IPOs are expected to start to rebound. The yield curve has steepened. There's record money market AUM on the sidelines. What are your expectations for both fundraising and transactions in 2025?
Sure. I mean, if you look back, first of all, we're fundamentally micro investors, not macro investors. We're not trying to call cycles or time the market per se. In our private equity business, which is still half of our AUM, we're looking for really good companies in the sectors in which we invest, acquire control of those companies, help them grow more effectively under our ownership. And we do that in and out of equity market cycles. That being said, we like to talk about the importance of being cycle aware and aware of where we are in a valuation cycle. Think about that when we overlay deployment pace, monetization pace, for example. So if you look back at the last run-up in the market in 2020, 2021, when multiples got as high as they did, we became a significant net seller within our private equity business.
We monetized almost two X in our large buyout fund what we invested. That still benefits us today. The DPI we generated for our LPs at the right time in the market, and then when the market corrected in 2022 and began coming back a bit in 2023, we became—we kind of rotated into finding that to be a more attractive and interesting investment environment, and since then, our pace has been picking up. Our investment pace, our monetization pace, our fundraising pace, all three of those key metrics of the health of our business, the volumes of our—we're up somewhat significant last year versus the year before.
Based on the pipelines we see right now, based on the valuation environment, the interesting companies that we see in our pipeline, we would expect that, as we said on our earnings call yesterday, we fully expect that fundraising volumes will be up significantly this year over last year. That's just a bottoms-up build of the funds that we're in the market with. I think the investment pace and the monetization pace will remain very healthy.
So Jack, let's talk about long-term growth. TPG has grown very quickly since the 2022 IPO and is well positioned for multiple secular themes. What is your growth outlook and how much of a role will the flagship funds play versus new products via innovation?
Yeah. So we went public in early 2022, as you say. We had $108 billion of assets under management. And at that time, we had kind of a multi-staged outlook for growth. The first phase of growth in the first couple of years post-IPO was very visible. We talked about the near-term visibility on the fundraising outlook to your point on just the first prong of growth, refreshing the existing capital bases, growing the existing capital bases for our existing funds. Longer term, we think about several pillars of growth. Fundamentally, it breaks down into kind of organic and inorganic. And organically, there's a couple of pieces. One is just growing our existing businesses.
The other is we've been very good at, over time since the firm was created 30 some odd years ago, organically stepping into adjacent investment opportunities that our teams see in the market, but we don't have funds that target those opportunities. So what do we do? We hire more people. We create a new fund structure to target those opportunities. As TPG Capital, a large buyout business, grew over time, we were writing larger checks and doing more control-oriented deals. And therefore, we created a new pool of capital called TPG Growth to focus on continuing to invest in those interesting growth-oriented companies that were one step below the opportunity of TPG Capital. We then, out of our growth business, grew our impact business. Out of our impact business, grew our climate business.
Out of our buyout and growth business, we grew our Tech Adjacencies business because we saw a lot of interesting companies, later-stage growth companies looking for growth capital that we could structure deals with, with our Tech Adjacencies business. That kind of organic new business creation has always been part of the DNA, the kind of entrepreneurial DNA that we try to maintain at the firm. Organically growing existing businesses, organically creating new businesses. Then inorganically, Angelo Gordon is the first major acquisition we've ever made as a firm. We put a lot of work into it. We put a lot of work into making sure the two teams come together into one firm, one culture, all of the difficult work, bringing together the back office systems, creating one operating infrastructure. We're well along that path.
We just had (Jon Winkelried talked about this on our earnings call yesterday) our first partner meeting as a combined firm, and the feeling in the room with our 101 partners around the world coming together as one and talking about your question of where we go from here, what's our long-term growth path, the pillars that I just outlined, it really feels like we've created a single unified culture with a well-integrated business. To some extent, we feel like we've kind of built a muscle that is working well in integrating Angelo Gordon, and that can be applied to other areas that we strategically want to grow into, so there will be selected opportunities to add to our growth inorganically where we decide that buying, and we'll take a step back.
At the IPO, we made it clear that one of the reasons to go public was to create a public currency to enable inorganic growth, among many other reasons. The first target of our inorganic growth, we were clear, you remember, was credit because we felt like we wanted to diversify our business. Our LPs wanted to do more with us across asset classes. We wanted to diversify our sources of income, and we wanted to become a more broad-based alternative asset manager. Credit was the biggest asset class that we felt like we had to reenter, and reentering it organically, the build versus buy analysis, would have taken too long. Given how fast, how quickly the private credit markets were consolidating, we felt like buying in that case was really a necessity, so we spent the better part of a year finding the right partner in Angelo Gordon.
We feel better now than we did then that they are the right partner and they're part of our firm now. There are other areas that we'll choose to grow into organically, like within climate. Now that we've built, I think, the best climate private equity business in the industry in TPG Rise Climate, the adjacent asset class of infrastructure and climate transitional infrastructure is very interesting to us. We feel like we're already in the middle of most of those asset flows. We just didn't have a pool of capital targeting infrastructure risk return opportunities. So rather than go acquire an enterprise that does that, we hired people, and we're stepping into it organically and building that business. So each area strategically that we want to keep growing our firm, we'll ask ourselves that question: organic build versus inorganic buy. How important is speed to market?
How much of a right to win do we have just leveraging our current platform with some new hires? How important is it for us to establish a new business through acquiring it? And then if you—I guess we'll get back to maybe more on that M&A approach. But so longer term, organic growth, organic step-outs, inorganic growth. And then from a sourcing of capital perspective, another important pillar of our growth is broadening our sourcing of capital outside of our traditional sweet spot of institutional investors into more penetration of insurance and more penetration of high net worth.
Thank you, Jack. You addressed part of this earlier, but I wanted to see if you could refine the response. What are the key product gaps today? And specifically with them, do you have any thoughts on how you'll look to address them between organic, inorganic, team lift-out?
Yeah. I would say, unlike at the IPO, where credit was a significant product gap, if you think about the pillars of alternative asset management, we have a large, established, very high-performing set of private equity businesses. We have a very large real estate business focused on the TPG side on opportunistic, value-added, platform-building, private equity style approach, higher return approach to real estate. The areas below that from a risk return perspective, core plus and core, we really don't have much of a presence today. So that would be a natural area that we might look to fill in either organically or inorganically. On the credit side, Angelo Gordon really filled most of the spectrum of private credit. Our goal there now is to scale their existing businesses.
There's some tuck-ins we could consider in certain products within private credit, but I think we've kind of got what we need as a starting point. And then in infrastructure, we're relatively very early in our kind of addressing the infrastructure opportunity. And the most obvious organic opportunity is the one I mentioned with TPG Rise Climate infrastructure directly adjacent to the climate business we already have in all the same flows. There are lots of other areas of infrastructure. It's a huge asset class that we're just scratching the surface of. How do we build into those other areas after we establish this business on the climate side? We could do that either organically or inorganically.
So coming back to Angelo Gordon, how has the deal been tracking since you closed it?
Really well. The most obvious opportunity for us immediately was to, when we made the acquisition, we said that. Well, let me take one step even further back. When we launched our own IPO before Angelo Gordon, one of the opportunities we saw as we began to scale our own business was to generate the obvious operating leverage that comes with FAUM growth and FRR growth in our business. Through the initial wave of fundraising that we anticipated, we saw ourselves getting from a high-30s FRE margin to the mid-40s within a couple of years. We did that almost exactly as we had suggested we would. Then we acquired Angelo Gordon. Because they were a smaller business than we are, they were earlier in their operating leverage journey. Their FRE margin when we acquired them was in the mid-20s.
So the combination blended our combined FRE margin down to 37%-38%. And we talked about the fact that the real opportunity, the other fact is their businesses, all of them, were out originating their capital bases. They had a less well-developed fundraising engine than we did. We had better. We talked about the fact that we only had a 10% overlap in our LP bases. As a general characterization, we had a more international LP base and more presence with the largest pools of capital in the world.
So put all that together, the real opportunity was for us to help the Angelo Gordon teams scale their businesses more effectively as a combined company, penetrate new LPs that they didn't have a relationship with, scale their capital bases, and together drive the same kind of margin expansion that we did independently as a combined business with a much bigger FRR base to benefit with more FRE dollars dropping out of the bottom of that. So from 37%-38% as our starting point, we got to, in the most recent quarter, 41%, 42% for the year last year. And we announced that we are anticipating exiting the year this year with a mid-40s FRE margin. That's a pretty good formula if you can apply that to the larger combined FRR base that we have. And I think that's just a step along the way.
From there, we can keep scaling the combined business. On the Angelo Gordon trajectory in particular, I think the clearest example is the fundraising example. We announced at the acquisition that in 2023, they had raised three-odd billion dollars of capital for their credit businesses. And we were targeting raising $10 billion last year for credit alone. And we ended up raising $12 billion. So that's working. The other thing I'd say is that success at scaling to $12 billion of capital raising last year benefited only in small part from the cross-selling that I alluded to. We've been meeting with all of our largest LPs, as you can imagine, introducing them, if they didn't yet know Angelo Gordon, to the credit businesses, the various credit businesses, credit solutions, structured credit, the middle market direct lending business, Twin Brook. And each client has different objectives right now.
But generally speaking, there are still strong flows of capital into private credit. But it takes a number of cycles and meetings for any one of our LPs, no matter how strong our relationship is, to get from the point of meeting a new credit team for the first time to wanting to commit. And I would tell you that the number of discussions we have that are moving toward that I want to commit stage is quite large. Very little of it's happened already. So the scaling that happened last year didn't even benefit from that yet. So as we look to raising credit capital this year, I would expect that even though we had a big step up last year from 3 to 12, we expect to raise more capital and credit this year than we did last year.
So Jack, I wanted to talk about your portfolio positioning, especially in the capital business, which is very different than your peers. When I look at it, I see a lot of tech, kind of really software, a lot of healthcare. These were areas that did very well in 2021. These are areas that I think did not do as well when we had that 500 basis points shock. But now fast forward to today, if you look at the IPO pipelines out there, it's mostly tech and healthcare. So it looks like they're doing really well again. What is your perspective on how the underlying fundamentals have trended? And if this is a rich IPO pipeline for these areas, TPG should be pretty well positioned.
Yeah. First of all, you're right that there are certain—we're fundamentally sector-based thematic investors. You asked about private equity, so we'll focus on our private equity business. We have teams dedicated from top to bottom to certain sectors. Some sectors we don't focus on. You got to know what you're good at, what you like doing, how you create value. We look for industries, subsectors, sub-themes that have long-term secular growth opportunities. Then we look to try to find high-quality businesses within those sectors and apply our operating resources and our deal teams in partnership with our management teams to try to accelerate growth under our ownership, and if we can do that, markets will go up, markets will go down, multiples will go up and down. If we can accelerate earnings growth under our ownership, that is a persistent way to generate value creation.
If you look in our buyout business, between 70% and 75% of our value creation tends to come from earnings growth and that's both enhancing the top line growth and driving margin expansion. Now, the sectors that you mentioned, tech and healthcare, we have very large teams. We're not kind of a buyer of all things healthcare. There are certain areas of healthcare we won't touch because we don't like the secular trends, so it's about being smart investors, focusing on what you believe will be the subsectors and sub-themes within those industries that will benefit from long-term growth. If you look at within our broad-based private equity platform, TPG Capital, growth, the impact private equity businesses across those companies, revenue growth in the past 12 months, just to give you a feel for it.
This is in the preponderance of these companies are in larger buyout funds that often people associate with low growth, high free cash flow, traditional financial engineering buyouts. Our revenue growth has been in the mid to high teens, 16% on an LTM basis across the entire portfolio with expanding EBITDA margins. It is part of that driven by, as you said, the cessation of the rate spike. [This] is part of it driven by a macro dynamic, maybe. Fundamentally for us, it's much more a micro investing approach where we try to identify and partner with those companies we think are well positioned to accelerate.
Jack, one of your more differentiated businesses is TPG Growth, where you're an industry leader. This business supplies capital to younger, higher growth companies, actually not necessarily younger, but higher growth companies, and a good example, I think, was your previous investment in Uber, and it allowed them to remain private much longer. My question is, how has this business performed since 2000, 2001, given the 500 basis points rate shock, but then we're in year three of the bull market today.
Yeah. It's performed well. It's funny. People associate, if I think back at our IPO journey, throughout 2021, as we were laying the seeds for the IPO and doing our pre-IPO test in the waters meetings, back then in 2021, everything was up and to the right. And people got to know our investing businesses and say, "Wow, you're in growth equity. That's great. That's where you want to be." Then we go public in January of 2022, and things had started to correct. And the first questions we started to get are, "Aren't you too long growth equity? Isn't that where you don't want to be now?" And for us, as I just described, it's about investing behind high-quality growth-oriented industries, sectors, and companies.
I think some people misinterpret the word growth equity to mean deep minority investing behind pre-IPO companies and trying to play the pre-IPO arbitrage game, or earlier stage investing behind unprofitable companies and betting that they'll become profitable, where we play as kind of in the middle of that. We don't do a lot of pre-IPO flips. We're trying to find established growth-oriented private companies with an established business model with profitability and use our capital and our operating resources to help them grow faster and, yes, in many cases, stay private longer. If you look at the public equity market, the number of public companies has been cut in half. The public market has become the domain of large companies. So much of the capital flows in public equity markets have been oriented toward index investing and looking for large cap businesses with a lot of liquidity.
So, smaller companies that go public too early often get lost as public companies. And we find more and more private companies in the sectors in which we invest wanting to stay private longer, wanting to keep building a great business that's a bigger business by the time it goes public. And that creates lots of opportunity for us in that middle ground of already profitable, proven business, wanting help scaling. And that applied to Uber, Airbnb, Spotify. Being out in the Bay Area with an entrepreneurial kind of presence out there in the middle of the kind of tech ecosystem, innovation ecosystem, we think we're pretty well positioned with our brand, our position, our relationships to be a partner of choice for those companies.
So Jack, I know you're very focused now on growing in the private wealth channel. I think over the last decade, you mainly use that to raise some capital inside your longer-term drawdown strategies. But what are your plans for the future there? And will semi-liquid products be more in the mix?
Yeah, for sure. And I'll say what I can about our semi-liquid private equity product. We're kind of in the quiet period there because we're getting very close to launching it. But more generally, what I would say is we've been placing, to your point, one closed-end fund at a time with private wealth channel partners like Merrill Lynch, by the way, for decades. And people have generally had a great experience with our products. We've been generating good returns. And today, we've probably got $20 billion under management. So call it 9% of our capital is from high net worth and family office sources. But the whole way that high net worth investors want to invest in alternatives has changed.
In most segments of the market, other than the very high net worth segment, where people may want to keep picking one closed-end fund at a time, the semi-liquid products have become where most of the capital is flowing. So for us to address that kind of one asset class at a time, we have to have enough of a market presence with enough deal flow to feed into these semi-liquid products. And we have to build out our distribution and our brand in the channels. Because historically, placing closed-end funds, we probably address the top five or 10% of the financial advisors and their clients. But the semi-liquid products are addressing a much wider universe of clients. So putting time into building our brand, building relationships, having a distribution team, getting to know more financial advisors and their clients, and in the meantime, developing a suite of products.
I think we've earned the right to win because of our strong investment performance, which is ultimately what the clients want access to, and the time and effort we're putting into repackaging those investment products into the form that high net worth investors want to buy. The first of those products, well, we already have one of those products in our credit business. Angelo Gordon has something called TCAP, which is a closed-end BDC feeding into its middle market direct lending business. We have a couple of others. But the first product we're creating in the private equity landscape is a semi-liquid product that invests alongside all of our private equity businesses. There's more to come there.
We just said on the earnings call yesterday is we remain on track to launch that business at the end of this quarter and go live with it at the end of the second quarter. And we're optimistic about that. On the heels of that, having built the rails and the relationships, we have a series of additional products that we're contemplating, including a semi-liquid product more broadly across our credit platform, something in the real estate business, and then maybe some specialized products focusing on areas, subsectors, or themes that the channel wants to have kind of targeted access to. So it's a very important effort for us. If you think about, take a step back and realize that if you look at global wealth, there's almost the same amount of wealth controlled by high net worth investors, by retail investors, as there is by institutions globally.
Institutions globally are probably 15% allocated to alternatives. We still think that's going to grow over time. There are pockets that want to keep increasing their alternatives exposure, but it's certainly more fully penetrated. On the high net worth side, it's like 2%, and most channels, most financial advisors would say they'd like to see their high net worth clients get closer to the institutional allocations, so across that big pool of capital, scaling kind of allocated assets to alternatives from 2% to 10% is a massive wave of capital, so even though there's been a lot of news and a lot of progress made already, we think it's very early innings.
I think on the semi-liquid side, growth capital impact, there might be some cool products there.
Possibly.
Let's jump into the insurance channel. This is an area where you're not as visible as some of the other large cap alts. I mean, you have insurance clients, and I'm curious to see what % of AUM comes from them. But now that you have Angelo Gordon, you have a real private credit manager, what are your thoughts on building something? And we have a lot of different varieties out there. We have the capital-intensive model. We have the capital-light, zero liability model. Which one attracts you more?
Yeah, look, the insurance channel is up there with private wealth as one of our most important areas of focus. Frankly, it was one of the reasons, to your point, that Angelo Gordon or re-entering credit was so important to us. I mean, we've got, having been in business 30 plus years as TPG, a long list of high-quality insurance clients. The fact is, if all we have is private equity, we can address about 2% of their investment book. Because from a Reg Cap perspective, private equity is an interesting return generator, but they can't allocate too much to private equity. We had all these clients who were great clients on the private equity side, allocating lots of capital to private credit, and we couldn't help them. We couldn't address that need. By acquiring Angelo Gordon, we now have the product set.
It's also the case that Angelo Gordon historically was underrepresented in the insurance channel, so the immediate opportunity for us was to leave aside anything strategic, was just to penetrate the insurance market the old-fashioned way, one LP relationship at a time, and the early days there are really promising. If you look at, for example, within Twin Brook, the direct lending business, before we acquired Angelo Gordon in their Direct Lending IV fund, 6% of the capital came from insurance. After we acquired them, we raised MMDL V and 29% of the capital came from insurance, so that was in part leveraging TPG's insurance relationships. It was in part getting more aggressive at creating regulatory capital-friendly, Reg Cap -friendly ways for insurance clients to invest, rated notes, et cetera. We now have, on a combined basis, about over 100 insurance clients.
We're kind of in the early innings of increasing our penetration. I think in 2023, we raised about $1.3 billion from the insurance channel. Last year, we raised between $3.5 billion and $4 billion of capital from the insurance channel. So no matter what we do on the strategic side, that growth, we believe, will continue. When we brought the two firms together, we took Angelo Gordon's insurance coverage team and our insurance coverage team and created one combined SWAT team with the knowledge of private equity and credit and structuring expertise to address the needs of insurance clients. And we're addressing those one client at a time. Strategically, obviously, you referred to this, that our peers have taken different approaches to this. When we went public, we talked about our view that the industry was kind of bifurcating into balance sheet light and balance sheet heavy models.
And that has continued to be the case. You see some who own insurance companies who are growing big asset management businesses on their balance sheet, Berkshire Hathaway style. And you see others that are more focused on maintaining their position as an asset-light alternative asset management firm, doing business with those who own the assets. And our approach has been more the latter approach. It is important to us to grow into insurance organically and strategically. And we're talking to a lot of insurance companies about what they're trying to accomplish and trying to figure out the best fit.
Got it. Let's move on to the operating margin story. And Jack, one of my favorite things about TPG is that your margin is not as high as peers. And I like it because as you drive operating leverage, it's going to enhance your earnings growth. And it's something that some of them don't have anymore because their margins are so high. So I wanted your perspective on how you plan to drive operating leverage going forward.
First of all, we like that too. We think it's a real opportunity. I mentioned we talked about that at the IPO. We hit our initial operating leverage targets. We're now back on the trail of doing the same thing with the combined TPG and Angelo Gordon businesses. I've given clear guidance about where I think we'll be by the end of this year. How are we doing that, to your question? Look, the margin structure in our business is pretty simple. We have fee-related revenue. And against that, above FRE are basically two line items: comp and benefits and OPEX. If you look back at some of our peers, when they were our larger peers, when they were at the stage we're at now, from an AUM perspective, from an FRR perspective, their OPEX nominal dollars were about the same as what ours are now.
If you look at our current OPEX as a percentage of FRR, it's the highest among our peers. And that's simply a scale question. We've put the effort and the resources into building an operating platform. Of course, we'll have to invest a bit more. That'll grow a bit over time, but nowhere near as fast as FRR will grow. So that OPEX, we measured two basic formulas: OPEX as a percentage of FRR and comp and benefits as a percentage of FRR. And we need to scale both of those. The most straightforward way to do that is top-line growth. We're not going to cost-cut our way to prosperity. We're not going to cost-cut our way into a better margin structure.
The most high-quality way for us to drive long-term better FRE margins and a great business over the next five or 10 years is driving top-line growth and benefiting from operating leverage. Now, in doing that, going back to the ways that we grow, if we grow organically, there is a tension, Craig, in this question of measuring operating leverage and FRE margin, is we have to be very careful if we create a new business, not to go out and hire a big team, and if you build it, they will come, and incur too much of a J curve from a cost perspective as we're measuring. So we have to think about, in a new business, how scalable is the asset class? What's the business plan? How quickly can we scale to a size of X?
Against that, what should the comp structure be to be accretive to our firm and ultimately be accretive to our FRE margin structure? And then kind of meter the hiring authority against that plan, but do so in a way that enables the growth of the business. So it's a delicate balance. And we have to think about that balance relative to inorganic growth opportunities in any given sector as we think about our long-term margin objectives.
Great.
It's something we measure very carefully. We sit down with each of our business units every quarter and review their path to, in their way, scaling their own Comp ratio, as we call it, and if each of our businesses is focused on scaling their Comp ratio, then we'll succeed as a firm.
Great. And I think with that, we are actually out of time. So Jack, on behalf of all of us at Bank of America, just want to thank you for joining us.
Thank you. Thanks, Craig.