TPG Inc Q4 2021 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Glenn Schorr - Evercore ISI - Analyst : Thanks very much. I heard you on you're standing firm on your broad fundraising objectives. I want to dig a little deeper into the near-term, say, this year. You've seen the pulldown in rotation out of growth and rising rates that you mentioned and cracks in valuations. I think that might be a good thing for deploying capital, but I don't know if that slows realizations such that LP's liquidity is gummed up. So, can you just talk about the current fundraising environment in growth and capital and how you weigh the puts and takes of all that?

Question: Glenn Schorr - Evercore ISI - Analyst : I agree with you on the long-term. Maybe one quick follow-up on -- there's liquidity driving all different parts of the market, and there's some articles written recently on how the demand for private credit capital is in very high demand with the backup in rates. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 28, 2022 / 3:00PM, TPG.OQ - Q4 2021 TPG Inc Earnings Call So, curious how you're thinking about -- I know it hasn't been that long since our last conversation, but your build versus buy, what you are doing on the organic front to address some credit demands in the market and then how you're thinking about the backdrop. Is this a good thing or a bad thing with the market shifts and your ability to maybe find a partner in the credit side?

Question: Craig Siegenthaler - Bank of America - Analyst : My question is on the growth to value rotation that we're seeing. If the US equity markets go through a multiyear growth to value rotation, can you talk about how this will impact your business, but also remind us how private market investing is different than public market investing and some ways less impacted by public market valuations?

Question: Craig Siegenthaler - Bank of America - Analyst : Thanks for the comprehensive response there. Just a quick follow-up on inorganic growth corporate M&A. We just want an update in terms of how you're thinking about this, if anything has sort of changed. And I was especially interested in the credit vertical and also retail distribution.

Question: Craig Siegenthaler - Bank of America - Analyst : Your prior expectations for inorganic growth.

Question: Ken Worthington - JPMorgan - Analyst : Hi, good morning. TPG has used structured products and other mechanisms to provide some downside protection to your fund returns. I guess I wanted to better understand how that downside protection may be holding up in the current markets. And where I've struggled is with the degree of protection you're actually getting from these structures. So, I was hoping you could help us on maybe the magnitude of the downside protection you've built in, either from the proportion of your investments that utilize these structures, or maybe another way would be if the market is down a certain percent, what sort of downside protection you think an overall portfolio might get from your utilization of these -- this downside protection? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 28, 2022 / 3:00PM, TPG.OQ - Q4 2021 TPG Inc Earnings Call

Question: Ken Worthington - JPMorgan - Analyst : Brilliant, thank you. And then just maybe briefly, non-comp expense I believe was $36 million this quarter. Were there unusual items in 4Q or is that OpEx a good starting point for 1Q and beyond?

Question: Alex Blostein - Goldman Sachs - Analyst : Maybe just building on some of the fundraising discussion from earlier. Some of your comments around private equity and some of the indigestion in the marketplace are consistent with how we've been looking at it as well. But curious if you are seeing any of the similar signs in terms of fundraising within other parts of private markets. And if you could also give us a sense of, within private equity by type of LP or geography, are you seeing any notable differences or is your comment fairly broad-based?

Question: Alex Blostein - Goldman Sachs - Analyst : Yes, exactly right. So, the private equity you broadly comment, I heard that loud and clear, for the industry. But you guys generally expect your fundraising to be on track with what you've communicated during the IPO. But as you kind of double click into geographies and LP types, so there are notable differences between different customer bases.

Question: Alex Blostein - Goldman Sachs - Analyst : Great. That's really helpful color. Just pivoting to maybe some of the other growth initiatives we talked about in the past. I was hoping maybe we could zone in on core-plus real estate and what you guys are doing there, especially with respect to opportunities to roll this product out to retail broadly and any sort of timing of that would be helpful. Thanks.

Question: Robert Lee - Keefe, Bruyette & Woods - Analyst : Great, good morning thanks for taking my questions. And congratulations on your first public earnings call. Maybe going back to fundraising and deployment, certainly appreciate the comments about the fundraising environment. At the same time -- at least I'm getting the sense when I think of TREP 4 I guess maybe closing in the not-too -- or having it close in the not-too-distant future maybe through a growth deployment is maybe healthy. So, maybe growth [certs] happening faster. It kind of feels like maybe some of your fundraising is being pulled -- potentially actually being pulled forward a bit from -- versus maybe what you had initially thought. If I just think more TPG 9? Is that a fair characterization? It kind of feels like some things are happening a bit faster.

Question: Robert Lee - Keefe, Bruyette & Woods - Analyst : Great, that's super helpful. Thank you. And maybe two follow-ups, and I'll maybe have a two-parter. First, Jack, if you could also just -- I want to make sure I have the numbers right. Your Q2 guidance on pretax DE, was that 190 to 200? I just want to make sure I have the numbers right. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 28, 2022 / 3:00PM, TPG.OQ - Q4 2021 TPG Inc Earnings Call

Question: Robert Lee - Keefe, Bruyette & Woods - Analyst : And then maybe more broadly, one of the, I guess, impacts of the war in Ukraine is more countries focusing on energy security, which necessarily in this day and age still means fossil fuels. So, does that at all impact -- as you think about your Rise and Impact funds -- at all impact how you think about any opportunities that may evolve over the next couple years? If there's going to have to be more focus globally on secured domestic production or gas generation? Does it have any impact at all on how you think of the opportunity set?

Question: Bill Katz - Citigroup - Analyst : So, first one maybe for Jack. If you could unpack the guidance for the first quarter I would certainly appreciate it, around the revenues 235 to 245, and how much might be base versus transaction or modeling fees. And for either the quarter just over or the upcoming quarter, are there any catch-up fees embedded in that guidance? Thank you.

Question: Bill Katz - Citigroup - Analyst : Great, thank you. I apologize for that. And then bigger question, maybe for either of you guys. Just in terms of funding markets, I was wondering if you could comment on that. And then as you look into your downstream view with the portfolio of companies, what are your companies seeing in terms of economic slowdown as we look out over the next three to nine months? Thank you.

Question: Bill Katz - Citigroup - Analyst : Yes, funding markets for sure, right, has the ability to impact deployment. Thank you.

Question: Brian Bedell - Deutsche Bank - Analyst : I'm not sure if you answered this, but I did want to understand the infrastructure comments I think you made earlier, Jon, on looking at step outs to build the business. And I just want to understand if that was on the infrastructure side. Is that largely part of an impact strategy overall because you mentioned obviously energy transition being a major role within that infrastructure? Or is that something you're thinking about as a separate platform and then obviously I guess organic versus inorganic, is the inorganic a possibility within that strategy?

Question: Brian Bedell - Deutsche Bank - Analyst : And that's more in the near-term or are we talking about more of a multiyear vision starting next year?

Question: Brian Bedell - Deutsche Bank - Analyst : Yes, okay. That makes sense. And then just a follow-up on retail strategy. Obviously (inaudible) you're trying to certainly advance that. How important is the credit platform -- or acquiring a credit platform to that retail strategy? If that ends up getting postponed for a little while, if it's any issues in finding the right partner, do you feel that you can really advance the retail strategy from a distribution angle given your product mix right now?

Question: Truman Cooper - Morgan Stanley - Analyst : This is Truman here from Morgan Stanley standing in for Michael Cyprys. Thanks for taking the question. I'm just going back to organic growth very quickly. You've talked a little bit about (inaudible) as well as some other expansions. I'm just curious, what other adjacencies do you think you could get into over the next three to five years? And just more generally, how do you think about where exactly you step out into and how meaningful could those step outs be over time?

Question: Truman Cooper - Morgan Stanley - Analyst : That's great color, thank you very much. And if I could just ask a quick follow-up about capital return. How did you think about the 85% payout ratio versus say a fixed dividend (inaudible) some of your peers do? And how that would allow you to potentially retain more capital for investment, depreciate some of the balance sheet life strategies you are trying to pursue?

Question: Rufus Hone - Bank of Montreal - Analyst : Thanks for taking my question. I wanted to get some more detail on deployment trends across your different investment platforms. Where are you seeing the best opportunities in terms of deployments? And also relative to the roughly $8 billion of capital you invested last quarter, roughly where are you year today versus that run rate?