TPG bets on Trumid as covid-19 boosts digital adoption in credit trading

The remote-everything environment has sped up the trend of digitization and automation in general, and specifically the adoption of electronic corporate bond trading, TPG’s John Flynn told PE Hub. 

As covid-19 accelerates the move to digital bond trading, TPG is betting that its adoption is here to stay, John Flynn, a principal on the firm’s internet, digital media, and communications team, told PE Hub.

TPG participated in a $200 million funding round for Trumid, led by growth equity firm Dragondeer Investment Group and funds and accounts managed by T. Rowe Price, Hillhouse Capital and BlackRock.

The new funding round pushes the company’s valuation to more than $1 billion.

The remote-everything environment has sped up the trend of digitization and automation in general, and specifically, the adoption of electronic corporate bond trading, TPG’s Flynn told PE Hub.

“Years of technology adoption has taken place in the bond market over the last few months. Trumid provides a better way for both buy-side and sell-side market participants to trade corporate bonds: it saves traders time, while allowing banks to be more efficient with their balance sheets and providing enhanced liquidity to the market,” Flynn said.

“Covid-19 and the current work-from-home situation have served as a catalyst for people to rethink how they do their work, and we believe that this type of automation and technology adoption is here to stay,” Flynn continued.

In fact, covid-19 has been a very big period of usage on the Trumid platform. TPG consequently shifted its diligence to determine whether the engagement surge is temporal, existing mainly due to the pandemic and work-from-home situation, or if it’s permanent, the investor said.

“We spoke to a wide array of market participants through our diligence,” he said.

“The conclusive response was this is the way we should have been trading the whole time, but there was just resistance to change. Covid-19 has helped to mobilize that change, and we believe this is how we will continue to work going forward,” Flynn said.

For many traders, the benefits of electronic trading and software technology that facilitates workflow has become more evident while working from home.

“With the pandemic, some of the large institutions led the way and immediately dissolved their teams, sending them to work from their homes and apartments,” Flynn said.

“People are completely scattered and remote, and that has caused many institutions to rethink their workflows,” he said.

Trumid has also capitalized on the spike in market volatility during covid-19, which has led to more people trading on the platform.

The company said its market share increased five-fold in 2020 while the volume of trades on the platform grew nearly 500 percent.

For TPG, the greater value lays within Trumid’s growing network that now has many hundreds of different institutions, each with multiple traders on the platform, according to Flynn.

The so-called dark pools allow market participants to enter into a trade anonymously, protecting the marketplace and tradable securities from price speculation ahead of the transaction.

While dark pools are not a novel concept, many of them have struggled to get enough market participants to offer liquidity on both sides of the pool, Flynn said.

“The ability to go into a trade anonymously is extremely valuable, and Trumid is the first to create this kind of scale of engagement in a dark pool,” the investor said.

TPG’s other fintech investments include Eze Software and Advent Software.

Action Item: See PE Hub’s recent report on TPG’s stake sale in WellSky.