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Big private-equity firms have outgrown that label, but investors can now buy something closer to a purebred.

TPG is the latest firm with roots in private equity to list its shares—they began trading on Thursday. It will be something of a unique play among publicly traded alternative-investment managers, as they are now often known, in that it is still largely in the private-equity business. Roughly 80% of its assets under management are in private-equity strategies, which is high among large publicly traded peers, according to figures compiled by Autonomous Research analyst Patrick Davitt. Firms such as Apollo Global Management, Blackstone, Carlyle Group and KKR & Co. these days have relatively more exposure to other alternative assets such as credit and real estate.

This kind of diversification has many benefits, and investors have largely rewarded the expansion in the kinds of funding and breadth of products at Apollo, Blackstone and others. But it also has been a very good time to be in the private-equity business and might still be for a while, depending on broader financial conditions.

A buoyant stock market has boosted the ability of firms to exit investments, along with the performance fees and other gains that come with those exits. Plus, it also remains a business that generates a lot of steady earnings. The portion of TPG’s earnings that are related to fees, rather than performance-related gains, is high compared with peers. Fee-related earnings were about 55% of its pretax distributable earnings through the first three quarters of 2021, according to the initial public offering prospectus. Investors tend to value these fee earnings more highly than income related to exits.

Of course the future is also what concerns investors. Fees are prized because they aren’t directly dependent on market performance of investments. But their growth must be fueled by fundraising and adding fee-paying assets under management. Exiting investments and returning money to limited partners also means you have to replace those fees. TPG doesn’t yet have the scale of perpetual-capital vehicles—like retail funds or pools of insurance money—that some peers have recently built. Those don’t rely on regular fundraising. So investors might be more skeptical of TPG’s ability to navigate cycles.

That could be a negative mark on TPG’s valuation. By the same token, though, it also means TPG has the opportunity to add permanent capital and its stock can tack on some of the multiple expansion others have. Investors could make a bet not just on TPG’s existing business but on upside beyond what is implied by its anticipated pace of fundraising and deployment. Similarly, the continuing evolution of private-equity firms still has a big catalyst ahead of it: Inclusion in major indexes like the S&P 500. It is possible the whole sector will get a boost if one of them is finally added to the widely followed benchmark.

Investors also should keep in mind that not all “private equity" strategies are old-school leveraged buyouts. There could be lots of growth in certain areas. TPG has high exposure to faster-growing environmental, social and governance, or ESG, investment via its Impact platform. Impact represented about 12% of total assets under management as of the third quarter. This also applies to growth-style private equity, which often involves backing younger companies such as Airbnb. TPG’s Growth platform represented about 20% of AUM. Exposure to those areas might be enticing to some investors.

There are looming macro questions for the private-equity industry, including what effect rising rates and a less accommodative Federal Reserve might have on exits. At the same time, market dislocation also tends to create longer-term opportunities that could bolster fundraising efforts. Investors willing to be on that ride might view TPG as a good vehicle.

Write to Telis Demos at telis.demos@wsj.com

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