Good morning, and welcome to the TPG's Second 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. In addition, our Executive Chairman and Co-Founder, Jim Coulter; and our President, Todd Sisitsky, are 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 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 act of 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, Rudin Management, the 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 into $11.3 billion of capital raised, 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 IX and Healthcare Partners III. We're seeing an acceleration of fundraising into the…

Thank you, Jon, 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 invest it this year and 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 T-POP 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 Jon indicated, our deployment pace has begun to accelerate. At the end of the quarter, our net accrued performance balance remained at $1 billion as strong…

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

So I wonder if you could help us. You're the last of the, I think, the big goals to report. And we've seen you guys had good performance across private equity. You've raised a lot of money, you've returned a lot of money. Yet the aggregate details across private equity are still stuck in portfolios, low DPIs. And I see some surveys that show almost half of LPs saying that they're overweight with maybe potential to cut some allocations. So like is it that the big get more successful and you're seeing more? Like I'm curious to get your thoughts on the highest-level 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 where we're at in that private equity cycle right now.

Yes. Well, thanks, Glenn. I think -- I mean 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, and I think we've…

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?

Yes. 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 transactions might fit into TPG 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, does for us. Additionally, I think as we've talked about sort of not turning ourselves into an insurance company, I think that to 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 -- 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 experienced 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 impacts 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. That's our approach. We 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 we'll -- 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 fundraising 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. So the $9 billion 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 on these funds and perhaps any step-down things we need to consider?

Yes. Alex, thanks for the questions. Just a little more color on what Jon 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 each LP 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 Jon 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 in TPG and Healthcare Partners III, 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 fundraise 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 a 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 equity 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 X and Healthcare Partners III, 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 TPG X last month in July. We have not yet activated Healthcare Partners III because we still have a little bit of investing to do in Healthcare Partners II. If I had to estimate when we'd activate that fund, it will probably be maybe first quarter of next year. So step-downs obviously occur as you activate the next fund. What that means in TPG IX and TPG X is the TPG IX fund will step down next quarter in the fourth quarter.

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

The guidance. 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, it's 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 that deployment will pick up a bit as we go through the balance of the year, and then we'll see what happens into 2026. So we're feeling pretty good overall 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 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 hit it.

Margin on incremental deployment.

I mean, obviously, that's going to differ in each 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 markets 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 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 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 and 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 did 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 in 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 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 items that was about $150 million 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 before 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 T-POP. 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 T-POP, really, the first couple of closes we alluded to were with our -- we've said we've had 2 large U.S. warehouses 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 Asian market. We have a product -- we have a focus on the RIA market. It's been publicly disclosed that iCapital has filed a registration statement for a TPG-branded fund that they will be managing that's going to look a lot like T-POP, but focused on the RIA market. And then what was the second part of the question?

On the product road map beyond private equity. So we've got a lot of growth ahead of us in this core private equity product, T-POP. 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.

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-parter is, first, Rise III looks like that's 70% invested. So commentary on the next vintage there. Secondly, the Climate franchise, Rise Climate is 80% invested. It looks like on your fund 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 II coming in. So just if you can update us on the timing of the incremental fundraise there. And then just three, just the tangent strategies to the impact platform like 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 III and IV, we expect to be holding first closes for Rise IV probably in the fourth quarter. So that -- you're right in saying that we are heading into the market in that. So we'll have more to report going forward. And the Climate discussion, I think, requires a step back on 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 around the world -- before jumping to the U.S., let me make a general comment. As I travel around the world, there's a lot of discussion of tariffs. The rest of the world is not that fussed with U.S. energy policy. And as Jon 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 policy would land. Where did it 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 roared back. In fact, it sits 6% 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…

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

Just wanted to circle back to an earlier comment that was made around your engagement in cross-platform strategic partnership discussions to increase duration and 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're 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're very…

Yes, Jack, just a little bit. I mean I see it as it's almost a byproduct of what we've been talking about for a while now is that we see the largest LPs in the world 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 designed 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 partnership discussions. 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 were 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 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 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 Voigt 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 and 401(k) plans should be looking at 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 a 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 into creating different entry points and different structures around our private equity business will feed into that kind of partnership naturally.

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 today. If you have any additional questions, please feel free to follow up with the IR team directly.

Thank you.

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.