TPG Inc is reportedly set to slash its China allocation by more than half from prior regional funds, as the US alternative asset management firm deploys capital from its eighth Asia buyout fund.
TPG will close its eighth and largest Asia buyout fund, TPG Asia VIII, at around $5 billion in early April, Bloomberg reported on Monday, citing a person familiar with the matter.
The reported fund size falls short of an earlier announced target of $6 billion during the firm’s earnings call in November 2023, but it would still be larger than the predecessor TPG Asia VII which raised over $4.6 billion in early 2019.
TPG plans to deploy about 10% of the Asia VIII pool to China, down from approximately 25% of invested capital in previous funds, according to the person, who asked not to be identified because the information is not public.
The San Francisco-headquartered PE firm will allocate more than 80% to Australia, India, and Southeast Asia, up from 70% in the previous funds. The rest will go to South Korea, said the person.
The firm has already invested over $2 billion from the new fund, with zero investment in China so far. It booked a strong start with a net internal rate of return (IRR) of 129% as of December 31, 2023, according to its latest earnings presentation. About 70% of the initial deployment went to India and Australia.
TPG’s decision to slash investments in China comes amid the recent few years of US dollar pullback from the country’s capital markets due to concerns over geopolitical uncertainties and a slowing domestic economy. S&P data show that the total value of the US private capital invested in China dropped to $7.25 billion in 2023, the lowest since 2019.
The 2022-vintage TPG Asia VIII, for which the firm held a first close at $3.4 billion in November 2022, counts some of America’s biggest pension funds such as the Teacher Retirement System (TRS) of Texas and Washington State Investment Board (WSIB) among its limited partners (LPs), DealStreetAsia previously reported based on public filings.
The $4.6-billion TPG Asia VII has a net IRR of 14%, dragged down by China investments, according to the person and public filings. TPG Asia VI, which was closed at nearly $3.3 billion in 2014, has a net IRR of 11%.
Founded in 1992, TPG invests across a broadly diversified set of strategies including private equity, impact, credit, real estate, and market solutions with $222 billion in assets under management and investment.