Tetragon Financial Share Discussion Threads

[ceaserxzy] 16/2/2019 22:32

At a yield of over 6% which grows steadily at 3 to 5 % each year, it is reasonable to expect on average about 10% yearly total return, with some safety margin provided by the big discount (over 50% if the 15% cash is taken into account).

This also provides some hedge to a bad brexit, in terms of $ based assets and dividend.

[alpal2] 16/2/2019 09:32

Has there been RNS of changes in major shareholding from Brenner West or Cooperman?

[horndean eagle] 15/2/2019 12:08

It is stated policy that they they are looking to demerge the asset management side of the business when it gets to certain size. They have done a fair bit of shareholder friendly activity over the last 5 years or so. I would expect the discount to close. They are doing annual tenders and brought circa 5% back last year. Eventually stale holders are out and they will do tenders at higher levels. Lets not forget 2017 tender was at $13.60 iirc. NAV was lower back then compared to now.

[skyship] 15/2/2019 11:57

HE thnx for all of that research

MF - seems like fair comment. Perhaps we'll learn more in the upcoming Investor call

In the meantime a reasonable rally taking place...

[mad foetus] 15/2/2019 10:52

I've mentioned - possibly on another board - that I go to an annual conference where the manager of Tetragonal presents and he is very impressive. But I do not think the discount here is likely to materially close. The businesses are so opaque that it will always be at a big discount to NAV. What you get here is a chunky dividend, a fair bit of downside protection as a result of the discount and the chance of an uplift and/or special dividend if any of the underlying businesses are sold.

[horndean eagle] 15/2/2019 10:43

Hedge fund was Brenner West. According to bloomberg they had circa 4% last year. They would have been selling down ahead of the tender. Obviously other sellers about as well. Management now own mid 20% and British Empire own a largish chunk. So there is a core group of holders out there. Eventually overhang will clear.

[skyship] 15/2/2019 09:29

Incidentally, we are likely to be XD again in a couple of weeks - on Thursday 28th.

[skyship] 15/2/2019 09:26

4.348m tendered out of 87.1m shares in issue - that's 4.99%. So, yes, other holders too may have exited.

[skyship] 15/2/2019 08:25

HE - thnx for the above. You've provided the fat to the bone of my P.No.45 above:

"Perhaps the whole event was really just to release one institutional holder, as surely not many will have accepted such a lowball figure."

Will have to check the figures, but if one fund accounted for 4% then surely there wouldn't have been the cash to take anyone else out! Not that anyone else would have wanted to exit at that lowball price...

[spectoacc] 15/2/2019 07:07

Thanks @HE

[horndean eagle] 14/2/2019 18:16

Forced redemption's from hedge funds closing up shop. Shareholder list hasn't been terribly supportive over the years. Had thought the weak hands had been taken out in 2017 tender offer at $13.60 iirc. Obviously not the case. There was a hedge fund that was liquidating and they owned circa 4% last year so they probably put their entire position in. Others also followed suit. Its strange given the disposal news in Dec helped crystalise a big gain and put cash on the balance sheet. Still I would expect shares to recover well. Eventually overhang will go and no more weak holders left and then the annual tender will be at a much smaller discount to NAV.

[skyship] 14/2/2019 15:45

Received this today from Keppler Trust Intelligence:



Tetragon Financial Group - Discount @ 47.4%

Tetragon Financial Group (TFG) has net assets of $2.1bn and trades on a discount to NAV of around 47% (Numis estimate). There are US$ and £ denominated shares, but both give exposure to the same underlying investments and dollar exposure. A discount this wide clearly raises eyebrows, but we believe TFG passes the sniff test.

The company is certainly complex – it comprises investments in a number of “alternative” funds – as broad as convertible bonds, event driven equity strategies, bank loans and real estate which shouldn’t exhibit much volatility. However, it also has stakes in a number of asset management companies (held within TFG Asset Management, representing 30% of NAV), many of which manage the company’s capital, and the valuations of which could be quite volatile over the medium term. However, TFG has largely achieved steady positive returns since launch, and certainly since the current strategy has been adopted. Indeed, over the past five years, the NAV total returns have been 10.3% pa. Given the underlying asset classes, we hazard that the NAV should be relatively uncorrelated with equity markets going forward.

The company’s objective is to provide stable returns across cycles, and generate distributable income and capital appreciation. TFG’s shares currently offer a dividend yield of 6.1%. The principals and employees at TFG own around 26% of the shares, which certainly aligns them with shareholders, however it is worth noting that the shares are “non-voting”, which puts shareholders at the mercy of Tetragon’s principals: Reade Griffith and Paddy Dear, who also control the investment manager.

Historically there has been a certain about of discord between some non-voting shareholders and Tetragon evidenced by the recent buyback tender for 4.5% of the shares, which according to Numis was executed at a c. 49% discount to the prevailing NAV estimate, and a 6% discount to the share price which certainly reflects some dissatisfaction. One other wrinkle for potential investors might be the fees which are charged at 1.5% of NAV and a 25% performance fee (also on NAV) above a hurdle of Libor +2.65%. The stated OCF of TFG is 1.74% (as at 31st December 2017) and the KID RIY cost is 5.66%. In our view, there is a price for everything, and so corporate governance issues aside, the discount of 47% on a portfolio of uncorrelated assets which have delivered solid returns in the past is worth a closer look for those who aren’t too fainthearted.

[robsy2] 12/2/2019 08:53

Stumbled on thsi whiel I was digging around looking at something else. They have an impressive track record and own some really nice looking assets,the only thing I don't like is the large exposure to CLO's which I don't really understand but see as risky?
The discount is also very persistent.Maybe thta is flagging up the doubts about some of the assets here . The incentive fees are fairly outrageous as well.
R2
Tempted but too wary to take things any further.
R2

[skyship] 08/2/2019 17:08

EDIT:- Discount = 46.2% @ 1210...

[skyship] 31/1/2019 09:29

Tilts - yes. of course:

"Tetragon's Net Asset Value (NAV) for 31 October 2018 is U.S.$2.08 billion.
Taking into account the GreenOak merger and other portfolio gains and losses
through 30 November 2018, it is estimated that Tetragon's NAV will increase by
approximately 4%, with the GreenOak valuation uplift portion being reflected in
December."

So the January figure will reflect the tender uplift; though that will be partly cancelled out by the $ weakness.

The tendered shares remain in Treasury; but quite why Heaven knows! They're on a 44% discount, so hardly likely to be re-issued...

[tiltonboy] 31/1/2019 09:05

The jump in NAV relates to the transaction in December.

[skyship] 31/1/2019 07:33

Monthly Factsheet shows Dec. NAV jumps 4.5% to $22.48! Also next XD date is 28th Feb.

[value hound] 28/1/2019 17:37

Yep - relax and take the yield for the foreseeable IMO; unless the discount narrows to, say, <35% (around $14.3) for some reason.

[skyship] 28/1/2019 17:10

The result of the tender offer is to raise the underlying NAV by 2.2% to $21.98.

At $12 the discount = 45.4%.

[skyship] 28/1/2019 17:00

Yes, really surprised at that. Perhaps the whole event was really just to release one institutional holder, as surely not many will have accepted such a lowball figure.

I was unable to get a bid for my stock this morning, though it sttaed 12.10 bid for the first couple of hours. Will stay with them now.

[davebowler] 28/1/2019 15:32

In accordance with the terms of the tender offer, Tetragon has accepted for
purchase 4,347,826 non-voting shares at a purchase price of $11.50 per share.

[skyship] 23/1/2019 11:10

12.10-12.35! Maybe the strike price will be 12.30...

[skyship] 22/1/2019 14:26

A nice bounce continuing, now 11.90-12.00.

Personally I tendered low @ 11.90; but would expect 12.10 to be the strike price.