TPG, Inc. (NASDAQ:TPG) Q4 2021 Earnings Conference Call March 28, 2022 11:00 AM ET
Company Participants
Gary Stein – Head of Investor Relations
Jon Winkelried – Chief Executive Officer
Jack Weingart – Chief Financial Officer
Todd Sisitsky – President
Jim Coulter – Executive Chairman and Co-Founder
Conference Call Participants
Glenn Schorr – Evercore
Craig Siegenthaler – Bank of America
Ken Worthington – J.P. Morgan
Alex Blostein – Goldman Sachs
Robert Lee – KBW
Bill Katz – Citigroup
Brian Bedell – Deutsche Bank
Lucas Ruttan – Bank of Montreal
Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edited and is designed as a guide.
Operator
00:05 Good morning and welcome to the TPG’s Fourth Quarter 2021 Earnings Conference Call. Currently all callers have been placed in a listen-only mode and following management’s prepared remarks, the call will be opened up for your questions. [Operator Instructions] Please be advised that today’s call is being recorded. Please go to TPG IR website to obtain earnings materials.
00:48 I would now like to turn the call over to Gary Stein, Head of Investor Relations at TPG.
Gary Stein
00:55 Great. Thank you, operator. Welcome to our fourth quarter of 2021 earnings call. Joining me this morning are: Jon Winkelried, Chief Executive Officer and Jack Weingart, our Chief Financial Officer. In addition, our Executive Chairman and Co-Founder, Jim Coulter and our President Todd Sisitsky are also here with us and will be available for the Q&A portion of this morning’s call.
01:16 Before we begin, I’d like to remind you this call may include forward-looking statements, which 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.
01:37 Within our discussion and earnings release, we are presenting GAAP measures, non-GAAP measures and pro forma GAAP and non-GAAP measures, reflecting the reorganization that was completed during 2021 and immediately prior to TPG’s IPO. We believe it is helpful for investors and analysts to understand the historic results through the lens of our go-forward structure and please refer to TPG’s earnings release for details on the pro forma financial information.
02:00 We will also be discussing certain non-GAAP measures on this call that management believes are relevant in assessing the financial performance of the business. These non-GAAP measures are reconciled to the nearest GAAP figures and TPG’s earnings release, which is available on the company’s website. Please note that nothing on this call constitutes an offer to sell or solicitation of an offer to purchase an interest in any TPG fund.
02:21 I’d now like to turn the call over to Jon Winkelried, Chief Executive Officer.
Jon Winkelried
02:26 Thanks, Gary, and good morning to everyone. I’d like to thank you all for joining us for our first public investor call, since we completed our IPO on NASDAQ in January. Becoming a publicly listed company was a significant milestone for TPG, as we celebrate our 30th anniversary as an innovator in the alternative asset management industry.
02:48 During our prepared remarks, I’m going to touch on our strong performance for the fourth quarter and full-year of 2021, and then I’ll discuss a few highlights across the five multi-product platforms that comprise TPG business. I’ll then turn the call over to Jack to provide some more details on our financial results. After that I’ll make some closing remarks and then we’ll open up the call to take your questions.
03:11 Before I discuss our performance, I’d like to address the situation in Ukraine, which I’m sure continues to weigh heavily on all of you just as it does on us here at TPG. From a humanitarian perspective what we’ve all been watching unfold is truly heart wrenching on so many levels and we extend our thoughts to the courageous citizens of Ukraine. We are providing financial assistance through several charities on the ground in Ukraine and we are also encouraging all of our employees to do whatever they can to help. From a business perspective we have conducted a thorough review of all of our activities and we’ve confirmed the funds we manage have no direct investments in any Russia or Ukraine-based companies. In addition, no Russian Institutional Investors or Sanctioned Russian Nationals or Limited Partners in any of TPG funds.
04:05 We finished thousand 2021 with $114 billion of total assets under management, which increased 27% year-over-year. This growth was driven by a combination of strong investment performance and fundraising across our five platforms, partially offset by significant realization activity. From a value creation perspective TPG funds increased by 7% in the fourth quarter and 38% for the year, which compares to 18% in the prior year.
04:33 Turning to fundraising, we had our second strongest year on record with approximately $20 billion raised, nearly tripling the amount of capital we raised in 2020. Looking at invested capital we put nearly $8 billion to work in the fourth quarter and deployed $22 billion during the year. We have also been very intentional with our realization strategy and we’ve had an outstanding year with $7 billion of realizations in the fourth quarter, and more than $25 billion for the full-year.
05:03 Taking a step back, we recognize we’re talking with you this morning about results that occurred several months ago. Since that time, the global geopolitical and economic landscape has changed dramatically. We are now operating a mix of far more uncertain in volatile backdrop, due to a number of significant macro factors, including widespread inflation, rising rate environment, global supply chain disruptions, and a tight labor market that is driving an extraordinary demand for talent, in addition, of course to the war in Ukraine.
05:35 In an environment such as this, we are even more intently focused on adhering to our investment strategy and approach and we were relying on the playbook we have developed through our 30-years of experience investing across cycles as we navigate through this period. Our expertise is informing every aspect of our business, such as how we source and underwrite new investments; engaged with our portfolio companies; and attract and retain top talent.
06:02 With that in mind, I’d like to spend a few minutes walking you through some of the highlights across our five multi-product platforms, starting with our largest platform capital, which had a total AUM of $55 billion at the end of 2020. The recent performance of the portfolio companies within our capital funds has been very strong with value creation of more than 7% in the fourth quarter and 43% for the full-year, this performance was driven by strong growth at the portfolio company level and underscores our investment strategy and focus on bending the curve with respect to the growth trajectory of our portfolio companies. We have also been actively investing across the capital platform deploying nearly $11 billion in 2021 with a focus on large scale control-oriented investments in our core sectors. As an example of the types of investments we made in the fourth quarter, in November, we announced a significant transact — strategic investment in Troon, the world’s largest golf and club related leisure and hospitality services company. We made this investment together with professional golfer Rory McIlroy, who invested in the company in partnership with us.
07:09 During the fourth quarter, we also completed the corporate carve out of Boomi from Dell in a $4 billion transaction. 2021 was also a very significant year for us to deploy capital through our Asian franchise. During the year we made several investments in the region, such as Greenfields Dairy, which is a leading consumer dairy business in Southeast Asia and Fund Lab, which is a leading out of home entertainment company with operations in Australia, New Zealand and Singapore.
07:38 As I mentioned, we have also been highly focused on returning profits to our fund investors. And during 2021, we generated record total realizations in the capital platform of approximately $16 billion, including $4 billion in the fourth quarter. We also have a robust pipeline of realizations in 2022, including the sales of McAfee and Wind River. Jack will provide some additional details regarding these significant transactions during his remarks.
08:07 I’d now like to discuss our growth platform, which are at $22 billion of total AUM at the end of 2021. This platform provides flexible and scaled capital for rapidly growing businesses through our growth, tech adjacencies and digital media funds. These funds are well positioned to capitalize on the continued trend of high quality growth companies staying private for longer. Given the scale and stage at which we are investing and the resources we bring to bear in the current volatile and uncertain market, we are seeing excellent opportunities to invest, including investments with structured securities with downside protection.
08:46 Similar to our capital portfolio our growth funds continue to perform well with aggregate value creation of 5% in the fourth quarter and 32% for the year. We deployed more than $3 billion during 2021 and a wide variety of companies and returned $4 billion to our investors during the same period. Since the beginning of the year, we have already announced several investments, including project44, a leading provider of supply chain visibility solutions and Xpressbees one of the fastest growing third-party logistics firms in India.
09:18 Moving on, I’d like to briefly discuss our Impact platform, which our total AUM of $14 billion as of December 31, including our inaugural rise Climate Fund, which currently has nearly $7 billion of AUM and we believe is one of the largest and most significant new private equity fund raisers. We were a first mover to institutionalize the private market impact investing more than five years ago and we are incredibly proud of the market-leading platform we have built. Our Impact funds, which operate under the Rise brand focus on investing in companies that are driving societal benefits, while also generating non-concessionary financial returns.
09:54 In addition, we have built a rigorous proprietary impact measurement framework through Y Analytics, TPG’s Impact assessment in ESG performance arm to objectively measure and report the true impact of our funds invested capital. Consistent with our long-held view that impact investments do not need to have lower returns, our Rise funds had a net IRR of 25% as of December 31st to the portfolio of attractive, high growth companies across a range of sectors such as education, healthcare, accessibility financial inclusion, and Climate.
10:28 As an example of the types of significant impact investments we make during the fourth quarter, we announced that Rise Climate is investing $1 billion in a newly created Electric Vehicle subsidiary of Tata Motors, one of the India’s largest vehicle manufacturers. This sizable transaction aligns with Rise Climates focus on decarbonize transport, leveraging TPG’s long history of investing in India and our expertise and corporate carve outs. It also underscores the substantial number of opportunities we are seeing to deploy capital at scale and proprietary climate investments around the world.
11:03 In terms of operating results the value creation across our Impact funds was 9% for the fourth quarter and 33% for the year. During 2021 our Impact funds deployed $1.7 billion and we returned more than $1 billion to our fund investors, nearly half of those realizations were generated in the fourth quarter led by the sale of DreamBox Learning a pioneer in the emerging field of intelligent adaptive learning.
11:28 Turning now to real estate, this multi-product platform ended 2021 with $13 billion of total AUM across our opportunistic real estate funds, our core plus strategy and a publicly traded REIT. Our real estate investment — our real estate platform harnesses TPG’s collective sector expertise and knowledge, applying a thematic approach to investing with a focus on building companies and platforms. This differentiated investment strategy has enabled our $3.7 billion opportunistic real estate fund TREP 3 to generate a 30% net IRR since inception as of the end of 2021.
12:04 TPG’s real estate platform delivered value creation of 6% for the fourth quarter at 31% for the year across our opportunistic and core plus funds. Our team has been very active deploying a returning capital to our investors, a platform invested $4.5 billion in 2021, including $1.7 billion in the fourth quarter and had total realizations of $3 billion for the year. One transaction, I’d like to highlight is the acquisition of Cinespace Studios, which is North America’s second largest independent soundstage platform. Cinespace Studios is well positioned for growth, driven by the surge in demand for original TV and film content. This transaction reflects the deep expertise in media and content development across the firm and is a great example of our thematic approach to investing.
12:50 Lastly, I’d like to touch on our Market Solutions platform, which at $10 billion of total AUM at the end of 2021 across several strategies, including our long-short and long-only public investing funds, our Capital Markets Group and Private Market Solutions, which is our secondary’s business. Our Capital Markets Business, which we established more than 15-years ago as continued to drive significant value by delivering bespoke solutions and optimized financing outcomes for our portfolio companies. Our Asian secondary’s business NewQuest continues to perform well, driven by a distinct focus on GP Solutions and we are actively building out our secondary’s platform globally.
13:28 Summing it all up, 2021 was an excellent and important year for TPG. For us that starts with continuing to deliver outstanding investment results across each of our five platforms and generating strong operational and financial results from wide. We are carrying that momentum into 2022, which began with our successful initial public offering in January. Our strong start to the year has continued with a number of significant developments, regarding realization events, new investments by our funds, and ongoing success with our broad-based fundraising campaign. We will also continue to explore ways to diversify and expand our business through both organic and inorganic opportunities. We’ve been highly successful with our organic growth initiatives and over the last four years, we have raised $17 billion for five new products. Regarding inorganic growth there are several asset classes where we do not currently have a presence that would be highly complementary to our existing product set. We are continually exploring a pipeline of strategic growth opportunities that may help accelerate our ongoing expansion and diversification.
14:34 I’d now like to turn the call over to Jack, so he can take you through our financial results.
Jack Weingart
14:39 Thanks, Jon and good morning everyone. I’m going to briefly walk through our financial results and highlight some of the more significant points regarding our fourth quarter and full-year financial performance. Our total assets under management grew from $90 billion at the end of 2020 to $114 billion at the end of ’21. The drivers of this 27% increase during the year include $29 billion of value-creation from our underlying fund investments and over $20 billion from capital raises, partially offset by more than $25 billion of realizations as Jon alluded to. Then we returned to our fund investors throughout 2021.
15:19 Looking briefly at fee generating AUM, we had approximately $60 billion at the end of ’21, compared to $51 billion at the end of 2020, this 19% increase was driven primarily by the successful raising of nearly $9 billion in fee earning capital related to the Impact and growth platforms. As you may have noticed on Page 20 of our earnings presentation, we have provided some additional detail regarding the duration of our total and fee earning assets under management.
15:49 At the end of ’21 approximately 87% of our AUM and 85% of our fee earning AUM was in either perpetual or long dated funds with a duration at inception of 10-years or longer. In addition 75% of our fee earning AUM had a remaining duration of five or more years as of the end of 2021, with nearly 25% in vehicles with 10 or more years remaining. At year-end we also had $9.4 billion of AUM subject to fee earning growth, including nearly $7 billion of AUM not yet earning fees and $2.5 billion of fee earning AUM subject to fee rate step-ups in the future.
16:33 In total, we estimate the potential fee related revenue opportunity associated with this AUM is approximately $50 million to $55 million on an annual basis with very high incremental margins. In addition, at the end of 2021 our funds had more than $28 billion of available capital or dry powder for future deployment. As Gary mentioned, we recently completed our reorganization in connection with our IPO. Beginning in ’22, we are now operating under our new structure and we believe it’s important to communicate our historical results to you on a pro forma basis for comparability purposes. We recorded GAAP net income for the quarter of $326 million and our pro forma basis GAAP net income totaled $41 million.
17:20 Turning to our pro forma non-GAAP results for the fourth quarter and full-year of 2021. We reported fee related revenues of $238 million for the fourth quarter, which increased 18% year-over-year and $874 million for the full-year, which increased 20% versus the prior year. We also reported pro forma fee related earnings or FRE of $91 million for the quarter and $326 million for the year, which was an increase of 44% versus pro forma 2020. The strong growth in our quarterly and full-year fee-related earnings was driven by a combination of top line growth in management fees at a meaningful expansion in our FRE margins. As we continue to scale our business and generate operating leverage.
18:09 Our pro forma FRE margins were 38% for the fourth quarter of ’21 and 37% for the full-year, compared to 31% in 2020 and 26% in 2019. As we’ve indicated previously, we expect the continued growth in our FRE margins with a target margin of 45% that we expect to achieve in the next two years. Our pro forma after-tax distributable earnings in the fourth quarter of ‘21 were $137 million, which increased 34% versus the year ago quarter and for the full-year, we generated $538 million of pro forma after tax DE, which more than doubled, compared to 2020.
18:53 In addition to the strong FRE growth that I just discussed, our pro forma after-tax DE for the fourth quarter and full-year of ‘21 also benefited from a substantial amount of realized performance allocations, which were $54 million in the fourth quarter and $205 million for the year. Notwithstanding, the significant amount of realized performance allocations we generated in 2021, we ended the year with a pro forma net accrued performance allocation balance, which reflects the 20% allocation to the TPG Operating Group of $769 million, an increase of 96% relative to a balance of $392 million at year-end 2020. We also have begun 2022 with a significant amount of realized performance allocations already locked in, including the two signed sale transactions in our capital funds that Jon mentioned. The $14 billion take private of McAfee, where we were substantial shareholders and the sale of Wind River to Aptiv in a $4 billion strategic acquisition.
20:01 Based only on sales of portfolio companies that have been contractually committed in our capital growth and Impact platforms, including Wind River and McAfee. We currently expect these transactions will generate more than $200 million of realized performance allocations on a pre-tax basis. The McAfee sale closed earlier this month, so the performance allocations from this sale will be included in our Q1 dividend and we expect the sale of Wind River to close in the next two quarters.
20:34 Turning briefly to our balance sheet on Page 17 of our earnings presentation, we’ve included a pro forma view assuming our IPO occurred on December 31 of 2021 and as you can see we have a balance sheet light business model and we are well capitalized with approximately $650 million of cash and less than $450 million of long-term debt.
20:57 Looking forward, we have an exciting period of growth ahead of us at TPG. We have a broad series of fundraising campaigns underway and spanning a 11 products across all five of our multi-product platforms. In capital we launched next generation funds in January as planned for all three of our products TPG Capital, TPG Asia and Healthcare Partners. In Impact, we recently launched our Next Rise Fund and in real estate, we are nearing completion of our next opportunistic fund and we just had a final close last week on our first Core Plus product. We also expect to be in market with several new products over the next 18-months, including life sciences and secondary’s.
21:40 While the fundraising market has become more challenging in recent months, we’ve been very pleased with our clients receptivity to these campaigns, we are experiencing strong momentum and we remain confident in our ability to achieve our broad fundraising objectives. Through this fundraising cycle, we’re also focused on strategically expanding our institutional client base and further building our presence in the high net worth channel and we’re seeing very strong demand from our high net worth channel partners in particular.
22:09 Before I turn the call back over to Jon, I’d like to share some financial guidance based on our current expectations for the first quarter of ’22, while we do not intend to provide quarterly guidance on a regular basis, since we’re reporting the fourth quarter results so close to the end of the first quarter, we believe it’s appropriate to provide guidance in this instance. For the first quarter of ’22, we currently expect fee-related revenue in the range of $235 million to $245 million; FRE in the range of $87 million to $92 million and pre-tax DE in the range of $190 million to $200 million.
22:49 I’d also like to quickly remind you of the timing for our first dividend, as well as our dividend policy. As we noted during the IPO process we expect the Executive Committee of our Board to declare our first dividend in the second quarter of this year with respect to the first quarter of ’22. Based on this timing, we currently plan to publish our first quarter ’22 results in May and pay a dividend to record holders during the month of June. As a reminder, our current intention is to pay out to shareholders at least 85% of the after-tax distributable earnings attributable to the TPG Operating Group on a quarterly basis, subject to necessary approvals.
23:28 I’d now like to turn the call back over to Jon for a few closing remarks.
Jon Winkelried
23:33 Thanks, Jack. Before we take your questions, I wanted to touch on what we view as the most critical element of our strategy TPG’s culture. With our family office heritage and our West Coast roots, we maintain a flat organizational structure that fosters an entrepreneurial and inclusive environment and celebrates innovation, authenticity and a hands-on approach towards identifying solutions and building businesses.
23:58 As we talk about culture, I’d like to highlight TPG’s long-standing commitment to fostering strong ESG performance as a firm and in our investment practices. ESG is a core tenant of TPG’s culture and manifests itself in everything we do from Impact investing, building a responsible portfolio to advancing diversity and inclusivity within our organization ecosystem and industry. Earlier this month TPG sponsored the Annual Women and Private Equity Summit for the six-year with 21 of our senior women representing the firm at this leading industry event. We believe our commitment to building a diverse equitable and inclusive culture improves the quality of our investments and our ability to build great companies.
24:42 Last month we held the strategy off-site in the San Francisco for our senior business leaders. It was the first time we had been altogether in person since COVID and it reinforced the momentum we are feeling across the firm. We have started bringing our employees back into our offices around the world on a regular basis and the collective level of enthusiasm across the firm has been incredible. It’s clear to me and other members of our leadership team that despite our extended period of time working away from the office, the culture TPG has never been stronger, we’re extremely proud of our team for their exceptional performance during an unprecedented time in our professional careers, and we look forward to what we will accomplish as we move forward together at TPG.
25:21 With that, we’ll open up the line for questions.
Question-and-Answer Session
Operator
25:25 [Operator Instructions] We will take our first question from Craig Siegenthaler with Bank of America. Your line is now open.
Jon Winkelried
25:46 Craig, you there, Craig?
Operator
25:52 Craig Your line is now open. Please check mute function on your phone.
Jon Winkelried
26:01 Why don’t we go to the next question. Let’s see if we can get Craig back in the queue.
Operator
26:09 We will take our next question from Glenn Schorr with Evercore. Your line is now open.
Glenn Schorr
26:17 Hi, thanks very much. I heard you on your standing firm on your broad fundraising objectives. I wanted to dig a little deeper into the like near-term say, this year we’ve seen a good pull down in rotation out of growth and rising rates that you mentioned and cracked from valuations. I think that might be a good thing for deploying capital. But I don’t know if that slows realizations such that LPs liquidity is gummed up. So can you just talk about the current fundraising environment growth in capital? And how you weigh the puts and takes of all that?
Jack Weingart
26:57 Sure. Hey, Glenn, it’s Jack. Thanks for the question. Look, I think the fundraising environment let me start by saying what over a longer arc we continue to believe that the very positive secular growth drivers for our industry remain intact. We think the growth in investable capital will continue, the allocations to alternatives across most pools of capital around the world we’ll continue and the desire among the largest allocators to invest more capital with fewer managers, we think we’ll certainly benefit firms like TPG.
27:33 In the short-term to answer your question, the industry is definitely experiencing some indigestion, due to a few factors you pointed to the slowdown in liquidity and we certainly would expect that, I think as you heard from my comments our liquidity, we have a substantial amount already locked in that will be closing over the coming quarters from sales that are already been signed. So I think we will continue to be a stand out among the LPs in driving substantial liquidity from our portfolios. But for the industry, if choppy markets continue liquidity will likely slow down. There’s also been faster deployment and expected across the industry and there has been a bit of a numerator, denominator effect kicking in as many of you have written about with last year’s strong alternative performance driving outsized gains in LPs alternative portfolios and then this year’s choppy market is driving a bit of a denominator effect with total assets going down on the margin.
28:35 So the result of all of that is a bit of indigestion in the market, but I will tell you we are in the market with many of our campaigns that I alluded to on the call. And as I said, we are seeing strong reception from our clients for our fundraising campaigns. And we do expect to be successful across our fundraising efforts. But those dynamics that you alluded to in the market are definitely real.
Glenn Schorr
29:02 I hear you and I agree with on the long-term that’s cool. Maybe one quick follow-up on the — there is liquidity drive in 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? 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’re 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 bad thing with the market shifts and your ability to maybe find a partner in the credit side?
Jon Winkelried
29:45 Glenn, its Jon. Thanks for the question. Look, I think at a high level, I don’t think any of us have ever seen, sort of, the level of, kind of, evolution within our industry going on in terms of M&A activity, strategic activity across the board. And I think that with some of the forces that Jack described and forces that we’ve described before, I think that we find that the size and scale is continuing to matter more being able to raise capital and source capital is — I think is being ever more influenced by brand and strength of brand. And our LPs that we are close to want to do more with us across a range of different products and so I think that, that forced to sort of affecting the industry more broadly and we were looking at some of the data, the other day, I think over the — from a decade of ‘09 to like 2018, there were something like four M&A deals done in our industry, and I think last year there were eight only — there were eight I think last year only and I think there’s four or five already this year.
31:00 So there’s a lot of talk and a lot of dialog going on in the industry, and I think there were many managers across various strategies, including credit, but not exclusive to credit as you’ve already seen that are trying to see and trying to think about what the future looks like, that’s creating a lot of dialog and it’s creating a lot of opportunity. So we are as we discussed when we went through our IPO process, we think we’re well positioned as sort of a strategic partner for a number of different types of businesses. As I mentioned before, I think we feel like credit as an example is — and by the way, it’s not the only area, but we feel like credit is complementary to the firm and our capabilities overall. And so we are evaluating opportunities and we’re going to be as you would expect, I think, we’re going to be careful about what we do and we’re going to try to be tactical about what we do with respect to doing something that we feel like we can is complementary with our overall franchise is something that we feel like we can help continue to scale also something that where the culture and the people are compatible with what’s important to us as an organization and where we feel, again that will get sort of the power of the brand and the power of the franchise working together.
32:28 And so I would expect us to make some progress on that over time, but we’re not — we certainly don’t feel compelled to rush on anything we want to find the right opportunities. There are a couple of other areas, I would say, you know, that we feel like we can leverage our brand and expertise well into, I would say another area might be the, kind of, broader infrastructure space, particularly as it relates to energy transition leveraging off of what we’ve built on the Rise within our Rise business within the Impact business, leveraging off our Rise brand our Y Analytics capability and what we’ve seen and what we’re doing in Climate, where we’re seeing as a result of having now raised the capital and deploying our team into the market, we’re seeing a lot of interesting opportunities. And so I think building some capital with perhaps somewhat different cost of capital features to it. And building an expertise in other disciplines might be very additive to us there, you know, we made an acquisition in the Secondary’s GP solutions space, which is NewQuest, I think, we continue to be interested and continuing to grow that. We’re organically, kind of, launching our business within GP solutions in the US and in Europe by having added a team, which we’ve talked about before and we’re about to add — we’re about to launch in a – another organic step out strategy of ours will be life sciences, which we’re about to launch in the market, which is obviously leveraging off our deep expertise there. So I think our mix of, kind of, organic step out growth opportunities for us, we’ll continue to be an important part of our playbook. And then we have our eyes and ears open with respect to other opportunities strategically in the market.
Glenn Schorr
34:25 Thank you for all that, Jon.
Operator
34:29 [Operator Instructions] And we will take our next question from Craig Siegenthaler with Bank of America. Your line is now open.
Craig Siegenthaler
34:44 Great. Can you guys hear me, okay?
Jon Winkelried
Yes. [indiscernible] clear.
Craig Siegenthaler
34:48 Hi, perfect, good. So good morning, everyone. Hope you all doing well?
Jon Winkelried
34:52 Good morning.
Craig Siegenthaler
34:53 My question is on the growth of value rotation that we’re seeing. If the US equity markets go through a multi-year growth to value rotation, can you talk about how this will impact our business, but also remind us how private market investing is different than public market investing in some ways, less impacted by public market valuations?
Todd Sisitsky
35:13 Great. Yes, thanks, Craig. It’s Todd Sisitsky here. Thank you for the questions. You know, I think, first of all, you’re right, we’ve been oriented as growth investors and transformational investors and I think I’ll get to in a moment, but I think your point about the private market has been somewhat different that the public markets is spot on. And we’ve been anticipating choppier markets and really a potential downturn now for several years and that expectation has really shaped our approach to investing and managing our portfolio.
35:46 So first, you know, the new investment front. Our expectation for market [indiscernible] downturn is factored into the go-to-market strategy, the way that we source the new investments that we make. And for several years now, we’ve built multiple compression so an expectation that we will exit at a lower multiple than we acquired company into our financial model. And our expectation of this downturn has [voted] (ph) us to even more committed to our core strategy of investing only in those sectors and in those themes, so we have really strong conviction across the partnership, and we’ve got that angles and confidence in our strategies over a number of years.
36:25 And for us especially in late cycle, but really throughout our strategy, we focused on investing in secular sources of growth rather than cyclical growth, which we do think navigates very well through different economic environments. So you can see, for us, even with the choppiness of the past 12-month period and the COVID effect our broad portfolio grew, it’s revenue at a rate of 35% versus 17% for the S&P 500 Total Return Index. And so the, you know, so really the sectors and themes we’re investing behind in healthcare in cyber security and Climate and DevOps and EdTech, you know, these are all themes that we think we’ll grow well and we’ll grow through different market environments and will overwhelm the multiple contraction that we’re modeling.
37:10 So if you were to distill our investment strategy on two principles, the first is to focus on sectors and themes. And the second is really to invest and this is where I think it gets to the point that you’re raising about the difference between private and public markets in situations where we can inflect the growth where we can bend the curve as Jon mentioned in his comments of the companies that we invest in. And so we’re able to really focus on organic growth and inorganic growth we spent years, developing themes, building relationships with CEOs and once we have a company, it’s a platform for us. So we invest in it with the view of a longer-term hold in some cases through different market cycles to the point where we feel like we have seen this growth here more strategic and that’s a big part of the reason you see so many interesting strategic exits for us on the other side.
37:58 And our experience over the 30-years of investing across cycles is that the strong secular growers with strong support engagement, investment from us as a sponsor can perform quite well through recessions. So again recognizing that we’re living through a complicated choppy market, this is — these are exactly the type of companies, the ones we’ve invested over the last few years that we think we would invest in under any market condition, including late cycle and where we find ourselves now in the market.
38:30 The only other observation I’d make relative to your question of the rotation from growth to value is that a lot of the discussion of a public market reset is really around young and often pre-revenue companies that saw explosive growth run-ups in the — mirror and often as it seem recently been weighed towards companies, who badly missed aggressive revenue projections. And stepping back, of course, it would make some sense that these pre-revenue companies are very early stage companies would be particularly sensitive to capital market volatility, because these companies need access to additional funding to keep operating, but pre-revenue is really not part of the market that we focus on. And we’re really seen very strong performance in our portfolio not the extraordinary performance misses that you’ve seen some of these high flying public young growth companies.
39:18 So the last point, new investment front the reset in the public market in a lot of ways as you also mentioned creates a really interesting opportunity for us on the new investment front in the intermediate term. Only the 25% to 30% of our exits in the growth arena, have been in the public markets, but the public market is really are a meaningful competitor us, the stack in the IPO boom over the past couple of years represented with a competitor and took dozens of opportunities that we might have otherwise pursued away. And so right now we find ourselves in a very good position, where capital has become more scarce again, which is of course very positive thing for us.
39:58 The other thing I’d just point out briefly relative to the market environment is that, you know, that has our expectation of a downturn and choppiness in the market has also driven our priority and our focus around liquidity. As both Jon and Jack described, we’ve been very focused on driving liquidity during the favorable period over the last few years, record liquidity return to our investors in several business units and driven overwhelmingly through a return sale of equity and specifically full company sales rather than floating companies are doing recaps. And so that has the effect, which is a very positive one for us, particularly the context of our fundraising efforts of returning capital at the same LPs that we’re going to be — that we’re going to for additional some new fundraisers. But also lacking in our returns and locking in our performance. And so from our standpoint, that’s been a really important part of our macro view, where we are in the cycle.
40:59 So, look we’re a folks in this environment, and we do anticipate choppy times ahead, but we actually feel like our playbook, our strategy of investing in growth companies and then transforming and inflecting those growth companies is actually very well suited to the current environment, we feel really excited about the portfolio that we’ve built up over the last few years.
41:17 Jim, do you want — anything you add to that?
Jim Coulter
41:19 You know, that was well said, Todd. Craig having done this for a long time, it’s always been interesting to me how different the private market growth investing landscape is in the public market, best in landscape and to think indices in the public market investing world, we tend to think companies in our world. And as Todd pointed out are you get heard is if you have unexpected multiple compression, which is not what we’re seeing in our underwriting. Secondly, you heard if you miss your numbers in our portfolio is performing very, very strong. And third, in some ways the public market is a robust competitor for us. The world we went through last year of very high access to public markets and SPAC activity in some ways was less attractive for us than the environment we’re in now. In the intermediate term to long-term investing area that we’re in, this is actually a better part of the cycle for us to invest in, and I think our LPs understand that and continue to support us as we delve into this very interesting market.
Craig Siegenthaler
42:36 Hey, thanks for the comprehensive response there. Just a quick follow-up on inorganic growth corporate M&A. We just wanted to update in terms of how you’re thinking about this, if anything, sort of, changed? And I was especially interested in the credit vertical and also retail distribution?
Jon Winkelried
42:56 When you it changed relative to what?
Craig Siegenthaler
43:02 Your prior expectations for inorganic growth?
Jon Winkelried
43:06 No, I don’t think so, I mean, I think we’re — I would say if there is anything that may be changed is we’re mindful of price, because the values in various parts of the market have been — I would say frothy to a degree, it’s for certain businesses at certain levels of scale or certain levels of development, everybody thinks they have really valuable thing, and so we’re mindful of that as we look at opportunities. But I think again the important things for us, our quality of business, quality of partner and what we feel is an intelligent fit both by virtue of the nature of the business, as well as the team that people, we’re not buying something — we wouldn’t be buying something with an eye toward, you know, just having, sort of, some, kind of, independent subsidiaries somewhere, we’d be buying something that would become part of our overall franchise. And so we also are looking for as people who want to join us, but that would continue to be builders and building the business and so that’s important to us.
44:31 I think that within the landscape of credit, as an example, obviously credit is not just one thing, there are sort of multiple aspects to what credit strategies do. And I think that we would over time also be looking to build a balanced approach to that in terms of the different, kind of, lines of business if you will. And so we may — if we are able to do something in terms of an acquisition, as an example, we may do something that’s a piece of that strategy to start with and then continue to build from there. So, but I don’t think, I have anything more yet other than our intent to continue to build and diversify our franchise that we talked about during our IPO process, when we last talked about, this is still the same.
Craig Siegenthaler
45:27 Thank you, Jon.
Jon Winkelried
45:29 Thanks.
Operator
45:31 We will take our next question from Ken Worthington with J.P. Morgan. Your line is now open.
Ken Worthington
45:37 Hi, good morning. TPG is you 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 markets down at certain percent, what sort of downside protection you think an overall portfolio might get from your utilization of this downside protection?
Jack Weingart
46:25 Ken, as you know in the growth equity market in this case differentiated from Venture. There is a wide usage of preferred stock structures. And also those preferred stocks have real teeth, because the businesses are at a point where they have achieved fundamental long-term value. I would say very high percentage of our growth equity investing is in preferred structures and increasingly as markets get choppy, those preferred’s are not only downside protection, but often have ratchets, super premiums or other things that provide not only downside protection, but upside even in a downside scenario, that’s one of the innovations, we really have been leaders in, in the growth equity marketplace. How many not from venture, but instead from the structured world of private equity, we have always built that into our portfolio. I can give you today a absolute percentage as to what percent of the capital would be in that structure, but it is a very broad piece of our economic tool kit. And that is something you will also see us use even more aggressively going forward.
47:47 In moments like this, Ken, as companies go to the financing markets with uncertainty often they’re wanting to avoid down rounds and that allows us to create very attractive structure transactions for the capital that they will need as they continue to grow.
Ken Worthington
48:07 Brilliant, thank you. And then just maybe briefly non-comp expense, I believe, was $36 million this quarter. Where there unusual items in 4Q or is that sort of OpEx, a good starting point for 1Q and beyond?
Jon Winkelried
48:25 Yes, I think it’s a good starting point for 1Q and beyond. We are, as you know, we’ve had to build substantial resources to support all the activities as a public company, and I think that’s a good starting point for OpEx going forward.
Ken Worthington
48:40 Great. Thank you very much.
Ken Worthington
48:43 Thanks.
Operator
48:46 We will take our next question from Alex Blostein with Goldman Sachs. Your line is now open.
Alex Blostein
48:53 Hey guys, good morning. Thanks for taking the question as well. Maybe just building on some of the fundraising discuss from earlier some of your comments around private equity and sort of some of the indigestion in the marketplace are sort of 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 that within private equity by type of LP or geography, are you seeing any notable differences or is your common fairly broad-based?
Jon Winkelried
49:29 So, Alex, you’re saying just, kind of, drilling down on the characterization, I gave more by geography and type of LP?
Alex Blostein
49:39 Yes, exactly right. So the private equity broadly comment — heard that lot unclear for the industry, but you guys generally expect your fundraising to be on track with what you’ve communicated during the IPO. But as kind of double-click into that geographies and LP types, so there are notable differences between different customer basis?
Jon Winkelried
49:58 Yes, that’s a good question, Alex and I know you wrote somewhat extensively about this and I think we do a lot of your comments, but to your point, these dynamics are very different in different parts of the world and with different types of LPs. The most directly impacted by some of the, kind of, numerator, denominator, allocation target type math that I walk through or maybe a good example of the US State Pension Funds. Who operate where the target for alternatives and although some of those targets are moving higher and there’s been some publicity about that. Do they have to manage to a target pretty specifically? So — and some of the maybe International pools of capital that are growing more rapidly and don’t have quite as strict target to manage to or actually, we’re seeing increasing allocations to our funds.
50:53 As we are in the market, we have some, who are more directly impacted by this. Re-upping with us for sure in some cases staying flat when they would have preferred to increase the amount of capital that we invest for them, but in the international pools of capital we’re seeing in some cases, substantial increases in commitment sizes.
Alex Blostein
51:15 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 when you guys are doing there with, especially with respect to opportunities to roll this product out to retail broadly, and any sort of timing of that would be would be helpful? Thanks.
Jon Winkelried
51:36 You know, I would make one more comment on the — I left out you just sparked my thought process, Alex. But within the broad high net worth in retail landscape that whole universe of investors is still substantially under allocated to alternatives. And is not impacted by the, kind of, current formulaic numerator denominator effect, so we continue to see real opportunity to grow into that space.
Jim Coulter
52:01 And Alex, it’s Jim. One thing I would add also is the learning’s of the last private equity cycle was that investors who stepped back from their deployment actually led to some poor performance afterwards. So we’re seeing our clients really work to continue deployment even with some of the ingestion learning from past cycles.
Jon Winkelried
52:28 Alex, on — just moving to your example on real estate, I think first of all very important business for us in terms of a driver of growth. We — I think we talked about this around the IPO the momentum that we have with respect to that platform is very strong. I reviewed in my comments, obviously the types of returns we’ve generated there. And obviously that’s led to us going through a meaningful period of scaling within our real estate platform and also the ability to leverage that performance into new product development. In terms of our progress on fundraising that’s one area, as an example where I think we had highlighted, we were going to be in the market raising our fourth opportunistic fund, which was — which is trapped for, and the progress there, I guess, let me just say has been excellent, and I think we’ll be announcing relatively soon. I think a final close with respect to TRIP 4 and that’s been excellent.
53:40 I think Jack may have mentioned in his comments that we have announced the final close on our first Core Plus strategy, which was I think — I had mentioned to you before, a strategy where several of our LPs, who had success with us in the real estate business came to us and helped us basically launch into that part of the market, we closed $1.750 billion in our first Core Plus strategy and I think we mentioned that we had designed that we’re after it’s effectively after most of the capital is invested. We have an opportunity to work with our LPs to flip that into an open-ended fund structure.
54:22 One of the things that we’ve been doing recently is thinking through whether we’re not, that’s the most effective way to do it. By the way, I think, that our LPs are going to be interested in seeing the investments in that fund perform for little while. So I would say that we have a little bit of work to do still in front of us before we were able to open it up. But the other thing that we’ve been evaluating is potentially alongside of that whether or not we use some other structures, other investing structures in the market like, for instance non-traded reach and things like that to continue the expansion of that strategy. So we feel pretty good about where we stand right now on the real estate front. We also as you know, have a commercial mortgage a publicly traded commercial mortgage REIT we recently EMEA a higher, which we have announced where we’re hiring — we hired a new CEO for the REIT Doug Bouquard, who comes from Goldman Sachs, who will be joining us very shortly, and hopefully will continue to help us build out in the credit space around real estate, as well with some other structures. So we feel pretty good about the momentum there.
55:36 The other area, obviously, with respect to our progress, I had mentioned earlier, is within the Rise and Impact platform there’s been a lot of focus obviously on that, we feel like that’s a — we certainly feel like our franchise is differentiated there and I think we did — during our IPO road show we were right, we were working on in the middle of raising our Climate Fund, which Jim leads and we’ve effectively reached our fundraising goal there having raised about $7 billion for our Climate Fund. And I would say, I know, Jim, you might want to talk about it, but in terms of one of the questions that we got along the way was what would deployment look like in Climate, since is to an extent a new sector in the market. And I think we’re very encouraged a number of investors have asked us, you know, how can this scale over time? And we’re very encouraged by what we’re seeing there in terms of opportunities.
Jim Coulter
56:40 I would add in that question of — would the opportunities that be large enough is at least in my mind, very much answered. To give you a sense, Alex, we’re little over six months into the close of that and fund and activity levels across our Climate investing have been in excess of $3.4 billion of total capital committed across our Rise platform and Co-Invest, and that’s really accomplished while we were in the fundraising market. So indicative of very substantial opportunities to attractively deploy capital and grow that product base.
Jack Weingart
57:27 Sorry, again it’s Jack. I want to go back to your OpEx question, because I don’t want to indicate the 36 per quarter is what you should expect going forward in ’22. We do continue to invest in resources for the public company. We do expect that with COVID-related travel restrictions moving on, we are seeing an increase in travel expense. So I would guide you toward, kind of, go-forward quarterly OpEx in the low ’50s.
Alex Blostein
58:03 Thanks everybody.
Operator
58:07 We will take our next question from Robert Lee with KBW. Your line is now open.
Robert Lee
58:14 Great, good morning. Thanks for taking my questions and congratulations on your first public earnings call. Maybe going back to fundraising and deployment, so certainly appreciate the comments about fundraising environment. At the same time of those reason getting the spend I think of TREP 4, I guess, you know, maybe closing in the not too distant — or having a close and not too distant future, may be growth deployment is maybe help these maybe growth six happening faster, kind of, feels like maybe some of your fundraising is being pulled potentially actually being pulled forward with this and versus, you know, maybe what you initially thought. If I just spend a word TPG 9, I mean, is that fair characterization, kind of, feels like something that are happening a bit faster?
Jack Weingart
59:11 Yes, hey Rob it’s Jack. Let me, and we’re not going to be giving substantial intra, kind of, quarter guidance as we go here, but obviously we’ll be giving information as we close on capital raises that being said, this is our first quarter, I know, this is obviously our fundraising super cycle ahead of us is super important. So let me try to give you all a little bit more framework and little more information, kind of, campaign by campaign. I think you’re the — inference of your question is correct. So we are seeing a bit of a pull forward relative to our expectations. In fundraising in the context of what I mentioned was a strong demand that we’re seeing from our clients for our funds. And as I mentioned in my comments, we have about 11 funds, we expect to be in the market with this year, and let me just walk through the most significant of those to give you more color.
60:04 On the real estate platform, we are currently oversubscribed on our next opportunistic fund TREP 4, Jon alluded to that. And we expect to hold our final close there in the second quarter and we’ll obviously give an update at the end of the first quarter, about how much we’ve closed on as of then. And we expect to be at our hard cap there of $6.5 billion. We just had our final close last week as I mentioned on the Tech Plus, Core Plus product, which is an exciting expansion into — of our real estate platform.
60:38 On the Impact side we expect to hold the final close for the Climate Fund in the second quarter at the hard cap of $7.2 billion and we recently launched our next broad-based impact fund Rise 3 with a target of $3 billion. On the capital platform, which you asked about we did launch TPG 9 Healthcare Partners 2 and the next Asia Fund in January as planned. On the capital — on the TPG Capital side, TPG 9 and Healthcare Partners as you know are kind of joined us as the [indiscernible]. And those two, we haven’t — we have articulated to our LPs in aggregate target across those capital basis of $18.5 billion, you know, on the Asia side we launched with a target of $6 billion.
61:33 And we had planned across those businesses to hold first closes as you know from our IPO discussions more in the back half of the year. And I would say, given the pace of investing that we’ve been seeing. And given the demand we’re seeing for the products. I would, currently expect that we hold first closes across all three of those products TPG 9 Healthcare Partners and Asia towards the end of the second quarter.
Robert Lee
62:03 Super helpful. Thank you. And maybe a two follow-up and then I’ll — maybe has the two-part the first check, if you could also just want to make sure I have the numbers right, your 2Q guidance on pre-tax DE was that 190 to 200, so I make sure I have the numbers right?
Jack Weingart
62:22 That’s Q1.
Robert Lee
62:25 Yes, sorry Q1, yes, yes, right.
Jack Weingart
62:27 On pre-tax DE, yes.
Robert Lee
62:31 Right. And then maybe more broadly, one of the, I guess, impacts of, you know, the warrant in Ukraine is more countries focusing on energy security, which necessarily in this day and it still means fossil fuels. So does that all impact as you think about your Rise and Impact funds at all impact? How you think about the opportunities that may evolve over the next couple of years is going to have to be more, more focus globally on secured domestic production or gas generation, have any impact of all, kind of, how you think the opportunities set?
Jon Winkelried
63:22 Generally, I see it accelerating, a lot of our activity in the Climate area. Let me give you a few pieces of data around that. First of all, one of the big issues in Climate product evolution is what’s known as a green premium. How much more expensive or in some cases less expensive it is to do Climate-friendly activity. Higher oil prices generally create very attractive shifts in the green premium and can accelerate projects and activities around Climate investing. The first of all, higher oil prices tend to help us. Secondly, as people focus on energy security and building into energy security they’re doing so thinking about it with a green future in front of them. So if you were for example in Europe, not only are you worried about liquid natural gas, but you’re looking beyond that the questions of how do we build our solar and other sustainable types of fuels and executions. So essentially, while there will be a lot of focus on fossil fuels are also be a focus on what are we doing next, and that will accelerate activities for green investing, we’re seeing that very much in our pipeline.
64:51 And overall, we are also seeing very substantial investing in re-shoring of supply chains, so as people are thinking about battery investing or solar panel investing, there is a real movement towards moving that question of energy security closer into regions, you see that particularly in Europe, but also in the US, and that will drive substantial investment opportunities for us. So a lot of difficult things coming out of the Ukraine, there’ll be a lot of near-term focus on fossil fuels, as there should be, but I think in many ways this will accelerate the activity that we’re seeing in our pipeline to move to a green future.
Robert Lee
65:36 Great. That’s very helpful. Thank you — thanks for taking my questions.
Jim Coulter
65:40 Okay. Thanks, Rob.
Operator
65:43 We’ll take our next question from Bill Katz with Citigroup. Your line is now open.
Bill Katz
65:49 Okay. Good afternoon, everybody. Thanks for taking the question at this point. So first one maybe for Jack could unpack the guidance for the first quarter, I appreciate it around the revenues to $235 to 245? How much might be base versus transaction monitoring fees and for either the quarter just over or the upcoming quarter, are there any catch-up fees embedded in that guidance? Thank you.
Jon Winkelried
66:15 Hey Bill. I would say the — there is actually a little bit less — I would say that the mix of management fees and transaction and monitoring fees is expected to be pretty consistent with what, I mean, what we experienced last year and what we expect to experience this year.
Jack Weingart
66:43 On your second question, I don’t think there are any material catch-up fees embedded in that Q1 guidance.
Bill Katz
66:51 Great, thank you. I apologize for that. And then bigger question may have either you guys just in terms of funding markets, someone if you comment on that. And then as you, sort of, look into your downstream view with the portfolio companies. What are your company seeing in terms of economic slowdown as we look out over the next sort of three to nine months? Thank you.
Jon Winkelried
67:14 Are you talking about funding markets? Bill, you’re talking about financing markets?
Bill Katz
67:17 Yes, funding markets for sure right as the ability to impact deployment? Thank you.
Todd Sisitsky
67:23 Sure. But hey, it’s Todd Sisitsky, I think you know, from our standpoint we have generally been very conservative on leverage and so our strategy as growth investors and [indiscernible] investors, sort of, necessitated being not, I can’t remember the last time, we’ve actually taken the full amount of leverage offered by banks in some of these situations. We need the flexibility, we need the ability to put more money into our platforms, both equity and debt. And so despite the ample availability of debt over the last five to seven years, our overall net debt to EBITDA portfolio wide is below 4 times, which again is consistent with our strategy and our exposure.
68:10 I’d also say that again with a anxiety about the choppiness of the market for some number of years, you know, once we do acquire companies won’t use — when we use leverage and we have floating rate debt, we are typically hedging 75% to 85% of the rate exposure. So I think your comment, I mean, obviously interest rates are going to be increasing and that will factor and I think to the overall deal environment, I do think that our strategy is probably a bit insulated from the financial engineering type strategies that really require high availability of cheap leverage. And as a result, I think we feel pretty comfortable with where we said.
Bill Katz
68:59 Thank you.
Todd Sisitsky
69:02 Thanks, Bill.
Operator
69:04 Our next question from Brian Bedell with Deutsche Bank. Your line is now open.
Brian Bedell
69:10 Hi, good afternoon [Technical Difficulty] okay?
Jon Winkelried
69:13 You’re breaking up, Ryan, like it’s hard to hear you.
Brian Bedell
69:17 Can you hear me better now.
Jon Winkelried
69:19 Yes. Yes.
Brian Bedell
69:20 Okay, great, great, thank you. I apologize, I had just step up the call for a few minutes. If I’m not sure if you answered this, but I did want to understand the infrastructure comments, I think that you made earlier Jon on the — on looking at step outs to build the business. And I just wanted to understand if that was on the infrastructure side, is that largely part of an impact strategy overall, because you’ve mentioned obviously energy transition being a major role within that infrastructure? Or is that something that you’re thinking about as a separate platform and then obviously, I guess, organic versus inorganic a possibility within that strategy?
Jon Winkelried
70:07 I think both organic and inorganic is a possibility within infrastructure and as with any acquisition, it would be where would you take it from where we began. There’s two areas that interest us greatly in the infrastructure area, where we also think we have some natural advantages. The first is related to Rise Climate and in the Tech revolution, what we’ve found is early on private equity was successful in data centers and towers, and then over time as those revolutions continued they moved into the infrastructure area. And so, having the knowledge, but having multiple pools of capital will be helpful in the Climate revolution, just as it was in the Tech revolution. So we have natural amounts of quite substantial deal flow and often that deal flow doesn’t know if it’s private equity or infrastructure. So having the opportunity to correct that deal flow and take advantage of our knowledge is as a natural for us.
71:09 The second area that I would point out, we have some advantages as digital infrastructure which is, as you know, one of the fastest growing parts of infrastructure and across what we’ve done in fiber and elsewhere. We have a strong track record there. So those two particular areas are the most interesting for us, and both of them are things we’re thinking deeply about it.
Brian Bedell
71:32 And that’s more in the near term or are we talking about sort of more of a multi-year vision starting fee next year?
Jon Winkelried
71:42 As with all our acquisition discussions, it’s hard to predict timing, but we’re a business builders as you know, and these are clear areas that we would have advantages in building into or acquiring.
Brian Bedell
71:54 Yes. Okay, that makes sense. And then just a follow-up on retail strategy, obviously you’re trying to certainly advance that how important is the credit platform or you’re acquiring a credit platform to that retail strategy, if that ends up getting sort of postpone 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?
Jack Weingart
72:28 Yes, it’s Jack. Let me touch on that. I don’t think it’s a problem if credit is — and say our build into credit is somehow delayed, but you start by thinking about like our current product set is particularly relevant to the high-end of the high net worth market, and we are continuing to invest in building our brand among those high net worth investors. We’re continuing to build our team to market to this channel directly at all levels, and we do without having a credit platform during this fundraising cycle that I described, we do expect to raise a greater percentage of our capital from this channel than we have in the past. To give you a sense, I think we have 15 separate campaigns planned across many banks and across almost every product that we have in the market. So we are putting real resources into building our brand and building into that channel. I agree with your — the inference of your question, as we do continue to diversify our products Tech Plus on the real estate side, as we expand that product and expand into further real estate products and eventually into credit as well. I think we will have set up our brand in the channel to readily capitalize on those opportunities and those products will be applicable to a much broader set of retail investors.
Brian Bedell
73:53 Great, that’s super helpful. Thank you.
Operator
74:00 We will take our next question from Michael Cyprys with Morgan Stanley.
Unidentified Analyst
74:06 Hi, good morning. This is [indiscernible] Morgan Stanley signing in for Mike Cyprys, thanks for taking the question. I’m just going back to organic growth very quickly. You talked a little bit about infra as well as — it’s some other expansions. I just curious, what are the adjacencies do you think you could get into, say over the next three, 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?
Jim Coulter
74:32 I think there’s a lot of examples, if you look at our history, with the healthcare fund that we’ve attached to TPG Capital, that’s been very successful, there’s a lot of demand for that. Not that many place is actually expressed, scale healthcare investing. Jon, I think mentioned this in passing, but another near-term opportunity, sort of, along the same lines even in the same sectors our life sciences fund. As part of building over many decades now this broad-based healthcare focus which is not just in TPG Capital, it’s in growth, it’s in TPG Asia. We have gotten into the flow of a lot of opportunities that are just earlier stage and really exciting opportunities that we feel very well equipped to evaluate and we want to create an opportunity, a liability stream, it’s better suited to addressing that part of the market.
75:29 And frankly the pullback in the life sciences world creates an even more compelling opportunity from a new capital standpoint. So we have a great team that we’ve built around that. We have a lot of resources around the firm that are excited to be involved from investment community standpoint in the sourcing standpoint. And again, it’s like a perfectly natural step out and one that be the LPs that we partner with as long as we have particularly around healthcare are very excited to be part of as well.
Jack Weingart
75:58 Secondary, I would point out is Asia, where we have very substantial opportunity for expansion. And lastly, just a general comment, innovation is alive and well at TPG and the type of innovation you’ve seen over the last few years. And what you think, Jon, but my sense around the firm is it’s not slowing down.
Jon Winkelried
76:20 No there is, look, there is a — people are constantly looking for ways of growing the franchise and growing your platforms and one of the things that we are trying to be thoughtful about is how to think about where to allocate resources to because in our view, one of the things that’s important is that things either have to be very complementary to the ecosystem and therefore, drive that flywheel effect that we have, you know, Todd referenced the life sciences is a great example, because we’re so deep in healthcare and we’ve actually done — we’ve been successful in a number of cases in life sciences investing already that it provides the basis of which to build a meaningful credible step out opportunity, where we have a reason to win in the market.
77:13 The other thing that we focus on is, look not only this question of whether or not it completes the ecosystem, but also whether or not, it can scale or not. And so those are other things that we’re mindful of as we think about, because ultimately to generate the kinds of economics we want to generate for the business and grow our business and our financial results. We also want to make sure that we can develop the scale, which implies ultimately sufficient margin. And so we focus on that as well, so when we talked about infra, as an example, that’s a place where it links back into a couple of our businesses, but also is a very potentially scale of opportunity where we’re already seeing opportunities, as an example, I think, as Jim had mentioned in energy transition, we’re already seeing opportunities there and the question is how is cost of capital effect that? How is return profile of the pool of capital effect? How you stand up something on its own versus integrated and what you have?
78:12 Jim mentioned Asia as an example, we have a private equity business in Asia and I think over time, there are a number of different there are — there is the potential for step outs and organic growth in Asia as a result of the same phenomenon that we’ve seen here developing in Asia as an example, we developed our tech adjacencies platform here, because we saw opportunities through our franchise that we’re slightly different than traditional growth equity opportunities either in structure or in terms of deep minority or whatever the opportunity might have been. I think that we’re still — given the development of some of the markets around Asia, particularly outside of China, we see potential opportunities to do that, whether it’s in Australia or in some cases, in India and Southeast Asia. So that’s how we think — that’s just to give you a sense of our mindset in terms of how we approach these things. There’s lots of innovation energy, we have to, kind of, meter it out and manage it in an appropriate way.
Unidentified Analyst
79:19 That’s great color. Thank you very much. And if I could just ask a quick follow-up on our capital return, how did you think about the 85% payout ratio versus say a fixed dividend with some of your peers do? And how that would allow you potentially to retain more capital for investment depreciates in the balance sheet like strategy you’re trying to pursue?
Jack Weingart
79:36 Yes, it’s Jack. I think you hit on it right there. Right, we — pro forma for the IPO as I mentioned, we’ve got $650 million of cash on the balance sheet. With retaining 15% of after-tax DE will continue to add to that balance sheet flexibility and we have relatively little debt. So as we sit here today and think about pursuing the growth opportunities that we’ve talked about, we believe we have plenty of capital, and as long as we feel that way, we believe the right answer is return capital to shareholders. So that will be – we continue to be our policy.
Unidentified Analyst
80:10 That’s great. Thank you very much.
Jack Weingart
80:12 Okay, thanks.
Operator
80:14 And we will take our final question from Lucas Ruttan with Bank of Montreal. Your line is now open.
Lucas Ruttan
80:22 Alright, 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 deployment? And also relative to the roughly $8 billion of capital you invested last quarter roughly where are you year-to-date versus that run rate? Thank you.
Jim Coulter
80:46 Sure, I’ll start with the — just to sort of where we’re seeing opportunities and again apologies if it sounds a bit repetitive. We’ve continued to I think find our best opportunities near is we have our strongest focus our strongest teamwork and hopefully you’ve gotten a sense from this, culturally we’re very much oriented around themes, around sectors, around getting very deep and developing conviction across our investment committees in the opportunities that we have resources and ecosystems built up in and so for us, and I think, actually, it’s worked out quite well, particularly in recent years as we’ve envision getting later in the cycle in terms of the investment strategy.
81:31 So for us, I’d say that we continue to see a lot of activity and a lot of interesting differentiated make a — right opportunities in the broad worlds of technology, which would include both software, content, media and host of other sort of interesting areas in and around technology and healthcare, those are two, sort of, big sector areas. And of course within each one there is a lot of granularity as to what we’re finding. Jon mentioned interesting opportunity that intersected two of our other sectors in Troon, which overlap both business services and consumer, which are important sectors for us as well. But it’s thematically again I think we’ve continued to, sort of, lean-in, in the places where we have the most conviction and we feel like we have the best resources to continue to drive the growth in our companies and that has continued to generate the most attractive deal flow from our standpoint. And we continue to see to have very busy investment committees with a sense of, a lot of opportunity in front of us will be under three or four final pricings after we’re done with the call today in fact.
Lucas Ruttan
82:49 Thank you.
Jim Coulter
82:52 Thanks.
Operator
82:53 This concludes the question-and-answer portion of today’s call. I would now like to turn the call back over to Gary Stein for any additional or closing remarks.
Gary Stein
83:01 Great. Thank you, operator. Thanks everyone for joining us today. We look forward to following up with you again next quarter.
Jack Weingart
83:09 Thanks everyone.
Jon Winkelried
83:10 Thanks everyone. Appreciate it.
Operator
83:14 This concludes today’s TPG fourth quarter 2021 earnings conference call and webcast. You may disconnect your line at this time and have a wonderful day.
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