TPG, which priced its IPO on Wednesday, has benefited from an interest-rate slide that began before its founding in 1992. David Bonderman’s private equity firm, still focused on LBOs, is exposed to debt costs rising, writes TheRealLSL
The firm, now run by ex-Goldmanite Jon Winkelried, raised a total of $1 billion from investors in its IPO . About 40% of its net spoils will go towards buying out certain stakeholders. The rest will give the business ammunition to expand.TPG has focused on its bread and butter. Its prospectus boasts that its funds own 280 companies in 30 countries which employ more than half a million people.
Bonderman's firm has clocked average annual returns of around 15% for fund investors, net of fees. That has looked favorable enough against other options, like public stocks, for private equity to become a staple holding for pension funds and endowments. Competitors have used the currency of public shares to diversify. Carlyle now has just around 40% of its assets in private equity, Blackstone a third, and Apollo one-tenth. Investing in debt is a big business for some of TPG's rivals. KKR and Apollo bought or built insurance businesses, giving them permanent capital that enables them to spend less time on the fundraising treadmill.
The Federal Reserve is likely to start raising interest rates soon to tackle inflation, which hit 7% year-on-year in December, the highest in 40 years. That could dent leveraged buyouts after three decades of easy money. TPG, with around 80% of assets still in private equity, needs to reinvent itself.- TPG priced its initial public offering on Jan. 12 at $29.50 per share, raising $1 billion. The deal values the firm founded by David Bonderman and James Coulter at $9.1 billion.
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