2024 in Focus with CEO Jon Winkelried: Macro, Credit, and More

In our first edition of The TPG Take, we sit down with CEO Jon Winkelried to discuss the current economic environment and how it's shaping his views on the investing landscape across products and geographies.

On the Macro Landscape: "After a period of rising interest rates and lower transaction volumes in the corporate world, we're starting to see confidence come back – rates are not going to continuously go up. Some of the fight that we've had with inflation and input costs or labor costs seem to be settling down."

On the Investing Environment: "As confidence comes back to the market, you tend to see transactional volumes pick up. Valuations have settled in and adjusted, and sellers and buyers are finding ways to get things done. We see an interesting pipeline of opportunities that has been building from the second half of last year into this year. From an investment perspective, 2024 could be an interesting year."

On the Credit Landscape: "When you look at the last five years and this bolus of levered companies, what generally has to happen is one of several things: They either get sold and then refinanced, or they don't get sold and eventually the debt that they took on has to be refinanced because they have maturities. And so one of the interesting dynamics in the market right now is that with the market generally supporting, on average, less leverage given higher interest rates and companies facing refinancing pressures... that puts a lot of stress on these companies from a cash flow perspective. One of the things that we're seeing is the emergence of opportunities where companies are going to have a hard time refinancing their balance sheets. That creates an opportunity for us in terms of credit solutions."

On the Impact of Evolving Geographic Trends in Asia:

"Japan has finally come out of a long period of stagflation... So, there's growth happening. There's slowly increasing interest rates and yield opportunities. And there's actually a flip going on in Japan where there is more of a shareholder value focus that's emerging in the market. That creates an opportunity... And we have a long history of being good partners to large corporations where they are looking to carve out businesses and looking to partner with private equity to do so."

"India is another example where there has been a cultural sea change in terms of innovation, capital flowing to technology, capital flowing to business models that are beginning to change."

On the Impact of Dislocation in the Real Estate Landscape: "Financing costs have now gone up to a point where they are generally higher than cap rates. That inversion creates a negative cash flow position in a lot of real estate situations. So, naturally, what's the answer to that? Real estate values have to come down. COVID created a massive dislocation in office and the regional banking crisis has had a big impact on the provision of credit to real estate. If you think about the 4,000 regional banks, their biggest exposure traditionally in lending has been real estate. There's clearly an opportunity to step in and provide credit to real estate developers against certain assets. As I look at different markets and different opportunities, this is probably the best real estate credit investing opportunity that I've seen in at least a couple of decades."

In addition to featuring new insights for our subscribers in each issue, we also want to "circle back" to share other recent insights from our senior leaders and investing professionals that you might have missed.

Watch more from our series, Trends Shaping the Healthcare Landscape, including from TPG Partner Katherine Wood:

Watch more from our series, Asset-Based Credit: The Post-Bank Era, including more from Jon and TPG Angelo Gordon’s Head of Structured Credit & Specialty Finance T.J. Durkin:

Thank you to all of our followers and readers for joining us for the first edition of The TPG Take. Please share the newsletter with anyone you think would be interested and we look forward to being back in your inboxes soon.