London, UK, 2 September 2021

Edison issues update on Tetragon Financial Group (TFG)

Tetragon Financial Group (Tetragon) reported an H121 NAV total return (TR) of 0% in US dollar terms. Gains on investments in asset managers, bank loans and hedge funds were offset by losses on its listed equities portfolio and private equity (PE). TFG Asset Management (TFG AM) has continued to increase its assets under management (AUM) to US$32.8bn (up 9% in H121) by attracting capital to existing strategies and setting up new managers (eg Contingency Capital active in financing law firms and legal proceedings). Meanwhile, employee ownership of Tetragon increased to 35.0%, further aligning the interests of management and investors.

Tetragon's H121 return was behind broader equity markets, but we note that this was primarily due to assets that show little to no correlation with equities: two early-stage gold miners in Hawke's Point portfolio were written down by 29% amid a lower gold price (after a +66% return in FY20); Tetragon's listed equity portfolio is concentrated (10 positions) and focused on (bio)technology and financials with value driven by company-specific developments; and Polygon funds (making up 97% of Tetragon's hedge funds exposure) have concentrated portfolios focused on special situations. Meanwhile, the privately valued TFG Asset Management remains the main value driver of NAV returns (see chart above). While Tetragon's historical long-term performance remains intact, the high concentration in some asset buckets, coupled with Tetragon's limited disclosure on individual underlying investments, translates into lower visibility of prospective returns. 

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