By Dan Victor
For alternative investment managers, describing the start of 2026 as challenging would be an understatement. Shares of publicly-traded private equity and private credit firms have declined sharply amid investor concerns over the impact of artificial intelligence, particularly on funds exposed to software technology. The industry's often opaque nature of underlying valuations, coupled with reports of fund redemption requests, are adding up to a crisis of confidence.
It's a dynamic we missed when we selected TPG Inc., a major private markets investor with more than $300 billion in assets under management, as a Barron's stock pick in 2025. TPG was a strong performer at one point last year, but is down 29% from our original publication price of $56 in July.
There are many moving parts and a number of uncertainties, but we think some of the worst case scenarios are more than priced in by now. Compared with peers such as Blue Owl Capital and Ares Capital, TPG presents some key advantages in the current environment and retains fundamental strong points. Hold on to the stock ahead of a rebound.
That's also the message from JPMorgan analyst Kenneth Worthington. He makes a key distinction between TPG's relatively limited private credit exposure to software investments -- just 2% of its credit assets -- against the more meaningful 18% of its private equity franchise. "While the perception is that TPG is more exposed to software risk because it participated largely via equity investments, it's not necessarily a valid perception," Worthington says. Even as credit and equity both face the possibility of "strikeouts," private-equity investments can outperform with a few "home runs" over time, Worthington writes in a recent report. This positions TPG better from a portfolio returns perspective than firms heavily concentrated on credit. Noting an expansion into areas like real estate, insurance, and wealth management through multiple strategic acquisitions in recent years, Worthington called TPG "well-sized for growth" and reiterated an overweight rating on shares. His price target of $78 suggests the stock could nearly double from the current level.
Don't forget that not all software holdings are identical. TPG's private equity software portfolio consists mainly of newer investments, on average allocated in the past three years. The firm exited several legacy software holdings in recent years. Current investments include AI pioneers like OpenAI and Anthropic along with a handful of early AI unicorns -- companies that have seen their valuations rise above $1 billion.
Indeed, TPG has a history of identifying transformative market themes early, with growth investments in names like Airbnb and Uber Technologies more than a decade ago. This legacy was a key part of our original stock recommendation. There's no reason to believe it's changed. Our confidence in the firm's ability to navigate market turbulence remains in place.
All this as TPG reported fourth quarter results in February capping off a record year. The firm's after-tax distributable earnings, a metric representing the bottom-line for shareholders, reached $971 million, up 16% year over year. The fee-related earnings margin of 52%, climbed from 41% in the year prior, a sign of effective capital management across the platform, with a contribution from the 2025 acquisition of Angelo Gordon. TPG entered 2026 with $72 billion in dry powder -- commitments for new investments -- which should help it emerge stronger once it deploys that capital at more attractive valuations.
Investors may still be rightfully concerned about the short term. But as UBS analyst Michael Brown wrote in a recent report, "the market is becoming more receptive to fundamental analysis and shifting away from the -shoot first, ask questions later mentality." Shares of TPG should find their footing in time, but still lack a clear near-term catalyst to materially improve sentiment. "Negative industry news covering redemptions, credit fears, and related headlines likely continues to cast a dark cloud on the group" and should keep things volatile at least in the near term, Brown says.
On the upside, getting through this period should position shares of TPG to outperform. As uncertainty subsides, the expectation is for realization activity to accelerate, driving the stock higher. Brown maintains a buy rating on the stock with a price target of $60, citing its multiple growth drivers with a clear path to convert upward of $40 billion into fee-paying AUM.
While the firm's dividend policy is variable based on quarterly profits and cash flow, a yield above 5% should be sustainable. Recognizing what remains a complex geopolitical and macroeconomic environment, TPG offers a classic buy-the-dip opportunity for investors convinced the near-term fears will subside.
-- Stay tuned for the next live Q&A! Watch the Barron's Investor Circle page for the sign-up link -- Share your questions and thoughts in the "Conversation" section below to engage directly with the author and our community -- Receive alerts about more content from this author by clicking "Follow" next to the author byline at top
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 14, 2026 02:08 ET (06:08 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments