talked about earlier on this call, which is that what we're finding is that the largest institutional partners are narrowing and focusing their relationships. And as a result of that, they are really, I think, trying to figure out ways of structuring win-wins with firms and partnerships with partners that they have a lot of confidence in. And so increasingly, what we're finding is engaging in dialogue with a number of our largest partners about how can we structure essentially longer-term relationships with one another that usually come in the form of thinking about commitments across asset classes, which is important, by the way, because it's not touching just one asset class, but thinking about commitments that go across asset classes where in exchange for commitments of certain dollar amounts of capital over a period of time, and that could vary depending on -- these are very bespoke arrangements by the way, that could vary from a 3-, 4-, 5-year kind of time horizon where they commit a certain amount of capital to TPG and to our various funds. And in return for that, there's incentives for them. There are economic incentives that are, again, are also fairly bespoke in nature. But the basic partnership arrangement is that they're looking at very significant large capital commitments to the firm in return for those benefits. And for some reason, if things change or if they have to make adjustments in their plan, and they don't achieve those milestones, then some of the economic benefits roll back. And so again, I want to emphasize that they are very sort of bespoke, but I would say that we're engaged in that dialogue with more of our major partners than I think we've ever been before in our history. And what it does is it obviously ties us closer together. I mean there are sort of other dynamics to some of these partnership arrangements where we spend time with one another at the top of the house sharing ideas and talking about markets and talking about what we're seeing. But essentially, it is a kind of throwing in together on a longer-term basis. And what it does for us, obviously, it gives us much higher degrees of confidence in re-ups in our major funds because those are sort of our core strategies. And it also creates additional incentives for them to essentially work with us to anchor new strategies. And I think as you know, building and anchoring newer strategies is -- and growing organically, that's probably one of the toughest things to do in our industry, which is start something new, bring anchor LPs in and then scale it from there. And so what these kinds of things do is it creates a partnership approach to doing that with our biggest relationships, and it generally accelerates our ability to do that. And so we're excited about these conversations that we're having. And I think that when we talk about things like our first closes and the time to first close, like we were talking about before, these partnerships impact that because generally, it implies that these partners are more inclined to be first closers in these funds and also, again, exploring new avenues of growth with us as well.

[indiscernible] Jack, just a little bit. I mean, I see it's almost a byproduct of what we've been talking about for a concentrating their capital with fewer partners. And when they do that, they step back and say, if we're going to choose you as a partner in a concentrated way, let's break out of this fund by fund mode and talk about what a bigger partnership might look like. And that begins the dialogue about what a longer-term partnership might look like, whether it's whether it's design as an SMA, a fund of one, a perpetual fund with kind of inherent re-ups, but that's the nature of the dialogue. And fortunately, we're on the winning end of a lot of those discussions, which is leading to a lot of these partnerships [indiscernible].

I think one other thing that's affecting it, too, Mike, is that, one important kind of like overriding trend that we're seeing in the market is that -- I think that there was a time when -- and not -- recently, there was a time when some of the largest pools of capital in the world, we're really continuing to focus on their ability to be "direct investors. And some of them still are, but what I would say is that there's been a fairly big pendulum swing back the other way where some of the largest pools of capital in the world are really now much more focused on this partnership model where they realize that their ability to source on a very broad basis, on a global basis, some of the most interesting transactions across multiple strategies is enhanced by engaging in these partnerships with our core partners. And so I think that's another trend that I think is also giving rise to this desire to figure out how do they construct these partnerships where they get the benefits of seeing the opportunities that we're creating, but also being able to partner together to get them done. And so I would say that's another kind of broader trend that we're seeing there's just a bit of a pendulum swing back to this kind of doubling down on kind of the partnership model.

And our next question comes from Kyle Voigy with KBW.

Maybe just a question on the 401(k) opportunity. So now that you're adding more breadth to your semi-liquid product suite, just wondering how you're thinking about addressing the 401(k) opportunity if that market begins to potentially open up more to private investments over time?

Yes. That's a good question. Obviously, as we are building out our suite of evergreen products and high net worth focused products across alternatives, it's a natural focus area. I think it's a bit early to speculate on how it's all going to play out because the executive order hasn't been issued yet. But when you step back and look at the overall U.S. retirement savings ecosystem. It's approximately a $35 trillion market. About $10 trillion of that is in defined benefit pension funds about $10 trillion is in the 401(k) market, and the rest is in things like the IRAs. Defined benefit pension plans are some of our biggest clients. They were among the earliest institutional investors to adopt alternatives. 30, 35 years ago, they had very little exposure to alternatives. Today, it's probably 1/3 or so on average of their investment portfolio because they've been diversifying their exposure beyond public markets, looking for enhanced return opportunities to generate long-term compounding of wealth for their constituents. And when you look at the 401(k) market, those same objectives should apply right? The constituents in 401(k) plans should be in a compound wealth over decades and looking for diversification and enhanced returns. So we think the moves being talked about being made make a lot of sense for 401(k) participants to have access to the diversification and enhanced return benefit of alternatives. Now if you look at how 401(k) plans today are invested. About 40% of the capital is invested in target date funds. And we think that's the natural entry point for alternatives as opposed to a private equity fund by GPX being an investment alternative for alternative assets to be co-mingled with things like target date funds. So we're in active discussions with potential partners with whom we could partner where we're a very attractive partner given our ability to source and execute alternative asset investments. And by the way, if you look at 401(k) plans, most of the exposure in longer-dated target date funds is in equity-oriented investments because that's the higher returning asset -- expected to be a higher returning asset class that compounds wealth over decades. So private equity, in particular, over time will be a very attractive addition to 401(k) plans, and we're a very natural partner for those managers to source that flow. And as you're alluding to, the work we're putting in to creating different entry points and different structures around our private equity business, we'll feed into that kind of partnership naturally.

Thank you. This concludes the Q&A portion of today's call. I would now like to turn the call back over to Gary Stein for closing remarks.

Thank you, operator. Thank you all for joining us today. If you have any additional questions, please feel free to follow up with the IR team directly.

This concludes today's TPG's second quarter 2025 earnings call and webcast. You may disconnect your line at this time, and have a wonderful day.

Before we get started, for important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. Taking of photographs and use of recording devices is also not allowed. If you have any questions, please reach out to Morgan Stanley's sales representative.

With that out of the way, good afternoon, everyone, and thanks for sticking with us here on day 2 of the Morgan Stanley Financials Conference. I'm Mike Cyprys, equity analyst covering brokers, asset managers and exchanges from Morgan Stanley Research. And welcome to our fireside chat with TPG, and we're excited to have with us here today, Todd Sisitsky, the President of TPG. As many of you know, TPG is a leading global alternative asset manager with over $250 billion of assets under management. Todd, thank you for joining us today, making the trip out here.

Thank you for having me.

Great. Well, look, you've been President of TPG since its inception and have led -- co-led the health care investing practice. Can you talk a bit about how your role has evolved over the years, how you're allocating your time today? And as you reflect on the journey of TPG over the years, what lessons learned stand out as you've built a $250 billion leading alternative asset manager with global footprint.

Absolutely. Again, thank you for having me. I'm excited to be here. I have been at TPG now. I'm in my 23rd year. I've been there 22 years longer than the furniture, really have grown up at the firm and grown up, as you said, on the private equity side. The only continuous job I've had that entire period is investing in health care, but the role has evolved quite a bit over time.

I became President of the firm right ahead of our IPO. I was the first President, even that role has evolved. In context of my firm-wide responsibilities, I've co-run the Management Committee and the Partnership Committee. I've been involved in leading some of our really important initiatives, including the Angelo Gordon acquisition, which I led with our CEO. And then I'm focused on some of the areas that we're trying to really develop strategic growth plans, including places like Europe and then some of the businesses that are growing nicely, like our secondaries business where I support the team.

So I've had a number of firm-wide responsibilities, but maintained a lot of focus on investing. I think actually when I was asked to be President, one of the primary reasons was not just my historical experience as investor and hopefully credibility as investor, but also my ongoing passion for investing. And ultimately, the job as President in all of our jobs is just focusing on investing excellence. And I would say one thing that is interesting about TPG, I think it's been a real positive is that nobody retires into middle management. We're all on the front lines. That's part of how we think about ourselves. It's how we evaluate one another. And that has certainly persisted for me.

I can tell you also that my credibility as investor allows me to do things as President that I think to your question about reflections on what has been the core part of our DNA, but I'm able to sort of continue to push these things that I think are already strengths of the firm.

One is this continued and singular focus on performance and making sure that you are distinguishing yourself in every asset class which you're involved, focusing on the areas where you have a competitive advantage, always thinking about your strategy and pushing strategy in the same way that you're pushing your investments, the portfolio of companies that you invest in to think about their strategy. And I think that, that's the only thing that gives you right to grow as an asset manager is really what you're delivering for your partners.

The second thing I think is even perhaps more distinctive to us is this focus on collaboration. That's been really an exciting part of TPG. We've had some of our greatest success in the themes between sector teams, in the collaboration between businesses. As we've added Angelo Gordon, as we added our credit business, expanded our real estate business, we found some incredible opportunities to -- essentially to unlock investments that would otherwise not be available to us in other business units by working together, the DIRECTV, DISH transactions. There were actually a series of opportunities there. We were a great example of that. That as an investor, as a deal guy, that gets me really excited. And I think of a big part of my responsibility is trying to continue to encourage and support that type of collaboration because I think it's distinctive and has created some of our most important practice areas and investments and to continue to grow from that base.

And then finally, it's a very distinctive culture. There's a lot of support. It's a very flat organization. Our investment committee dialogues are open to every professional and everyone is encouraged to participate. It's an entrepreneurial place. We focus on things that we think are really interesting as opportunities. We stick to our lanes where we have competitive advantage. Those cultural dynamics are also important to reinforce. And I would tell you from a cultural perspective, more things have stayed similar than have changed over my 2-plus decades with the firm.

Maybe shifting gears over to the broader macro environment through the lens of your portfolio companies, curious to get your take on the state of global economy, health of the consumer, path of inflation here, just given some of the uncertainty and volatility and how your portfolio companies are performing today?

Well, it has certainly been a remarkable couple of quarters for all of us. And I think even some of the statistics, I think it was the worst ever start 75 days to a year. And then it was the strongest rebound after a 20% drop in -- since World War II to at least. So it's a pretty dramatic moment in some respects. I would say that as long-term investors, we're not as caught up in the day-to-day, but certainly that macro environment is very important to us. And I would also say that during moments like this, we're always focused on our portfolio. But to your question about performance, we're particularly focused on trailing results, on forward indicators, on operating metrics, and we stay very, very close to the portfolio. That's sort of the nature of our investing style across all of our asset classes.

I can tell you, not that I'm not perpetually focused and anxious, that's sort of my nature for even beyond my job. But I've been really pleased and encouraged by the performance and the persistence of growth that we've seen in our portfolio. So if you focus on the private equity side for a moment, I think we reported at the first quarter earnings call that our revenue growth across all of private equity was about 18%, which was relative to, I think, 5% for the S&P. And actually, the EBITDA growth was stronger at 24% relative to, I think, 10%. And we've qualitatively continued to see that strength. I think that strength is a reflection of both the macro resilience in the economy, which we're seeing across geographies and which I think reflects the starting point of a pretty good macro environment and economy going into some of the turbulence we've seen more recently.

I think it also reflects our strategy. We try to be very focused on areas that are secularly growing. We outlined [ FOMO ] a long time ago. We don't worry about how the people are making -- seeking to make their money. But we're looking for areas of secular growth and areas in which we can bring what is a very broad set of operational capabilities to inflect the performance of our underlying businesses. And I think that's what you see coming through in the numbers.

We've actually been cautious about the macro for some time. So we, in fact, have underwritten multiple compression into our centering cases really for a fund cycle and a half, which puts a lot of pressure on that focus on growth. So I think part of the reason that we're seeing this consistently strong growth is the neighborhood and the impact that we're having on our companies. But that's, I think that's certainly part of what's flowing through.

I'd say elsewhere in our business, which is, of course, very important on credit and real estate, we're also seeing strength. We actually get questions because I think folks are particularly focused on the leveraged finance world on our direct lending business, which is Twin Brook. It focuses on the lower middle market, which is an interesting place, has an excellent market share, and it's been steady. I mean, we have 2x coverage ratio and consistently LTV of about 43%, loan-to-value of about 43%. And we've seen good growth in the underlying portfolio of 290 companies. Like the private equity side, I think that reflects both the resilience of the macro, but also the way we go about doing things in terms of the selection of companies, 100% of these companies have covenants. We sit at the table, I think 98% is senior secured. We're in the revolver.

So I think the way we do things is another part of the reason that we're seeing such strength in the portfolio. So I'm not at all complacent. It's an interesting market and an interesting moment we're living through. But I can tell you that we've been very pleased with the performance so far.

Great. Turning to capital markets. Can you talk about the pipeline and opportunity set that you see in the current backdrop? How volatility has impacted that pipeline of deals that were arguably slated to get done? How has that sort of transpired? And how is it looking now in terms of the outlook for the remainder of the year?

Absolutely. I think that -- I mean I said on a number of our investment committees and sort of aware of what's happening across the firm. We're still very busy and active. I would have said going into the year, it might have been robust, maybe even more than we can handle. So I do think volatility, in some cases, causes folks to hunker down a bit, but it's still very active, and we're still, I think, quite pleased with our pace of investment.

I think that there's a reason that we've continued to see the level of activity. There's -- in my mind, there's -- if you think about the private capital market, there's sort of a flow side of the business where things are usually intermediated and they come out with a chaperone -- you have a chaperone dinner with name your investment bank and the management team, very high probability that that's an actionable opportunity because it's for sale.

On the source side of the world, which is where we participate for the most part, it's less certain that there'll be a transaction. But you're usually coming with a proprietary idea or strategic or some other partners coming with an [ ID ] to you. And that has been a very healthy portion. In fact, it's 70% of our latest U.S. flagship fund in the private equity side is either structured relationship with corporate, a carve-out or some combination thereof. So I think that side of the market is a little less volatile, a little less tied to overall deal market. And so that's, I think, been part of the reason. And if you look at Asian growth, the majority of those deals are also proprietary, and there's a very healthy set of those deals that are also corporate partnerships. In fact, we've also had partnerships with universities and not for profit. So very unusual sort of deal sourcing stories, which I think result in a portfolio for us to look a little bit different than others.

On the credit side, volatility is sometimes your friend, I think, in terms of opportunities. On the Twin Brook, we have a very active pipeline. We're sort of the incumbent in those 290 or 300 companies in that they -- in these periods, they sometimes do add-on acquisitions with even greater frequency and we're the lender. Credit Solutions, really interesting capital structure opportunities. So good companies with challenging capital structures. I think the pipeline in that business is robust at this moment as it's ever been. And that's sort of, again, a very creative capital type of approach.

And then structured credit, which is non-EBITDA-based, asset-based lending, the opportunity set is extraordinary. And frankly, the opportunity set significantly exceeds the capital base we have built there, although, of course, over time, we're going to try and address that. That is a business that has been driven from a number of different angles, including LPs, particularly insurance companies increasingly want to be in that space. And in some cases, including with our insurance partners, we've worked together to get into new areas and to innovate, investment-grade asset-based financing as an example. So there is a lot of activity.

And then on the real estate side, I would tell you that we're getting access to some assets that either lenders or other -- sometimes REITs, some owners that are feeling some form of distress are selling. And these assets are not assets that we would usually get access to. So some really interesting high-quality assets, a lot of defensive space. We're not overly burdened by U.S. office exposure. And so we've been able to play offense. There have been some opportunities. We've looked at some really interesting take privates, again, opportunities that would necessarily be available in other markets.

So there's no question that volatility often causes people to slow down. But I think in part because of the way that we source opportunities, we've continued to be very active.

So it sounds like a little bit of a differentiated sourcing funnel maybe versus others. But maybe along those lines, as you're thinking about this sort of backdrop, anything stand out in terms of the most compelling areas for deploying capital leaning into over the next 12 months?

I think there's a lot of interesting pockets. Again, we're trying to be super selective in terms of the areas we focus in, and it's a competitive market. We want to make sure we're focusing in areas where we have real competitive advantage. If I think about geographically, we actually feel like there's a lot of interesting opportunity in Europe right now. I look at Europe and I think about the areas that are compelling to me. Areas like on the sector side, technology and software, health care, climate investing, the deal type, some of the secondary opportunities there are that are GP-led secondaries. I feel like a lot of the real estate opportunities on the industrial side, the logistics side, student housing.

I actually feel like the interesting opportunities in Europe are very well lined up with our authentic global strengths as a firm, the spots that we've picked. And so we've been busy, and I feel like that's an opportunity. There's an opportunity to continue. As I mentioned, spend a lot of time in Europe. We have an excellent group of folks across the platform and likewise, on the credit side in Europe. So I think that's interesting. In Asia, we've continued to be busy. In Asia for us, we've leaned into places like Australia and India, Southeast Asia, Korea, Japan, particularly on real estate side. And so we've been a little less active in China. We have a team there, but it's less than 2% of our AUM.

It's harder for us because I think the rules of engagement are not quite as clear. So it's a good time, I think, frankly, to be a global firm. And I think there is some overall dialogue around global diversification, and I feel really well positioned as far as that goes. On the individual businesses, structured credit, as I said, super busy. So one of the things we try to do in all of our businesses is not only participate in the spaces we are in, but figure out where the opportunities are going to arise. We've been almost, in some respects, a first mover in areas like HELOCs, which is in a world where people have equity in their homes, but they also have lower interest rate mortgages that they don't want to refinance. That's a really interesting place. And we've found some strategic partnerships in this space to allow us to participate there. And I think there's a lot more opportunity to explore.

Essential housing, I mentioned a really strong pipeline. There's another place. My partner, Ryan, talks about going into the lab. The team created an essential housing business, and that's essentially working with builders who are both reacting to the macro inadequacy of -- perpetual inadequacy of housing and also the desire of those homebuilders to become more capital efficient and more thoughtful about their balance sheet. And so this is a company that -- this is a business for us. It's on its, I think, third fund, $20 billion of project value, 16 different homebuilders that they've worked with.

So again, these are places where we're not following, but we're really trying to lead, and we see a lot of opportunity there. So just a few examples. I could -- I know we only have 17 minutes, so I'll stop now.

Fair enough. Why don't we shift gears and talk about the exit backdrop. I think there's a lot of excitement coming into this year, but given some of the volatility maybe expectations have tempered a little bit. So I guess how do you see the outlook for exit activity from here? And how much of the portfolio would you say is exit ready?

Well, exits is a place we spend a particular amount of time thinking about. I feel like this is a very important topic for our partners. It's a very important topic for us. Before I get into sort of the numbers, process-wise, whatever your strategy is, everybody spends a lot of time on the investing decision going in. There's always -- everyone has investment committees. I think ours is particularly robust, and we have a particularly tight strategy, but this is something that is part of the core job of private equity.

I think one of the things we do a little differently is we try to bring the exact same level of rigor to the exit dialogue. And that's something that's evolved really over the last 10 or 15 years, we've gotten tighter and tighter. And it's a very engaged dialogue. I mean, I'm -- I think myself as an investor deal guy. We do sometimes fall in love with our businesses. So I think it actually really matters that we come together as a partner group and figure out not necessarily what's best for the business, what's best for the fund and for the LPs. That has led to some very interesting patterns for us.

So if you look at TPG Capital, we were net sellers in '20, '21, '22, not '23, and then '24. And in '21, where everyone was really leaning in, we sold -- and we were actually busy on the origination side, but we sold twice as much in TPG Capital as what we invested at that time. And I think that, that's put us in a really good place relative to our partners.

DPI has been important for us. We've demonstrated our focus on exit. We've continued to see a lot of activity. Actually, about 60% of our private equity exits have been to strategics, which is also a little insulated from the more open and shut IPO market. But in markets like India, I think we took 2 companies public last quarter, and we've had 11 in total in the last 3 years. We've continued to see good liquidity even into the choppiness of this year. I think on the growth side, we have 3 portfolio company exits, full exits that are out there, some of which I'm not sure we've disclosed the details of.

We just finished our sell-down of Viking Cruises on the capital side. Rise Climate fully exited Tata Technologies and has had some other important liquidity recently. Growth is already, I think -- growth is, as I mentioned, 3 full company exits. I think they're already at $1.8 billion of exits, which is more than they had last year combined, and we're only in June. So I think the overall picture for us on liquidity has been good, none of which to say that it's easy because I do think in moments of volatility, people tend to hunker down a bit, but we've been able to find a way.

Were any of those second quarter events, Viking?

Yes. Yes, Viking was, I think, in the last 10 days.

Okay. And then those 3 on the horizon, that's...

Yes, sort of some [ announced ] and some a little less so.

Okay. Maybe turning to fundraising. We're seeing some headlines around some challenges around institutional asset owners potentially coming into the -- allocating to the asset class, whether it's endowments or China LPs. And then in the context, we still have the DPI challenges across the industry. So it seems like a little bit of a tougher backdrop for private equity fundraising. You're in the market with several flagship funds. Maybe just talk a little bit about your expectations, timing around that, magnitude, pace of those campaigns in the context of what has been strong performance and strong DPIs from TPG.

Yes. And thank you. I do think it's an interesting market because as is often the case, different parts of your partner base are experiencing the world somewhat differently right now. We reiterated our guidance at the -- in the first quarter conference call that we were going to hope to raise, expect to raise significantly more capital in '25 and '24. And we continue to feel confident and comfortable with that guidance. On the PE side, where I think we get a lot of questions around the appetite for commitments, I do think it's a story of having differentiated ourselves in a positive way. DPI is important, as you mentioned, that's something we've been focused on a long time well before we started hearing phrases like DPI is the new IRR, which I've heard a few times today already. But that's been a positive. But I think the other thing that's positive is just the level of differentiation in the portfolios that we are looking at these structure relationships, these carve-outs, I think people really appreciate that. And they appreciate the consistency between the strategy that we're articulating and the discipline around that strategy and what we're doing and the execution. So I think that, that's been important.

We are, as you say, in the market with our U.S. and European flagships, which will be [ TPG X ] and Healthcare Partners III and looking for a sizable close around the middle of the year. And of course, in heavy dialogue since we're approaching the middle of the year with a lot of our cornerstone LPs and continuing to feel like there's real progress along that front. Climate is another important fundraise for us. That is an area of the world where there is noise in the U.S. I think it's great to be a global asset manager at this moment, as I said earlier. I think it's great to have resources, investing resources and capital formation resources around the globe.

We have had a strong start in the climate fundraise, so over 60% of our target. And I would say that despite the U.S.-centric noise, we continue to see an enormous amount of appetite, both from a capital formation and a deal flow perspective outside the U.S. So in Europe, we've talked about our Global South initiative publicly. That's another interesting sort of dimension where one of our good partners globally said we want to not only participate in this investment strategy, we want to have some of the capital deployed in the Global South. That's something I think we're going to continue to see. There's real momentum around that business.

So Asia, the Middle East, Europe, really active, not at all, candidly affected by some of the noise. And then just from the underlying belief that we have that this is a bit of a generational opportunity. If you look at just energy transition as one subset of the climate opportunity, the needs for energy are growing so dramatically in the U.S. and elsewhere, data systems, data centers and the like. that you see it. And in Europe, you see blackouts, right, which speaks to sort of the aging infrastructure and clean energy is becoming increasingly competitive on a cost basis and I think increasingly relevant as you think about addressing some of these macro needs.

So in any event, climate is global for us. And I do think we're seeing there and elsewhere to some degree, a little bit more of a barbell in terms of first close versus later closes as people want to see the performance. But again, we continue to feel really excited about the trajectory. And stepping back from any one campaign, I think you'll continue to see a little bit more of this barbelling in terms of the fund closes.

On the credit side, we've said that we're going to raise more credit in '25 than '24. I think the thing I would want to highlight here is that we're feeling increasingly enthusiastic about the cross-sell opportunity. I think there have been over 200 introductions involving senior members of our team on the legacy TPG side and engaging with the senior team on the legacy Angelo Gordon side. We're all just one firm now. But the traction is only increasing there. It's beyond what we've closed year-to-date, just the dialogue around SMAs.

We announced on our last earnings call, I think it was a $4 billion sort of special cross-platform relationship. We did not announce the name. We have 10-plus dialogues going on around those type of conversations now. And these things sometimes take a little bit of time, but it does feel to me like the flywheel is spinning. And I think that's really exciting to see, and I think reinforces the reason for leaning into this combination, which has been a really successful one for us.

Why don't we dig in a little bit on credit, newer area for you guys at TPG post the Angelo Gordon acquisition. First quarter fundraising was, I think, a little bit lighter, but you guys reiterated your expectations to raise more this year for AG Credit versus last year. So maybe just update us on the fundraising on the credit front, how the pipeline is shaping up and where you're seeing some of the most demand?

Yes. I mean, again, I think we feel good to sort of continue a little bit of what I was saying before about that cross-sell opportunity and feeling like we're having real traction and these sort of chunkier opportunities. I think we talked about $3 billion of discrete credit mandates that were closed or expected to be closed. That number has grown since our earnings call. And we're seeing clients that are continuing to broaden their relationship with us.

We've had a really successful close in our middle market lending business, Twin Brook, and we're starting the dialogue and already engaged with LPs around the graduated product, which is again another interesting opportunity. I've mentioned before, structured credit is really interesting and exciting. A huge amount of opportunity, a lot of engagement around how to expand that into investment grade, I mentioned earlier and other avenues, but great uptake.

And if you look at the insurance part of our overall LP base and AUM, it's up by 1/3 plus since we closed the Angelo Gordon deal. So that speaks really well to credit and particularly to the structured credit world. So we're seeing a lot of traction. And I think we're feeling really good about that momentum. So none of these things come immediately when you close a transaction. But the sense of cross-sell and probably at least as important, the sense of TPG as the world of LPs focuses on an ever smaller number of GP partners with whom they want to have broader and deeper relationships across asset classes, I think we feel really well positioned for that, and we're seeing that in the nature and level of engagement around these larger opportunities.

So you spoke to some of the benefits, the synergies of TPG coming together with Angelo Gordon. Have there been any sort of challenges that you've had to overcome as you brought 2 firms together kind of looking back, any sort of surprises or interesting learnings?

I think the headline is definitely one of feeling really excited about it. I mean, as I tell you, I spent years of my life on it. And we started with a number that was probably 50 or 60 folks, but spent the vast, vast majority of time with this group and getting to know one another. The reality, when you're executing these acquisitions, you're really just merging 2 partnerships together, right? So one of the things we wanted to make sure of is that we were not engaging with someone who was just trying to sell their business. But instead, they were looking to partner and throw in with us and really become one firm and that they wanted to find opportunities for collaboration on individual deals across asset classes to build new asset classes like our hybrid solutions that we've come together. And across all of those dimensions, I would tell you, it is -- I think it's really been exceeding our expectations, the way I would describe it.

On the challenges side, we have put a lot of energy against the integration, I think it's gone very well. It is the case that if you think about particularly a fund that's in mid fund raise when these deals come together, it's natural, and we experienced LP saying, let me make sure and see how this plays out. Let me take a pause. Let me see, is everyone sort of in their seat? Is this a partnership where people are going to keep growing? Are the incentives well aligned? Is the organ going to work? And so I think that, that's the reality of it. I don't know that it was a particularly a negative surprise so much, it's just a reality of businesses that are driven by people. But as we see now, the traction and the flywheel spinning, we're excited, and I think it speaks again to the logic of the underlying transaction.

The thing I would tell you I'm the most encouraged about from my president seat as someone who grew up in one culture has been the way in which the cultures have come together and the sense of valuing the same thing, the collaboration, the intense focus on excellence and making sure that we always have earned the right to grow as our first job in the morning and the last job at night. All of that feels excellent and it's been just really encouraging for someone who has been around as long as I have.

And with the AG deal under your belt, how are you thinking about M&A at this point? Where could it be most additive? And how are those conversations progressing?

Well, I'd say -- I'd start off by saying we had a -- we've created a lot of value over time organically. So if you exclude Angelo Gordon and now we've recently announced Peppertree, I'll come to that in a minute. We've created very accretive growth by launching products, not with a blank sheet of paper, thinking here, we could add an asset class by following our strength and the IP and ecosystems we have and partnering with our long-term LPs into natural adjacencies. That continues to be a really important opportunity for us. But having said that, the inorganic side is also important. And I think we look at Angelo Gordon as a really good proof point that we can do this, we can execute, we can integrate, that was a platform transaction. It was a really important one for us for all the reasons we just talked about.

And I think it is encouraging. The Peppertree transaction, which we announced, we are also very excited about. That is a little bit of a different type in that. It's an excellent team and excellent track record in digital infrastructure, which is an area where we have adjacencies already, but this gives us a really strong footprint from which to build further. And I think that we will continue to look at things that feel a little bit more platform-like, but also a little bit more like we're filling the blank, and we might also filling in sort of holes in our existing set of capabilities, which might call tuck-ins, but they're more important than that name implies.

I think we might also find opportunities to sort of strengthen ourselves in geographies. You have mentioned Europe. We have great businesses in these places, but even more critical mass might help us. So we continue to be very active on the business development front. And I think we have a really clear sense of the areas that are logical and where we feel like additional resources would not only be additive from a growth perspective, but would make our existing businesses better, and that's really the primary criteria. So I think there's a lot of opportunities out there.

Maybe just somewhat related to that theme around M&A. Just curious how the dialogue is progressing around strategic insurance relationships. And how you're thinking about capital light, capital heavy or some middle ground of a hybrid in between?

Sure. Well, I think just to start, our broad firm-wide relationships with insurance have been great and growing. And I think it's yet another benefit to having credit in-house because I think that's really one of the key unlocks there. I mentioned that those LP relations have grown by more than 1/3 since we started, which is excellent. But I do think there's a symbiotic relationship in the industry, talking about us now with these more strategic relationships. The stronger returns on the asset management side help insurers be more competitive in their market and of course, from a capital formation and an FRE standpoint, there's a lot of benefits that revert back.

What I would tell you is that much like we were a couple of years into thinking about credit, we're much more sophisticated and understand that market even better than we did when we started. And I do think it's something that could be quite interesting. We don't have actually a really preconceived set of ideas that it has to look like X, Y or Z. We have criteria. We want a distinctive business that is differentiated in what is also a competitive market of insurance.

We want a team that understands their business and wants to throw in with this isn't trying to sell, but is trying to build. And we want flexibility to sort of build together and figure out, again, how to create synergy between the two. As to your specific question about asset light, asset heavy, what I would tell you is that we are open minded, and we can envision different states of the world that will be compelling. What I think is unlikely for you to see from us is something that looks like us shifting and converting our business into an insurance business with an asset management arm. That's unlikely.

So we want to stay in the core business that we're in. We do think that there's a possibility if it's the right team, it's the right culture, and it's the right structure for an insurance capability -- origination capability really to help us with our long-term plans. But we're going to be selective and only do it if it makes sense and only do it if we're convinced as we were in the case of Angelo Gordon, that it's going to be a great cultural fit.

Great. I'm afraid we'll have to leave it there. Thank you very much,