Stock Analysis & Valuation TPG Operating Group II, L.P. 6.950% Fixed-Rate Junior Subordinated Notes due 2064 (TPGXL)

• Previous Close: $25.23
• Sector Valuation Confidence Level: High

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	189.84	652
Intrinsic value (DCF)	9.92	-61
Graham-Dodd Method		n/a
Graham Formula	22.66	-10

Strategic Investment Analysis

Company Overview

TPG Operating Group II, L.P. is a financial services entity operating as part of TPG, Inc., a leading global alternative asset management firm. Based in Wilmington, DE, TPG Operating Group II primarily functions as an investment holding company, issuing 6.950% Fixed-Rate Junior Subordinated Notes due 2064 (TPGXL). The company operates within the financial conglomerates sector, leveraging TPG’s extensive investment expertise in private equity, credit, and real assets. With a market capitalization of approximately $17.3 billion, TPGXL provides investors with exposure to TPG’s diversified portfolio while offering a fixed-income instrument with long-term maturity. The company’s financial stability is underscored by its $808 million in cash and equivalents, $2.62 billion in revenue, and a disciplined capital structure. TPGXL appeals to income-focused investors, given its $1.79 annual dividend per share and a low beta (0.39), indicating lower volatility relative to the broader market.

Investment Summary

TPGXL presents a niche fixed-income investment opportunity tied to TPG’s diversified alternative asset management platform. The 6.950% fixed-rate subordinated notes offer an attractive yield in a low-interest-rate environment, supported by TPG’s strong revenue base ($2.62B) and liquidity position ($808M cash). However, the junior subordinated structure implies higher risk in the capital stack, and the 2064 maturity introduces long-term credit risk. The low beta (0.39) suggests defensive characteristics, but investors must weigh the illiquidity and structural subordination against the yield. The $1.79 dividend provides income appeal, but net income ($23.5M) and diluted EPS ($0.064) reflect modest profitability. Suitable for yield-seeking investors comfortable with TPG’s credit profile and long-duration exposure.

Competitive Analysis

TPG Operating Group II’s competitive position is intrinsically linked to TPG, Inc.’s broader alternative asset management platform, which competes with large private equity and credit firms. Its fixed-rate subordinated notes (TPGXL) differentiate by offering retail investors access to TPG’s diversified strategies—uncommon in public markets. The 6.950% coupon is competitive versus corporate bonds but carries subordination risk. TPG’s scale ($17.3B market cap) and operational cash flow ($532M) provide stability, but the structure limits upside compared to equity in peers like Blackstone or KKR. The notes’ long duration (2064) may deter rate-sensitive investors, though the low beta (0.39) appeals to those seeking defensive yield. TPGXL’s niche lies in bridging private capital markets to public investors, but its appeal is narrower than traditional fixed-income instruments due to complexity and limited liquidity.

Major Competitors

• Blackstone Inc. (BX): Blackstone dominates alternative asset management with a $154B market cap and diversified private equity/credit platforms. Its publicly traded equity (BX) offers growth exposure, unlike TPGXL’s fixed-income structure. Blackstone’s scale and brand strength overshadow TPG, but its higher beta (1.23) implies greater volatility. TPGXL’s fixed coupon may appeal to conservative investors versus BX’s variable dividends.
• KKR & Co. Inc. (KKR): KKR’s $89B market cap and global private equity/credit presence make it a direct TPG peer. Unlike TPGXL’s fixed-income offering, KKR’s equity (KKR) provides leveraged exposure to alternatives. KKR’s stronger earnings ($4.2B net income) and diversified fee streams outpace TPG’s modest profitability, but TPGXL’s yield structure caters to a distinct investor base.
• Apollo Global Management, Inc. (APO): Apollo’s $65B market cap and focus on credit strategies (e.g., Athene) compete with TPG’s credit arm. Apollo’s equity (APO) offers growth, while TPGXL’s fixed income suits yield seekers. Apollo’s higher revenue ($10.5B) and yield-focused business model overlap with TPG, but TPGXL’s subordinated notes lack Apollo’s insurance-linked synergies.
• Ares Management Corporation (ARES): Ares ($42B market cap) specializes in credit and private equity, akin to TPG. Its equity (ARES) outperforms TPGXL in liquidity and growth potential, but TPGXL’s fixed coupon provides predictable income. Ares’ stronger AUM growth and fee-related earnings ($1.8B) contrast with TPGXL’s static yield profile.