Good morning and welcome to TPG's Third Quarter 2023 Earnings Conference Call. Currently, all callers have been placed in a listen-only mode and following the management's prepared remarks, the call will be opened up for your questions. [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 Angela and welcome everyone. Joining me this morning are Jon Winkelried, Chief Executive Officer; and Jack Weingart, Chief Financial Officer. 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'll be discussing certain non-GAAP measures on this call that we believe 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 $15 million and after tax attributable earnings of $196 million or $0.56 per share of Class A common stock. We declared a dividend of $0.48 per share of Class A common stock which will be paid on December 1st to holders of record as of November 17th. With that, I'll turn the call over to Jon.

Thanks Gary. Good morning everyone. I want to start by acknowledging the recent tragic events and continued loss of life in the Middle East. We strongly condemn the terrorist attacks against Israel and are deeply saddened by the ongoing humanitarian crisis in the region. We're focused on supporting our colleagues and their families and our thoughts are with all who have been impacted by these terrific events. Turning to earnings, it's been a busy and productive quarter at TPG. We remain highly focused on our core business and are excited about the progress we've made across investing, capital formation, and organic initiatives. At the same time, we've made substantial progress on integrating Angelo Gordon into our firm. In my comments today I'll begin with a brief update on the AG transaction and then share some highlights from across our business. We closed our acquisition of Angelo Gordon on November 1st. Now, as one firm, we've strengthened our position as a scaled global alternative asset manager with six investment platforms, totaling $212 billion of AUM as of September 30. This strategic transaction marks an important and exciting milestone in TPG's evolution, providing us with several complementary business lines as well as additional levers to accelerate growth. We believe the addition of Angelo Gordon, together with our differentiated deal flow and strong investment track record, puts us in an advantaged position to capitalize on a number of long-term secular trends shaping the alternatives industry today including; one. a desire amongst the largest institutional LPs to allocate more capital to a shortness of scaled GPs who can partner with them across multiple asset classes. Two, in the important private wealth channel of growing demand for alternatives, especially in semi-liquid structures and yield-oriented asset classes like credit and real estate. And three, in the…

Thanks Jon. As a reminder, the results I'll be discussing reflect TPG on a standalone basis. They do not include Angela Gordon, since the transaction closed subsequent to the end of the third quarter. TPG had a record quarter for fee-related revenues, with FRR of $321 million, up 12% sequentially and 14% year-over-year. This was a result of strong growth in both management fees and transaction fees. Management fees totaled $279 million and grew 9% from the second quarter due to improved fundraising combined with an increase in catch-up fees. Transaction fees increased 83% sequentially to $31 million and continue to be driven primarily by our lead role in structuring and placing the debt financing in connection with new investments across our platforms. Our well-established debt capital markets business continues to be a strategic weapon providing us and our portfolio companies with differentiated access to capital which is particularly valuable in the current credit market environment. FRE was $156 million for the third quarter up 24% sequentially and 29% year-over-year. This significant growth was due to the FRR growth I just mentioned as well as continued strong expense management resulting in an FRE margin of 49% for the third quarter. This is more than a 560 basis point improvement from the year ago quarter. Our FRE margin for the last 12 months was 44%, which reflects the consistent progress we've been making towards the 45% FRE margin target we had set for the end of this year. While our FRE margin in the fourth quarter will blend down with the acquisition of Angelo Gordon, we believe this provides us with a meaningful margin expansion opportunity as we look to realize significant operating leverage from the combination and scaling of our businesses. After-tax distributable earnings for the third quarter were $196…

[Operator Instructions] Our first question comes from Alex Blostein with Goldman Sachs. Please go ahead.

Hi, good morning everybody. Thank you for the question. I was hoping we could start with a quick discussion on Angela Gordon and I understand, we're going to spend more time on it next week. So maybe this is a little bit of a preview. But as you look at some of the information you put out on the business, a couple of weeks ago, it looks like fundraising Angelo Gordon was fair to muted. I think it was only about $2 billion through the first half of 2023. So, help us maybe unpack, what were some of the sources of constraints in that business? Was that sort of deal related and uncertainty related? And how do you expect the fundraising to evolve from here, action of any sort of synergies with TPG? Thanks.

Yes, Alex I can -- it's John. I can take a shot at that and Jack, could add in as well. But I think if you look at the fundraising momentum that Angela Gordon had prior to our transaction, they had substantial -- that made substantial progress across a number of the parts of their business. And when we -- I think it ultimately announced, our transaction, I think that as you would have expected, there was a bit of a pause that I think it was experienced really across the strategies from LPs, who naturally we wanted to understand exactly, what was happening in the transaction. On several fronts by the way, wanting to understand, how Angelo Gordon will be integrated into our firm, wanted to understand whether or not decision-making would be changing in any respect in terms of the investment process, wanting to understand whether or not there would be any changes in people, et cetera. So I think that -- not surprisingly, I think the number of the LPs took a bit of a step back and wanted to have an opportunity to understand the scope of what we were doing and also frankly to meet with us, and spend some time with both firms together to hear from us directly. So, we have spent a fair amount of time now going out together, even prior to the actual close of the transaction, meeting with LPs, and familiarizing them with TPG, how we were thinking of bringing the two firms together. A number of us spent some time at their annual LPAC meeting, which basically across all of their different strategies and had an opportunity to do a fireside chat in the front of the room. I did a fireside chat and firm in the room as well as individual one-off meetings for the question of the LPs. And this will be a continuing process. But I think that the reaction and response that we're getting from their LP base overall, I think now that we've had a chance to spend some time with them and we'll continue to do that. I think it's been very good. And I think that we've been clear about how Angelo Gordon, will be positioned inside of the broader organization. And it feels to me like we're getting back to sort of more business as usual, as we sort of -- unless we've now closed the transaction and we'll continue the engagement with the LP base together. So -- not surprising, I think in the context of a transaction that is somewhat transformational, for both organizations. And so I think we appreciate LP's desire to learn more to understand it. But I think we're very confident coming out of it that we'll be able to accelerate capital formation together.

Yes. I would only add to that, Jon that in addition to the temporary pause from their existing LPs as they wrap their minds around this and make sure they're comfortable with the with the combination of the stability the real longer-term opportunity here is expanding their LP base and introducing them to some of our larger LPs. And that's something that we've already been actively working on that takes a while to play out, but we're encouraged by the early engagement with some of our larger LPs to help expand their capital. So we would expect a reacceleration of their fundraising as we enter next year.

Great. That's helpful. Thanks. And then my second question around TPG's fundraising. It's great to see you guys come through with the existing campaigns and getting closer to the end of that as you mentioned your -- I think are on track to launch Climate 2 for next year. And just given the fact that we've seen a more challenging environment for broader private market fund raising over the course of the year. How different do you think this strategy will be received by LP given that it is a little bit more nuanced and it is syncratic to you guys? And their ability to sort of upsize the size the fund relative to the processor is an strategy?

Yes. On the climate -- sorry look, I would take a step back on the fundraising mark overall and think about as we went public in early last year, we knew we had this kind of the big super cycle of our flagship funds coming for the next couple of years. As I talked about on the call, we're approaching the end of that. I think the work we've been doing in the meantime has been positioning ourselves for the next wave of growth as we enter next year and the year after. And I'd say, we feel good about the progress we've made both in terms of new business creation like the Climate Infrastructure Fund that you're referring to. And the Treco fund that we talked about, and the acquisition of Angelo Gordon. So now we've got a whole new growth curve ahead of us. On your question in particular Alex, I would think about the Climate private equity fund the next generation of our $7 billion fund and the Climate Infrastructure Fund together. And we'll obviously be updating you all as we make progress there. But I would say, the early engagement is very high. I think we're -- continue to be viewed to have a leading position in that market. And across those two funds I would expect substantial growth off of the size of the first private equity fund. And when you take all of what I talked about into account with Angelo Gordon's funds the growth in credit the launch of climate we expect fundraising activity to increase next year over this year.

The next question comes from Craig Siegenthaler with Bank of America. Please go ahead.

Thanks. Good morning everyone. We wanted to focus on the growth capital business.

Good morning, Craig.

Good morning, Jack. So TPG has almost $9 billion of unrealized value across growth 1 5. So we're curious how are those portfolio companies performing against the higher rate backdrop? And if you have any fresh data points like revenue or EBITDA trends to date that would be helpful to.

Sure. I mean, I talked about the overall portfolio performance across our private equity portfolios in my comments Greg in growth the same dynamics apply still strong revenue growth kind of probably mid-teens in the growth portfolio strong EBIT -- stronger EBITDA growth. So we're actually seeing margin expansion in the growth portfolio. So the portfolio health is quite good. The broader growth equity market is very interesting and we continue to feel like we're very well positioned there. It was obviously the market that saw the biggest spike in activity towards the end of 2021 and kind of the most active part of the market. As you know from looking at our results, we were relatively patient in that environment. Now with the IPO market becoming more difficult, some of those companies needing to raise follow-on capital with our position as kind of a solution provider adding more than just capital. We're pretty well positioned to capitalize on that disruption in the market. And you see that in both our growth and TTAD funds. I mentioned that we accelerated the first close process and growth, because we're seeing a pickup in investment activity. So that happened after the end of the third quarter. So we'll be talking about it in the fourth quarter earnings call, our progress in starting to raise the next growth fund. But the reason we're accelerating it, is because of the new investment activity we're seeing. And likewise in TTAD, we're now over half deployed in the relatively new TTAD fund.

The next question comes from Ken Worthington with JPMorgan. Please go ahead.

Hi. Good morning. Thanks for taking the question. TPG generated meaningful carry and the continuation on the United Artists this quarter. And John, you mentioned that you see opportunities to leverage continuation funds as we look forward. So maybe first, are there more opportunities like United Artists in your portfolios? And is that something we can expect if the PE environment actually remains challenging? And then second, last quarter I think you mentioned TPG back continuation vehicles in India, Germany and the US. So are there different ways for TPG to participate in continuation funds, either by asset class or regions as we look forward?

Yeah. Let me take a shot at it. The -- I think first of all the continuation vehicle market and the evolution of that within private equity, I would say continues to become a more and more important part of the toolkit that firms like TPG or other firms for that matter have. The -- clearly, I think you've seen an environment where exit activity, exit volume is lower. I think that for what it's worth, I think we would expect generally that trend to continue. I think that given what's going on in terms of volatility in the market valuations, we already talked about multiple compression and the -- just overall -- the overall kind of dynamics of the exit environment. I think you should expect that to continue to be less active. And in that context, I think there's still a tremendous amount of pressure within our industry to find ways of returning capital to LPs. And I think as you know LPs are somewhat constrained as a result of a number of factors but one of the clear factors is a slowdown and exit activity. So, I think that the continuation vehicle market has become I think better understood and more and more accepted in the market. I think that frankly going back several years ago, I think there was some level of hesitation on the part of LPs generally to understand what was going on with continuation vehicles and how that would affect their ability to both get capital out but also the dynamics of assets moving from one fund to new vehicles and things like that. And I think over time it's become a much better understood part of the market. So, in that respect, I think that we will strategically look at using continuation…

The next question comes from Michael Cyprys with Morgan Stanley. Please go ahead.

Hey. Good morning. I wanted to ask on the real estate credit strategy checkout. I was just hoping you can update us on the build-out of the platform there where you're seeing some of the most compelling opportunities to put capital to work now in the real estate credit marketplace the types investments? And then, how are you thinking of building out this platform as you look out over the next three to five years, just in terms of how you're thinking about enhancing your origination capacity? Thank you.

Mike thanks for the question. I think first of all, we're waiting with to leverage our origination capability that comes out of our public REIT. So that was obviously pre-existing. So we're already well seeded into the market in terms of flows with respect to some of the real estate credit opportunities. Check is really broader frankly in terms of the types of opportunities that we'll pursue. So over time, we'll continue to add to our origination capabilities. We feel like we're well connected to the sources of flow, if you look across both the banks in particular that are systemically under pressure looking to shed assets in certain cases. That's a clear opportunity for us in this market. If you look at financing solutions, that certain real estate players have in the market right now. It's a very disruptive market as I'm sure you're aware. And so, as a result of that, I think we'll be -- because of our deep relationships across the real estate market as a result of both our franchise building out of trip as well as Angelo Gordon's franchise in a number of different markets. I think we have deep credibility across the landscape as a financing provider that understands the market and understands the space. So to us, it really looks like a very interesting and scalable opportunity over time. Real estate financing, overall, right now is a pretty broken market. And so, I think as a result of that, we expect it by virtue of have an approval of liquidity to be able to do this. And given our expertise, we expect to be able to be a value-add solutions provider and understand the risks of what the market is currently looking like. There's also just a lot of dislocation and what you were thinking as public markets and publicly traded securities in the real estate world. So our expectation is that, we will be able to flex between public markets and private markets as a result of having a pool of capital. The team -- by the way the team at Angelo Gordon on the structured credit side, there's also seeing those types of opportunities as well. So more to come on this, but I think we'll scale the business in a way that's consistent with what we see the opportunity to be and both in terms of resources and footprint but we think it's a great opportunity.

The next question comes from Michael Brown with KBW. Please go ahead.

Great. So as you know Jon, the addition of Angelo Gordon certainly gives you much broader diversification and capabilities to better service the insurance industry and we'll truly hear more about this next week. But I just wanted to maybe hear a little bit about, how you're approaching that channel, thinking about that playbook and maybe how long it would take you to meaningfully tap into the opportunity there? And what's the incremental investment that may be needed just to get you to where you want to be over time?

Yes. I mean, it's a good question. I think you heard in my prepared remarks that the type of dialogue that we're experiencing right now has meaningfully shifted. And that is -- it's very tangible. Just to put it in perspective, prior to the Angela Gordon transaction, we had dialogue with a number of insurance companies that were LPs of ours, but really fundamentally only being able to serve them from a private equity and real estate perspective. We also had a number of insurance companies, particularly life and annuity players that have approached us about a more holistic relationship but -- and I wanted to understand what our plans were for credit as an asset class overall. And so we had a series of conversations that were hard to execute on. Post the Angelo Gordon transaction, we've had a very substantial I would say inflection in the type and quality of dialogue that we're having with a number of players in the industry. And those dialogue -- that dialogue has ranged from I guess what I would describe, I mean I put them in two categories. One would be general LP-type relationships and credit strategies participation in SMAs or permanent funds. The other would be a more strategic type of relationship similar to what you've seen other alternative asset managers execute in the market. And so, we currently have several dialogues going on that I would put in that category. Exactly how long it will take to advance the ball that. Hard to say, but I would say that it's a very high level of focus for us as a combined firm now. We have a team that we put together between TPG and AG that is sort of dedicated to focus on this. I think over time, naturally, we'll continue to attract some talent in the industry with respect to knowledge and understanding about effective asset management for life and annuity players, what you would think of as sort of insurance solutions type of expertise. So I think that we'll be adding some capability in that respect over time. So -- it's a very exciting opportunity for us. It's exciting area for us, now that we're together as one firm, because this is an area where I think we can play a very, very competitive role. And if you look by the way at Angelo Gordon's business across the credit spectrum, one of the things that was really attractive to us about AG was that it's a multi-strategy credit capability, a multi-strategy credit platform. So, a combination of credit solutions on the corporate side structured credit the asset-backed asset-related side and then Twin Brook, which is direct lending platform really incorporates a broad capability that is really required to fully service the insurance industry and the insurance needs. So we're very focused on it. We think we're well positioned now. And obviously we'll keep everybody informed as we continue to go down that road.

The next question comes from Brian Bedell with Deutsche Bank. Please go ahead.

Great. Thanks. Good morning, folks. Good -- almost afternoon.

Good afternoon.

Most of my questions have been asked and answered. But do you have one on the LP conference and then related of course to Rise climate and climate infrastructure. Just I guess in terms of the -- what you're hearing from the LPs in terms of demand for those two asset classes individually. So obviously, the demand is very good for energy transition. But how are they thinking about that for infrastructure? And then I guess what I'm getting at is what are they substituting if they've got limited capacity to invest what are they substituting either infrastructure or energy transition for?

Look, I think, first of all, I think that the climate PE strategy and also transitional infrastructure is I would say a kind of a frontier in our markets that is very, very unique. First of all, I think, we -- having dedicated the resources that we've dedicated to the sector and the space now for the better part of the last five years and building this capability, I think, that we're in a small category with respect to the number of firms that are very credible in this space. And for us it's been a very deliberate strategic build because we do believe that over the course of the next as I mentioned in my remarks over the course of the next decade plus the amount of capital required to solve some of these climate-related issues is just absolutely enormous. And the number of credible solutions providers and partners that are in the market right now is actually quite limited. And we view ourselves in a very distinctive category as it relates to what we've built and our capability. I think what we're seeing from LPs is that are looking at this they're looking at this in a range of different ways but I think what we're seeing from LPs is they view this as a hard to navigate part of the market. And as a result of that because of our leadership in it the robustness of our dialogue with LPs in this area is really -- is frankly pretty extraordinary. And what we're finding from LPs is that they're looking at this depending -- be looking at this in a number of different ways. Some look at this as sort of a piece of their private equity strategy. Some are looking at this as sort of a…

Yes, Brian. I would only add just to amplify Jon's comments that the breadth of LPs interested in this area has expanded significantly. If you think about the last – the first Rise Climate fund we raised was two or three years ago. And certainly since the first Rise fund we raised seven – six, seven years ago, the awareness among our LP base of the investment opportunity, the capital needed in these areas has expanded significantly. So while it may be the case that any one LP is more capital constrained today than they were two or three years ago, I think as we embark upon this next wave of fundraising across climate generally, the number of LPs around the world who have identified this as an important investment area for them has increased significantly.

The next question comes from Adam Beatty with UBS. Please go ahead.

Thank you and good afternoon. I appreciate your staying on making time for us. I want to follow up on real estate. Thanks, Jack. On real estate maybe a little bit more on the equity side. I was intriguing what Jon said before about potential sort of multi-decade opportunity. So right now TPG is positioned in some of the more resilient real estate subsectors, certain areas of housing, light industrial life sciences. Just wondering whether you're thinking about deepening the involvement and investment in those areas or maybe seeing opportunities in some of the less favored real estate sectors like office or retail? And then, if you could maybe just a quick thumbnail, what Angelo Gordon brings in the areas of value-add and Triple Net. Thanks very much.

Yeah. I think -- I would say that, we are very sector focused, as you know. And that's been sort of a core underpinning our strategy. And I would say sort of what's got us here, in terms of being very deliberate about, where we're investing capital and how we're investing it. And so with respect to your question on maybe do we look at some of the less favorite areas? I would say, in general, one of the things that's kind of marched our approach to investing on the equity side is that we have looked at different sectors overtime, done our work on them. And if we felt like the opportunity wasn't quite there yet either from a valuation perspective or a fundamentals perspective, sort of wait until that opportunity is upon us. And we did that actually by the way in sectors like for instance, hospitality. We have not really been involved much in hospitality until, we got through COVID and we saw an opportunity to actually make a couple of investments in that space. With respect to office and retail right now, I think we view the market as sort of sufficiently dislocated and efficiently uncertain, that I think in the near-term we probably don't see compelling enough opportunities there. But obviously we continue to watch it. But right now our office exposure, on the TPG side is I think 2% of our portfolio. So it's probably not an area that we're going to go anytime soon. I think the -- what's more interesting about the market right now is, sort of what I said in my prepared remarks which is that, we're seeing things that really kind of need to happen right now because of certain investors' desire and need for liquidity and capital. And…

The next question comes from Luke Mason with BNP Paribas. Please go ahead.

Yes. Thanks for taking my question guys, and appreciate as more detail next week but my question is on Gordon's FRE margin, which was 23% in H1. Just wondering how quickly you think that can scale up. I think you mentioned previously the mid to high-20s on longer time is running more than the FRE margin of enjoy going shouldn't be in the 40s like a TPG stand-alone? Thank you.

Yes. Good question. We will talk more about this next week. But one of the things we really liked about the Angel Gordon platform. John talked about the breadth of it and how important that is for things like the insurance market. But having the multi-strategy coverage of virtually every aspect of private credit was super important to us as we thought about the right platform to grow from. Now, it's also expensive to support all that, to build an operating platform to support each of those businesses and they have fully built out scalable operating platforms to support each of those businesses. So now, as we come together as a combined firm, find additional synergies and ability to operate better together and scale their businesses, we absolutely expect that we will get their margin. Our combined -- really what we're focused on now is our combined margin. And getting -- beginning the same margin expansion opportunity that we saw for TPG on a stand-alone basis we now see for the combined business. And I think your comments over time that their credit platform, if it were a stand-alone company and scale should get into the 40s is absolutely correct.

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

Great. Thanks Angela, and thanks everyone for joining us today for taking on such a busy day, appreciate it. And if you have any follow-up questions please feel free to circle back to us. Otherwise we'll look forward to speaking to you again next quarter. Thank you.

Thanks, everyone.

This concludes today's TPG Third Quarter 2023 Earnings Call and webcast. You may disconnect your line at this time, and have a wonderful day.