Tags: TPG | Fee | Investors | LBO Fund

TPG Offers Fee Breaks to Lure Investors to $10 Billion LBO Fund

Monday, 18 Aug 2014 07:43 PM

TPG Capital is offering investors discounts on management fees as it tries to raise a $10 billion buyout fund after investing in soured deals including TXU Corp. and Washington Mutual Inc.

Investors that commit to TPG Partners VII LP could get as much as a 25 percent reduction on fees, depending on the amount committed and whether they participate in the first round of capital raising, according to an offering document obtained by Bloomberg News.

TPG Capital, which controls more than $59 billion in buyout, credit and real estate assets, is dangling the incentives after disappointing returns from deals made during the buyout boom and financial crisis cast a shadow over more than two decades of investment success. The move follows rivals including Apollo Global Management LLC, Carlyle Group LP, KKR & Co. and Warburg Pincus LLC that offered similar breaks on recent funds.

TPG spokesman Owen Blicksilver of Blicksilver Public Relations declined to comment on fundraising and the fee structure.

Co-founded by billionaire David Bonderman in 1992 as Texas Pacific Group, TPG is seeking $10 billion for its latest pool, which includes $2 billion obtained from large investors such as Oregon Investment Council and Washington State Investment Board. The last fund raised $19.8 billion in 2008, just before the bankruptcy of Lehman Brothers Holdings Inc. caused a global financial meltdown.

Avoiding Consortiums

TPG has told investors that it plans to avoid mega deals after experiencing losses during the crisis. Since 2009, the firm has made an average investment of $306 million and hasn’t participated in a consortium, or a takeover done by a group of buyout firms, the marketing document shows.

To entice big checks, the Fort Worth, Texas-based firm is offering 5, 10 and 15 percent discounts on commitments of at least $100 million, $250 million and $400 million respectively, according to the document. It will give an extra 10 percent discount to investors that commit to the first round of capital raising. An investor could be charged around 1.1 percent annually on committed capital, less than the standard 1.5 percent fee structure.

The firm is also offering investors the choice of a 1.5 percent management fee during the investment period, or a structure that reduces the drag fees have on performance early in the fund’s life, known as the J-Curve, the document shows.

TPG, which will commit as much as $400 million to the fund, will take 20 percent of the profit, known as carried interest, according to the document.

Apollo proposed cutting the management fee on its $18.4 billion fund by 10 basis points a year for commitments of $250 million and by 20 basis points for $500 million. Carlyle is charging investors that committed as much as $500 million to its $13 billion fund a discounted fee of 1.1 percent.

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TPG Capital is offering investors discounts on management fees as it tries to raise a $10 billion buyout fund after investing in soured deals including TXU Corp. and Washington Mutual Inc.
TPG, Fee, Investors, LBO Fund
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2014-43-18
Monday, 18 Aug 2014 07:43 PM
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