Good morning, and welcome to TPG's Third Quarter 2025 Earnings Conference Call. 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 continuation vehicle. 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, with 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, focusing 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 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 partnering 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 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 position 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, 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 predecessor. 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 on 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 a 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. Non-accruals 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 fund's 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 non-traded 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 continues 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.

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 or 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 a 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. To echo what Jack mentioned, these are many newer deals. We focus on driving growth in those investments, which sometimes takes a couple of years. However, we believe we are at the right point regarding the liquidity in those funds. I agree with Jack that DPI and liquidity have been significant differentiators for us. We approach this with intentionality, bringing the same focus and intensity to our liquidity management as we do to our investment decisions, which has set us apart. This focus is partly why we were net sellers in capital and growth in 2021 and 2022, net buyers in 2023 when the market retreated, and net sellers again in 2024. Looking ahead, we are optimistic about the liquidity prospects and currently have several assets we are exploring for liquidity opportunities. Jon pointed out that the majority of TPG Capital's investments from the last fund have been structured in carve-out arrangements. In many of these relationships, we already know the buyer of the business. In several instances, we have put-call arrangements, which present unique opportunities. Most of the deals in capital over the last few years have been sold to strategic buyers. Those strategic buyers appear to be becoming more active. We also discussed recent IPOs, including one just yesterday. Over the past few years, we have seen more than 13 IPOs in India, allowing us to leverage those market opportunities. Overall, we feel positive about the portfolio's momentum, the discussions we are having, and our outlook 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 flow through to PRE.

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 is 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 I just mentioned. That being said, our accrued but unrealized PRE performance allocation balance is now up to $1.2 billion. We acquired some accrued PRE from Peppertree, which accounted for half of that increase. The other half was also significant, so we're seeing that balance start to grow again. As we've discussed, you would expect that we would monetize that balance over a 3- or 4-year time period. The more attractive the market gets, the more we'll tend to lean into that. 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? That will be our framework for thinking about each exit throughout the year next year.

Craig, it's Jon. I believe your understanding is somewhat off. What we aimed to convey is the intentionality behind our actions and strategies. As we look at how we've constructed our portfolios through Capital VIII, Capital IX, and now Capital X, the strategic partnerships we have often involve working closely with partners who are interested in potentially acquiring our assets. We've structured our portfolios to ensure we have multiple exit strategies available. Considering the scale of our companies and businesses, our focus is on creating value as reflected in revenue growth and EBITDA growth. We're also deliberate about determining when in the lifecycle of value creation we should think about selling or monetizing assets, while also considering who will eventually purchase those assets. In our portfolios, we are aligning this approach with our perspective on current valuations. You noted the years '21 and '22; during that time, we made the decision to sell our entire software portfolio based on our assessment of market valuations, which proved to be a wise choice. Our message is that we are just as concentrated on how we approach acquisition decisions in our portfolio as we are on divestitures. I wanted to provide this clarification because I think your understanding might be a bit misaligned.

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.

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 early investors in AI, starting over a decade ago with C3 AI and various early companies related to today's landscape. Recently, we made what I believe is the first substantial debt investment in AI by leading the investment in xAI last quarter. Being based in San Francisco provides us good access to many AI companies. We have made significant investments in AI capabilities and have established an AI center of excellence, where our team promotes AI adoption across our portfolio companies. We've recently invested in AI-specific talent, including former executives from Accenture and McKinsey. AI has become integral to everything we do now, influencing every underwriting decision. In software, our portfolio is experiencing 22-23% earnings growth, and AI is playing a significant role, creating both opportunities and challenges. We have been focusing on areas like vertical market software, fintech, and cybersecurity, while being more cautious with broader infrastructure software themes due to the rapid changes AI is bringing. Every underwriting decision, especially in software, is intensely focused on AI's impact. For example, one of our largest investments in healthcare IT is a company called Lyric, which analyzes over 60% of primary claims in the U.S. healthcare insurance industry. This algorithm-based business benefits from AI, allowing it to expand beyond primary claims editing. Thus, our analysis is very company-specific, and where we choose to invest, we see AI as an opportunity. AI significantly impacts healthcare and also has effects on the credit side. We believe we've built the right team and internal processes to navigate and leverage AI effectively for the performance of our portfolio companies.

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, thanks, Alex. It's Jon. As we mentioned previously, our acquisition of the Angelo Gordon business was based on the idea that it offered a multi-strategy platform that included lending, structured credit solutions, and total return opportunities. This platform would enable us to enhance our capital formation and improve our overall ecosystem for sourcing transactions. I'm pleased to say that we are seeing strong performance across all areas of the business. Initially, we noted that the businesses were outpacing their capital base, but that is changing now. Our capital formation has grown across all divisions, and the demand for our open-ended vehicles, such as TCAP, has surged. The inflows into TCAP are increasing rapidly, reflecting its market significance. A similar trend is evident in our MVP structured credit business. We are also reevaluating the cost of capital for different investment strategies, particularly for our insurance company clients. Our engagement with insurance clients has significantly increased this past quarter, and we are developing various investment vehicles for them, whether they are funds or accounts moving into different investment risks. There is a growing recognition among life and annuity companies about the importance of partnerships in the alternative business to maintain a competitive edge. Consequently, we are experiencing heightened discussions regarding partnerships with a variety of insurance clients both domestically and internationally. I believe that over the next several quarters, we will see significant improvements in our engagement in this market. Additionally, we are focusing on enhancing our capabilities in the retail wealth market and identifying effective ways to access this market on a larger scale. Jack mentioned this in his comments, and we hope to share meaningful progress on this front in the coming quarters. We are committed to providing return streams that often combine both liquid and illiquid products. Also, regarding growth areas, we have a strong presence in lower middle market lending with Twin Brook. Our sourcing capabilities, supported by relationships in Credit Solutions, allow us to identify larger bespoke transactions. We've been involved with over 300 portfolio companies in Twin Brook, supporting their growth from initial cash flows of $25 million and below to significantly higher figures over the years. Our familiarity with these companies gives us a competitive advantage as we explore further lending opportunities. We are in the process of developing the next stage of growth in this area and have begun to build a portfolio with some of our LP partners ready to anchor this strategy. While it's still early to unveil everything, we plan to share more in the next couple of quarters. Overall, I hope this gives you insight into our growth drivers.

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 fee-earning AUM. So we expect the next several years to be attractive growth years for our credit business.

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 FRE. 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.

It's great to revisit your comments on the fundraising outlook, especially given the strong momentum we're seeing. Jack, you mentioned that 2026 is expected to be a robust year, similar to 2025. I wanted to clarify if you believe that 2026 might actually surpass 2025 in terms of new funds being introduced to the market. The reason I’m asking is that with Asia coming into play and the significant role of real estate, particularly with Rise IV, plus the ongoing capital and anticipated growth in credit and wealth, I wanted to confirm if that’s your perspective. Additionally, could you provide an update on the deployment capabilities for the transition infrastructure fund with Kinetic? Is that progressing and enhancing the fundraising efforts for the Rise Climate segment?

Thank you for the question, Brian. Regarding the outlook, I was deliberate in my choice of words. I believe next year will also be a strong year. There are some factors to consider compared to this year. We had a significant initial closing for TPG Capital and Healthcare Partners. We do plan to raise more funds for that in the fourth quarter, meaning that we expect to raise less capital next year since we will have already achieved over half of our target by the end of this year. On the growth side, we had a significant final closing earlier this year, and our growth franchise in the U.S. will not be active next year. Concerning real estate, I want to clarify that when I mentioned our flagship real estate launch being crucial next year, we currently anticipate that most of that capital will likely be raised the following year, as our first closing may not occur until the second half of 2026. It is also true that we expect continued strong fundraising on the credit platform, as Jon pointed out. Overall, while there are some factors to weigh, given this year's remarkable performance, which showed over a 50% increase from last year, there might have been an expectation of a decline next year. However, we do not foresee that happening.

Regarding your question on deployment related to TI and climate, I want to emphasize that we are fully engaged with our strategies and are discovering truly unique deployment opportunities. We are optimistic about what we are seeing and believe we will achieve differentiated returns. This is not the first time we've mentioned it, but we view the various types of climate strategies, including private equity and infrastructure, as a generational investment opportunity with a global reach. We've been quite active in this space, having deployed $2.3 billion of capital this year in these strategies, with Kinetic being our most recent investment in TI, marking our second investment in that area. We are building a robust portfolio while also fundraising concurrently. The trends in global power demand, electrification, colocation, and storage present us with compelling opportunities, and we are excited about the potential of these strategies as we move forward.

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, thanks, Michael. First, I want to emphasize that we have been very deliberate about the types of inorganic activities we've pursued. Where we have executed, we believe we are doing exceptionally well. It's important to understand that while securing a deal is just the beginning, the true work lies in execution, integration, cultural engagement, and growth. We feel confident in our skills in this area, which we believe will be a key part of our ongoing growth strategy. Additionally, given the current industry trends favoring consolidation, we find that our established reputation allows us to receive significant interest across various strategies. This situation is beneficial as it gives us insights into potential opportunities. Many potential targets show a preference to engage with us exclusively, which is a promising way for us to assess whether the opportunity aligns with our goals and to execute accordingly. Our business development efforts remain active as we explore and evaluate opportunities. While we will remain selective, there are certain market areas that continue to intrigue us. For instance, we are looking to expand our footprint in Europe and see potential opportunities developing there. Although there is nothing immediate, it's an area of interest for our global firm. We also see possibilities for tuck-ins or fill-ins within our credit strategy, and we are exploring aspects related to builds and infrastructure, especially considering our current initiatives like TI and Peppertree. Furthermore, there are significant developments in the secondary market that align with the growth of primary markets across all asset classes. We anticipate that secondary flows will grow increasingly critical in the market, making it another fascinating area for us.

I appreciate all the guidance and discussion so far. Maybe just 2 areas of growth seem 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. Thank you for the question. Wealth is a long-term development for us. We began by launching T-POP alongside our existing products, including MVP and TCAP, to establish our primary private equity offering in the wealth channel successfully. This initiative has started off strong, and we have significant potential for growth moving forward. The latest assets under management figure we announced is $900 million, and we anticipate substantial growth throughout this year and next. So far, this growth has primarily occurred across three platforms. In the platforms where we are offering T-POP, it has become one of the most attractive or highest-volume private equity evergreen products, if not the most active. Although it is well-received, we are still in the early stages of expanding to more distribution partners. In the upcoming year, you will see us broadening partnerships to enhance the global reach of T-POP. Additionally, we have several products that we believe are well-positioned for market introduction. One of these is likely to be a multi-strategy credit interval fund. We have discussed the positive reception of TCAP as a direct lending BDC. The other businesses we have in credit through Angelo Gordon also stand out in structured credit, Credit Solutions, and more. A credit interval fund, similar to T-POP, would benefit from our private equity deal flow and the activity across our credit platform. We are seeing demand for this and are in early, mid-stage discussions with potential partners interested in the product. The next key focus will be real estate. We currently do not have a non-traded REIT, but we possess a strong real estate business diversified across various segments. Thus, we are actively engaging with channel partners who are interested in seeing a real estate product from us. This outlines our near-term roadmap, with more developments to follow.

I expect our capital markets business to keep growing. It’s a transactional business, so its opportunities will be linked to market trends. Over the past several years, we have integrated our capital markets capabilities into all our platforms and product areas, making us active as both a capital provider and arranger across nearly all our businesses. With the addition of our credit franchise, we've enhanced our ability to utilize our broker-dealer and capital markets capabilities for distribution and sourcing. Therefore, as the firm expands, I anticipate our capital markets business 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.