Mike Brown : Great, good morning. I wanted to start with the — maybe the insurance opportunity. I guess it’s few months since you closed in Angelo Gordon, I just wanted to see if there was any update on the opportunities there in terms of the opportunity of looking at from strategic partners? And then when you think about the broader platform now you’ve got full diversification across a lot of the major product lines. But is there any element of the Credit business that you think you want to continue to bolster and build out to really fully service the insurance balance sheet?
Jon Winkelried : Sure. Yeah, it’s a good question because it’s very much something that we’re focused on and we’ve been focused on. Let me just say that — just reiterate that the insurance opportunity, I think, is both sort of — there’s two categories of opportunity. One is we currently have a number of insurance companies that are clients of ours, across a range of our products. So think of the insurance sector is also a source of LP penetration, and that exists here to date on both sides of the firm, both across all of our strategies. And I think with the expansion of our general product capabilities, I think we are able to have a dialogue with insurance companies that’s a bit more holistic, and we’re already seeing the benefits of that and we have a dedicated team covering the insurance sector, as LPs with the embedded knowledge of what’s important to insurance companies in terms of their asset selection process.
So, that, I would say, is one part of it that continues to grow and continues to be a great opportunity for us, and it’s also a global opportunity. Secondly, on the strategic side, obviously, we’ve talked about this before with our expansion into — across the range of asset classes. The opportunity to have a more strategic dialogue with a number of insurance companies is clearly there, it’s front and center for us. And I would say that since the announcement of the acquisition of Angelo Gordon, that dialogue has picked up quite meaningfully. And so we’re doing a lot of work on it. I would say we’re evaluating opportunities. And of course, we’ll be very selective and careful in terms of what we ultimately do so that we position ourselves in the most strategic way we can.
And as far as the product lines, particularly on the Credit side, we feel we feel great about the mix of product capability that we have in AG. I mean one of the things that attracted us to Angelo Gordon, was that it was a multi-strategy platform. It wasn’t a mono line that, for instance, was only doing direct lending. It was a multi-strategy platform. So it had a direct lending capability. It has a Credit Solutions capability, and it has a Structured Credit capability. And in particular, I would say one of the things that is very important in the process of managing assets on behalf of insurance companies is making sure that you have product structuring capabilities, whether it’s creating rated note structures, risk tranching and asset sourcing capabilities outside of just pure essentially EBITDA risk, outside of purely the corporate side, you’ve got to also be able to reach and source product on the non-EBITDA side.
So our Structured Credit business in terms of asset-based finance, specialty finance, securitized mortgage product, across the whole range of those products, we have a — we have a business that’s been built out over the last 15 years that has infrastructure, servicing capability and product breadth. So, now we’ll never be done building those businesses. We’ll continue to build those businesses and expand them as we’re able to scale them with respect to more capital, but we feel pretty good about the tools that we have. So that’s how we feel we’re positioned right now.
Operator: The next question comes from Brian McKenna with Citizens JMP.
Brian Mckenna : Great, thanks. So performance in Rise Climate is pretty impressive today with an IRR of 27%. It would be great just to get some color on really what’s driving this outperformance? And then with the next rise climate and infrastructure funds coming down the pike, what are your initial base case expectations for performance for these strategies?
Jon Winkelried : James, I think you’re on.
James Coulter : Thanks for the questions and greetings from Geneva, where I’m above about the 10th city of the Rise Climate launch. So I’m well positioned to answer those questions. I’d say the outperformance last year was really being in the right place ahead of a wave. We started the decarbonization investment journey almost seven years ago. And as a result, I think we ourselves in a position to lead the market in terms of deployment and opportunity creation. Last year, I think the value creation for the fund was up 37%, which is obviously a standout in Private Equity. But in particular, we were able to execute two very important IPOs in a market, where IPOs were certainly rare. And that’s because I think that the public market is ready for the next generation of climate forward companies.
So this fund is fund that so far in a world where we live has happened as expected in Private Equity. It’s been invested in exactly the three years that we told the market to be invested. It’s in 20-plus companies well diversified. And so far, the performance, I think, as you pointed out, has been strong. Going forward, we continue to think we’re well positioned to show the market differentiated opportunities, and we should be able to continue to generate the Private Equity target returns that we’ve been focused on in this fund. In the Infrastructure world, I think you continue to see a fair amount of interest in decarbonization and our position essentially expanding from Private Equity into the Infrastructure adjacency offers, I think, a significant opportunity for us.
So this is a period of time that investors are looking for sector differentiation, and I think we’re in a good position to continue to offer it in live climate.
Jack Weingart : And Brian, in terms of in terms of fundraising targets for the business, if that’s what you’re referring to, we did say publicly when the commitment was announced that we were targeting at least $10 billion, across our next Private Equity fund, TRC 2, combined with the Global South initiative. So those numbers do not include the Infrastructure business. That won’t all be raised this year. It will be raised over this year and next year. And assume that those funds will be activated more toward the end of the year.
Brian Mckenna : Great, thanks, Jack.
Operator: The next question comes from Luke Mason with BNP Paribas.
Luke Mason : Yeah, thanks for taking my question. It’s just on transaction fees. You talked about pipelines picking up back Q1 seasonally weaker and you integrate AG there. So I’m just wondering how we should think about the potential growth in kind of capital markets transaction fee revenue in the coming years, if we issue more benign markets? Thank you.
Jack Weingart : Good question, Luke. If you separate that into kind of the legacy TPG businesses and the Capital Markets business, we’re building here and then think about adding Capital Markets fees through the integration of AG, particularly on the Credit side. What we’ve said historically is we think of a normal run rate for that TPG Capital Markets business, at today’s level to be around $100 million. So on a quarterly basis, $55 million is high, relative to that normal run rate. Now that’s going to be growing over time as we grow our businesses. And then you layer on top of that opportunities from AG, which were in the early innings of developing. So I would think of the AG contribution growing, during the course of the year this year.
And then the TPG side, stepping down to a below normal level in Q1 because of the seasonally light number of deals closing in Q1. So the TPG side back loaded and the AG side also kind of feathering in, during the course of the year and growing during the course of the year. So much like this year, where you saw our Capital Markets revenue line start low and grow toward the back of the year, I’d expect the same kind of pattern this year.
Luke Mason : Great. That’s helpful. Thank you.
Jack Weingart : Yeah, thanks.
Operator: The next question comes from Bill Katz with TD Cowen.
Bill Katz: Okay. Thank you very much for taking the question, this morning. Just want to pick up on that last question. As you think about the opportunity set for the capital markets platform within the Angelo Gordon, would Apollo be a reasonable directional view? And then how much of that assumption is embedded in the 45% long-term FRE margin target? Thank you.
Jack Weingart : Yeah, good question. We — I think what Apollo is doing is a decent kind of directional proxy for the opportunity set. I would say we’re pretty early in kind of underwriting that opportunity for ourselves. So we’re not ready to put a target number out there. But the longer-term FRE margin of 45%, I would say, only incorporates a piece of that opportunity.
Bill Katz: That’s it for me, thank you.
Jack Weingart : Thanks.
Operator: The next question comes from Brian Bedell with Deutsche Bank.
Brian Bedell : Great, good morning, folks. Maybe my questions were answered. But maybe just some perspective on the timing of the deployment that you outlined on Slide 18, in terms of the $132 million and thanks for the color on breaking or segmenting that $132 million. But just if you can give us some color on how you think that might be deployed over the course of this year? Is it — are we in a situation where we’re likely to see that $132 million be reflected, say, mostly by year-end? Or is it much more dependent on credit conditions within AG?
Jack Weingart : Well, I would say, as I said a few minutes ago, most of that $132 million is associated with capital not yet deployed, not the natural step-up of capital already deployed on fees, the step-up structures — funds or step-up structures. So just thinking about your question, real time, that capital underlying the capital not yet deployed probably has just taken a kind of swag a three-year deployment pace to it on average across those funds. So if I had to take a guess, I’d say that would kind of feather in over about a three-year period.
Brian Bedell : Great. Thank you.
Jack Weingart : Thanks.
Operator: The next question comes from Adam Beatty with UBS.
Adam Beatty : Thank you and good morning. I just want to ask about performance within the Credit portfolio. I appreciate the earlier comments around I think it was either equity or firm-wide, 20% revenue growth with stable margins. But there is some concern these days around middle market credit despite the growth there. Obviously, AG Credit performance was quite good. And I know there’s pretty intense monitoring and tight docks around that. So just wondering, any detail you could share about how those companies are performing, whether or not there’s been equity backstops or what have you? Thanks very much.
Jack Weingart : General question on that in a second, but I just want to finish that last question that Brian asked, the 132. So I don’t want to leave the impression that, that’s like a onetime opportunity that comes in over a three-year period. As that capital is deployed, we’re obviously raising a lot more credit capital, as we’ve talked about. So the $10 billion of credit capital plus that we expect to raise this year will all come in with no fees yet. And have whatever fee rate you want to assume across our Credit business, we’ve provided some detail there. So that 132 of fee opportunity should be growing over time as we’re realizing was embedded today.
Jon Winkelried : Just to pick up on the question on — in terms of credit quality and what’s happening in the portfolio. I think that, as I mentioned or alluded to, performance has been across our Credit strategies has been very, very good. And just to give you some — maybe a little bit more color on some data on it. If you look at our Direct Lending business through Twin Brook, here, by the way, our pipeline is up reasonably meaningfully this year based upon transaction activity that we’re seeing. We’re also seeing generally a quality uptrend, just in terms of the opportunities that we’re seeing. But if you look at the performance of the business over the course of last year, we had no credit losses in the business. And the performance of the portfolio was generally reflective, I think, of what was happening overall within our Private Equity portfolios.
