Michael Woolhouse - Co-Managing Partner of TPG GP Solutions

[MUSIC] Hello listeners, my name is Dean and welcome to the episode of the NSE focal point podcast. Today we are delighted to be joined by Michael WoHols. Michael WoHols is the co-managing partner of TPGGP solutions. He graduated from the University of Calgary with the Bachelor of Commerce degree, then starting his career as an investment banking analyst in the FIG team of Solomon Brothers before obtaining his MBA from the IB business school. Over his career he has worked across multiple industries and taking on various roles, including manager, abandoned company, and Toronto, Singapore, and Hong Kong. Head of strategy at AXA for his Japanese life insurance business in Tokyo, before returning to investment banking at TD securities in Toronto, where he was a director in the FIG team. In 2007, Michael joined the Canada Pension Plan Investment Board, where he spent more than 13 years and took on leadership roles, such as head of coin investments and head of secondaries, where he grew the coin investment platform from $300 million to $4 billion in just three years. He structured their legacy direct secondaries platform to focus on LP leds, grew the secondaries team by threefold, and built the preferred equity business. In August 2020, Michael joined TPG GP Solutions in New York as the co-managing partner, where he leads TPG's North American business and European secondaries business. Michael, thank you for joining us today. How are you doing? I'm doing great, Dean. Thanks very much for the time and the opportunity to speak with you and all of your podcast listeners across the world. Amazing. So let's begin with your career journey. Over the course of your career, you have been an investment banker, consultant, strategist, investor. He tells about the incentives behind the times where you decided to explore a new field. A curious person. I enjoyed learning, exploring new things, and as I look back at different roles that I've had over time, one thing that I've also, I think, come to enjoy, and I still enjoy being a builder, a builder of new things, coming up with a vision, figuring out how to go after it in a different shaded way. And I'm fortunate, actually, I'm, we'll talk about my time. I know at CPP today, and what I'm doing at TPG, but that's a common thread which sort of cuts across my career over a long period of time. And as I look at some of the moves that I've made, they make sense to me, but I don't think you'll find many people who have been a banker and then a consultant and then worked at a life insurance company and then on the buy side. It's a bit of an unusual path. Some people have, well, it's called the good fortune of, from a young age, knowing exactly what they want to do. They want to be a teacher. They want to be a doctor. They want to be a physicist. They want to be a private equity investor. I never really have that foresight. And my career path probably reflects how I've made different choices at different parts of my career, following my curious nature, wanting to learn new things, live in different places, and that's resulted in me finding my way to TPG 30 years into my career. And following that, what are your key takeaways behind your diverse range of roles and different geographies? Sooner or later, most people need to specialize. As you heard me, or the way that you frame my career experience, my career path, who arrange a different things, for me, it'll ultimately allowed me to move, to seek PPP investments and join the buy side for the first time. And while there, I had the opportunity to spend 13 great years across, always in private equity, but across the three different private equity business. At the beginning, when I joined in 2007, I joined them in their private equity funds group. So being an allocator of capital into private equity funds, that gave me a terrific role at X, actually, of relationships with sponsors across the world, which is very valuable to me today. I built and ran a passive column investment business. And for the last five years that I was there, I ran their secondaries business. And it's interesting, as I look back, moving to join them and having a tremendous opportunity to go from various advisory type roles, et cetera, to become a principal investor. I was really fortunate. Not sure they'd hire me today. I say that tongue in cheek, but in 2007, they were big. The whole firm was in Canadian dollars, $100 billion of assets under management. Today, I think they're $800 through $800 billion. So they've grown really, really rapidly. But at that time, there were in a single office in Toronto. And there was a need for talent to help support the growth that I was just describing. So, I'm lucky in that they took a chance on me. I'm not sure they'd take the same chance on somebody like me at a relatively senior level coming in with no investing experience. But I consider myself lucky to have had such a great time and great set of leadership and investing experiences with them over that 13-year timeframe. Thank you for sharing that. So, in August 2020, you joined TPG, GP Solutions, adds the co-managing partner. So during that point in time, we're motivated to pursue an entrepreneurial opportunity. And why were you attracted to building a new business within TPG? Yeah, well, in 2019, if that's the year just prior to my joining, the single asset continuation vehicle market did about $5 billion of volume. It was a pretty small, that sounds like a big number in some ways. It was a pretty small number in the context of the greater secondary's market. But I thought it was really interesting. I thought the companies that were moving into continuation vehicles were very high quality businesses. So that caught my attention. I thought it was a market even though $5 billion was relatively small at the time. I thought, call it the industrial logic around the deals and the various participants and stakeholders to make these deals come together would result in a lot of growth. You know, sponsors, it's really hard for them to find great businesses. And when they have a great business, that can generate a good return for their fund. And they need to do that for their investors, but they don't want to sell it. I mean, like, well, that's the purview of this market. I thought that was going to drive growth. And I'd say the last point that I would say got me interested. So we have really interesting companies and market position for growth was that I was looking at the skill set required to be really thoughtful, effective investor into these deals. And I thought putting hundreds of millions of dollars into single companies was actually more like a private equity business. So I thought the way to ultimately participate in this market and have a real differentiated perspective or competitive advantage, I didn't think the platform to do that well existed in the secondary market. It wasn't the team that I had at CPP, great team, great people that built to do and designed to do something else. And I looked at the incumbent firms in the marketplace and came to the same conclusion. So I said, all right, well, great market. No one's positioned to go after it the right way. Let's go build it. And the opportunity to do that with TPG is what was the output of that journey. That makes sense. And now shifting the scene to TPG and recent industry trends, came to us more about your current role as co-managing partner, your team and the edge of the platform in today's GP lead market. So myself and my co-managing partner Matt Jones who joined the firm after spending 20 years at Pantheon, great guy, we co-head the business together. I work at a New York, he works at a London and we have a team today of 18 investment professionals. But speaking more generally about what we see that's interesting in this market and how I guess we're the first of a growing number of specialists that will have this as we do, private equity orientation being brought into this market. I'd say there's maybe two things that this group of new entrants have in common. One is we are all approaching this marketplace as sector specialists. And what I mean by that is private equity firms who have been investing for decades into healthcare or software or business services, whatever the sectors might be. That expertise can be super relevant when applied properly into the secondary market around single company. So the first thing they have in common, it sounds kind of obvious is they actually bring sector specialization into the secondary market. Now the second thing I'd say that we have in common but everyone's model is maybe a little bit different is how you operationalize that. How do you ensure that the secondaries team, which is responsible for the investing activity can actually leverage the expertise that resides across the platform. And that comes down to kind of of soft skills to the honest, you have to have the right incentives or the right culture or the right partnership, the way of sharing information and collaborating together. Even though that sounds easy, I think that is sometimes quite difficult. Oftentimes it can be difficult in a big firm where everybody is focused on their day job. But I think it's those two things if you can make them work together, you can actually have a very differentiated position investing into this market. As I said, talking just about us for a half a moment, we've been at this for five years. We've successfully raised our first fund. We're now investing our second fund. So the experience that comes along with that is serving us really nicely. Other groups that have come following our footsteps are maybe they're trying to catch up. Generally speaking though, we're a full, fun cycle ahead of most of the other groups that are also looking to take the same approach and apply it into the secondaries market. You have been with the firm for more than five years now and the platform has moved from its first fund to the second. How have the platform grown over the years and did it align with your vision when you first joined? Reflecting back on the last five years in the original vision that we had and the investment opportunity that we saw in the marketplace, looking back, it's worked out better than we thought. I'd say that for three main reasons. The first is the growth of the market. The single asset continuation of the local market has exceeded our expectations. I mentioned it was $5 billion of volume in 2019. In 2025, just this last year, it was over 50 billion. So it's grown 10 times in the last six years and the growth is not slowing down. The second thing that's worked out better than we thought was the benefits of being a sector specialist, as I was describing before and how a firm like TGS or some of the new entrants with their own similar approaches, to the extent that they can integrate and leverage the sector expertise that resides in the firms. It was very novel at the time, arguably a little disruptive, very different model, but it's being embraced. It's being embraced by sponsors and the other stakeholders in the marketplace. So that's worked out better than we thought. Third thing matters to me. It's actually a lot of fun when you join any new organization, no matter how much diligence you might do, how well you might know the people. When you jump on board and start and change your t-shirt, as I swapped out my CPP t-shirt for my TPG t-shirt, it's worked out great. We have a terrific team within a broader organization and I'm having a lot of fun. Building a business is exciting, it is challenging, and if you can do it with people that you really like, that's like the cherry on the Sunday. It's awesome. And multiple secondaries' platform nowadays have launched or have announced a launch funds dedicated to GP Light transactions to really specialize in single-acid continuation vehicles. What is the rationale behind this and what will this mean for the secondaries market? Yeah, so if I just sort of go back to what the market opportunity looked like in 2019, at that point it wasn't super obvious. Today it's super obvious. It has captured the attention of lots of different stakeholders across the marketplace. From where we stand today, however, for the folks that are having just jumped in or thinking about jumping in, I'd say there are four reasons for that. The first is notwithstanding all the growth that we've had, there still is a really significant supply-demand imbalance. There are more deals to do than there is capital and capability to get them done. Supply-demand imbalances are a really good positive thing to tail when you're investor because that means a market is inefficient and that creates opportunity. I do think as you look at the deals themselves and at least in my opinion it was what we saw in 2020 when we were getting started, we're still seeing this today, the deals themselves are structurally attractive. So you have an attractive market, this supply-demand imbalance, and the deals themselves are attractive. I'd say the deals are attractive for three reasons. The first is what we call positive selection bias. These are the companies that sponsors have owned, typically for four or five years. They're the special companies in the portfolio, in most cases, the best performing company in the selling fund that they need to generate liquidity for but don't want to sell. So that creates a very positive halo, positive selection bias as we call it around the opportunity set. The second thing that we find attractive is when you have a sponsor who has selected the best performing company or their prior fund, they don't want to sell it because they see too much upside. That's the sort of the why behind it. It reduces risk. You have the same company, same sponsor, same management team, same strategy. It's kind of just doing more of the same. You can generate an in our view private equity return because of those factors but do it with lower risk because of those same factors. So positive selection bias, lower risk, and then the last thing we think there's the strongest alignment between the investors and the sponsors that you'll find anywhere in the private equity market. They are putting a substantial amount of their own capital into these deals alongside the continuation of vehicle investors. And I think if you put that into a package, that's what other private equity firms see and creates a desire to enter this marketplace and see if they can make a go. That makes sense. GP led transactions have reached near parity with LP led deals in the secondary market. With the GP led volumes are passing LP led for the first time in the recent two years. What are the factors building this growth and looking ahead? What trends are you watching most closely? To be a little controversial perhaps, let me start with making a prediction. I think in the next five years, we could see the single asset continuation vehicle market. So a subset of the GP led market as you were just describing. I think a good very well become the largest segment of the overall secondary's markets. So by itself, it could surpass the LP market as you were just saying the GP led market is done. So stepping back, there's a bunch of reasons why the secondary's market is going to continue to grow. And we've talked about the drivers specific to the single asset part of this market already. So we hash that. But private equity market continues to grow. Nav has been growing of the entire secondary's market has been growing for a long period of time driven by investor demand wanting exposure to the asset class and also driven by the underlying companies wishing to stay private for longer. And if you look at these businesses as I was describing them, long term compounders, sponsors who own these long term compounders, we want to find a way to hold them for longer. And you put that into a blender. That's what's driving some of the growth in the secondary's market because at some point, the secondary's market growth is derivative of those factors. That's a derivative of the underlying growth in the private equity market. So I think that growth is going to continue for quite a while. One of the other things that I think we'll see more of in the years ahead is related to specialization. When a market grows from like the secondary's market, going back 25 years ago is single digit millions and it's you know, $225 billion in 25. And we think the single asset market could be $200 plus billion in five years from now. So like the numbers are pretty staggering and exciting. But when you have markets that grow from being small to being very, very large, it creates both the opportunity and the necessity for specialization. So we see some of the early entrants in the LP market have grown to be managing very, very large funds, specializing in that type of deal. We also see generalist groups though who have been doing LP deals, perhaps in the beginning to starting to do GP lead deals broadly defined that started as zombie funds. We talked about that earlier coming out of the GFC. Now they're doing multi asset continuation vehicles and single asset continuation vehicles. And from my perspective, each one of types of deals or increasingly segments of the market are actually quite distinct. They solve different problems. The LP market exists because an LP no longer wants to own the fund that they own. On the GP lead side, it's the sponsor who is initiating the transaction. Sometimes they're initiating a transaction to get liquidity for entire fund. Sometimes they're looking to get liquidity at the end near the end of the life of a fund for four or five companies, multi asset continuation vehicle. Or as we call them transactions of strength where they've been successful owning a company. It's not driven by the end of the life of the fund rather they need to generate DPI for their investors, but they don't wish to sell. That's why they want to do it. A continuation vehicle. So it's a long answer to your question, but hopefully by my double clicking in two or three different ways there, you'll get the sense where it's a large growing and very dynamic market. And that is actually what's made me interested. We talk about specialization from a career perspective to be specializing and focusing my time and energy and career into a dynamic and rapidly growing market with a Supply demand imbalance which means low competitive intensity is what gets me excited and keeps me excited amazing Thank you for the bold prediction on single asset CVs and we're definitely hearing more discussions around the specializations in the GP that asset classes and finally turning the attention to our audience what insights our world wise would you offer to current students who are just starting your careers and aspire to break into the Secondaries in the street. Let me think about that for just half a second. I think the secondary's market as we've talked about is large growing and really dynamic. So I actually think the way that I described when I joined CPP 20 years ago I didn't know I'd never heard of it. Here I am being invited to do this podcast today Dean. That's changed a lot over the last 20 years. So I think it's an interesting place to think about starting a career at least and maybe even having a very long career because it's growing. If there's a growing dynamic market that is a great way I think to create white space and opportunity to have an interesting career that you can run with for a long period of time. The way that most people, young professionals get into the secondaries market is by doing two or three years in investment banking in that sense. It's a similar way of getting started nowadays to looking for a job in private equity and I think there's probably a couple of exceptions here and there. But I think that's probably the most well-traumat path to break into a career in secondaries. Thank you for your inspiring advice and your time to share amazing insights with us and thank you to our listeners So joining us on this episode, stay tuned for more content.