TPG Growth’s Rise Fund rocked by federal charges against CEO Bill McGlashan

Editor’s note (March 15) — ‘Scaling with integrity’ was the theme of this week’s annual meeting of the investors council of the Global Impact Investing Network on Long Island outside New York. The closed-door huddle got underway the same day news broke that the CEO of the most highly scaled impact fund of all had been caught on tape acting with a distinct lack of integrity in the “Varsity Blues” college-admission scam. Bill McGlashan, the brash and brilliant force behind The Rise Fund, was quickly put on leave; two days later he was fired for behavior a spokesman called “inexcusable and antithetical to the values of our entire organization.”

Does McGlashan’s fall signal some kind of moral rot at the core of impact investing, as some commentators have suggested? Or is it the very contrast with Rise’s stated goals – including “build businesses that expand access to educational attainment, boost educational achievement, and strengthen pathways to employment” – that made McGlashan such an emblem of bad behavior? Self-dealing and hypocrisy is not unique to impact investing. What is new in business and finance is the expanding culture of, and toolkits for, accountability for social impact.

For my money, I’ll take intentional capital and the occasional embarrassment over conventional capital with little accountability to social justice. Reforming the rigged college-admissions process, not to mention a host of other social challenges, requires investment and innovation (see No. 3). TPG Growth has already raised $1 billion toward its planned $3 billion Rise II; it already has allocated nearly $2 billion from Rise I. Raising and deploying capital on that scale puts Rise in an impact investing league of its own. You can bet there will be a lot of people watching closely whether they scale with integrity.

– David Bank, editor

ImpactAlpha, March 12 – In the morning, Bill McGlashan’s name was among the 50 people charged in Operation Varsity Blues, the federal crackdown on a wide-ranging college admissions scam. By afternoon,the private-equity power player had been placed on leave – and the future of impact investing’s most prominent fund manager was in doubt.

McGlashan, who built TPG Growth into a $13 billion juggernaut before raising a $2 billion impact fund, was in the midst of raising $3.5 billion for Rise II, one of the world’s largest impact funds.

“As a result of the charges of personal misconduct against Bill McGlashan, we have placed Mr. McGlashan on indefinite administrative leave effective immediately,” said a TPG spokesperson. Jim Coulter, the co-CEO of TPG, is taking over as interim managing partner of both TPG Growth and The Rise Fund, the spokesperson said, and will “lead all investment work for both going forward.”

The impact on impact investing could be significant. McGlashan, who co-founded the Rise Fund with U2 frontman Bono and billionaire Jeff Skoll, had attracted a Who’s Who of investors, including Richard Branson, Reid Hoffman, Laurene Powell Jobs and Pierre Omidyar, along with pension funds and other institutional investors. He had become an outspoken advocate of a brash approach that aimed for high returns and high impact, which Rise seeks to measure with a methodology it calls “the impact multiple of money.”

Rise Fund’s Impact Multiple of Money: A conversation with TPG’s Bill McGlashan

Significantly, Rise had been close to a deal to take over a Gates Foundation-backed $1 billion global health fund from the Abraaj Group, which was brought down last year by a scandal of its own.

The Varsity Blues indictment presents an awkward juxtaposition to McGlashan’s rhetoric of social equity and justice. McGlashan is accused of making a $50,000 contribution in exchange for falsifying his son’s college-entrance test results, and promising another $200,000 once he was admitted to the University of Southern California.

You might also like...