Compliance & Regulation

TPG slashes finance fund by 25%

A $6bn fund targeting financial services closed last year will downsize to $4.5bn in commitments. TPG is telling investors an influx of US government rescue cash to the sector has diminished opportunities.

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TPG is cutting the size of its financial services-focused fund, which closed on $6 billion in 2008, by 25 percent – roughly $1.5 billion – according to a source with knowledge of the situation.

TPG Financial Partners held a final close in 2008, though it’s not clear exactly when the fund closed. The source said TPG will cut about $1.5 billion in commitments, reducing the size of the fund, because the federal government has moved into the space and taken away some opportunities that had existed. Also, the firm is reducing the fund to give its limited partners some relief.

Under the fund reduction, the New Jersey State Investment Council slashed its $100 million commitment to TPG Financial Partners to $75 million on Thursday.

The US Treasury established the Troubled Assets Relief Program (TARP), with an initial budget of $250 billion, last year to invest in financial institutions to help strengthen the financial sector.

Some private equity firms have already benefited from the programme, including Corsair Capital, which was made whole after PNC Financial bought troubled Cleveland Bank National City for $5.2 billion. As part of the deal, the Treasury agreed to purchase $7.7 billion of preferred stock and related warrants under the TARP. Cerberus Capital Management’s portfolio company, GMAC Financial, which had been on the verge of collapse, is eligible to receive money under TARP since it converted to a bank holding company in December.

TPG, in December, chose to shrink another of its funds, TPG Partners VI, which closed on $19.8 billion in September. The firm has allowed limited partners in the fund to reduce their commitments by as much as 10 percent, or up to $2 billion. LPs in the buyout fund include the New York State Common Retirement Fund, which approved a $300 million commitment to the fund, and The California Public Employees’ Retirement System, which committed nearly $1 billion to the fund.

Mega-firm Permira also chose to give its limited partners some relief, allowing its investors to cap at 60 percent their original commitment to the firm’s fourth buyout fund, which closed on €11.1 billion in 2006. Eighteen LPs took up the offer, reducing the size of the fund to €9.6 billion.

TPG declined to comment for this article.