By Chibuike Oguh
(Reuters) - TPG Inc said on Monday its fourth-quarter after-tax distributable earnings rose 34% year-on-year, driven by strong asset sales across its portfolio of private equity, impact investment, growth equity, and real estate assets.
The performance of many private equity firms were boosted by a record-breaking year of deal-making in 2021, buoyed by buoyant public markets, the availability of cheap capital owing to low interest rates, and economic recovery from COVID-19 pandemic.
TPG's peers Blackstone Group Inc, Carlyle Group Inc, and KKR & Co Inc all reported record fourth quarter earnings as the firms sold off assets for top dollar last year.
The Forth Worth, Texas-based firm said its after-tax distributable earnings, which represents the cash used to pay dividends to shareholders, rose to $137 million from a $102 million a year earlier.
Its after-tax distributable earnings slightly exceeded the average Wall Street analyst estimate of $133 million for the fourth quarter, according to financial data provider Refinitiv.
TPG said it generated $7 billion from asset divestments across its portfolio in the quarter and spent $8 billion for new acquisitions, mostly in its private equity and real estate businesses.
Under generally accepted accounting principles, TPG reported a 46% drop in net income to $326 million, owing to a slowdown in revenue from capital allocation activities. TPG said it ended the quarter with $114 billion in assets under management and $28.4 billion in unspent capital.
Buyout firms face a more challenging year in 2022. The U.S. Federal Reserve has started raising interest rates to combat inflation and is expected to begin unwinding its bond-buying program, thus ending the era of easy financing for leveraged buyouts.
TPG said it still expects to capitalize on opportunities to invest in the current climate, particularly among growth-oriented companies that are shelving or postposting plans to go public amid a slowdown in stock market valuations.
"The IPO and SPAC markets are essentially shut down right now, particularly across the growth investing landscape, and we think it creates more opportunity for us because they are competitors to private equity as companies look for sources of capital," TPG Chief Executive Officer Jon Winkelried said in an interview.
"We're looking to be capital partners with really interesting strong companies but in the private markets."
TPG made its stock market debut in January after raising $1.1 billion from an initial public offering that valued the firm at $9 billion.
(Reporting by Chibuike Oguh in New York; Editing by Rashmi Aich)