Conference Transcript - TPG 2026-09-15

Ben Budish, Analyst — Barclays

All right. Good afternoon, everyone. Thanks for joining us for, I think, our last session, at least in this room. If any of you don't know me, I'm Ben Budish. I cover the U.S. Brokers, Asset Managers, and Exchanges. And for this fireside chat session from TPG, we've got Jack Weingart, former CFO, now CEO of TPG's Wealth Business, and Axel Andre, new CFO. So gentlemen, welcome. Thanks so much for being here. Thank you. Thank you. Maybe Axel, we'll start with you. You joined TPG almost two months ago. Can you maybe share some of your early observations and talk about where you've been spending your time and how do you think about your main priorities as a CFO?

Axel André, CFO

Yeah, sure, thanks. So first, it's great to be here. It's fantastic to have joined TPG. I've been with the firm for now over six weeks. So as you can imagine, my initial focus is really to conduct a listen and learn phase. i'm really kind of digging into the various platforms and strategies of the firm really spending time with our people and kind of understanding what are the strategic and operational drivers of growth in the various businesses you know it's important for me to get to know the people that are making a difference in this firm so to that tour to that to that extent i've engaged on a mini world tour over the past few weeks i spent some time in asia spent some time in Europe and in the U.S., meeting the investment teams. I've started to attend some of our investment committees, and it's been kind of great to see it come to life, to see the culture of TPG come to life during those investment committee meetings. You know, TPG is known for its distinct collaborative culture, its thematic approach to investing, and it's great to see it come to life in the meetings, to see kind of the investment teams investment professionals come together with specialized operations professionals in kind of evaluating the investment thesis around various investments and then kind of articulate the drivers of value creation for LPs. In terms of my priorities as CFO my focus is really on understanding how the finance organization can support the firm in its long-term growth strategy so how can we support the scaling of our platforms how can we support making continuing to make the right investments in our people in our capabilities while maintaining expense discipline and driving ultimately operational leverage i'm spending a lot of time with jack and the rest of the team to ensure a seamless transition of the CFO functions and continuing to execute on our strategy.

Ben Budish, Analyst — Barclays

Great. Maybe, Jack, similar question. So you were recently named CEO of the wealth business. Maybe talk about your priorities for the platform. How are you thinking about distribution expansion, product development, and competing against some of your larger and more established wealth channel peers? And along the same lines, how would you say TPG is differentiating itself in the wealth market?

Jack Weingart, CEO

Sure. Well, the dirty little secret is I've been doing this for a while now. I've had two jobs. We didn't announce me as CEO of our private wealth business until we found a great new CFO to step into that role in Axel. But as you know, we launched TPOP. As of a year, year and a half ago, we had some very distinctive private equity focused evergreen vehicles. Mostly we inherited those through Angela Gorton. We had TCAP that feeds into our direct lending business, Twinbrook. We had MVP that's very high-performing asset-backed finance vehicle that feeds into that asset-backed finance business. But in private equity, we had done, for the 30-year history of the firm, we had placed one closed-end fund at a time in a world where the convenience of Evergreen vehicles was becoming the predominant way that financial advisors and their clients wanted to invest in private markets. And we had an excellent 30-some-odd-year track record of private equity investing, but we hadn't put the effort in to repackaging what we do into that evergreen format. So the first step for us was to create what everyone now knows as TPOP. And to your point on differentiation, since we launched TPOP a year and a quarter ago, on the platforms that we have been distributing through, we have been one of the most popular, and in some months, the most popular private equity evergreen vehicle on their shelf, sometimes outselling even our big peers who have much bigger brands. So the first step to your point was establishing TPG as a chosen partner by financial advisors. I think in the first year and change with our biggest partners that we had worked with in closed-end fund world for a long time. We've probably done business with four or five times as many financial advisors in that one-year period as we had in the 25-year history of working with them in closed-end fund world because we've created a much more user-friendly, accessible product in TPOP. So we're off to a good start. We've started building our brand. So the next steps from here are, number one, expand our distribution and our brand recognition across more than just the handful of initial partners we've had with TPOP. We've talked publicly about the fact that we have two new international partners launching kind of right now. We have a series of additional partners that we're launching with on the back of that in multiple jurisdictions around the world, Japan, Australia, Canada. And we're building teams to support that distribution and build our brand. And then the second piece is expanding products beyond private equity. So think about the TPOP of credit. Take the asset-backed finance access point, the direct lending access point. We have no access point yet on our higher octane credit solutions business, but a multi-strategy credit interval fund. We're one of the best positioned credit managers to offer that, and we're actively working on that. And then think about the same kind of tentpole T-pop of real estate in a new non-traded REIT seeded in today's valuation environment with no legacy exposure to, you know, assets purchased back in a zero rate environment. So we have good demand from our partners to launch those products, but between expanding our brand with additional partners and layering on additional products, then the third piece I would say is part of our strategic roadmap is once we have those building blocks to find the right partners to create the right bundled solutions, model portfolios, target date funds, et cetera, and all that is kind of in the works. Great.

Ben Budish, Analyst — Barclays

Maybe one for you, Axel, just thinking about capital formation. So TPG is in the middle of a pretty significant fundraising cycle. I think you guys have twice affirmed the target of over $50 billion for 2026. Could you maybe talk about the major components of that fundraising and what should investors be looking at as we move through the rest of the year and into 2027?

Axel André, CFO

Yeah. So we're very pleased with the fundraising progress we've made this year. So over the first half we raised 26 billion dollars so very very pleased with that progress and we continue to be confident in our abilities to raise uh over 50 billion dollars this year so we'll reaffirm it for the third time third third reaffirm um you know i think um you know what what's changed is is really that you know we think we've moved beyond um kind of the super cycle of large fundraising cycles associated with kind of the large flagship funds to more of an always-on model and that's really a result of having you know diversified the firm across you know multiple asset classes multiple strategies so we're kind of always raising capital across private equity real estate credit so it's not only kind of diversified across asset classes but also when you look within that we're raising capital for you know a well-established strategy so we're you know we're raising capital for capital 10 and healthcare partners 3 for example this year and you know combined we're going to you know we believe we're going to achieve a significant fund over fund growth as well there but also we're raising capital for newer strategies strategies that may be in the first generation or the second generation of the fund cycle So for the building blocks for the remainder of the year and then into 2027, we're going to be concluding those large fundraising cycles in private equity that I talked about. We're going to also conclude the Rice Climate II Fund and the Global South Initiative, as well as a number of other strategies such as our sports franchise. we have our first sports dedicated fund we have a transition infrastructure dedicated fund moving on to real estate we expect real estate to be a significant contributor to fundraising for the balance of 2026 and then into 2027 and that's going to be led by our trap five strategy trap five fund in addition to a number of other real estate strategies that we're raising at the same time so we're also in the market for US real estate for Asia real estate and for our Japan value oriented funds on the credit side you know we were we're also kind of concluding the raise on the number of funds but also it's we have a steady kind of steady inflow into our various credit strategies for example through the strategic partnership that we have with with jackson so so that's kind of you know that's kind of 26 looking into 2027 um you know kind of an anecdote also when you when you look at the the diversification of strategies when you think of you know this year we're in the market across 35 products compared to last year we're in the market across 25 products that kind of gives you a sense of the the range of strategies that we're in the market for you know behind that kind of in the backdrop we have the broader trend of you know LPs are looking more and more to consolidate their relationships with fewer GPs that are able to you know provide access to you know really all of the asset classes that they're interested in and also that are able to structure strategic relationships across those multiple asset classes you know we believe given the the way that we've built the firm that we've expanded our capabilities that you know we're very well positioned to be on the winning side of that trend great maybe just funny you look back for those of you who've been with us since the IPO you remember our dialogue on the road.

Jack Weingart, CEO

Back then, it was only four and a half years ago. And we had 80% of our AUM was in private equity. And we spent a lot of time forecasting our drivers of growth in the coming years after our early 2022 IPO. And we went kind of one fund at a time. We had a series of refreshes that we expected to accomplish in our private equity and a little bit in real estate. And the biggest question we got was, what are you going to do about the 2024 cliff? Because back then, if all we did was forecast out our need to refresh our private equity funds, we would do that. And then we'd have a pause. We wouldn't need to refresh our capital base for some period of time. And the model that didn't incorporate any views on credit or inorganic growth had implied that we'd have a fall off in fundraising in 2024. And we said, what we've got. That's the whole idea. We're going public. We're going to fill out our asset. We're going to diversify our platform across asset classes. And of course, that's exactly what we did. And now we're raising $50 billion a year across 35 different funds. So we feel pretty good about what we've accomplished in creating in a pretty short period of time, going from $108 billion of AUM to $327 billion and really rounding out our firm across asset classes.

Ben Budish, Analyst — Barclays

Maybe one last question on the fundraising side, Jack, if you want to dig in a little bit more. So private equity specifically, maybe talk a bit about the LP appetite for traditional drawdown PE strategies. And are you guys seeing any meaningful shifts in allocations, behavior, sentiment as a result of some of the software and AI discourse we've been hearing?

Jack Weingart, CEO

Well, first of all, if you look at institutional LPs, and I'm now living more in this world of private wealth, where there's this strong preference for the efficiency of evergreen vehicles, the big institutions around the world, by and large, still want to commit to draw down funds. They want to pick their narrow strategies, create SMAs that invest across strategies with us, but they want a more tailored solution than the diversified evergreen vehicle provides. So within that context, institutional demand is still heavily weighted toward drawdown funds. Now, demand for private equity is at different parts of the maturation curve in different parts of the world. Just a little anecdote, if you look back 10, well, 20 years ago when I joined the firm, 15 years ago, we probably raised, if I look back at our buyout fund that we raised back then, 50 or 60% of the capital for that buyout fund came from U.S. institutional investors. In TPG 10 so far, less than 30% has come from U.S. institutions. So building a global set of relationships with the biggest pools of capital in the world and doing more with those, as Axel just indicated, doing more with those institutions over time has become a critical differentiator for us. And on your question, if we see any impact of the AI impact on software, I think it's a positive impact. Because institutional investors still believe that investing in software is going to be something they want exposure to, but they know they need to do it with GPs who have expertise and know how to invest around AI and incorporate the benefit of AI in the companies, in their business plans, in their investment strategy, and we clearly are one of those.

Ben Budish, Analyst — Barclays

Got it. Great. Maybe a couple of macro questions here, so maybe we'll stick with you, Jack. It feels like geopolitical uncertainty is likely to remain elevated. The interest rate outlook may be a little less supportive of asset valuations than maybe what was hoped earlier in the year. How would you describe the current deployment environment at TPG? Is the backdrop making it more difficult to get things done or are opportunities improving? And where are you finding the most attractive areas to invest today?

Jack Weingart, CEO

Yeah, look, our deployment, if you look at the numbers we reported in Q2, like on an LTM basis, I think our deployment across asset classes was up something like 70% year over year. And it was up significantly across private equity, credit, and real estate. So we're finding ways to invest. Our investing in private equity, for example, is much less tied to 100 basis point moves in interest rates. It's much more tied to very long-dated sourcing in the sectors in which we invest. The average investment we make, we've probably called on that company and been developing that relationship for three to five years. and over time those strategic partners of ours those corporates that we do business with decide they want to do something and hopefully we've earned the right to be a chosen partner so we don't see as much cyclicality now what does happen is when there's a dislocation in the market like there was earlier in the year in q2 private equity m&a activity was down substantially particularly around software because you had all the questions being asked about what's AI going to do to software companies, and in that environment, you had the public comps trading way down. In that environment, buyers step back, and sellers don't want to sell it to press prices, so you have a natural bid-offer spread. What we're starting to see on both the buy side and the sell side is a narrowing in that bid-offer spread, just with the passage of time and with many of these companies not suffering degradation, and in fact, seeing the opposite, incorporating AI solutions into their solutions for their customers and using that as a way to enhance revenue growth. We talked about that on the Q2 call Boomi, Delinea, Lyric, lots of examples in our portfolio where we see accelerating revenue growth through the use of AI. And the question for us is, how do we underwrite that as a buyer, but also on the sell side, as we look to monetize some of these investments, do we feel like a buyer is prepared to pay fair value that incorporates that growth as opposed to discounting risk that isn't as great as they thought it was? And what we're starting to see is a narrowing of that bid-offer spread, and we're starting to see strategic and financial buyers come back to the table.

Ben Budish, Analyst — Barclays

Along the same lines, maybe I'll direct this one to you, Axel. On the realization side, You know, a similar question, what impact are the current macro and geopolitical factors having on your ability to exit investments?

Axel André, CFO

Yeah, so I think it's fair to say that the realization environment kind of overall has been relatively muted for the industry because of the elevated market volatility. You know, that said, we're very focused on driving monetization. You know, I think we talked about realizing about $14 billion of exits in the kind of first half of the year, $26 billion on an LTM basis. So I hope that demonstrates kind of our focus and our ability on generating DPI for our LPs. You know, I think we're pleased with the kind of pickup in activity and dialogue that we've seen through August and September. So we think that, like Jack was saying, kind of that bid-offer spread is narrowing. So the ability to realize is coming back. We continue to believe that the realization environment will improve as we get towards the end of the year and into 2027. That's based on actual discussions, ongoing discussions that are happening with specific portfolio companies. in our portfolios uh and so we're very um kind of very pleased with the um the outlook the environment for um for realizations great um maybe one you know i would add another thing is it's important to also recognize and you may already appreciate this that tpg is very well known for um you know its approach to both the sourcing of investments and the exits through corporate partnerships so you know we're known kind of to we're known for sourcing investments through corporate carve-outs and then for exits through corporate through selling to corporates to strategic corporates as an example for for our capital franchise over 50% I would leave it oh okay here we go back in business thank you all right that everyone so our approach to to essentially our approach to strategic exits is well known. Over 50% of our exits in our capital franchise is through strategic exits. That said, of course, we utilize the IPO market when it's there, but we're not obviously overly reliant on that. So overall, we're positively inclined in terms of the realization environment as we get towards the end of the year and into next.

Ben Budish, Analyst — Barclays

Maybe just one more question on realization. So, you talked about how you guys have been using AI, and that's driving value creation in a lot of your portfolio companies. In terms of realizations, though, you historically have maintained greater concentration in software investments in the PE business relative to many peers. So, for the software sleeve in particular, how does the realization outlook compared to the broader portfolio? Where are you seeing the most attractive opportunities to monetize there?

Axel André, CFO

Yeah. So, I think Jack touched upon that. that we obviously went through this period over the last six months of a lot of focus on the so-called SaaSpocalypse, what is AI going to do to the software sector, and frankly we kind of lost all of the nuance. It was really, is it software or is it not? I think we're back now in a more rational environment where there's an understanding and there's a there's actually a lot of appetite from from buyers for quality software companies so quality software companies means really companies that are in a market leading position that have robust operating performance and that are front-footed in terms of embedding ai within their offering to further strengthen growth opportunities to really create newer new growth pathways for further offerings so we're seeing that interest from buyers we're seeing that opportunity for ourselves for a portfolio of software companies where you know the vast majority of them are really on that that side of the spectrum where AI is an opportunity is an is a way to further strengthen the growth opportunity and as kind of that bid offer spread narrows you know we're confident that ultimately we'll be able to monetize those investments.

Ben Budish, Analyst — Barclays

Maybe one more kind of AI-related question, maybe for Jack. So AI's been a pretty defining theme across this space. Beyond the implications for software portfolio companies, where else is TPG participating? So to what extent are portfolio companies adopting AI, and where else are you investing across that ecosystem?

Jack Weingart, CEO

Yeah, that's a good question. I mean, if you step back and think about how we invest in private equity from the beginning, from when David and Jim created the company, their thesis was we need to be more than financial investors. We need to add operational excellence to our portfolio companies, help them build better businesses. That went to their first hire they made. We've since then built one of the leading operating groups in the industry. We are well known among our LPs for helping companies improve their operations under our ownership through lots of tools. In the early days, it was more cost-focused. Then over the next couple of decades, we converted that group more to focus on helping drive faster revenue growth through things like pricing optimization, digital marketing, lots of ways to use new tools to drive faster revenue growth than companies might have been doing on their own. Well, the biggest tool in that toolbox now is agentic AI. And there's unending demand from our CEOs of our portfolio companies to have us help them drive operational excellence through the use of AI. So we're actively doing that, both internally at TPG and with our portfolio companies. And we talked about some of the software examples of that, Boomi, Lyric, et cetera, but there's lots of examples across business services companies. On the investing side, we're applying the same lens of what can we do with a given company that we're looking to acquire to improve the business and drive better returns through that acquisition, right? I mean, AI has become, not surprisingly, a firm-wide investment thesis. And we look at things like AI infrastructure. We look at vertical market AI applications. Some of that is happening in our portfolio. Some of it is through new acquisitions business services companies that we can acquire and ai enable and drive you know thousands of basis points of margin improvement um cyber security is we think a a a i mean all you have to do is read the headlines to realize how dangerous some of this can be if not controlled well in a security environment so the cyber security opportunity to help control this risk We're seeing that through Delineia, like accelerating growth. So those are some of the themes that we're deploying in our new acquisitions that we're making. It includes we partner with Tata in India to invest a billion dollars in their data center business. So everything from infrastructure to vertical market applications to services transformations. The other investment we've talked about is partner. We're obviously already investors in the major platforms, OpenAI, Anthropix, SpaceX, et cetera. We also partnered with OpenAI to create a brand new company called Deployco for now, which is basically a go-to-market deployment company, majority owned by OpenAI. We're the biggest outside financial investor to kind of a picks and shovels play on enterprise AI deployment. Think about it as a next-generation services company employing forward-deployed engineers that are organized by industry vertical and by business process to accelerate the adoption of agentic AI solutions by businesses across the economy with good forward-deployed engineers. So that's a brand-new business we're creating. So lots of ways to, we hope, intelligently invest around this secular trend.

Ben Budish, Analyst — Barclays

Great. Maybe we'll switch gears a little bit and talk about credit. So maybe, Axel, just to start. So you joined TPG after a long career in the insurance industry. So how does that background influence the way you think about TPG's opportunity set with that set of LPs? And then beyond the firm's existing partnerships, you mentioned Jackson. I know there's many others. But what are your longer-term ambitions for that part of the business?

Axel André, CFO

Yeah. Yeah, so having been in the insurance industry for a bit, kind of I've seen really the different models in which the alternative investment industry can partner with the insurance industry. I think that our approach, which is kind of a balance sheet light approach focused on strategic partnership, is really very beneficial to the business model of the firm and also to shareholders. I think it enables us, the strategic partnership approach enables us to grow significantly our fee-paying AUM, significantly scale our origination capabilities across the whole credit spectrum without the kind of burden of volatility and capital intensity that comes with owning an insurance company. I think the partnership with Jackson is off to a terrific start. We have $4.5 billion of commitments to date across our investment-grade asset-backed finance platform and our direct lending platform. We're actively deploying in those strategies. We're looking for ways to expand the relationship across some of our other asset classes. Things such as real estate credits would be a natural fit for an insurance balance sheet and could meet Jackson's objectives. And then, it's fair to say that we're early in our journey of partnering with the insurance industry you know we have a number of smas and then we have the strategic relationship with jackson i think the opportunity to scale that is clearly there the opportunity to scale with further smas of course that partly are the beneficiaries of the new capabilities and origination capabilities we're building in the context of the jackson relationship but also other forms of strategic partnership that may look like the jackson relationship or may look somewhat, you know, slightly different. Ultimately, I think the balance sheet approach, the FRE-centric approach of TPG, you know, is really beneficial and ultimately will really drive value creation for TPG shareholders.

Ben Budish, Analyst — Barclays

And maybe expanding on that, so you guys have discussed further expanding your IG, you know, and ABF capabilities to better serve insurance clients. So what's the current scale of that part of the business and your origination capabilities?

Axel André, CFO

Similarly, how do you see that evolving over time yeah so um so our investment grade asset-backed finance platform uh you know serves insurance clients other and other institutional clients um across residential commercial and consumer assets um the investment grade uh part of that equation is really um you know is really part of the capital structure a part of the capital structure that uh naturally uh Comes you know it comes comes with the capabilities that in general Gordon had built over many many years So really what what we're doing in the investment grade side is we're benefiting and leveraging the same capabilities so the sourcing underwriting and structuring capabilities that Angelo Gordon had built over decades are now put to work and towards a the higher Higher quality part of the capital structure You know, we're very pleased with the level of origination that we've been able to accomplish. We've reviewed, for example, year-to-date over 70 potential transactions on the IGABF side, representing about $25 billion of potential transaction volume. And we have a very healthy pipeline, you know, looking out towards the end of the year. So very, very pleased with the progress thus far. And I think, you know, we're kind of pleased with the flywheel effect that we're seeing through insurance relationships, partners that trust us, that enable us to further scale and develop our capabilities, and then be able to provide a more attractive offering to the insurance sector and to other potential LPs.

Ben Budish, Analyst — Barclays

And maybe, Jack, for you, you talk a bit about what you're seeing on the direct lending side, you know, a bit of an update on borrower fundamentals, portfolio company health, and maybe touch on TCAP a bit, you know, which has seen much lower redemption requests than a lot of, you know, your competitor funds, and maybe what factors do you think have contributed to that this year?

Jack Weingart, CEO

Sure. Let's start with, for those of you who don't know, defining what we do and we don't do in direct lending, because that feeds into what TCAP is, right? So Twinbrook, when we acquired Angelo Gordon, I have to admit, I didn't know as much as I should have known about Twinbrook, because I've been around leveraged finance markets for almost 40 years, but always operating at a little bit larger scale. And Twinbrook, to their credit, had stayed totally true to their discipline approach of investing, of lending only to lower middle market companies, which in their vernacular is less than $25 million of EBITDA. And I never operated down that space on the private equity side. So the more I studied it during our diligence, the more I appreciated the differentiation of the business because that's kind of what I think of what direct lending used to be. lending to smaller companies that don't have access to the big liquid syndicated loan markets. So Twinbrook is not held accountable to providing competitive terms with that market, right? We lend on average at probably four times EBITDA, not six or seven times EBITDA. Coverage ratios are higher. We control the revolver in almost every loan we make. We have maintenance financial covenants that let us actively manage risk. now in return for that we're lending to smaller companies we have to be a good credit underwriter and make sure we manage that risk effectively and in fact we have so we've seen very little deterioration in credit quality the current interest coverage ratio in the portfolio is still running around 2.4 times the non-accrual rate is 1.4 percent the pick rate is almost non-existent in a world where companies are often larger companies that started with tighter capital structures with higher degrees of leverage in a lower rate environment have seen rates move higher and the lender has often had to offer the borrower the right to pick. So you see pick rates elsewhere in BDC land going a little higher. Twinbrook has virtually no pick. So it's those credit fundamentals along with continuing to generate about a 10% return that I think the investors in TCAP. So TCAP is our BDC that feeds into Twinbrook, is one of the sources of capital for us in Twinbrook. And I think it's that stability of the portfolio, the consistent returns, the outperformance versus the leveraged loan market. And I think any investor, whether it's we also have a balanced mix of institutions and retail in TCAP. And I think any institution or individual investor who chooses to invest in Twinbrook or TCAP is doing it for an express purpose. You don't trip across TCAP and choose to invest in it because it's easy to buy. You do it because you want to lend to the lower middle market companies. And as long as you're getting the bargain you wanted from that investment, good returns and well-managed risk and low risk metrics, the incentive to redeem is just much, much lower. So you're right. In Q1, Q2, and Q3, respectively, roughly we saw 1%, 2%, and 1% redemption rates. So far below the 5%, the LP base is very stable and happy with what they've invested in.

Ben Budish, Analyst — Barclays

Why don't we move to real estate real quick? There's a bunch of flagship funds as part of this year's guidance. You've indicated a lot of confidence here. and previously in your expectations for underlying demand. So maybe talk a bit about your conviction in the real estate platform at a time when the asset class has been a bit more challenging for some competitors.

Jack Weingart, CEO

I mean, our real estate business, so you're right. We've talked about the fact that we are entering, again, back to the theme of having diversified our fundraising across many more businesses. We've been through a period of raising a lot of credit capital. We're still raising a lot of credit. It's kind of an always-on business. as we finish refreshing our big buyout fund, TPG Capital. Fortunately, we're now about 80% invested in our largest flagship real estate fund that Axel referred to, TREP, TPG Real Estate Equity Partners. And so we're ready to have a first close there relatively soon. We'll talk about that on either the third or fourth quarter call. But the confidence we have in that, if you step back and look at it, so it's gotta be based on returns. The returns we've generated from that business since we organically built it in the financial crisis, 2007, 8, 9, we saw the dislocation in the market. We took some of our team members who had a history in real estate, had them build a team and build a business from scratch. And that ended up being a great thing to do. We've scaled it since then. We've generated good returns. Our current TREP fund is a $6.8 billion fund. And we've talked about having a lot of confidence that we're going to raise more than that in this wave of funds, that is now informed by a lot of our dialogue with our LPs, because we're approaching a first close.

Ben Budish, Analyst — Barclays

All right, maybe one last one for you, Axel, and I want to, I'll squeeze a couple in here, because we just have a few minutes left. So I guess first, we've got this large fundraising cycle and accelerating deployment, which should be supportive of revenue growth. So as those drivers play out, you know, how do you think about the implications for TPG's earnings profile, and how should investors think about, you know, the longer term margin expansion potential. And the other, if there's time, I want to squeeze it in as a new CFO. TPG has expanded inorganically into credit, digital infrastructure. So how are you thinking about additional or incremental inorganic growth opportunities and what might be most strategically attractive?

Axel André, CFO

Okay, I'll try and do this real quick. So on FRE margin, we kind of restated on second call our guidance of approximately 47% margin for 2026. Rest assured, that is a milestone, not a stopping point you know as we look out we believe that our margin should expand into the 50s over time and that's really kind of supported by you know a few kind of structural drivers we've talked again and again here about fund over fund growth whether it's in well-established strategies whether it's in you know generation two versus generation one that fundamentally enables us to do to generate more revenues with you know the either the same size teams that we have or small small small addition to the team you know number two we've raised significant amount of capital towards a credit strategies that only that start earning revenue upon deployments and so as we deploy that that that that dry powder we're going to significantly add to the the revenue stream we talked a lot about on the last quarter about our record revenues for capital markets business you know we believe we're really only in the middle innings of the potential for revenue generation from that business. We've been very intentional about embedding our broker-dealer capabilities across our entire platform and strategies. So, for example, in the second quarter, we had 20 different transactions contributing to a revenue stream across 14 strategies across all platforms. And lastly, there's kind of the natural operating leverage that comes with operating at a larger scale that includes just like for a lot of other industries the use of ai the use of ai towards you know data intensive and uh and workflow intensive tasks that as we as we deploy ai should enable us to really get more productivity more efficiency and be gain gain ability to to to have better resource allocation of our people so maybe moving on quickly to the inorganic side Look, inorganic, we believe, is a component of how we deliver upon our long-term growth strategy. We have a clear track record of executing on that and successfully integrating. The AG transaction, the pepper tree transaction, are great examples of how we've added to our platform. We've added to our ability to scale our platform. We've added nice tuck-in capabilities that came into very specific verticals. So, as we think about inorganic opportunities, number one, we want to maintain a very high discipline as we evaluate potential opportunities, and we really look for three core components. Strategic fit, cultural fit, and the potential for long-term value creation. Some of the areas that we find particularly interesting, I think around the LP secondary space, where having that scale and that information advantage really matters. And then infrastructure. You know, infrastructure, we continue to believe with high conviction, is one of those, you know, long-term secular opportunities across the globe. So these are kind of examples of the types of things where we would be considering potential inorganic additions to our platform.

Ben Budish, Analyst — Barclays

Great. Well, we're out of time, so we'll have to leave it there. But Jack, Axel, thank you. Thanks so much for being here. Appreciate your time.