TPG Cuts Size of Distressed Fund

(Reuters) – U.S. private equity firm TPG Capital is scaling back the $6 billion fund it raised to invest in distressed financial companies, the Financial Times reported.

TPG told investors it has decided to return 25 percent of that money to investors, the paper said, citing investors of the private equity firm.

TPG said it was concerned the government’s expanded role in the financial sector meant fewer opportunities for private sector firms, the newspaper said.

“They told us, ‘we are competing with the government and their funding is cheaper,'” the newspaper quoted one investor as saying.

The newspaper said the decision was particularly striking because private equity competitors such as Carlyle are raising fresh funds for the same purpose and industry leaders — including Christopher Flowers, the private equity investor — have been promoting the idea that bargains exist in the ranks of bombed-out banks and lenders.

It said the different strategies showed the difficulties even sophisticated investors faced in understanding conditions and suggested the often pack-like behaviour of the private equity industry during the bull market was breaking down. TPG could not be immediately reached for comment by Reuters.

(Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Valerie Lee)