London, UK, 16 April 2024

Edison issues review on Tetragon Financial Group (TFG): FY23 growth driven by idiosyncratic factors

Tetragon Financial Group (Tetragon) posted a 6.4% net asset value (NAV) per share total return in US dollar terms in FY23. Tetragon’s returns normally have a low correlation with broader markets, and therefore its FY23 performance was below the 26.3% return of the S&P 500 Index, which rallied on the artificial intelligence (AI) theme. Tetragon’s FY23 return on equity of 5.5% was below its target of 10–15% pa. That said, its performance since listing was within the target range at 11.3%. Tetragon continues payouts to its shareholders, distributing US$83.6m in FY23 through buybacks and dividends (3.0% of opening NAV), with the dividend yield standing at 4.4%.

Tetragon’s performance in 2023 was primarily driven by idiosyncratic developments in portfolio companies – favourable rulings in the Ripple case, good operational developments in one of its Australian gold projects, one biotech company reporting encouraging developments for its potential cancer and autoimmune therapies, as well as exposure to companies positioned to benefit from AI infrastructure demand. After six consecutive years of TFG Asset Management being the main driver of growth (see chart above), its valuation remained broadly flat in 2023 (0.2pp contribution to NAV), while Tetragon’s portfolio of listed equities contributed 4.5pp in growth (from biotech and AI) and private equity exposure added a further 3.3pp (from Ripple Labs and the above-mentioned gold project).

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