TPG 2026年第三季度业绩电话会：募资指引上调至550亿美元以上lg...

TPG 2026年第三季度的业绩得益于管理费增长、广泛的募资活动以及费用相关收益的扩张。尽管实现退出规模达66亿美元，但已实现业绩提成仍然有限；管理层预计该指标将在2026年第四季度及2027年有所提升。

核心要点

• 归属于 TPG, Inc. 的 GAAP 净利润为1.00亿美元。税后可分配收益为2.65亿美元，即每股 A 类股0.65美元。
• 费用相关收入同比增长25%至6.38亿美元，费用相关收益同比增长43%至3.21亿美元。
• TPG 在本季度募集了超过150亿美元，2026年前九个月累计募集近420亿美元。管理层将全年募资预期上调至550亿美元以上。
• 付费资产管理规模达到1900亿美元，同比增长16%。创纪录的860亿美元待投资资金占付费资产管理规模的45%。
• 公司在本季度部署了超过110亿美元资金，并实现了66亿美元的退出收益。今年迄今的退出规模已超过200亿美元。
• TPG 宣布派发每股 A 类股0.55美元的季度股息，将于2026年11月23日支付给2026年11月9日登记在册的股东。

关键财务数据

业务与运营表现

募资情况

私募股权募资在第三季度总计85亿美元，今年迄今超过210亿美元。第二期 Rise Climate 基金、全球南方倡议（Global South Initiative）及相关载体的最终募资规模达到104亿美元，比首期基金高出44%。TPG 的新投资者贡献了31%的认缴意向。

TPG Capital 10 和 Healthcare Partners 3 另募集了17亿美元，使总认缴金额接近160亿美元。Tech Adjacencies 3 新增16亿美元，总认缴金额达到25亿美元。TPG 还完成了其首个亚洲成长型股权策略 TECA 的募资，规模超预期达到13亿美元。

信贷业务在本季度募集了58亿美元，今年迄今近160亿美元。第四期 Essential Housing 基金完成了20亿美元的首期关账，而 Advantage Direct Lending 募集或签署的资本达到14亿美元，在目标杠杆率下相当于约30亿美元的购买力。

在房地产领域，TPG 为其第五期机会主义房地产基金及相关载体完成了约50亿美元的首期关账。管理层称这是该公司重大募资活动中最强劲的开局之一。

投资部署与退出变现

TPG 在第三季度投资了超过110亿美元。信贷板块占77亿美元，其中包括 Twin Brook 的37亿美元总发起额，以及在基于资产的融资中部署的20多亿美元。房地产领域的投资部署总计18亿美元。

第三季度退出收益达66亿美元，今年迄今已超200亿美元。然而，已实现业绩提成仅为700万美元，因为资金收益主要用于收回成本和弥补未实现亏损（主要集中在 TPG Capital 内部）。管理层表示，有五笔已签署的私募股权和房地产交易正等待完成。

投资组合表现

私募股权投资在本季度升值3%，过去12个月升值10%。Capital、Growth 和 Impact 投资组合的收入和 EBITDA 增长保持在15%-19%（中高两位数）水平。TPG Capital 和 TPG Growth 软件持仓的总预订量在第三季度增长超过25%。

信贷投资在本季度升值2%，12个月内升值11%。Twin Brook 组合公司的平均利息保障倍数约为2.3倍，非应计贷款率为1.6%。第三期 Credit Solutions 基金自成立以来的净内部收益率（IRR）为29%。

得益于住宅、零售和办公物业的经营表现，房地产投资在第三季度升值1%，12个月内升值8%。

私人财富与保险业务

T-POP 季度资金流入约4亿美元，9月底资产管理规模达到35亿美元。管理层指其自成立以来的年化收益率为31%。季末之后，T-POP 及相关策略的月均资金流入约为2亿美元。

TCAP 第三季度录得1.34亿美元的总资金流入，资产管理规模达到56亿美元。赎回申请下降至已发行股份的1.2%。10月份的资金流入又达1.38亿美元，使今年迄今的净流入达到5.43亿美元。

TPG 表示，自收购 Angelo Gordon 以来，其保险合作伙伴关系及相关资产管理规模已增长了一倍以上。管理层预计保险资本将成为实现信贷增长目标的重要贡献力量。

管理层业绩指引

• TPG 目前预计在2026年募集超过550亿美元，高于最初设定的500亿美元以上目标。管理层指出，原定于2027年完成的部分基金关账已提前至2026年。
• 2026全年 FRE 利润率指引提高至约48%，比2025年高出近300个基点。管理层长期目标仍是将利润率保持在50%左右的区间，但未提供具体时间表。
• 在年度受限股票单位（RSU）相关扣除额充分利用后，预计2026年第四季度的实际企业税率将上升至18%至20%出头区间。
• 管理层预计已实现业绩提成将在2026年第四季度及2027年增加，但这取决于市场状况和交易时机。
• 在直接贷款、基于资产的融资、Credit Solutions 和保险合作伙伴关系的支持下，TPG 继续致力于实现到2029年底信贷资产管理规模达到2000亿美元的目标。
• 公司计划在2027年推出一款多策略信贷间隔基金（Interval Fund）和一款非上市房地产投资信托（REIT）。

风险与关注点

利率处于高位可能会放缓交易活动、推高融资成本并延缓退出进程。在房地产领域，管理层重点指出了估值的不确定性、流动性下降，以及在低利率时期以估值顶峰收购的资产所面临的压力。

在人工智能（AI）基础设施领域，TPG 正限制开发敞口，将重点放在具备已出租、可产生现金流的资产以及精选的“卖铲人”（picks and shovels）机遇上。管理层认为开发执行力、社区反对意见、反复的借款需求和投资者集中度是关键的融资风险。公司还看到市场部分领域存在重新定价或陷于困境的潜在风险。

已实现业绩提成对基金组合和退出时机仍然敏感。尽管净应计业绩提成达到15亿美元，但转化为已实现收益仍取决于能否成功进行变现。

分析师问答环节亮点

• 退出变现前景：管理层表示，有五笔已签署的交易正等待关账，外加广泛的退出项目储备，这是预计第四季度和2027年已实现业绩提成将更加强劲的基础。
• 房地产领域机遇：TPG 表示，机构投资者正日益从直接房地产投资转向与成熟的资产管理机构合作。公司看到了以具有吸引力的资本化率和低于重置成本的价格收购资产的机遇。
• 信贷业务扩张：实现2000亿美元信贷资产管理规模的途径包括 Advantage Direct Lending、投资级基于资产的融资、Credit Solutions、基础设施融资以及全球保险合作关系。
• 募资的可持续性：管理层表示，TPG 更广泛的平台已将其年度募资节奏提升至约450亿至600亿美元，不过并没有发布针对2027年的具体指引。
• 利润率扩张：收入增长、信贷部署、资本市场活动以及运营杠杆预计将支撑长期 FRE 利润率的扩张。TPG 将继续在资本形成、私人财富分销和信贷能力方面加大投入。
• 高利率环境下的私募股权：TPG 强调，过去十年间，TPG Capital 和 TPG Growth 超过80%的价值创造来自收益增长，而非杠杆或估值倍数的扩张。

业绩电话会议完整文字实录

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完整财报电话会议逐字稿

管理层陈述

Operator

Good morning and welcome to TPG's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] 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.

Gary Stein

Great. Thanks, operator, and welcome, everyone. Joining me today are Jon Winkelried, Chief Executive Officer; and Axel Andre, Chief Financial Officer. In addition, Jim Coulter, Executive Chairman and Co-Founder; and Jack Weingart, CEO of TPG Global Wealth Solutions are here with us for the Q&A portion of this call. I'd like to remind you this call may include forward-looking statements that do not guarantee future events or performance.

Please refer to TPG's earnings release and SEC filings for factors that could cause actual results to differ materially from these statements. TPG undertakes no obligation to revise or update any forward-looking statements except as required by law. Within our discussion and earnings release, we're presenting GAAP and non-GAAP measures and we believe certain non-GAAP measures that we discuss on this call are relevant in assessing the financial performance of the business. These non-GAAP measures are reconciled to the nearest GAAP figures in TPG's earnings release, which is available on our website.

Please note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any TPG fund. Looking briefly at our results for the third quarter. We reported GAAP net income attributable to TPG, Inc. of $100 million and after-tax distributable earnings of $265 million or $0.65 per share of Class A common stock. We declared a dividend of $0.55 per share of Class A common stock, which will be paid on November 23, 2026 to holders of record as of November 9, 2026.

With that, I'll turn the call over to Jon.

Jon Winkelried

Good morning, everyone. Thank you for joining us. TPG's strong third quarter results reflect our broad-based momentum and the continued progress against our long-term strategic objectives. We've successfully scaled and diversified our franchise. And despite a challenging macro backdrop, our pace of growth has accelerated. Over the last 5 years, we've more than tripled our AUM and doubled our capital formation on an annual basis. Base dynamic environment, including higher rates, increased geopolitical uncertainty and rapid advances in AI continues to add complexity to the investing landscape. However, periods of dislocation creates some of the most attractive investment opportunities, and we're uniquely positioned to capitalize on them given our record $86 billion of dry powder and flexibility to invest across the capital stack. .

My conversations with our clients, who are the largest allocators of capital globally, they're seeking partners with a discipline and track record to navigate uncertainty and source opportunities that generate alpha. These clients have significant visibility into our portfolios, investment pipelines and performance, and they're increasingly choosing to deepen their partnership with TPG. The quality of these relationships is reflected in our robust capital formation this quarter. We raised more than $15 billion, bringing our year-to-date total to nearly $42 billion. We're tracking ahead of the expectations we set at the start of the year, and we view this as a powerful testament to the strength of our franchise.

I'll walk through some highlights across our asset classes. Starting with private equity, we raised $8.5 billion in the third quarter and more than $21 billion year-to-date. We held a final close for our second Rise Climate Fund and the Global South initiative, bringing aggregate commitments to $10.4 billion across the 2 funds and related vehicles. This highly successful outcome represents a 44% increase over our inaugural fund and further validates TPG's leadership in the climate sector. Notably, 31% commitments came from investors who are new to TPG. The clients recognize the powerful secular trends of rising power demand the industrialization of major economies and the reshaping of global supply chains, which together are driving an unprecedented need for capital. Our climate franchise is well positioned to meet that need and build on the momentum within our portfolio.

For TPG Capital 10 and Healthcare Partners 3, we raised an additional $1.7 billion during the quarter, bringing our total to nearly $16 billion. This represents an important milestone as commitments to date already exceed the size of our prior vintage. We also completed fundraising for TECA, our Asia growth equity strategy surpassing our target with $1.3 billion raised for our inaugural fund. TECA is another clear example of our ability to successfully incubate and launch adjacent strategies. For our third tech adjacencies fund, we closed $1.6 billion during the quarter, bringing total commitments to $2.5 billion. This accelerating demand reflects both the expanding opportunity set and the strong performance we've delivered to date. AI has become an important pillar of the strategy, and we've continued to provide clients with differentiated access to AI-related investment opportunities.

And finally, for Peppertree, since launching our 11th fund earlier this year, we raised $2.2 billion to include commitments through October. The speed of this campaign has been driven by strong band for Peppertree's specialized strategy focused on essential tower infrastructure as well as our success in broadening its clients. More than 50% of commitments so far have come from investors new to the Peppertree strategy, including some of TPG's largest clients globally. This is another powerful validation of our ability to integrate and scale inorganic opportunities. Credit, we raised $5.8 billion during the quarter, bringing our year-to-date total to nearly $16 billion. We held a first close of $2 billion for our fourth essential housing fund, which has already exceeded the size of its predecessor. This strategy, which provides bespoke land financing to leading homebuilders is resonating with investors given its predictable uncorrelated returns and the structural advantages relative to traditional fixed income.

For Advantage Direct Lending, our core middle market direct lending strategy, we raised an additional $550 million, bringing total capital raise to $1.4 billion, including commitments that are signed but not yet closed. This represents approximately $3 billion of total buying power, including target leverage. To date, ADL has invested $1 billion of capital across 30 first lien senior secured loans selected for more than 425 opportunities sourced across our relationships with sponsors and corporates. Since acquiring Angelo Gordon 3 years ago, we've nearly doubled our credit AUM and continue to successfully expand into adjacent strategies. Our pace of capital formation has reached a structurally higher run rate, and we expect to double our credit AUM again to $200 billion by the end of 2029. As we've discussed, we are now in a significant fundraising cycle for our real estate platform.

We're currently in the market with 4 of our real estate equity funds in the U.S. and Asia and expect our capital formation activity to build through year-end and into 2027. In the past week, we held a first close for our TPG Real Estate opportunistic strategy, raising approximately $5 billion for our fifth fund and related vehicles. This includes strong support from both long-standing TREP relationships as well as important new partners for TPG Real Estate and the broader firm. We view this outstanding start as a testament to our leadership in real estate investing and our clients' confidence in our ability to continue delivering compelling results in a dynamic environment. Lastly, our experience in the private well channel remains differentiated from the broader industry. Inflows across our T-POP strategy were approximately $400 million in the quarter, bringing total AUM to $3.5 billion at the end of September.

We continue to broaden our distribution footprint adding several new international distribution partners this year, and we're also seeing subscriptions accelerate in the RIA channel with annualized inception-to-date returns of 31% T-POP continues to be a preferred solution among increasingly selective partners and advisers. TCAP, our nontraded BDC saw gross inflows of $134 million in the third quarter bringing total AUM to $5.6 billion, more than 4x its size when we acquired Angelo Gordon 3 years ago. Notably, redemption requests declined to just 1.2% of total shares outstanding well below industry averages, and TCAP has generated positive net flows every quarter since inception. In October, TCAP raised an additional $138 million, bringing year-to-date net inflows to $543 million, which represents approximately 24% of its NAV as of the end of last year.

Looking ahead, we now expect to exceed our original target of fundraising more than $50 billion in 2026, which Axel will discuss in more detail. Across our most recent cycle of fundraises, we've grown fund sizes by 30% on average and have welcomed more than 200 new clients to our firm since the beginning of 2025. Against the difficult fundraising backdrop, we continue to take share as many of the world's largest and most sophisticated investors are increasingly partnering with TPG and given our distinct strategies and consistently differentiated performance.

Turning to deployment. We invested over $11 billion in the third quarter. While renewed interest rate volatility may temporarily impact the pace of transactions, we continue to identify compelling opportunities to deploy capital and our pipelines remain robust. Our credit platform had its most active deployment quarter so far this year, investing $7.7 billion of capital across our strategies. In Credit Solutions, a higher for longer rate environment continues to expand our opportunity set. Companies with strong fundamentals balance sheets are increasingly seeking bespoke capital solutions that offer both scale and execution certainty. As a result of our third Credit Solutions fund -- excuse me, as a result, our third Credit Solutions Fund has deployed more than $5 billion of gross capital over the past 2 years, including recycled proceeds from several large early realizations.

In middle market direct lending, Twin Brook generated $3.7 billion of gross originations and 2026 is on track to be 1 of our most active years to date. Our leading position in the lower middle market, where we built deep relationships over many years has driven consistent fuel flow even as activity in the upper middle market has slowed. Our portfolio of over 300 companies continues to be an embedded source of origination with add-ons accounting for more than 30% of this quarter's volume. In asset-based finance, we deployed more than $2 billion across our core sectors. This included a first-of-its-kind credit secondaries transaction where we provided a liquidity solution for a GP's residential mortgage fund that was nearing the end of its life. Additionally, we continue to build out our investment-grade ABF capabilities with 6 transactions completed in the third quarter and a robust near-term pipeline.

Our private equity strategies invested $2 billion in the quarter and $16 million year-to-date. While higher rates may create headwinds for PE more broadly. Our pipelines remain healthy given our growth-oriented investment approach focused on driving operational transformation. Over the past decade, more than 80% of the value creation within TPG Capital and TPG growth has come from earnings growth. As performance across the industry diverges, we believe our distinct approach will continue to drive differentiated results. Additionally, the industry-wide need for liquidity has continued to propel the GP-led secondaries market, which is on track for a record year and remains the fastest growing part of the PE asset class. Spotters are increasingly using continuation vehicles to extend ownership of their best-performing assets while returning capital to investors.

As a result, TPG GP solutions pipeline of high-quality opportunities has grown approximately 35% over the past 2 years, and we maintain a highly selective conversion rate. continue to be a partner of choice for sponsors and companies looking for deep sector expertise and the ability to invest at scale. In our tech adjacency strategy, we coat a $3.9 billion Series F financing for Caruso, a vertically integrated AI infrastructure platform, our underwriting draw our unique perspectives across the firm, including TTAD's investments in leading LLMs, TREP's data center expertise and Rise Climate's insights into power generation. Caruso is a great example of how we're leveraging the full breadth of our platform to invest across the AI value chain. In real estate, we deployed $1.8 billion of capital in the third quarter, and our pipeline remains active. Current environment is impacting real estate investing through elevated financing costs, valuation uncertainty and reduced liquidity. This is placing additional stress on owners legacy assets acquired at peak valuations and lower rates, driving further capitulation and the need for solutions capital.

As a result, across our real estate equity strategies, we expect to see a growing number of attractive opportunities to acquire high-quality assets. At the same time, traditional real estate lenders with legacy exposure have become more cautious and selective. This has created a constructive backdrop for well-capitalized real estate credit investors, such as TRECO. We continue to deploy capital at a steady pace and expect our first fund to be fully committed by mid next year. During the quarter, TPG a U.S. real estate acquired a national portfolio of medical outpatient buildings. This is a thematic area of focus for us given strong demographic tailwinds, a secularships more affordable sites of care and favorable supply-demand dynamics. This investment was sourced off market through our proprietary relationship with a highly motivated sellers seeking to reposition its portfolio. Finally, we generated $6.6 billion realizations during the quarter, bringing our year-to-date total to more than $20 billion. We continue to be highly focused on generating liquidity for our clients with several meaningful exit processes underway. We expect the cadence of realizations to accelerate towards the end of this year and into 2027.

Stepping back, we've delivered on the ambitious growth objectives we've established as a public company. Over the past 5 years, we've built a distinctive alternatives platform across private equity, credit. Throughout this period, we've consistently generated differentiated performance, underpinning our long-standing and expanding partnerships with many of the world's largest investors. With this foundation firmly in place, we're now entering our next leg of growth with significant momentum across each of our asset classes.

I'll now turn the call over to Axel to walk through our financial results.

Axel Philippe Andre

Thanks, Jon, and good morning, everyone. It's great to be back here with all of you after my first full quarter as CFO. Over the past few months, I've had the chance to work closely with Jon, Jack and the rest of our leadership team to spend time with my colleagues around the world. I'm grateful to Jack for the strong foundation he's established across our finance organization, and I look forward to partnering with the team to build on the significant momentum we have today.

Turning to our financial results. TPG delivered another outstanding quarter, demonstrating the compounding strength and operating leverage of our expanding platform. For the third quarter, we reported fee-related revenue of $638 million, representing a 25% increase year-over-year. Management fees reached $573 million, which grew 11% over the quarter and 24% year-over-year. This was driven by strong fundraising, resulting in accelerating organic growth in addition to $62 million of catch-up fees, primarily attributable to our Rise Climate and TPG Capital campaigns.

We also continue to benefit from growing fee-earning deployment across our credit platform. Transaction and monitoring fees totaled $55 million in the quarter. As Jack noted on our last call, transaction fees stepped down sequentially following an exceptionally strong second quarter that benefited from the pull forward of certain transaction closings. Our capital markets revenue has grown meaningfully over time, averaging $65 million in the first 3 quarters of this year, driven by a broad mix of strategies and geographies. While transaction fees will naturally vary quarter-to-quarter, our capital markets business continues to be a significant long-term revenue driver for the firm.

Our fee-related earnings grew 43% year-over-year to $321 million in the third quarter. This translates into a 50% FRE margin, which was elevated by the significant catch-up fees I discussed. Our catch-up fees have averaged approximately $25 million per quarter over the last 3 years. Assuming a more normalized level in the third quarter, our FRE margin would have been approximately 47%, demonstrating continued underlying margin expansion. Given our strong performance year-to-date, we are raising our full year 2026 FRE margin guidance to approximately 48%, which would represent nearly 300 basis points of expansion compared to 2025.

Turning to PRE. As Jon noted, our realization activity totaled $6.6 billion in the quarter, driven by significant activity across our asset classes, including meaningful sell-downs of public positions in TPG Capital, Rise and deck adjacencies. This generated $7 million of realized performance allocations. Our lower PRE this quarter was a result of fund mix as private equity monetizations were primarily used to return costs to our clients. The momentum across our portfolios remained strong, demonstrated by positive value creation in each of our platforms and the sequential growth in our net accrued performance balance to a record $1.5 billion at the end of the third quarter.

Looking ahead, while the current environment may impact the timing of realizations across the industry, we expect to continue selectively monetizing investments at attractive valuations. We remain highly intentional in our exit planning and continue to expect realized performance allocations to pick up in fourth quarter and into 2027. Our effective corporate income tax rate for the third quarter was 10.4% as we benefited from the tax deductions generated by our annual RSU vesting in January. As a result of our strong profitability year-to-date, these deductions are now fully utilized, and we expect our tax rate to step up into the high teens to low 20s in the fourth quarter. Altogether, our third quarter after-tax distributable earnings were $265 million or $0.65 per share of Class A common stock. We finished the quarter with $346 million of total assets under management, up 21% year-over-year, driven by strong broad-based capital formation across the firm.

Fee-paying AUM grew 16% year-over-year and reached $190 billion at the end of the third quarter. AUM subject to fee earnings growth was $54 billion, including $43 billion of AUM not yet earning fees. The largest component of this sits within our credit platform, where we generally earn fees upon deployment. This represents a highly visible revenue opportunity of approximately $160 million on an annualized basis as we put this credit capital to work. Our dry powder stood at a record $86 billion at the end of September, representing 45% of our fee paying AUM. Periods of market volatility have historically played to TPG's strength, and our significant dry powder positions us well to capitalize on the higher for longer rate environment across our asset classes.

Moving to our investment portfolio. Fundamentals remain strong with positive value creation across each of our platforms in the third quarter. And in private equity, our portfolio appreciated 3% in the quarter and 10% over the last 12 months. Revenue and EBITDA growth across our capital, growth and impact platforms continue to track in the mid- to high teens. Specifically, aggregate bookings across our TPG Capital and TPG growth software portfolio grew more than 25% in the third quarter, which is a notable step up from the first half of the year. Our software companies are leaning into AI to drive new products and features, which is directly contributing to the strong bookings growth. In credit, our portfolio appreciated 2% in the quarter and 11% over the last 12 months, with healthy credit quality across the board.

The middle market direct lending, Twin Brook's portfolio, Twin Brook's portfolio companies continued to generate stable earnings growth with an average interest coverage ratio of approximately 2.3x and a low nonaccrual rate of 1.6%. Notably, our annualized loss ratio since inception has remained unchanged at only 2 basis points. Our third credit solutions fund generated a 2% time-weighted net return in the third quarter and inception to date performance remains very strong at a 29% net IRR. In Asset Based Finance, all our ABC funds remain at or above their target range and are currently generating a yield to maturity of more than 14%. Additionally, our public structured credit strategy, MVP continues to materially outpace public credit indices in a period of renewed interest rate volatility.

In real estate, our portfolio appreciated 1% in the quarter and 8% over the last 12 months, which remains highly distinctive, particularly in today's rising rate environment. Our value creation during the quarter was primarily driven by strong operating performance in our residential, retail and office holdings. Looking ahead, given the momentum across our platform, we are updating our full year 2026 fundraising guidance. Following the $42 billion of capital we raised through the first 9 months of this year, we now expect to raise more than $55 billion for the full year, which is benefiting in part from the pull forward of certain closes initially budgeted for 2027. We expect our fourth quarter fundraising to be driven by the following: first closes across our real estate funds, including $5 billion for our TREP opportunistic strategy, which Jon discussed. Final closes for TPG Capital 10 Healthcare Partners 2, Tech Adjacencies 3 and our second asset-based credit drawdown funds. Additional closes for a second TGP solutions fund and our sixth Twin Brook's drawdown fund. [indiscernible], continuous fundraising in perpetual habitual strategies, including T-POP, TCAP and ADL.

For 2027, our capital formation pipeline remains well diversified, including significant contributions from our real estate strategies, which we've already begun to see, continued inflows into our credit platform, driven by the breadth of our strategies and growing insurance partnerships and accelerating demand in the private wealth channel for existing products, T-POP and TCAP. We are also actively advancing our new product pipeline and expect to launch a multi-strategy credit interval fund and a non-traded REIT next year. Beyond 2027, as Jon highlighted, we continue to expect accelerated growth, including doubling our credit AUM to $200 billion by the end of 2029. This underscores our confidence in the long-term growth trajectory of our business, our ability to continue delivering strong performance for our clients. I'm incredibly excited to join TPG at a time like this and to continue building on our broad-based momentum. Thank you again for joining us today.

I will now turn the call back to the operator to take your questions.

Operator

[Operator Instructions] We'll take our first question from Ben Budish with Barclays.

Gary Stein

Actually, Ben, one second. Thanks for everyone on the call, we understand the webcast how the technical issue and was down momentarily. So we will make sure we get the replay posted as soon as possible and will also be a transcript posted to the site as soon as possible. I did just want to repeat something Axel said in case it was missed, which regards our FRE margin guidance. He said that given our strong performance year-to-date, we're raising our full year 2026 FRE margin guidance to approximately 48%, which would represent nearly 300 basis points of expansion compared to 2025. I just want to make sure everyone heard that. So with that, Ben, I'll go ahead to the question. Thank you.

分析师问答

Benjamin Budish

Maybe Axel, great to hear about all the kind of fundraising momentum and the positive realization commentary. Curious if you could just maybe size it up a little bit more. Obviously, this quarter looks like a bit more of an anomaly we've seen kind of strong and weak quarters over the last 2, 3 years. Just curious if you can give us any more color on what Q4 looks like, what the run rate looks like based on the current pipeline? And maybe similarly for transaction fees. It seems like you guys have been busy, obviously, quarters can kind of bounce around. But if you can kind of help us dimensionalize what to expect there, that would be helpful.

Axel Philippe Andre

Yes. Thanks, Ben, for the question. Look, like I said in the prepared remarks, we expect to raise more than $55 billion for this year, given our strong momentum, which is really broad-based across our strategies, backed by strong investment performance and all long-standing client relationships. We raised approximately $42 billion year-to-date. We expect to finish the year with several large flagship closes across asset classes, including TPG 10 and Healthcare Partners 3, TREP 5 and ABC 2. We also expect to hold first closes for our Asia Realty V and Japan value 2 real estate strategies and raise incremental capital for our direct lending MMDL 6 and essential housing for credit strategies as well as our ADL and CLO business. Beyond those flagship campaigns, newer strategy is also becoming increasingly meaningful contributors such as sports, TDS 2. And finally, in addition to our drawdown funds, we expect to see continued strong inflows through our private wealth products T-POP and TCAP. As it relates to transaction fees, capital markets fees, as we said, it's hard to predict. It is generally correlated with deployment activity. On our last call, we mentioned how we benefited from the pull forward of certain transactions, resulting in a record level of transaction fees in the second quarter. But in terms of the third quarter result of $55 billion of transaction fees, we're very pleased with that result.

Operator

We'll move on to Glenn Schorr with Evercore.

Glenn Schorr

Question on your realization and what drives the confidence because I think we've been watching the industry, we've all been watching the industry waiting on exits to ramp up. You've made some great comments on the cadence of realizations accelerating in 4Q in 2027. I'm curious if you could just give us a little more color on what drives that confidence? And then when you look at the net accrued slide that you give us, which I love, the 2020 and prior vintages, the net accrued actually went down, it went up for every other one of the vintages you list. So I don't know if you can dimensionalize anything while you answered the question on realizations.

Axel Philippe Andre

Yes, sure. Thanks, Glenn. Let me get started, and then I'll pass it on to Jon. Maybe starting with the last part of your question. So in terms of that net accrued performance balance, so you're right that we -- as we look at the kind of the change quarter-over-quarter, you see that we've essentially added to that net performance balance for newer the newer vintages 2021, '22, '23, et cetera, whereas 2020 and before that [indiscernible] performance balance is decreasing, which is good. It's a sign that we're basically executing on monetization and realization activity and that will ultimately result in flow-through to PRE.

Jon Winkelried

Thanks, Glenn. Look, overall, I think with respect to the monetization pipeline. I think we're pretty happy with and feel pretty good about the quality and breadth of the realization pipeline. I mean we had, as you know, approximately $7 billion of realizations in the third quarter and over $25 billion of realizations over the last 12 months. I think you also know that there's a cycle to realizations just in terms of getting transactions done. And -- but we continue to be highly focused on return of capital in the last 12 months over $8 billion of capital is returned from TPG Capital, TPG growth, TCAP and the LSI strategies.

We have also pretty good visibility with respect to a number of transactions. We have 5 signed deals in the pipeline that are waiting to close across our PE and real estate business. And so look, I think that over the arc of time, based on sort of what's going on in the environment, the kind of the ease or difficulty in the environment in terms of getting deals done, ebbs and flows, but this is something that we've been consistent about in terms of focusing on DPI as an important element of our differentiated performance. And if you look at year-over-year over the last 5 years, I think that we've had a general upward trajectory in terms of the return of capital, and that's been true over the last 3 years, including the last 12 months. So that's what gives us our confidence.

Operator

We'll move on to Alex Blostein with Goldman Sachs.

Alexander Blostein

I wanted to dig into 2 areas you mentioned obviously, lots of momentum in the business, as you highlighted, but the 2 specific areas of real estate and credit that I was hoping to double click on. I guess, one, environment has been super volatile, especially with rates really encouraging to see you guys start off this real estate fundraising with $5 billion. So maybe just expand a little bit on how you anticipate this flagship real estate fund raise to unfold over the next several quarters, both in terms of kind of the absolute size and timing? And secondly, and maybe even more importantly, Jon, to your point about doubling the credit business again by 2029 to $200 billion. Can you maybe just help us unpack some of the key drivers and how you're thinking about that coming through as well?

Jon Winkelried

Yes. Look, on the real estate side, just starting with the here and now in terms of our TREP 5 fund raise. We're having I would just say, not to get over my skis, but I have to say that when I look at the arc of these fundraisings with respect to large funds and what the initial response looks like and feels like I would say this is one of the strongest starts to a fundraise that we have had across our system. And based on what's going on with rates, some of the dislocation in real estate over time I would say, generally, people being wary of the space. I think that we have gotten -- there's many of our largest relationships have been very sort of intrigued by the way we've invested and the opportunity set that we see.

I would say also increasingly, one of the other interesting things is that there are a lot of very large institutional pools of capital in the world. that have changed their strategy in real estate. And what that means is that many of them prior and prior -- kind of in prior cycles had a strategy of being more or less direct investors. And I think that what has happened is that as navigating investing in real estate, particularly over this move in rates going even back to COVID, coming out of COVID and now in this latest cycle it's been difficult for people to navigate. And so we see an increasing number of large institutional relationships moving to what we call sort of the partnership model, which is looking for important GP relationships of theirs that they have a lot of confidence in terms of sourcing really interesting opportunities, opportunities in size, navigating the various sectors and then coming along with us in terms of either partnering in the form of co-invest, but they're making very large commitments to us in the underlying fund.

And so when we look at this fundraise, there are a number of first-time commitments from large institutions that are very -- that are very interested in partnering with us. And so we've had an incredibly strong following in this first close, having raised about $5 billion. I think that we expect the follow-through to be incredibly strong even in the face of kind of rising rates because one of the things that we're seeing, and we've talked about this over the course of the last several years, we see increasing capitulation sort of quarter-by-quarter. Large pools of real estate assets that need to actually liquefy and sell assets. We've seen harder to come by assets that finally are breaking loose over the last really 2 years, frankly, and increasing, particularly given this last move in rates, and we're seeing the opportunity to invest in what we think are very attractive cap rates and also way below replacement value.

And then the other thing that we see happening in this environment, which is I think always very important in the real estate cycle is generally one of the watchouts when you're acquiring real estate in a particular sector is new supply. And because of what's happened in the cycle and rates -- we don't see that happening in terms of generally across the landscape with the exception, obviously, of what's going on in data centers more broadly, and that's a story unto itself. So I think that we're -- in terms of our long-term target for the fund, I think we've talked about that in the past. I think we're pretty confident that we're going to accomplish that.

On the credit side, look, we are coming through a period where we're sort of at a systemically organizationally higher level of fundraising cadence as a result of the significant expansion in relationships as people have gotten to know our credit strategy over the last 3 years. And if you look at new to strategy, new to fund kind of commitments that are coming from long-standing TPG clients, that flow-through is very significant. We're also beginning to expand as you know, in a number of our different areas. So for instance, ADL is an example where we're leveraging off of the flow we see through both Twin Brook in larger companies that we have banked as well as in Credit Solutions, where we're seeing very bespoke financing opportunities. And in many cases, we essentially can structure things like first outs and other opportunities that are really perfect for our ADL kind of risk-reward type perspective there in terms of what we're trying to do.

So we have a lot of confidence in continuing to grow that part of our platform, where we haven't had that before. on the asset-based finance side, we're growing our business meaningfully there. Obviously, we have ramped significantly our insurance company relationships since we acquired our credit platform that continues to grow, continues to be healthy. We're also ramping our deal sourcing and asset sourcing capabilities. We have a growing pipeline every quarter on the IG ABF side. And there are a number of opportunities for expansion there that we're actively engaging in. Infrastructure finance is another area where we're continuing to pick our spots. Obviously, we think that there's a lot of -- I think you've got to navigate that sector very carefully right now just in terms of credit quality and where we want to play.

But that's another area where we continue to see growth opportunities. And then just -- and the last thing I'll say is in Credit Solutions. When you look at what people are talking about with respect to the maturity wall and bespoke financing requirements that many sponsors have as it relates to their portfolio, the AI financing bulge and bespoke financing opportunities there. Last 2 years, we've deployed over $5 billion. We've already had several realizations. We're recycling that capital. So that business just can be a lot bigger as a result of the size of the opportunity.

Operator

We'll move on now to Brennan Hawken, BMO.

Brennan Hawken

Okay. So fundraising, really great to hear the raised target here for 2026 and encouraging that it's a pull forward from '27, especially given the extended time frame you hear across the industry for fund ratings. So curious about what that might mean for 2027, though, given the pull forward, does that mean that '27 is going to have a harder time growing on '26? I know that that's a little bit of a what have you done for me lately type of question, but curious about how we should think about that.

Jon Winkelried

Well, that is that type of question. You're right. But I think that we -- I guess one way to describe it is that when you look at our capital formation process and you take a little bit of a sort of a snapshot of looking back to I don't know, let's say, 2020, all way through where we are today. Because of the growth of our business because of the diversification of our platforms now, I mean, the firm looks very different, right? So we've had kind of a systemic kind of cycle of fundraising where from like 2020 through kind of 2023, we had a series of large -- excuse me, large fund capital raising efforts and sort of systemically raised our kind of like sort of our annual fundraising cadence from to sort of like somewhere in the kind of $25 billion to $40 billion range.

Just as a note, in that cycle, when we raised the last TPG Capital Fund as an example, TPG Capital 9 and on Healthcare Partners 2, that fundraising because obviously, it's a large fund was a much larger percentage of what that fundraising cycle looked like versus what it does in this current funding cycle as a result of the diversification. So what's happening is with the growth in all of our businesses, we're now sort of -- we've now kind of moved up to systemically being in like the, let's call it, like about $45 billion to maybe $60 billion-ish kind of annual fundraising cadence? And any one fundraising, any one campaign is a much smaller percentage of the total. And so there's a much more diversification and breadth within the fundraising cadence that we're involved in, and that will continue.

So we're now we're ending some of our largest campaigns, capital, our health care campaign -- or excuse me, our climate campaign. We're now going into a cycle of real estate fundraising campaigns. There is some degree of our underlying fundraising effort that is, I would say, more continuous, particularly as a result of businesses like the credit business where you're raising you're raising SMAs and funds at One and things like that. So there are many more components to the fundraising picture now that we have -- and exactly what the number will be next year. We're not -- we'll probably -- we're not going to give guidance on that right now because we're just -- we're kind of focused on powering through this part of the cycle. But I would say that's a perspective for you just in terms of how we think about it.

Operator

We'll move on now to Mike Brown with UBS.

Michael Brown

Great. So on the wealth side, you continue to broaden the platform. You've got new evergreen product launches and you have continued success from T-POP. Maybe how should we think about the opportunity for these newer products to really broaden the potential here? And as you add more products and continue to prove the platform out to your distribution partners, do you think you can see an acceleration in the wealth fundraising? And do you need to kind of continue to invest and continue to support that growth potential?

Jack Weingart

Mike, it's Jack. Thanks for the question. Look, the progress we've made so far has largely been, as you know, in the private equity business. And I would say it's not just T-POP and related strategies. We are seeing the scaling that both Axel and Jon referred to. And I would say even since the end of the third quarter on that topic, we've seen a pickup in flows and kind of current run rate across the strategy of about $200 million a month. So I would expect T-POP and related strategies to continue to scale. In addition, some of the fundraising you saw in Q3 was a result of us successfully placing -- sorry, by successfully placing closed-end private equity funds with our channel partners. As we're building our brand more broadly with our partners, we're finding them selectively choosing in addition to the Evergreen product, really attractive drawdown funds to accentuate their exposure to those strategies. One of those or one of the biggest platforms in the U.S. was the biggest closed-end fund raise on their entire platform across all managers during the year. So we're really seeing a broadening -- a benefit in multiple ways in private equity. .

The next step for us on the T-POP front, from the private equity front is to continue to expand our distribution partners. We talked about onboarding a few more. Those are very early in their ramp stage I was in Asia a couple of weeks ago. I'm going back again next week as part of our brand building effort over there. And we're seeing very good traction with those partners, but very early. So you'll see continued expansion there. In addition, on the private equity side, if you look out to -- throughout '27, really in the first quarter, first half of next year, we have 5 or 6 more very significant partners lined up. in different regions to continue to expand that. So that's step 1 for us. And I think that will, to your question, results in an increase in the pace of expansion in private equity.

Then on top of that, as we've talked about, and Axel also mentioned, during the course of the year next year, we are still working towards launching both a multi-strategy creditable fund and a nontraded REIT. And we think with the brand building we're doing through the private equity expansion, we're kind of earning our way to having the right to expand with those partners who are having an exceptional experience with us on the private equity side. And when you add all that together, I do think your intuition is correct that we'll continue to accelerate in the wealth channel generally. And if you look back in '24, '25, '26; in '25, we grew substantially; in '26, we're going to end up raising through the wealth business more broadly, almost twice as much as we raised in '25. So the pace of expansion already is here, but we'll have more levers driving that in the next 12 to 24 months.

And your last question on team, we are actively adding to our team. We've been building this year. We just hired another person in the last 24 hours actually to be a senior member of the team to help us drive expansion of our national account strategy. So yes, we are adding to the team, both on the national account side and the product side and on the distribution side.

Operator

We'll move on now to Ken Worthington with JPMorgan.

Kenneth Worthington

As we think about 2027, how should we think about the underlying FRE margin outlook given catch-up fees positively influence the margin for 2026 and given some of Jack's comments there about the continued investment that you're making in wealth management?

Axel Philippe Andre

Yes. Thanks for the question. So you're right. So when we look at the third quarter and margin of 50% clearly benefited from the catch-up fees, $62 million of catch-up fees contributed in the quarter. As I said, if we normalize for what we could call a normal level of catch-up fee, although there is no such thing. Our FRE margin will have been approximately 47%. So given our strong margin performance year-to-date, we're updating our guidance for the full year, like I said, to approximately 48%, which would represent nearly 300 basis points of improvement relative to 2025. As we've discussed before, this is just a point a long way for us. This is not a final destination. Over the long term, we remain highly confident in our ability to continue expanding our FRE margin into the 50s, supported by really several structural drivers.

I would say one on the revenue side, continued revenue growth driven by fund over fund growth, private equity strategies and other newer initiatives, accelerating credit AUM deployment and continued scaling of our high-margin capital markets business. on the expense side or on the operating leverage side, greater operating leverage from our continued scaling into new and emerging strategies where the initial team build-out costs are largely behind us. And then lastly, additional productivity benefits from our formal AI initiatives that are really focused on streamlining some of our data and kind of workflow intensive operations. Now we're not putting an exact time line for this expansion into the mid-50s.

We're focused on the long-term growth of our business. We want to give ourselves the room to continue investing in the business in a measured and disciplined way. Some of the key investment areas would include capital formation, private wealth distribution, as we just discussed with Jack and our credit capabilities. So FRE margin expansion may not be perfectly linear quarter-by-quarter, but our long-term trajectory is compelling and remains firmly impact.

Operator

We'll move on now to Steven Chubak with Wolfe Research.

Steven Chubak

So was hoping to double-click into the digital infra opportunity, just given how prevalent that's been across the capital markets ecosystem, I was hoping you'd speak to how the firm is positioned to participate, understand your legacy exposure is more through direct investments in the model providers, as we think about the fundraising of the next set of real estate funds, the Climate TI strategy. Has it informed the sizing of some of these strategies and which areas are you more comfortable leaning into? Which pockets are you looking to avoid?

Jon Winkelried

Yes. Look, I think for starters, I think the context of your question is helpful because I think one of the things we -- when we think about kind of -- I mean you kind of described it as digital infrastructure. And -- but when we think about the acceleration in the development of infrastructure more broadly, I think that we feel like our approach to it is across the multi-strategy breadth of the firm, and that's how we do look at it. I mean, for instance, if you look at the opportunity set across our firm from Peppertree on the tower side, which is critical digital infrastructure across to what we're seeing in our Climate business as it relates to the evolution of -- and the importance of energy and what we think of as sort of the picks and shovels around the development of the infrastructure opportunity, and the flow of opportunities we're seeing there and then cross it over to our real estate business and the -- what we think is sort of the real estate angle on data center the data center opportunity, where we've been invested now for some time.

I think we feel like this is an environment where there's going to be a number of really interesting opportunities. Just to double-click on a couple of those things. I think if you look at on the digital info side, where we have our Peppertree business, our Peppertree business has an extraordinarily dedicated following. And as I mentioned in my comments, in the current fund raise, which has been extremely strong. And the Peppertree team has a very dedicated following. And what we have found is that many of our long-standing relationships are very interested in getting exposure to the strategy. The macro as it relates to that strategy is really intriguing. If you look at the need for critical digital infrastructure, it's only going up. And one example of that, by the way, is the latest announcements what you've seen out of Star Lake, where they're dedicated to creating a terrestrial infrastructure capability around wireless. And I think the number they quoted was something like 8,000 towers -- something like 80,000 towers, sorry, yes, some enormous number in terms of what their build out is going to look like.

And so there may be technology evolution in that over time, but I mean, we think that, that is incredibly bullish for our opportunity in the business. So we're expecting that will continue to grow and expand as an opportunity. We've also seen even on our -- in our private equity business. just in terms of the evolution of what's going on in technology and AI. Obviously, we're picking our spots there. We've made a number of investments across the LLMs and other interesting AI-related technologies across capital, TTAD and growth. We continue to expect that that's going to be a really important area. I think generally, the last thing I'll say on it is on the credit side, where we are being targeted with respect to the risk structures that we think are good risk/reward where you're getting compensated for the risk I think there is a lot of embedded risk in the market right now with respect to certain of the structures that have been financed.

And I think we feel that, ultimately, one of the interesting opportunities besides the transactions that we are financing ourselves because we think we -- because we like the structuring around them is that at some point, we expect that portion of that financing flow will likely break in terms of valuation. And as a result of that, I think that the build in our dry powder and the opportunity that we expect to come as a result of that we think is real. And so we're also going to be opportunistic as it relates to where we think that the value reset makes sense for us. So that's how we're looking at it.

Operator

We'll move on now to Devin Ryan with Citizens Bank.

Devin Ryan

A question on just the insurance platform and whether the capabilities developed through the Jackson relationship are beginning to maybe open up broader discussions with other insurers. And really just trying to think about if the third-party insurance can really become kind of a distinct growth business for TPG rather than primarily serving as capital for existing strategies and trying to also connect that back to the $200 billion credit AUM objective and how relevant this could be?

Jon Winkelried

Yes. Well, I think the answer is yes. The -- first of all, the Jackson relationship has been an incredibly strong partnership the engagement only increases across the firm. We started, as you know, with a focus particularly on IG ABF and improving their access to IG ABF as well as Twin Brook on the direct lending side. And both of those initiatives are growing substantially and what's happening as well. And I think I might have mentioned this on maybe another call. But because of the production capability that we've developed, the sourcing capability on the IG ABF side, that is serving a range of relationships for us, a range of insurance company relationships for us. And so that's up leveling the entire capability that we have with our partners.

Secondly, I think we have talked about the growth in our insurance partnerships, particularly since the original Angelo Gordon acquisition, and that the number of insurance partnerships and the AUM has grown meaningfully over that period of time and has more than doubled. So we continue to develop new relationships and expand the breadth of that. We -- on the capital formation side, we have a dedicated insurance coverage capability and a dedicated insurance coverage group, that's a global effort. If you look at the distribution of our insurance capital, our insurance capital right now is distributed around the globe between the U.S., Europe and Asia. And with the heaviest concentration in the U.S. right now, but we expect that, that will continue to grow on a global basis. And that, I think, will be an important driver of continued AUM growth across our credit franchise. So as far as kind of back to our kind of $200 billion target, I expect that our insurance business will be an important part of that. And we expect it to be a very strategic element of that long-term growth.

Jack Weingart

It's Jack. I would add just one thing. You asked whether the insurance business could expand beyond just being a sourcing channel for our existing businesses. And that I would make it clear that is already happening. If you look at all of the building we're doing into the investment-grade ABF space and other IG or higher -- lower risk return-rated segments of the market. Those are markets that Angelo Gordon, we acquired them, did not participate in. Our expanding insurance business is already significantly expanding our market opportunity into new areas.

Operator

We'll move on now to Brian Bedell with Deutsche Bank.

Brian Bedell

Great. You answered some elements of this already, but -- and it's on deployment and you definitely talked about this on the data center and infrastructure side. But if we can maybe 0 in on the 2 recently raised funds in the -- cash funds in the capital segment and in the drive Climate too in Global South. If you can comment on maybe how you're envisioning the pacing of deployment, given these opportunities is it on track, do you think to be either faster or slower. And then just connecting that with transaction fees, should we be thinking of that deployment base is informing the transaction fee growth? Or are there other areas within the capital emerging business that you think that's -- are not quite scaled yet or not quite internally built out yet enough more upside to that.

Jon Winkelried

Just quickly, I think that the scale of the opportunity is obviously meaningful in terms of deployment into the ecosystem that you're describing. And I think that we're -- we have a number of scaled pools of capital that I mentioned before that we're taking advantage of this, including by the way, credit, which you didn't mention. And if you look at the broader flows as a result of this, I think, again, we are -- I mean, in terms of predicting pace, that's always tough. I think that obviously related -- the AI-related ecosystem is, I think, clearly going to be a larger portion of the deployment picture as we think about deploying each of these different funds. I will -- I'd like to ask Jim if he can -- hopefully, he's still on and can hear us, but I'd like him to comment on the climate ecosystem because I think that's particularly interesting as it relates to this.

James Coulter

Yes, the climate ecosystem is essentially morphing into a pick and shovels expression of what is happening in the reset of the power sector around the world. And so we're seeing quite active deployment across our activities there. The funds we're closing are already about 25% deployed. And if you look into that deployment, you'll find utility services in the U.S. find green data centers in India, you'll find wind in India and data center equipment businesses across the U.S. So I think we are well positioned in the ancillary aspects of the huge capital cycles that are going on around the world through these products.

Operator

We'll move on now to Arnaud Giblat with BNP.

Arnaud Giblat

I just wanted to circle back on performance fees and the absence -- virtual absence in the quarter. I'm just wondering that is despite a decent level of realizations in the quarter positive accretion across all platforms and actual build. I just wanted more detail there, so we can square back with expectations of performance fees speaking back up in Q4 and in 2027.

Axel Philippe Andre

Yes. Excellent question, Arnaud, this is Axel. So look, in the quarter, we generated $6.6 billion of realizations, which, by the way, brought the yearly total to $20.4 billion, up 10% year-over-year. The proceed -- those proceeds from realizations were largely used to return basis on realized deals and cover unrealized losses, mainly in TPG Capital as we prudently reflected market volatility in the software companies are facing greater AI-related defensive risk. Outside of these specific companies, the portfolio fundamentals remain very strong with growth outpacing the broader market. So positive value creation across every platform this quarter and private equity, in particular, private equity strategies appreciated 3% in aggregate. So for example, we mentioned that aggregate bookings in our TPG Capital and growth software companies grew more than 25% in the third quarter, clearly, accelerating from the first half of the year. What we're seeing is that AI-enabled revenue and cost initiatives are accelerating earnings growth at many companies in software and beyond. So the fixed items of the $6.6 billion of realization in the quarter is that we saw our net accrued carry rose sequentially to a record $1.5 billion at quarter end. So while the current market conditions may temporarily impact the timing of realizations, we see clear opportunities to selectively monetize investments at attractive valuations. We continue to expect realized performance allocations to pick up in the fourth quarter and into 2027.

Operator

We'll move on now to Bart Dziarski with RBC Capital Markets.

Bart Dziarski

Just wanted to ask a question around on higher rates and the impact on private equity specifically as it relates to performance. So you talked about deployment monetization. Thanks for that color. But in terms of performance, you've historically been an alpha generator, a very strong performance within that asset class. Just wondering if value creation plans or anything like that are changing in light of the incrementally higher rate environment to preserve that performance advantage?

Jon Winkelried

Yes. Thanks for the question. I started off my comments just talking about, obviously, the rate -- the increasing interest rate environment and its impact generally on the market. And I think that certainly will have an impact on transactional activity, cost of capital, et cetera. Having said that, though, I think -- and I think you've heard us talk about this quite a bit. Our business on the private equity side is not really a kind of leverage arbitrage business our business on the private equity side is a growth-oriented business where we're generally driving top line and earnings growth in our companies trying to inflect growth, whether it's by just the core strategy evolution, better execution, implementation of technology, et cetera. And so as a result of that, we don't -- we use leverage -- we don't -- we're far from using maximum leverage in our strategy to finance our companies. The -- as I said -- I think I said in my comments, you look at a long arc of time in terms of the decade where 80% of our value creation across our private equity strategies is essentially from that earnings -- that base earnings growth as opposed to things like multiple expansion or any kind of leverage arbitrage.

The other thing I would say, which is important in our portfolio, which we didn't get a chance to talk about today is that we have been anticipating just generally more volatile markets. And going back probably now 24 months, we have undergone systematically as a result of our capital markets capability, a effort to optimize balance sheet structure and execute refinancings, extend maturities where we can lower our borrowing costs where we can and make sure that we're operating on the best terms. If you look at our interest coverage ratios, if you look at our general leverage ratios, they're all generally at the lower end of what you would see across large buyout players in the market. So we're not that concerned to be honest with rates as it relates to kind of inflicting any pain on our strategy. And so I think we're cognizant of it, of course, because it does have an impact on the overall transaction level, I think, in the market.

Operator

We'll move on now to Michael Cyprys with Morgan Stanley.

Michael Cyprys

I wanted to come back with a question on AI infrastructure, given your investment across data centers and related power infrastructure. Just curious how you're thinking about any sort of concentration risk? How much exposure are you comfortable taking that theme within your funds. And I was hoping you could elaborate a bit on some of the risks that you were alluding to earlier within certain structures that are being financed, how you protect against that? And while you've been quite active on the equity side, curious to what extent you see opportunities to participate more on the financing side through your credit platform.

Jon Winkelried

Yes. Thanks, Mike. Well, look, I think to start off with from a high level, I think that we're trying to be very selective in terms of what we do on that side of the business. I think that what we have tended to look for is in-place assets that are generating are leased and generating cash flow -- and if you look back at sort of our current -- if you look at our current exposures, I think that that's consistent with where we are and the I would say a couple of the things that we are very mindful of is development risk within our portfolio. And -- so we have very little of that across our portfolio. When we look at kind of what part of the ecosystem we feel comfortable and I think Jim commented on sort of like we use this expression, picks and shovels. I think that around the data center evolution, there's obviously a substantial energy need in terms of electrification.

There's clearly an industrial supply chain dynamic going on with respect to what needs to be done to fulfill the data center demand framework. And so we are digging into that and have invested actively in what I think of as sort of the second order opportunity around the data centers where we feel like, fundamentally, the risk reward of that is very, very good. and is distributed. It's not concentrated in several large data centers, but it's distributed around the data center ecosystem. Some of the risks that I was referencing before are that if you look at the financing that's going on in the market. Obviously, there is an extraordinary need for capital. I think the -- some of the risks that we look out for as it relates to how we think about lending and exposing ourselves is one development risk, as I mentioned already because there is a number of headwinds as it relates to development risk certainly just a political dynamic in terms of the community dynamic in terms of people pushing back, I think, is creating uncertainty and in some cases, surprises around that process. So that's one element of risk.

The second element of risk, I would say, is that the dependency on more and more financing and the questions of where that -- whether and it would price some of that financing will be available. And we're trying to reduce our exposure or avoid exposure to this sort of cycle of ongoing borrowing requirements, where we think that it's unclear whether or not investors will keep stepping up. One of the things that we typically see in the credit markets is that in areas that are flush with a lot of financing you get to concentration issues among investors, how much exposure they can take. And we're dealing with an historic level of financing pressure in the market right now. And we're starting to see that question of I can't take anymore or if I take any more, it's got to be a different type of risk reward or different type of structure or terms have to be different in terms of what the required returns are. So that's where we think we're trying to be careful about what our exposures are. We have seen a number of opportunities as a result of that trend to work on more innovative creative structures around that. We're working on one actually now as we speak. And we feel like in that context, we can structure better protections and better risk reward. So that's an area where we feel like our capital will be well deployed. And I think over time, I do think that there is going to be I guess, I don't know if the right term is some level of distress in the space or some level of repricing maybe is more appropriate. And I think that there are going to be opportunities to step in when that happens. So I would say that's how we're thinking about it.

James Coulter

If I can add, Jon, Michael, you've been through cycles before as we all have been. But there's a very good argument right now and it's been made pretty well for a large data center beta play. And that is certainly moving through the market. We're of a size and a focus where we're very focused on the data center alpha play, where we don't have to necessarily do the full beta play where we can sort of pick our spots, as Jon is describing. And having been through fiber cycles and airline cycles, et cetera, when the market gets very sure of something, occasionally, it's good to be cautious and this may be a moment where we're seeing some of that cautious alpha-seeking activity in our pipeline.

Operator

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 closing remarks.

Gary Stein

Great. Thanks, operator, and thank all of you for joining us today. As always, if you have any additional questions, please feel free to follow up with the IR team. Otherwise, we'll look forward to speaking with you all again next quarter.

Operator

This concludes today's TPG's Third Quarter 2026 Earnings Call and Webcast. You may now disconnect your line at this time, and have a wonderful day.

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