管理層發言
Good morning, and welcome to the TPG's Second Quarter 2025 Earnings Conference Call. Please be advised that today's call is being recorded. Please go to TPG's IR website to obtain the earnings materials. I will now turn the call over to Gary Stein, Head of Investor Relations at TPG. Thank you. You may begin.
Great. Thanks, operator, and welcome, everyone. Joining me this morning are Jon Winkelried, Chief Executive Officer; and Jack Weingart, Chief Financial Officer. In addition, our Executive Chairman and Co-Founder, Jim Coulter; and our President, Todd Sisitsky, are also here and will be available for the Q&A portion of this morning's call. I'd like to remind you this call may include forward-looking statements that do not guarantee future events or performance. Please refer to TPG's earnings release and SEC filings for factors that could cause actual results to differ materially from these statements. TPG undertakes no obligation to revise or update any forward-looking statements, except as required by law. Within our discussion and earnings release, we're presenting GAAP and non-GAAP measures, and we believe certain non-GAAP measures that we discuss on this call are relevant in assessing the financial performance of the business.
These non-GAAP measures are reconciled to the nearest GAAP figures in TPG's earnings release, which is available on our website. Please note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any TPG fund. Looking briefly at our results for the second quarter, we reported GAAP net income attributable to TPG Inc. of $15 million and after-tax distributable earnings of $268 million or $0.69 per share of Class A common stock. We declared a dividend of $0.59 per share of Class A common stock, which will be paid on September 2, 2025, to holders of record as of August 18, 2025. I'll now turn the call over to Jon.
Thanks, Gary. Good morning, everyone. Before we begin, we want to acknowledge the senseless act of violence that occurred at 345 Park Avenue last week. Our thoughts and prayers go out to those impacted by this tragedy, and we stand in solidarity with our friends at Blackstone, Rudin Management, the New York Police Department, the NFL, and KPMG during this difficult time. To the first responders who acted swiftly and courageously, thank you. Moving to earnings. TPG delivered outstanding results in the second quarter, reflecting the strength and durability of our franchise. Our after-tax distributable earnings for the quarter increased 30% compared to last year, driven by our strong operating metrics. On a year-over-year basis, our second quarter fundraising grew nearly 80% to $11.3 billion and deployment grew 36% to $10.4 billion and realizations grew more than 20% to $6.5 billion. After quarter end, we completed our acquisition of Peppertree and the integration process is well underway.
We're excited to welcome our Peppertree colleagues to TPG and to introduce our clients to this compelling digital infrastructure strategy. This morning, I'll discuss our momentum across fundraising, deployment, and realizations before turning the call over to Jack to cover our financial results. On the capital formation front, we had the second highest fundraising quarter in our history and the strongest credit fundraising quarter ever. On our last call, I highlighted the strength of our credit fundraising pipeline and that we were at an inflection point in our client dialogues. In the second quarter, we converted that momentum into $11.3 billion of capital raised, of which $5.4 billion was from our credit platform. Importantly, our second quarter numbers do not include any commitments for our flagship buyout funds, TPG Capital IX and Healthcare Partners III. We're seeing an acceleration of fundraising into the third quarter and are increasingly confident that we will raise significantly more capital in 2025 than last year.
I'll share some updates across our campaigns. In private equity, during the quarter, we completed fundraising for TPG Growth VI, exceeding our $4 billion target to raise a total of $4.8 billion for the fund and affiliated vehicles. This represents a 35% increase over Growth V, which is consistent with our track record of driving fund over fund growth across our strategies. In addition to continued support from existing clients, we meaningfully expanded our investor base outside of North America, particularly in the Middle East, Asia, and Latin America. Additionally, we are seeing strong early support for our second GP solutions fund, which we expect to be significantly larger than its predecessor. As a reminder, TGS is our GP-led secondary strategy focused on North America and Europe, and it's experiencing significant demand as GPs look for creative ways to drive liquidity for their strongest performing assets.
We recently launched the TGS II campaign and closed on $1.3 billion in the quarter. This early momentum is driven by the strong deployment and performance in our inaugural fund, which is now fully committed across 14 investments. In May, we also launched T-POP, our new perpetually offered private equity product on two of the largest warehouses in the U.S. The initial feedback has been very positive, and we raised approximately $430 million across our first two closes in June and July. The TPG brand is resonating in the channel, and we are establishing a strong following with more than 560 individual financial advisers participating in these closes. This is a great foundation to build upon as we scale T-POP and launch additional products over time. In Credit, the second quarter was a record fundraising quarter with $5.4 billion of total capital raised across our strategies. In Credit Solutions, we closed an additional $1.4 billion of capital for our third flagship fund, bringing the total raised to date to $4 billion.
Our market leadership in the opportunistic credit space, further enhanced by our strong cross-firm collaboration, continues to resonate with clients and our fundraising pipeline remains robust. In middle market direct lending, we held a first close of $1.4 billion for our sixth drawdown fund during the quarter. Due to Twin Brook's leadership position in the lower middle market and a continued steady pace of originations, we launched fundraising for our next vintage fund just seven months after the final close of its predecessor. Twin Brook's differentiated portfolio, disciplined underwriting, and stable returns continue to resonate with both existing and new clients, resulting in a very strong initial close. And in structured credit, we raised $1.4 billion across our ABC drawdown and Evergreen Funds as well as a number of SMAs. Demand for structured credit is high and continues to grow as clients are generally underweight and looking to diversify their exposure beyond corporate credit.
Additionally, we continue to expand our product set into key areas such as private investment-grade asset-backed securities. In aggregate, we are seeing significant broad-based momentum in credit fundraising, and we expect 2025 to be a breakout year. I also want to highlight the meaningful progress we've made in the insurance channel. Insurance contributed nearly 30% of the credit capital we raised in the second quarter, primarily through our structured credit and credit solutions strategies. Our scaled and diversified credit platform has enabled us to deepen relationships with our existing insurance partners while also establishing new ones. As we continue to organically grow our insurance client base and commitments, we are also actively evaluating broader strategic partnerships and inorganic opportunities within the channel. While I'm very pleased with our capital formation during the second quarter, I'm even more enthusiastic as I look ahead.
For TPG Capital X and Healthcare Partners III, we are in the midst of a rolling first close where we expect to receive total commitments of approximately $9 billion. This strong result during a challenging private equity fundraising environment is a testament to the trust we've built with our clients through our distinct investment approach and excellent performance. While clients remain cautious and highly selective amidst ongoing macro uncertainty and muted distributions, our market leadership and differentiated value proposition in private equity have driven strong absolute and relative fundraising results. Moving on to deployment. We had a robust quarter with more than $10 billion of capital invested, which increased 36% year-over-year. In TPG Capital, we announced the $2.2 billion take-private of AvidXchange, a leading provider of AP automation software and payment solutions in partnership with Corpay.
This is another example of a creative win-win corporate partnership that offers significant downside protection. And after the quarter end, we closed the carve-out of Sabre Corporation's Hospitality Solutions business, a leading technology solutions provider to the hospitality industry. Given our focus on vertical market software in the travel and leisure space, we are excited to drive transformational growth in the newly separated business. In Rise Climate, we recently announced a number of investments across Europe and Asia, representing over $10 billion of total enterprise value. This includes SICIT Group, a pioneer in sustainable agriculture; Aurora Energy Research, a U.K.-based provider of data and analytics for the global energy markets; and Techem, a leading digital-first provider of submetering solutions. In credit, we deployed $4.3 billion of capital across our strategies in the second quarter.
In structured credit, we continue to be a market leader in residential mortgage securitizations as one of the few managers who are vertically integrated in this space. We placed five issuances in the quarter across home equity, nonqualified mortgage, and agency-eligible collateral types to bring year-to-date securitizations to eight. Twin Brook generated $1.2 billion of gross originations in the second quarter. Add-ons made up nearly half of the activity in the quarter, demonstrating the power of Twin Brook's incumbency within its existing portfolio. And in Credit Solutions, we continue to see a growing pipeline of companies looking for solutions capital at scale. In July, we completed a $1 billion asset-backed term loan facility for Altice USA in partnership with Goldman Sachs. This is a first-of-its-kind transaction in infrastructure-backed financing secured by Altice's Bronx and Brooklyn network assets.
We also recently anchored an innovative multibillion-dollar debt financing for xAI, which is one of the world's leading AI companies. We believe this represents one of the first large-scale credit solutions to be provided in the AI space, where we expect demand for creative financings to grow significantly given the immense funding requirements. Both of these financings are great examples of our ability to deliver customized, scaled solutions to address the complex capital needs of corporates. Similar to the DISH transaction last year, they reflect our culture of cross-firm collaboration. Our Credit Solutions, private equity, and real estate teams work together seamlessly to execute these highly bespoke solutions within our core thematic areas. In real estate, we continue to take a patient and disciplined approach to capitalize on the dislocation within the asset class. Over the last two years, we have acquired a number of high-quality assets that are typically unavailable from sellers facing liquidity pressure.
These investments have performed well with strong operating fundamentals, driving LTM value creation for our TPG real estate of 14%. As we look ahead, we expect to see a growing pipeline of attractive investment opportunities. Shortly after quarter end, TREP completed the acquisition of two adjacent high-quality office towers located on a full block of Park Avenue South. This is a top submarket in New York City, where favorable supply-demand dynamics have led to a significant improvement in office fundamentals. As a result of strong fundraising, we ended the quarter with record dry powder of $63 billion, representing 43% of fee-earning AUM. Our investment pipelines remain very active, and we expect our deployment pace to accelerate in the back half of this year. Finally, we continue to successfully execute on important exits and liquidity events, driving $6.5 billion of realizations during the quarter across a number of our platforms.
We realized nearly $2 billion of total proceeds from public market sales during the quarter. This included fully exiting from Viking Cruises, Tata Technologies, and ServiceTitan, and selling down our positions in Life Time Fitness and Sai Life Sciences. TPG Growth also completed the full company sales of Q-Centrix and Crunch Fitness. We've generated $2.3 billion of liquidity in TPG Growth year-to-date, including signed but not yet closed transactions, putting us on track to reach one of our highest years for realizations for this strategy. And this week, we announced our first exit from TPG Capital IX with the sale of Elite, which we carved out of Thomson Reuters two years ago. This investment marks a strong early outcome for the fund and is a great example of our ability to drive meaningful top-line growth through disciplined operational transformation. Looking across the firm, we continue to experience strong momentum in scaling our business and deepening and broadening our client relationships.
In private equity, despite persistent headwinds in the fundraising environment, we continue to differentiate ourselves with strong investment performance and DPI. We believe we are being positively selected by clients and continue to gain market share, driving fund-over-fund growth across both our existing and newer strategies. In credit, we've reached an important inflection point in establishing our credit franchise with our institutional clients. We are now in the process of significantly expanding the capital base across each of our credit businesses, including partnering with our clients to develop and seed new strategies. In private wealth, T-POP and TCAP have provided us with a strong foundation to build our presence in the channel, where we believe our differentiated brand and track record are resonating with advisers and their clients. We continue to build out our sales team, infrastructure, servicing capabilities, and suite of products given the long-term growth opportunity in wealth.
Lastly, as the largest pools of capital globally continue to consolidate their relationships with fewer GPs, we are actively engaged in a number of cross-platform strategic partnership discussions. These partnerships position us to grow with our largest clients across multiple strategies and asset classes while also increasing the duration and continuity of our capital base. We're entering the back half of the year with significant strength across each of our platforms and look forward to continuing to deliver outstanding results for our clients and shareholders. I'll turn the call over to Jack to discuss our financial results.
Thank you, Jon, and thanks to all of you for joining us today. As many of you know, last year, we focused on putting the building blocks in place to support our next leg of growth. These included: one, scaling our credit businesses through a successful fundraising year, expecting that this capital would flow into fee-paying AUM as we invest it this year and the future; two, preparing for the launch of our next series of private equity funds; and three, continuing to innovate, building new products and businesses, including GP Solutions, Climate Infrastructure, and T-POP that we expect to scale into greater profitability over time. Through these levers, we expected to begin a new wave of growth this year. Our strong second-quarter results highlight our early success in executing this growth strategy, and we expect our momentum to accelerate from here. We ended the second quarter with $261 billion of total assets under management, up 14% year-over-year.
This was driven by $36 billion of capital raised and $21 billion of value creation, partly offset by $23 billion of realizations over the last 12 months. Fee-earning AUM increased 7% year-over-year to reach $146 billion as of June 30. These figures do not include TPG Peppertree, which closed on July 1 and added approximately $8 billion of AUM and over $4 billion of fee-paying AUM. AUM subject to fee-earning growth was $30 billion at the end of the quarter, which included $23 billion of AUM not yet earning fees and represents a revenue opportunity of nearly $200 million on an annualized basis. This shadow FAUM has been scaling with our credit businesses. And as Jon indicated, our deployment pace has begun to accelerate. At the end of the quarter, our net accrued performance balance remained at $1 billion as strong value creation and realizations largely offset each other during the quarter.
Our fee-related revenue in the second quarter increased to $495 million and included $43 million of catch-up fees, primarily associated with the strong final close of TPG Growth VI. We reported quarterly fee-related earnings of $220 million. Our FRE margin of 44% in the second quarter benefited from the catch-up fees as well as a step down in cash compensation expense from the seasonally elevated first quarter. After-tax distributable earnings for the second quarter increased 30% year-over-year to $268 million or $0.69 per share of Class A common stock, which included $87 million of realized performance allocations. As Jon noted, our strong pace of monetization has been a significant point of differentiation for us, which continues to benefit our fundraising discussions with clients. Looking at the back half of the year, we expect to drive additional realizations, particularly as the broader market backdrop continues to improve.
As a result of our strong quarter, we declared a record dividend of $0.59 per share. Looking at our non-GAAP balance sheet. During the quarter, we further enhanced our liquidity by upsizing our revolving credit facility from $1.2 billion to $1.75 billion. We've drawn on our revolver to fund several growth initiatives, including seeding T-POP's investment portfolio as well as funding the cash portion of the Peppertree acquisition in July. Pro forma for the Peppertree funding, the outstanding balance on our revolver is $570 million, and our available liquidity is more than $1.3 billion. Turning to our portfolio. We continue to drive positive value creation across all our platforms for the second quarter and over the last 12 months. In private equity, the fundamentals across our portfolios remain strong, and we continue to see robust growth that is outpacing the broader market. The portfolio companies within our capital, growth, and impact platforms grew revenue and EBITDA by approximately 16% and 23%, respectively, over the last 12 months.
Our private equity portfolio in aggregate appreciated 2% in the quarter and 11% over the last 12 months. In credit, our portfolio appreciated 2% in the quarter and 12% over the last 12 months. In middle market direct lending, all our funds remain at or above their target return ranges as of quarter end. Within our portfolio, our average interest coverage ratio has remained stable at approximately 2x, and our annualized loss ratio is approximately 2 basis points. Our structured credit strategies also continue to perform well. Our first private asset-based credit fund's net IRR since inception was above its target range at 13% at the end of the second quarter. TPG's real estate portfolio appreciated approximately 3% in the second quarter and 14% over the last 12 months. We continue to see strong performance and value creation in our data center, industrial, and residential investments. In addition, TPG AG's real estate portfolio appreciated by 20 basis points in the second quarter and nearly 3% over the last 12 months.
Turning to fundraising. We raised over $11 billion during the second quarter. As Jon noted, this was the second-highest fundraising quarter in the firm's history and the highest fundraising quarter ever for our credit platform. As a result of our strong fundraising momentum, we remain very confident that we'll raise significantly more capital this year than last year. Looking at the remainder of the year, we'll be in the market with approximately 25 different products across most of our platforms. The biggest contributors to our fundraising in the back half of the year include the following: one, the rolling first close for our next flagship buyout funds, TPG Capital and Healthcare Partners. As Jon mentioned, we expect to receive total commitments of approximately $9 billion during our rolling first close in the third quarter; two, continued strong capital raising across all of our credit strategies in drawdown funds, perpetual vehicles, and SMAs.
Three, formal first closes for our second GP Solutions fund and our third tech adjacencies fund as well as additional closes for TCAP, our new Asia growth buyout strategy. We continue to make strong progress with TCAP and have already raised more than half our target. And four, increasing our penetration within private wealth and insurance. On the topic of private wealth, I'd like to provide a bit more information on our strong progress in this important business. As Jon mentioned, T-POP is off to a great start, raising approximately $430 million in June and July alone, and we expect strong continued expansion with our two initial launch partners. We also have several additional partners lined up domestically and internationally over the next several quarters, including expanding into the RIA channel. On the credit side, Twin Brook's nontraded BDC, TCAP, had its highest organic fundraising quarter yet in the second quarter with more than $200 million of inflows.
TCAP is now actively distributed on three major warehouses, and we expect further expansion in the near future. Across our private wealth business more broadly, we continue to grow our distribution network. We're now partnered with over 30 firms globally, which has increased more than fourfold just since the AG acquisition. We're also focused on expanding our suite of evergreen offerings across asset classes, having created a strong foundation with T-POP and TCAP. We're actively working on additional products across credit and real assets. Private wealth is a high-priority growth area for the firm, and we continue to invest in broadening our capabilities to serve the growing needs of financial advisers and their clients. I'd like to provide a few important points regarding our near-term financial outlook. Beginning with the third quarter, our results will include the financial contribution from TPG Peppertree within our Market Solutions platform.
As we noted when we announced this transaction, we expect TPG Peppertree to be immediately accretive to FRE and after-tax DE per share. Following the completion of our DIRECTV investment, TPG Capital IX is now fully invested and reserved, and we already activated TPG Capital X in early July. We expect catch-up fees to step down in Q3 and then pick back up throughout next year as we hold subsequent closes in our capital and Climate campaigns. Following the step down in compensation expense in the second quarter, we expect this line item to begin trending back up starting in the third quarter. We continue to invest in our teams in strategic growth areas such as private wealth and Climate infrastructure. Although we expect our FRE margin to decline modestly in the third quarter, consistent with our prior guidance, we continue to expect to exit the year with an FRE margin in the mid-40s. And finally, we expect our effective corporate tax rate to remain in the mid- to high single digits through the remainder of the year.
Before I wrap up, I'd like to highlight the significant progress we've made in enhancing the liquidity in our stock since our IPO. Two recent events have contributed to this meaningfully. First, in May, David Bonderman's estate sold 21 million shares of TPG stock in order to satisfy certain obligations, including state tax payments. And second, in connection with the closing of the Peppertree transaction last month, we issued and registered 2.9 million Class A shares as partial consideration. These shares, which were not owned by employees of Peppertree, have already been fully liquidated in the public market. This supply was well received in the market, broadening our shareholder base and allowing many of our largest existing shareholders to further build their positions. Primarily as a result of these two events, the percentage of TPG Operating Group equity owned by TPG Inc. Class A shareholders has increased from 22% to approximately 40% in just 18 months.
Taking a step back, we are very pleased with our strong second-quarter results and the progress we continue to make driving growth and diversification across our business. We're experiencing substantial momentum as the pace of activity across the key drivers of our business, fundraising, deployment, and realizations continues to accelerate, and we look forward to creating additional value for all of our stakeholders. Now I'll turn the call back to the operator to take your questions.
分析師問答
And we'll take our first question from Glenn Schorr with Evercore.
So I wonder if you could help us. You're the last of the, I think, the big goals to report. And we've seen you guys had good performance across private equity. You've raised a lot of money, you've returned a lot of money. Yet the aggregate details across private equity are still stuck in portfolios, low DPIs. And I see some surveys that show almost half of LPs saying that they're overweight with maybe potential to cut some allocations. So like is it that the big get more successful and you're seeing more? Like I'm curious to get your thoughts on the highest-level industry dynamic because you're clearly not seeing the same PE stuck in the mud that a lot of the bigger picture surveys would have, you believe. So I'm just looking for where we're at in that private equity cycle right now.
Thank you, Glenn, for the question. I believe our experience is somewhat different from the broader trend you mentioned regarding private equity. At a high level, allocations to private equity are generally fuller and higher compared to some other asset classes. We maintain confidence in the significance of private equity as a return driver for larger institutional accounts. As we explore the wealth markets, we're noticing interest in alpha creation from private companies driven by private equity, particularly given the current dynamics in public markets. We strongly believe that private equity will continue to be vital and resilient for many reasons going forward. Our own situation fundamentally revolves around performance and the effective management of our business and funds, and we feel positive about our consistent performance. Furthermore, we have been intentional in managing our funds, focusing on both entry and exit strategies to enhance capital returns and overall performance.
There's a clear trend among the largest pools of capital, with major players in the industry gaining market share, and we believe we are capturing a disproportionate share of that growth. Since our IPO, we have significantly expanded our relationships with our top 100 partners across private equity, credit, and real estate businesses. In private equity specifically, we have numerous strong relationships that are increasing their commitments rather than decreasing. Additionally, we have been able to initiate new relationships globally. Overall, we are confident in the strength and durability of our private equity business, and we believe there will be clear distinctions in how different players in the industry perform as it evolves, with us well-positioned for success.
And we will take our next question from Ken Worthington with JPMorgan.
I wanted to maybe dig into the build-out of insurance. Can you talk about your view on balance sheet heavy versus balance sheet light? I think the preference has generally been partnerships and balance sheet light. You called out a number of times you don't want to be an insurance company. What would you want or need to see in something more balance sheet heavy that might change your mind in terms of what could be a good fit for TPG? Is it size? Is it price? Is it all the above? Is there some other nuance on mix that ultimately makes a different structure a good idea for TPG?
Yes. Thank you for the question. Let me address it this way. First and foremost, when we consider how insurance or insurance-related transactions might align with TPG, there are a few core principles we keep in mind. One key aspect is maintaining a focus on fee-related earnings, as that is crucial for driving our asset management business and overall earnings growth. This is a primary consideration as we evaluate potential transactions. Additionally, as we've mentioned previously, we are cautious about becoming an insurance company. More specifically, we are very mindful of the types of liabilities we might assume in any insurance transaction. This doesn’t mean we wouldn’t use our balance sheet, as we have discussed before, but we want to ensure we're not exposing ourselves to risks that we do not feel equipped to manage or that relate to certain insurance liabilities. When we assess transactions, we look at how they impact our ability to grow our asset management strategy and enhance our fee-related earnings without taking on excessive risk regarding our balance sheet.
In some instances, we've considered partnering with strategic players in the insurance sector, focusing on acquiring parts of the business, particularly those related to distribution capabilities, that would enable us to gather more capital while leaving the riskier segments to the experts in the insurance field. These are the principles guiding our approach. We recognize the industry's evolving nature and continue to evaluate opportunities, keeping these objectives in mind if we choose to proceed with a transaction.
And our next question comes from Alex Blostein with Goldman Sachs.
Maybe going back to Glenn's question around private equity. Obviously, very impressive fundraising numbers with the first close here. I was hoping you could help us think through how you might sort of think about the ultimate size of these funds now. I think like in the past, you talked about 40% to 50% typically comes in, in the first close. So the $9 billion that you raised potentially puts you quite above, I think, than certainly prior funds, but also maybe what we were thinking before. And then also, Jack, maybe just kind of walk us through the P&L impact on management fees in the third quarter as you started to earn management fees on these funds and perhaps any step-down things we need to consider?
Yes, Alex, thank you for your questions. To expand on what Jon mentioned about the market, we still observe that globally, the institutional LP market isn't reducing its allocations to private equity. Overall, there are still increases in allocations, though it varies in different regions of the market. There is a factor of liquidity that each LP has to consider, which is affecting some areas, particularly in the U.S. institutional market. As Jon hinted, there is a re-evaluation process taking place, and we are seeing positive results from that. The $9 billion we expect to close on with TPG and Healthcare Partners III is primarily from existing LPs, with many increasing their commitments to us by over 20%. This shows that we are gaining share with these LPs. The ongoing fundraising will involve more re-ups as well as new LPs joining us. Regarding the fund size, I agree that the percentage raised in this first close is higher than what many are achieving currently.
Our goal remains to increase the size of each private equity fund sequentially. We've already seen a 35% increase in growth versus the previous fund. While we haven't set a specific target for TPG X and Healthcare Partners III, I anticipate a similar growth rate compared to the previous vintage. The strong start we're experiencing in this first close is a good sign. Concerning management fees, I noted that we activated TPG X last month, but we have not yet activated Healthcare Partners III as we still have some investing to complete in Healthcare Partners II. I estimate we might activate that fund in the first quarter of next year. As we activate the next fund, there will be some step-downs, which means TPG IX will experience a step-down next quarter in the fourth quarter.
And our next question comes from Bill Katz with TD Cowen.
Just you mentioned the sort of flywheel accelerating to the second half of the year and great to see the significant jump in AUM not yet paying fees. How quickly do you think you can sort of deploy that $30 billion? And then the second part of the question is, I think you mentioned a significantly high level of revenues on that. How much incremental margin might be against that incremental revenue?
We feel positive about the deployment opportunities across our business, which are somewhat influenced by overall market conditions. However, our pipelines have been growing consistently each quarter throughout 2025. We expect deployment to continue to progress, and we are optimistic that it will increase as we move through the rest of the year, with further developments expected in 2026. Overall, we are encouraged by the opportunities available to us. Our diverse business segments, various strategies, and flexible capital enable us to respond to a wide array of unique opportunities. This flexibility is a key aspect of our strategy, allowing us to remain active across different opportunities within the capital structure. Therefore, we maintain a reasonably positive outlook on deployment opportunities.
Margin on incremental deployment.
I mean, obviously, that's going to differ in each asset class.
And we will take our next question from Steven Chubak with Wolfe Research.
One opportunity that maybe hasn't gotten as much airplay on the call is within capital markets. And I was hoping you could speak to, given some of the improvement in deployment in 2Q, certainly encouraging to hear expectations for continued acceleration in the back half. What the potential windfall could be on the capital markets side? And are there any remaining gaps in terms of your capabilities? And just longer term, how large could this business grow over time?
Yes, we've consistently discussed the significance of capital markets to our firm and how we are enhancing our capabilities. We are actively building our expertise in capital markets across all strategies, ensuring that this expertise is closely integrated into the deal-making process. This allows us to finance deals, refinance balance sheets, and provide innovative solutions, which is essential as we aim to engage in larger transactions. Additionally, the integration with our credit business has led to increased collaboration, resulting in compelling opportunities across various asset classes. Our recent deals, including the Altice, DISH, and xAI transactions, showcase the collaboration between our investment teams in credit, private equity, and real estate, as well as our capital markets capabilities to broaden our capital base and manage risk. As we look ahead, we expect our capital markets business to grow alongside our firm's expansion and transactional activity. We are optimistic about its future impact and its role as a key driver for our business.
Yes. I can say that transaction monitoring and other fee-related items totaled about $150 million last year. As Jon mentioned, we still anticipate that amount will increase over time, not just in line with our overall growth but at a faster rate because we are expanding into new segments of our business by enhancing our capital markets team. We expect this line item to grow this year compared to last year in a healthy manner, and even more rapidly next year.
And our next question comes from Dan Fannon with Jefferies.
I wanted to follow up on the retail opportunity and the initial rollout of T-POP. So you talked about, I think, broadening distribution. Maybe if you could expand upon what that looks like. And then also the product road map for other products for this channel and how you see that proliferating in the coming quarters?
Sure. Thank you for the question. Regarding T-POP, the initial partnerships we mentioned were with our two large U.S. warehouses, which provided most of the capital. Moving forward, we expect significant penetration through these core partners, and we have several additional partners lined up both domestically and internationally. In a couple of months, we're launching with a large international bank focused on the Asian market. We are also targeting the RIA market, and it has been publicly disclosed that iCapital has filed a registration statement for a TPG-branded fund that they will manage, which will resemble T-POP but with an emphasis on the RIA market. What was the second part of your question?
On the product roadmap beyond private equity. So we've got a lot of growth ahead of us in this core private equity product, T-POP. While we're accomplishing that, we're also in the middle of designing the next wave of products, which will include something broader in credit, like a multi-asset class credit interval fund, something in real assets as well. We've described a lot about our broad-based real estate platform, and we're in the middle of designing a product there as well.
And our next question comes from Brian Bedell with Deutsche Bank.
If I can squeeze in a three-parter on the Impact platform.
We'll take the first part.
At least I'm telling you it's three before all related. But just, I guess, the fundraising pipeline on the Impact platform and the three-parter is, first, Rise III looks like it's 70% invested, so commentary on the next vintage there. Secondly, the Climate franchise, Rise Climate, is 80% invested, as it appears on your fund tables. So if you can wrap together the Global South Initiative with the final close of Rise Climate II coming in, please update us on the timing of the incremental fundraising there. And then just, regarding the tangent strategies to the impact platform like Climate infrastructure, what are the expectations for that into '26?
Sure. This is Jim. Let me address your questions and provide some context about what's happening in that area. Specifically regarding Rise III and IV, we anticipate holding first closes for Rise IV in the fourth quarter, so we are indeed moving into the market. We will have more updates to share in the future. When it comes to the Climate discussion, it’s important to take a step back and look at the overall Climate landscape. First, it’s extremely beneficial that the bill has been passed, as it clarifies the policy environment. While traveling globally, I've noticed significant discussions surrounding tariffs, and the international community doesn't seem overly concerned with U.S. energy policy. As Jon mentioned, we've been quite active in the Climate franchise during the first half of this year, closing five international deals while the U.S. market has paused to assess policy developments.
The outcome of the bill was better than many anticipated. You can gauge this by watching the Clean Energy Index, particularly the S&P Clean Energy Index. In April and May, there were various concerns, but following the bill's release, that index surged back. Currently, it is 6% higher than where it stood at the time of the election, with many subsectors performing even better. The area that faced the most challenges within the bill was EVs, which we have been clear we are not investing in within the U.S. However, if we examine the policy details, it’s noteworthy that there’s generally more support now compared to 2022 when ChatGPT was launched. For instance, in critical areas like batteries, the new bill maintained the IRA provisions for significant incentives and introduced additional U.S. incentives. Amidst the noise in the U.S. market, the newfound clarity is quite promising, resulting in a very active pipeline.
Moving forward, two significant factors to keep in mind are that we are significantly short on energy in the U.S., and the quickest, most cost-effective way to increase energy supply remains through renewables. Though there will be more gas, it constituted only 7% of the market this year. Additionally, adaptation efforts will continue to be strong. Regarding fundraising, we’ve had a successful first close, exceeding the 50% targets previously discussed. Despite market fluctuations, the first half of this year saw the Rise Climate franchise close $1.5 billion in capital. We are currently progressing well into the latter half of our campaigns, significantly ahead of our previous fund cycle. In terms of capital committed, much of which is yet to be deployed, we are in a substantially better position than last time. With greater market clarity, we are optimistic about the latter part of the fund cycle for TRC II and the upcoming opportunities following our anchor commitments of TI.
I believe we are on course in these areas, recognizing the temporary pause as the market assessed where the bill would settle. This aligns with trends in fundraising within the broader market, and our Impact franchise is poised for a busy six to nine months ahead.
And our next question comes from Michael Cyprys of Morgan Stanley.
Just wanted to circle back to an earlier comment that was made around your engagement in cross-platform strategic partnership discussions to increase duration and continuity of the capital base. I was hoping you could elaborate a bit on your aspirations there, the strategy, how you're approaching this, what this could look like, and how it might contribute over time for TPG?
Sure, thanks, Michael. We previously mentioned a strategic partnership example during last quarter's call. The overall approach aligns with the theme discussed earlier in this call. We're observing that the largest institutional partners are narrowing and concentrating their relationships. Consequently, they are seeking ways to create mutually beneficial arrangements with firms they trust. We are increasingly engaging in discussions with several of our largest partners about structuring long-term relationships. This typically involves commitments across different asset classes, which is significant because it requires a broader perspective rather than focusing on just one area. These commitments involve specific dollar amounts of capital over a defined time frame that can vary, often tailored to individual agreements that may span three, four, or five years. In return for their commitments to TPG and our various funds, partners receive economic incentives, which are also customized.
The fundamental arrangement relies on substantial capital commitments to the firm in exchange for those benefits. However, if circumstances change or if they need to adjust their plans without meeting certain milestones, some of the economic benefits may revert. These arrangements are highly individualized, but I must emphasize that we are engaging in more dialogues with our major partners than ever before. This deepens our connection and allows us to collaborate more closely. We also benefit from spending time together, sharing insights about markets and ideas. Ultimately, this collaboration fosters a longer-term partnership. It boosts our confidence in renewing investments in our major funds, which are our core strategies, and encourages them to help support new strategies. One of the most challenging aspects of our industry is launching new initiatives, attracting anchor limited partners, and scaling those efforts.
These partnerships facilitate that process with our key relationships and accelerate our ability to grow. We're enthusiastic about these discussions, and when we reference our first closes and the time involved in reaching them, these partnerships play a significant role, as they indicate our partners are more likely to be first closers in these funds while also seeking new growth opportunities with us.
Yes, Jack, just a little bit. I mean I see it as it's almost a byproduct of what we've been talking about for a while now is that we see the largest LPs in the world concentrating their capital with fewer partners. And when they do that, they step back and say, if we're going to choose you as a partner in a concentrated way, let's break out of this fund-by-fund mode and talk about what a bigger partnership might look like. And that begins the dialogue about what a longer-term partnership might look like, whether it's designed as an SMA, a fund of one, a perpetual fund with kind of inherent re-ups, but that's the nature of the dialogue. And fortunately, we're on the winning end of a lot of those discussions, which is leading to a lot of these partnership discussions. I think one other thing that's affecting it too, Mike, is that one important kind of like overriding trend that we're seeing in the market is that I think that there was a time when and not recently, there was a time when some of the largest pools of capital in the world were really continuing to focus on their ability to be "direct investors".
And some of them still are. But what I would say is that there's been a fairly big pendulum swing back the other way, where some of the largest pools of capital in the world are really now much more focused on this partnership model, where they realize that their ability to source on a very broad basis, on a global basis, some of the most interesting transactions across multiple strategies is enhanced by engaging in these partnerships with our core partners. And so I think that that's another trend that I think is also giving rise to this desire to figure out how do they construct these partnerships where they get the benefits of seeing the opportunities that we're creating, but also being able to partner together to get them done. And so I would say that's another kind of broader trend that we're seeing. There's a bit of a pendulum swing back to this kind of doubling down on kind of the partnership model.
And our next question comes from Kyle Voigt with KBW.
Maybe just a question on the 401(k) opportunity. So now that you're adding more breadth to your semi-liquid product suite, just wondering how you're thinking about addressing the 401(k) opportunity if that market begins to potentially open up more to private investments over time.
Yes, that's a good question. As we develop our range of evergreen and high-net-worth products in alternatives, it naturally becomes a key focus for us. It's still early to predict the outcomes since the executive order hasn't been released yet. However, when considering the overall U.S. retirement savings landscape, it is roughly a $35 trillion market. Around $10 trillion is held in defined benefit pension funds, another $10 trillion is in the 401(k) market, and the remainder is in vehicles like IRAs. Defined benefit plans are among our largest clients and were early adopters of alternatives. Historically, they had minimal exposure to these investments, but now about a third of their portfolios typically includes alternatives, as they diversify away from public markets to seek enhanced returns that compound wealth for their stakeholders over time. The same objectives apply to the 401(k) market; participants should be focused on compounding wealth over decades while seeking diversification and improved returns.
Thus, the proposed changes make sense for 401(k) participants to access alternative investments for diversification and enhanced returns. Currently, around 40% of the capital in 401(k) plans is allocated to target date funds, which we see as a logical entry point for alternatives, rather than a private equity fund being the sole option for alternative assets paired with target date funds. We are actively engaging with potential partners where we can be a valuable ally, given our expertise in sourcing and executing alternative asset investments. Additionally, most of the allocations in longer-dated target date funds lean towards equity-oriented investments due to their higher expected returns, making private equity an attractive addition for 401(k) plans. We believe we are well-positioned as partners with those managers to facilitate that investment flow. The efforts we are undertaking to develop various entry points and structures around our private equity business will naturally enhance these partnerships.
This concludes the Q&A portion of today's call. I would now like to turn the call back over to Gary Stein for closing remarks.
Great. Thank you, operator. Thank you all for joining us today. If you have any additional questions, please feel free to follow up with the IR team directly.
Thank you.
This concludes today's TPG's Second Quarter 2025 Earnings Call and Webcast. You may disconnect your line at this time and have a wonderful day.