Tetragon Financial Group Limited Edison issues outlook on Tetragon Financial Group
April 28 2021 - 2:00AM
RNS Non-Regulatory
TIDMTFG
Tetragon Financial Group Limited
27 April 2021
London, UK, 28 April 2021
Edison issues outlook on Tetragon Financial Group (TFG)
Tetragon Financial Group (Tetragon) reported a 9.5% NAV TR in
FY20 in US dollar terms. Its main value driver remains TFG Asset
Management, which delivered a 24% return in FY20 as it continues to
expand its assets under management (AUM, up by 10% in FY20 mainly
assisted by Equitix). In contrast, Tetragon's CLO and real estate
investments were a drag on FY20 performance. Moreover, Polygon
funds (the majority of Tetragon's exposure to hedge funds)
delivered positive returns, but below broader equity markets. As a
result, Tetragon posted a 7.6% return on equity, below its
long-term target of 10-15%. Still, its long-term performance
remains intact with an average 13.7% NAV TR pa over the last 10
years.
Despite the long-term NAV returns Tetragon demonstrated, its
shares continue to trade at a wide discount of 63%, which is ahead
of the already wide 10-year average of 43% and visibly higher than
its peers. This may at least partly come from its incentive fee
structure (which also dampened the NAV TR in FY20), only non-voting
shares being available to investors (which means Tetragon cannot
enter LSE's premium segment) and TFG Asset Management's carrying
value being based on private valuation. The recent enforcement
action of the US Securities and Exchange Commission (SEC) against
Ripple Labs (7.3% of Tetragon's NAV) may add to this. Nevertheless,
the current discount offers considerable downside protection to
investors, who are also rewarded through dividends (4.1% yield on a
last 12 months basis) and NAV-accretive share buybacks. Tetragon
sees room for further growth in AUM of TFG Asset Management and
does not expect to float the business in the near term (which,
however, remains its long-term intention).
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