Tetragon Financial Share Discussion Threads

[hpcg] 09/10/2020 17:41

Signs of life today. It is also a useful long term income play pound cost averaging over time, ideally more so near the bottom end of the range rather than the top. One day, and it literally will be one day, the discount will close like a trap door. This happened to extremely illiquid non-voting shares of Pantheon International.

[igbertsponk] 09/10/2020 13:28

I've been looking at these ever since I met the management team who said they were trying to narrow the discount to NAV. But it never happens. Only way is to split it up, but that won't happen until team want to hang up their boots. This weeks announcement suggests they've no desire to do that.
One to buy on dips and sell on peaks. And repeat.

[skyship] 09/10/2020 09:25

WoE - there is absolutely no point whatsoever in permanently growing the NAV if they don't reward shareholders with some of that success. That way the only winner is of course the managers, who see their fees grow because they keep the funds in-house rather than allocating out to shareholders.

Cutting the dividend to such an extent was a really crass move; and it is to be hoped that they will restore at the next declaration.

[spectoacc] 07/10/2020 13:19

@westofengland - NAV goes up, but is opaque.

We're non-voting so have to take things on trust.

They cut the divi at the first opportunity, then came up with that $25m buyback, proving it wasn't a lack of liquidity.

Not too impressed, tho remain a holder.

[hugepants] 07/10/2020 12:59

There was a chance Ripple Labs was going to IPO this year. Ripple is 7% of NAV and TFG subscribed at a $10 billion valuation!
IPO seems unlikely this year -

[westofengland] 07/10/2020 12:48

They are actually solid stewards of TFG.

Ultimately, the shares will go up when investors recognise the good work the TFG team do for us shareholders.

Meanwhile, I am content to collect a fair dividend and be pleased that they are capturing opportunities it is difficult to access directly.

The NAV keeps increasing and has significantly and constantly out performed public markets.

[alpal2] 07/10/2020 12:38

Re-rate will only come when management actually takes action. Buyback of $25m was a predictable waste of time. Buyback of $250m may work.
Separate listing of asset management companies would have good effect.
Cutting the dividend was just to show us minorities how irrelevant we are.
Management so busy collecting their fees that they don't care about minority shareholders.

[spectoacc] 06/10/2020 14:02

Not uninteresting RNS this morning - but when on earth will TFG ever re-rate..

[skyship] 30/9/2020 14:13

Agreed re management. Why would they cut the dividend when still covered 1.6x and the NAV almost 3x the sp? The only reason is as always, to retain the cash on the B/s so as to maximise their fees.

They really are a bunch of crooks - but we all knew that, so only ourselves to blame if the price moves against us!

[alpal2] 30/9/2020 13:55

It's hard to imaging the management of TFG doing anything to benefit minority shareholders [who don't even have a vote?].
I was stupid enough to buy because of it's [then] 50% discount to NAV. Discount now 64%; so, egg on my face.

[skyship] 29/9/2020 14:40

Hmm - falling off the cliff again...Discount 64.3% and rising!

[skyship] 12/9/2020 10:06

Last traded these back in early February; when luckily made a small turn. Decided then not to trade again as corporate governance is total cr*p and the fees absurd.

However, if they really do manage to launch an IPO then for sure the higher profile would inevitably reduce the discount from the current 62.5%. NAV 24.13, share price 9.00.

It would likely return the stock to the $12 level again, ie, still a 50% discount. A more shameful indictment of management it is hard to imagine.

So, with the possibility of further IPO progress, or even talk; I've decided to buy back in with a small 3% allocation. Target is for $12 and a 33% gain...

[hpcg] 11/9/2020 14:37

I started looking in more depth at the asset management companies. I only got as far as Equitix, but it certainly looked like a decent enough operation to have substantially more than zero value; I would suggest an absolute minimum of £200m. Year to 31 Dec 2018 accounts are on Companies House.

[davebowler] 03/9/2020 13:42

Tetragon Financial Group (TFG) invests in a diversified set of alternative assets, including bank loans, real estate, convertible bonds and event-driven equities via hedge funds. However it also has investments in six management groups which manage a significant part of the portfolio. Together they are known as TFG Asset Management and represent 31% of NAV (as at 30/06/2020). The companies within this business currently manage around $27bn of assets in total. We understand that the long-term strategy is to continue to grow this business, effectively, as a group of asset management businesses under a corporate umbrella: with a view to a possible initial public offering and listing of its shares. If this were to be achieved, given the percentage of NAV the business represents, it would likely be a material development for the TFG share price. Nevertheless we would caution that the managers have stated that there is no short-term plan to crystallise value in TFG Asset Management.

The current discount to NAV that TFG trades at would suggest that investors are ascribing little or no value to the asset management business. The business is valued in the NAV at $703m (as at 30/06/2020). This valuation appears conservative in terms of an earnings valuation and broadly in-line with listed peers – as we illustrate in the tables above. When we apply the value ascribed by the market in the form of a 62% discount, however, the valuations appear compelling. TFG Asset Management companies certainly invest in alternative assets and have large performance fee elements to them, which makes direct comparisons difficult. However we would note that the funds and underlying assets tend to exhibit low volatility, and have an emphasis on the underlying stability of cashflows. As a result TFG Asset Management could offer compelling value for long-term investors, on both an earnings and AUM basis and based the valuation implied by the current price of Tetragon’s shares.

[rambutan2] 01/9/2020 21:02

Nav up a tad in July:

[alpal2] 31/7/2020 08:57

It's shareholders that need to be punished for poor performance by management. So: Management fees up; dividend down.
To say the least, I am not pleased.

[spectoacc] 31/7/2020 07:43

Need a week to wade through that Half Yearly. Can't say it isn't thorough, despite a lot of glossy photos & gems like:

"We are
mindful of the potential for both right tail and
left tail outcomes"

[scbscb] 29/7/2020 09:17

The reason this is on such a large discount is because it is run solely for the benefit of the management. They do not want to buy back shares or even pay a cash dividend, but to retain the maximum amount of money invested so that high fees can be charged. Shareholders have no votes so are completely irrelevant. Any investment company that wants to maximise shareholder returns and indeed produce a good performance would buy back shares if the price is below the nav. In this case the investment managers could make a 100% return by just picking up shares in the market for no risk, but they must have other spotted other opportunities that offer higher returns! If they keep issuing shares in lieu of dividends at a big discount to nav the price can only go down. With no votes there is not a potential exit from this failure. These shares could not be recommended at any price.

[makinbuks] 24/7/2020 17:12

Spec I think you would agree that for the same absolute cost to the company a buyback offers an amplified return to the investor compared to a dividend. Its probably more tax efficient as well, certainly in the UK.

The more interesting point is, if the IRR from a buyback were greater than that of and investment or a loan what would the directors, who are also the fund managers and control the voting rights of the company do ? The suspicion is they would invest rather than buyback because that is in their overall interests. Thats why these are not in higher demand

[spectoacc] 23/7/2020 20:23

Hmm but the share structure isn't likely to change, nor the opaque valuation, nor (clearly, looking at it over time) the discount, which varies between "massive" and "cavernous".

In which case, for me, the return all comes from the generous yield. Which they cut at the first sign of trouble, something that would seem worrying if not for then chucking $25m at a buy-back tender.

They waited a long time to inform us how they were doing - but am still hopeful they prove to have traded well through Covid.

Might be wrong, but don't get the feeling the co is run for our benefit, & it stops me taking too large a position.

[makinbuks] 23/7/2020 13:54

The fees are high in comparison to other trusts but whether they are excessive depends on your expected return. I'm happy with the rate of compound return they claim (admittedly I'm sceptical of the valuations used)so I don't consider the fees to achieve that net return excessive.

Similarly I don't really care what dividend they pay as that is simply affecting the timing of my return rather than its size.

The discount is caused by the share structure and the lack of a transparent valuation

[alpal2] 22/7/2020 15:10

The last buy-back of $25m was so small that it just emphasised the overhang of willing sellers. I'm not generally in favour of buy-back as it seems to do nothing for long-term share price enhancement.
That said: If they committed something like $250m in a buy-back, then it may work. That's 10% of NAV and 30% of market capitalisation.
Also all cash realisation will be paid to shareholders until share price is more than 80% of NAV. Oh, but then they wouldn't be getting their excessive fees; so, not likely.

[spectoacc] 22/7/2020 13:16

I think the trouble with TFG is the discount is so huge, and so persistent, that shareholders' only return is from the tidy yield.

Management already own so much that buy-backs (via the tenders) simply concentrate their ownership.

Meanwhile, they take disproportionate fees.

All fine if returns are flowing to shareholders too. But looks less good when the divi gets cut at the first sign of trouble.

Otherwise - yes - fair point re buying back when at such a discount. Remain a holder, but haven't been minded to add in a while.