TPG's Coulter calls for patience, perspective amid 'great reset' - AVCJ Forum

“I cannot remember how big any recession was in any particular quarter,” Coulter said, noting that he has experienced seven recessions to date. “It’s a journey, it’s not about the landing.”

He compared the tendency to fixate on the nature of economic landings to the atmosphere on a plane in the moments before touch-down when the chatter fades and passengers contemplate their own mortality “even though we know we are safer in that moment than when driving out of the garage in the morning.”

Investors must respond to the reset in the global economy by resetting how they think about opportunity and risk, Coulter added. Decisions will be characterised not only by higher interest rates and inflation, but also by a shift “from globalisation to regionalisation, from global correlation to dispersion.”

The notion of regionalisation is already impacting how TPG thinks about Asia. Coulter highlighted the strength of intra-Asia trade – it is three times larger than NAFTA by value and the number of trade pacts signed within the region has risen from six to 19 over the past 15 years – and how the US-Europe-China economic axis is being challenged by a variety of issues.

TPG is increasingly prioritising India and Southeast Asia, although there is a desire for flexibility in deployment rather than being tied to specific geographies. “Countries move over time to their own rhythm. We are very active in India now, but between 2012 and 2014 we did nothing in India even though we have a big office there,” said Coulter.

TPG is currently in the market with its eighth flagship Asia fund, which launched earlier this year with a target of USD 6bn and recently achieved a first close of USD 3.4bn. In April, the firm closed its first dedicated climate-focused fund – which sits within The Rise Fund, a global impact investment platform – on USD 7.3bn.

Coulter noted that he has seen a handful of global phenomena that fundamentally altered the landscape for private equity investors: interest rates falling from 15% to zero, globalisation, which is what brought TPG to Asia in 1994, and the technology-driven disruption of business models. He believes climate change is another.

“I said if we ever see a wave of similar scale and impact [to the technology wave] we would position ourselves for it. Climate is that,” Coulter said. He added that the scale of spending in this area is equivalent to the top 10 companies in the world being created every year and that much of the value creation will happen in private markets.

Widespread commitments to achieving net zero carbon emissions – which have filtered down from country to corporate level – and the emergence of green technology that is superior to fossil fuel technology have only strengthened this conviction.

Coulter observed that the US Inflation Reduction Act, which was signed into law earlier this year and authorises an initial USD 391bn in spending on energy and climate change is “no stick, all carrot.”

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