TPG is said planning to launch next flagship fund in first-half 2018

TPG Capital plans to come back to market with its next flagship fund in the first half of 2018 and possibly as early as Q1, according to two people with knowledge of the firm.

The target on TPG Fund VIII is unclear; the two people said they expected the fund to target at least as much as the prior fund, which closed in 2016 on $10.5 billion including $400 million from the firm and its personnel.

If TPG Fund VIII launches early next year, it would join Carlyle Group’s seventh flagship as one of the private equity megafunds in the market. Carlyle is targeting $15 billion for its seventh flagship fund and is expected to hold a first close by year-end, Buyouts has reported.

While TPG Fund VII closed last year, it had been in fundraising since 2014 and had been investing since that time. At the time of final close, which TPG announced in May 2016, the firm had invested $2.1 billion in six companies.

Fund VII has made a slew of investments, including in McAfee, Vice, Cirque du Soleil, Mediware, Cushman & Wakefield, Life Time Fitness and Poundworld, among others.

It’s not clear how much capital Fund VII has deployed. A spokeswoman for TPG declined to comment.

The firm, formed by David Bonderman and Jim Coulter, invests across industries including healthcare, consumer and retail, financial services, industrials, technology, internet and digital media, natural resources and energy and real estate.

Fund VII’s fundraising process was boosted as the firm rolled a $2 billion bridge fund into the vehicle that made investments prior to the launch of the main pool. TPG raised the bridge fund in 2014 from a handful of limited partners.

TPG launched the bridge fund as an interim vehicle before it went full steam into raising its seventh pool. At the time, fundraising for the seventh vehicle was expected to be challenging because of the weak performance of Funds V and VI.

Both funds had large, challenged buyouts that dragged down returns, such as Washington Mutual and the former TXU (now Energy Future Holdings).

Since then, both funds’ performance has improved, though they are not spectacular. Fund V, a 2006 vintage that closed on $15.3 billion, was generating a 5.2 percent internal rate of return and a 1.46x multiple as of June 30, 2017, Oregon Public Employees Retirement Fund data shows. Fund VI, a 2008 vintage that raised $19 billion, was producing an 11.5 percent IRR and a 1.6x as of that date, according to Oregon.

That performance puts Fund V in the third quartile for the 2006 vintage, and Fund VI in the second quartile for the 2008 vintage, based on the Buyouts return database of 2,300 private equity funds.

Fund VII is still too young to determine meaningful performance.

Action Item: Check out TPG’s Form ADV here: http://bit.ly/2AodJrS

David Bonderman, founding partner at TPG, takes part in the Private Equity: Rebalancing Risk session during the 2014 Milken Institute Global Conference in Beverly Hills, California, on April 29, 2014. REUTERS/Kevork Djansezian