TPG has reportedly become the latest US buyout firm to attract Chinese state investment, with the country’s State Administration of Foreign Exchange agreeing to commit more than $2.5 billion (€1.6 billion) to its sixth buyout fund.
The commitment was revealed in a Financial Times report that did not reference any sources.
A spokesman for TPG declined comment.
The sovereign fund’s decision to make a traditional fund commitment rather than invest directly into TPG’s management company, such as the China Investment Corporation’s purchase of a 10 percent stake in The Blackstone Group, illustrates a desire to distance itself from political backlash associated with private equity, the Financial Times said.
TPG’s sixth global buyout fund is targeting approximately $20 billion, according to numerous market participants. Roughly two months ago, a limited partner source told PEO that the fund had some $17.5 billion in commitments and was close to closing.
Should the fund close on an amount above $21.7 billion, it would surpass Blackstone’s record for raising the largest-ever leveraged buyout fund.
TPG Partners VI will make equity investments of between $200 million and $1 billion in companies with market valuations of $300 million or more, according to documents from the Pennsylvania State Employees’ Retirement System, which agreed to commit up to $400 million to the fund.
Given current credit market conditions and anticipation of a US economic downturn, TPG told the state pension that the buyout fund expects to employ a great range of deal types, including stressed and distressed seller situations and carve-out transactions, and to do a greater number of deals outside the United States.
It stressed that many of TPG’s most successful vintages have been during periods of market volatility and distress.
Having raised some $48.75 billion in the past five years, TPG was recently ranked the third on the PEI 50, an annual ranking of the largest 50 private equity firms by sister publication Private Equity International.