Tetragon Financial Group Limited · EURONEXT:TFG
Tetragon Financial — Investor Day (September 2014)
96 slides from Tetragon Financial's investor day presentation, Sep 10, 2014
Slide 1: Tetragon Financial Group Limited Investor Day 2014
This presentation has been modified from its original version to address applicable regulatory and compliance matters associated with its release on the TFG website. The original version is available upon request. Tetragon Financial Group Limited Investor Day 2014 10 September 2014 THE INFORMATION C
Slide 2: Today's Agenda
Today’s Agenda • Introduction Paddy Dear • TFG Investment Portfolio Reade Griffith • CLO 1.0 Jeff Herlyn • CLO 2.0 Farboud Tavangar • Hedge Fund Investments o Convertibles Mike Humphries o Mining Equities and Mining Finance Mike Humphries o Distressed Olivier Blechner o Event Driven Equities Reade G
Slide 3: Portfolio Overview
Portfolio Overview Reade Griffith
Slide 4: Portfolio Evolution
Portfolio Evolution Investment Portfolio (% of Net Assets at 30 June 2013) Asset Other Net Managers Assets Investible 4.4% 0.6% Cash(i) 13.0% Real Estate 2.2% CB & Credit 1.2% CLO 1.0 47.0% Equities 8.0% U.S. Direct European Loans CLOs 2.6% 8.7% CLO 2.0 12.4% 68% CLOs (i) Investible Cash consists of
Slide 5: Asset Allocation and Uses of Cash: Expected Return Profile
Asset Allocation and Uses of Cash: Expected Return Profile Expected risk-adjusted return of each investment is a key factor in the asset allocation process − Impact of each incremental investment on overall portfolio risk/reward − Implications for size and structure of investment − Target Return on
Slide 6: Asset Allocation and Uses of Cash: Duration & Liquidity
Asset Allocation and Uses of Cash: Duration & Liquidity Expected duration and liquidity profile of each investment also drive asset selection and weighting − Time to maturity vs. payback period − Normalized vs. “worst case” exit options & their liquidity − Understanding impact on ability to adjust t
Slide 7: TFG Investment Portfolio Duration
TFG Investment Portfolio Duration TFG’s duration profile has diversified significantly over the last seven years 2007 Investment Portfolio Allocation 2007: 25% • 100% CLO investments 20% Expected Return • No long term / “permanent” investments 15% CLO 1.0 available in the CLO asset class to take 10%
Slide 8: Asset Allocation Framework and Uses of Cash: Correlation
Asset Allocation Framework and Uses of Cash: Correlation Secular rise in cross-asset correlations • Due to changes in market structure – globalization of capital markets, new risk management and alpha- extraction strategies (e.g. relative-value, cross-asset statistical arbitrage trading) Relationshi
Slide 9: Asset Allocation Framework and Uses of Cash: Correlation (cont'd)
Asset Allocation Framework and Uses of Cash: Correlation (cont’d) Spikes of cross-asset correlations during macro-economic/systemic crises • Risk-on / risk off trading pattern • Asset-class diversification benefits may be limited during periods of systemic distress − May warrant investment-specific
Slide 10: Portfolio Evolution: Current Portfolio
Portfolio Evolution: Current Portfolio Investment Portfolio Investment Portfolio (% of Net Assets at 30 June 2013) (% of Net Assets at 30 June 2014) Other Net Asset Other Net Asset Assets Managers Assets Managers Investible 2.1% 4.4% 0.6% 5.0% Cash(i) 13.0% Real Estate 2.2% Investible Cash(i) 12.5%
Slide 11: TFG CLO Equity Cash Flow Forecast
TFG CLO Equity Cash Flow Forecast Despite the amortization of CLO 1.0 investments, TFG’s CLO portfolio continues to generate strong cash flows TFG’s majority stake investments may allow it to influence the timing of its CLO cash flows through optional redemptions CLO Equity Cash Flow Forecast -
Slide 12: CLO 1.0 Portfolio: Performance Highlights
CLO 1.0 Portfolio: Performance Highlights Jeff Herlyn
Slide 13: CLO 1.0 Portfolio: Historical Unwind Path
CLO 1.0 Portfolio: Historical Unwind Path TFG’s CLO 1.0 portfolio has deleveraged substantially over the past two years TFG’s U.S. CLO 1.0 Portfolio: Aggregate Debt Outstanding (1) Outstanding U.S. CLO 1.0 debt balance declined by ~42% 20.0 $USD Billion 15.0 10.0 5.0 0.0 TFG’s European CLO Portfolio
Slide 14: CLO 1.0 Portfolio: Factors Affecting Pace of Deleveraging
CLO 1.0 Portfolio: Factors Affecting Pace of Deleveraging Structural features and market conditions interact to shape a CLO’s unwind path (vintage effects) Weighted CLO 1.0 De-Leveraging Example(1) average life 400.0 100.0 and maturity 90.0 constraints 350.0 Ablilty to invest Is reinvestment 80.0 (b
Slide 15: CLO 1.0 Portfolio Exit Options: Sell, Call, or Hold?
CLO 1.0 Portfolio Exit Options: Sell, Call, or Hold? Four key factors are evaluated in selecting an optimal CLO equity investment exit option • Equity NAV and expected equity cash flows Sale Price • Generic market CLO 1.0 equity trading levels and liquidity • Ability to monetize “control value” of m
Slide 16: CLO 1.0 Portfolio: Default Risk
CLO 1.0 Portfolio: Default Risk • Diversification and active portfolio management mitigate aggregate CLO default risk • CLO structural features offer additional protections - Overcollateralization cushion and “par building” strategies - Interest diversion & direct paydown (“turbo”) mezzanine O/C tes
Slide 17: CLO 1.0 Portfolio: Interest Rate Risk & LIBOR Floors
CLO 1.0 Portfolio: Interest Rate Risk & LIBOR Floors LIBOR floors embedded within loans have benefitted CLO equity but present a risk to its value - Differential increases the effective portfolio spread - Approximately 88% of U.S. loans outstanding contain LIBOR floors with an avg. strike of 104 bps
Slide 18: CLO 1.0 Portfolio: European CLO Investing
CLO 1.0 Portfolio: European CLO Investing European CLOs face a number of unique market challenges vs. U.S. CLOs Factor “Typical” U.S. CLO “Typical” European CLO Implications Loan market size U.S. issuers historically Non-U.S. issuers historically - Sourcing challenges comprised ~ 72% of global new c
Slide 19: U.S. CLO Arbitrage Evolution
U.S. CLO Arbitrage Evolution U.S. CLO 2.0 “funding gap” arbitrage levels have recently come under pressure − Loan spread tightening has occurred in context of broadly widening CLO debt funding costs − Market data understates true CLO debt funding costs as it is based on nominal debt coupons vs. disc
Slide 20: CLO 2.0 Portfolio
CLO 2.0 Portfolio Farboud Tavangar
Slide 21: Average Debt Multiples of Large Corporate LBO Loans
Average Debt Multiples of Large Corporate LBO Loans Source: Standard & Poor’s 8.0x 6.2 5.7 5.9 6.0x 5.6 5.4 5.4 5.4 5.3 5.2 5.3 4.7 4.8 4.9 4.7 4.6 4.2 4.1 4.0 4.0 4.0x 2.0x 0.0x FLD/EBITDA SLD/EBITDA Other Sr Debt/EBITDA Sub Debt/EBITDA 2014 | 21
Slide 22: LCM – Default Track Record
LCM – Default Track Record US Leveraged Loans in Payment Default or Bankruptcy Percent of Outstanding at End of Period 12% 10.7% 9.9% 10.0% 10% 7.4% 8% 6% 5.0% 3.6% 3.7% 4% 3.0% 2.6% 2.3% 2.2% 1.9% 1.9% 2% 1.2% 0.62% 0.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0% 2001 2002 2003 2004
Slide 23: Example: LCM XVI
Example: LCM XVI LCM XVI benefitted from a warehousing period with 1st-loss provided by a third-party investor − Improved portfolio execution flexibility − Allowed 100% ramp-up at Closing TFG hypothetical equity return enhanced by approximately 6% when including management fees (assuming 50% pre-tax
Slide 24: Hedge Fund Investments
Hedge Fund Investments Mike Humphries Olivier Blechner Reade Griffith
Slide 25: Convertibles and Credit
Convertibles and Credit Mike Humphries
Slide 26: Convertibles and Credit: Executive Summary
Convertibles and Credit Executive Summary • Strong team based in London and New York investing primarily in European and North American convertible and credit markets • Diversified investment expertise and niche approach to the asset class • Concentrated, high-conviction, portfolio • Fluid movement
Slide 27: Convertibles and Credit: Key Performance Analytics
Convertibles and Credit Key Performance Analytics – Inception to 31 August 2014* Risk/Return Profile 25% Polygon CB Fund(1) 20% Annualized Net Return S&P 500(4) 15% 10% HFRX Conv Arb(2) 5% HFRX Global(3) 0% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% Annualized Volatility *Please refer to Endnotes for im
Slide 28: Investment Process – A Typical Convertible Hedge Fund
Convertibles and Credit Investment Process – A “Typical” Convertible Hedge Fund Convertible Security Market Specific Expertise Considerations Investment Process Volatility Credit Trading Analysis Portfolio • Arbitrage-focused • Diversified portfolio of positions with similar return drivers (i.e. che
Slide 29: Our Investment Process
Convertibles and Credit Our Investment Process Event Driven Convertible Security Market Specific Expertise Considerations Industry-Specific Depth Investment Process Equity Long-Short Volatility Credit Trading Analysis Distressed Portfolio • Idiosyncratic return drivers • Research-intensive process •
Slide 30: Mining Equities
Mining Equities Mike Humphries
Slide 31: Mining Equities: Executive Summary
Mining Equities Executive Summary • A strong London-based team with significant technical and investment expertise • Investment focus on global mining equities with particular emphasis on gold deposits and listing geographies with robust technical disclosure • Concentrated portfolio of heavily-resea
Slide 32: Peter Bell – Historic Mine Site Visits
Mining Equities Peter Bell – Historic Mine Site Visits 2014 | 32
Slide 33: Scott Marsh – Historic Mine Site Visits
Mining Equities Scott Marsh – Historic Mine Site Visits 2014 | 33
Slide 34: Mining Team – Historic Mine Site Visits
Mining Equities Mining Team – Historic Mine Site Visits 2014 | 34
Slide 35: Universe of Investible Miners
Mining Equities Universe of Investible Miners Mining Company Distribution by Commodity Diamonds 4% Iron Ore 4% Industrial 7% Base metals 14% Gold and silver 56% Coal 15% Source: Bloomberg 2014 | 35
Slide 36: Gold and Silver Company Market Cap Distribution
Mining Equities Gold and Silver Company Market Cap Distribution >$5B 11 Market Capitalization $1-$5B 30 $0.3B-$1B 32 $50-$300mm 83 0 10 20 30 40 50 60 70 80 90 Source: Bloomberg # of Companies 2014 | 36
Slide 37: Mining Finance
Mining Finance Mike Humphries
Slide 38: Financing Environment for Corporates
Mining Finance Financing Environment for Corporates • Uncertain and volatile metals price environment • Equity and credit investor risk aversion ─ Significant losses on metals price sell-off ─ Capex overruns, project delays and general “over-promise and Companies generally have under-deliver” outcom
Slide 39: Financing Environment for Corporates: Sources
Mining Finance Financing Environment for Corporates Traditional Sources Alternative Sources Public Bonds or Bank Private Royalty & Off-take Vendor Equity Converts Debt Equity Streaming Financing Financing • Highly dilutive • Recent investor • Available but • Capital raised • Generally • Recently • L
Slide 40: TFG's Advantage
Mining Finance TFG’s Advantage Significant technical Extensive capital Long-dated capital to Investment appetite Technical skill to mining expertise markets and deploy provides and structuring focus on earlier-stage investing expertise in flexibility on the types expertise to flexibly opportunities
Slide 41: Distressed Opportunities
Distressed Opportunities Olivier Blechner
Slide 42: Distressed Opportunities: Executive Summary
Distressed Opportunities Executive Summary • Focus on non-control distressed situations • Experienced team of European nationals based in London, supported by extensive Polygon resources (e.g., legal team) • Nimble and opportunistic across the distressed landscape • Fundamental and research-intensiv
Slide 43: Distressed Opportunities: Exposure and Returns
Distressed Opportunities Net Exposure (% of NAV) Since Inception (September 2013) 100% 80% 60% 40% 20% 0% -20% -40% -60% Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Net LMV/SMV Trailing 12 Month Portfolio Returns Since Inception (September 2013) 3.0% 2.5% 2.0%
Slide 44: Ten Largest Contributors/Detractors Since Inception
Distressed Opportunities Ten Largest Contributors/Detractors Since Inception 4.0% 3.0% 2.0% 1.0% 0.0% Electricity Restaurants Media Merchant Directories Gaming Coal Mining Telco Banking Shipping Transmission Energy -1.0% -2.0% Europe U.S. Asia -3.0% Source: Polygon. Returns above are calculated by (
Slide 45: European Event-Driven Equity
European Event-Driven Equity Reade Griffith
Slide 46: European Event-Driven Equity: Executive Summary
European Event-Driven Equity Executive Summary • A seasoned team with significant experience in European equity event-driven investing • Diversified, catalyst-driven portfolio exhibits a low correlation to European equity markets • Thoughtful, size-constrained approach allows us to seek what we thin
Slide 47: Key Performance Analytics – Inception to 31 August 2014
European Event-Driven Equity Key Performance Analytics – Inception to 31 August 2014* Risk/Return Profile 18% S&P 500(4) 16% Polygon EEOF(1) 14% Annualized Return 12% STOXX 600(5) 10% 8% HFRX Event Driven(2) 6% 4% HFRX Global(3) 2% 0% 0% 2% 4% 6% 8% 10% 12% 14% Annualized Volatility *Please refer to
Slide 48: European sentiment has been improving materially
European sentiment has been improving materially August 2012 August 2014 Economic Sentiment Indicator (ESI) < 85 85 to 90 90 to 95 95 to 100 100 to 105 > 105 Source: Eurostat 2014 | 48
Slide 49: EMEA Deals Received as Hostile or Unsolicited
EMEA Deals Received as Hostile or Unsolicited Value ($ millions) # bids $250 50 44 Lowest hostile activity in 10 years 45 40 $200 37 40 36 35 34 35 $150 30 22 25 21 $232 20 $100 20 $142 15 11 $134 10 $50 10 $70 $59 5 $46 $26 $24 $30 $16 $3 $0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Slide 50: Real Estate Investments
Real Estate Investments Jim Blakemore
Slide 51: GreenOak US Fund I - West 18th Street
GreenOak US Fund I - 218 West 18th Street Off-market acquisition office property in Chelsea submarket KEY METRICS Location New York, NY Property was fully renovated by the previous owners, who acquired the property vacant in 2007, total cost basis of approximately $87MM Property Type Office ($520/SF
Slide 52: GreenOak Japan Fund I - Sale to Nippon REIT
GreenOak Japan Fund I - Sale to Nippon REIT • On April 24, 2014, GreenOak successfully closed on the sale of seven properties for $328MM to Nippon REIT Investment Corporation (“Nippon REIT”), a JREIT which listed on the Tokyo Stock Exchange through an initial public offering. • Assets from the Green
Slide 53: GreenOak Spain
GreenOak Spain Stabilised retail portfolio acquired at attractive going-in basis, GreenOak took advantage of previous failed sales process and added value through complex transaction structure Key Attributes: Key Metrics Overview (1) • Attractive going-in basis at €1,207 psm ($153 psf) and c.35% 201
Slide 54: Cathedral Lanes Shopping Centre
Cathedral Lanes Shopping Centre Deal Background • Shearer Property Group exchanged option to purchase from Hammerson at £5.83MM and planned £2.82MM capex/re-letting program; property originally offered for sale at £7.2MM Key Property Metrics Location Coventry Asset Overview • Two level shopping cent
Slide 55: Co-Investments
Co-Investments Reade Griffith
Slide 56: Co-Investment and "Best Ideas" Opportunities
Co-Investment and “Best Ideas” Opportunities Tetragon Financial Group Investment Opportunities Polygon GreenOak LCM Private Equity Special Situations 2014 | 56
Slide 57: TFG Asset Management
TFG Asset Management Greg Wadsworth
Slide 58: Organization Overview
Organization Overview A Broadly Based Alternative Asset Management Group TFG Asset Management Hedge Funds Private Equity Bank Loans Real Estate Joint Venture Approx AUM $1.2 billion(1) $0.3 billion(2) $5.1 billion(3) $3.9 billion(4) • European Event-Driven Equity • Private Equity • LCM • GreenOak Ja
Slide 59: Hedge Fund AUM
Hedge Fund AUM* $1,400 Millions $1,200 $1,000 $800 $600 $400 $200 $- May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Event Driven Eq Convertible Opp Mining Eq Global Eq Distressed *AUM for Polygon Convertible Opportunity Master F
Slide 60: Hedge Fund AUM
Hedge Fund AUM* $1,400 Millions $1,200 Since acquisition: +$701 mm TFG: $314 million $1,000 $800 $600 $400 $200 $- May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Event Driven Eq Convertible Opp Mining Eq Global Eq Distressed *AU
Slide 61: LCM AUM Growth Chart
LCM AUM Growth Chart LCM Assets Under Management History ($BN) $6.0 Post-Acquisition Pre-Acquisition $5.1 $5.0 $4.8 $4.5 $4.3 $4.3 $4.3 $4.2 $4.1 $3.9 $4.0 $3.5 $3.4 $3.7 $3.4 $2.9 $2.9 $3.0 $2.4 $2.3 $2.3 $2.0 $1.0 $0.0 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012
Slide 62: GreenOak Joint Venture
GreenOak Joint Venture GreenOak Assets Under Management History ($BN)(i) $4.5 $4.1 $3.9 $4.0 $3.6 $3.6 $3.5 $3.2 $3.0 $3.0 $2.5 $2.3 $1.9 $2.0 $1.7 $1.7 $1.5 $1.0 $0.6 $0.5 $0.0 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Europe U.S. Japan Source: GreenOak
Slide 63: GreenOak Joint Venture Snapshot
GreenOak Joint Venture Snapshot • Employee-owned and controlled, independent and fully aligned with our investors • Current team size of 45 professionals, many of whom have worked together for a number of years • Offices open in London, Los Angeles, New York and Tokyo » Team representatives in Madri
Slide 64: TFG Financials
TFG Financials Philip Bland CFO Please see the Appendix of this presentation and TFG’s Q2 2014 Performance report for certain relevant definitions.
Slide 65: TFG Key Metrics
TFG Key Metrics We continue to focus on three key metrics for TFG’s business(i): Earnings (Return on Net Asset Value per Dividends & Other Equity and EPS) share Distributions • How value is being • How asset value has been accumulated within TFG returned to shareholders • TFG’s Operating performance
Slide 66: TFG Key Metrics: Return on Equity
TFG Key Metrics Return on Equity (“RoE”)(i) Annual Return on Equity 60.0% 47.7% Target RoE 50.0% 10-15% 36.1% 40.0% Average 14.0% 30.0% 11.4% 20.8% 15.3% 20.0% 9.5% 10.0% 0.0% -3.7% -10.0% -20.0% -30.0% -27.6% -40.0% 2007 2008 2009 2010 2011 2012 2013 2014 annualised (i) TFG's returns will most like
Slide 67: TFG Key Metrics: Earnings Per Share
TFG Key Metrics Earnings Per Share (“EPS”)(i) Adjusted EPS 2012 – H1 2014 $3.00 $2.70 $2.52 $2.40 $2.50 $2.00 $1.50 $0.90 $1.00 $0.50 $0.00 2012 2013 H1 2014 LTM to H1 2014 Adjusted Earnings Per Share (i) Please refer to the TFG Financials appendix, page [98] for certain relevant definitions. 2014 |
Slide 68: TFG Key Metrics: Earnings Per Share
TFG Key Metrics Earnings Per Share(i) TETRAGON FINANCIAL GROUP TFG Earnings per Share Analysis (H1 2013 - H1 2014) % change H1 2014 H1 2013 2014 % of total 2013-14 CLO and other loans $1.01 $1.26 112% (20%) Hedges, FX and options ($0.10) $0.03 (11%) (433%) Other asset classes $0.27 $0.04 30% 575% Co
Slide 69: TFG Key Metrics: NAV Per Share
TFG Key Metrics NAV Per Share(i) TFG Consolidated Net Assets ($MM) and Pro Forma Fully Diluted NAV per Share(i) $2,000 Consolidated Net Assets ($ MM) $18.00 $16.83 $17.08 NAV / Share (pro f orma f ully diluted) $16.36 $1,800 $15.17 $15.49 Price/ Share $15.02 $16.00 $14.29 $14.65 $13.75 $1,600 $13.12
Slide 70: TFG Key Metrics: Fully Diluted Share Count
TFG Key Metrics Fully Diluted Share Count Share count impacts EPS and NAV per share U.S. GAAP shares reduced materially by share repurchases in recent years Escrow shares relate to shares issued as part of Polygon transaction – to align interests and promote retention TFM Option shares affec
Slide 71: TFG Key Metrics: Distributions - Dividends Per Share
TFG Key Metrics Distributions - Dividends Per Share (DPS) 12-month Rolling DPS Comparison Progressive dividend policy H1 2012 - H1 2014 (USD) 30%-50% of sustainable earnings 0.7 +13.3% 0.595 Q2 2014 DPS gave annualised dividend yield of 0.6 +23.5% 0.525 6.2% at Q2 share price of $10.03 0.5 0.4
Slide 72: TFG Key Metrics: Distributions – Share Repurchases
TFG Key Metrics Distributions – Share Repurchases Cumulative TFG Share Repurchases ($MM) Since IPO, TFG has repurchased 41 million $350.0 $324.5 of its shares $300.0 $257.5 $273.6 Latest repurchase was via a tender offer for $250.0 $50 million in Q1 2014 $200.0 $150.0 $100.0 $50.0 $0.0 Inception
Slide 73: TFG Asset Management
TFG Asset Management TFG AM Balance Sheet Value ($mm) • Total TFG Asset Management balance sheet $100 value was $90.7 million at 30 June 2014 $90 $80 $23.6 $70 $21.2 TFG AM Net Assets • $34.1 million relates to TFG’s 23% holding in $12.5 $15.8 $60 ($m) GreenOak $50 $33.1 Mgt contracts ($m) $36.5 $40
Slide 74: TFG's Financials - Summary
TFG’s Financials - Summary Delivering on Key Metrics • Continuing to deliver against the three key metrics, although RoE is below target range currently TFG’s Investment Portfolio - diversification continues • Amortization of CLO activities has accelerated but contribution remains significant, albei
Slide 75: The Future
The Future Paddy Dear TETRAGON
Slide 76: How Does Having an Asset Management Platform Help Asset Level Returns?
How Does Having an Asset Management Platform Help Asset Level Returns? Costs Lower Fees on Addition of Third Party Best Capital Fees Ideas Continuous Co-Investment Deeper Market Information Investor and “Best Knowledge Feedback Ideas” Access to Infrastructure Flexibility of Direct Access Market Stru
Slide 77: Example: LCM
Example: LCM Third-Party CLO Equity Hypothetical Return Profile (1) 15% 13.1% 11.1% 8.7% 10% 5.9% 5% 2.7% -1.1% 0% -5.7% -5% -10% 0% CDR 1% CDR 2% CDR 3% CDR 4% CDR 5% CDR 6% CDR Expected Returns to TFG on Same CLO if Managed by LCM (2) 18.7% 20% 17.0% 15.0% 15% 12.6% 9.6% 10% 6.3% 5% 2.4% 0% 0% CDR
Slide 78: How Does Having Investment Dollars Help Grow an Asset Management Business?
How Does Having Investment Dollars Help Grow an Asset Management Business? ATTRACTS Investment Working Robust TALENTED Capital Capital Infrastructure MANAGERS Co-investing Focusing on Critical Mass FASTER Alongside Performance AUM GROWTH our Clients and not AUM GROW NEW Investment & BUSINESSES Worki
Slide 79: LCM AUM Growth Chart
LCM AUM Growth Chart LCM Assets Under Management History ($BN) $6.0 Post-Acquisition $5.1 Pre-Acquisition $5.0 $4.8 $4.5 $4.3 $4.3 $4.3 $4.2 $4.1 $3.9 $4.0 $3.7 $3.5 $3.4 $3.4 $2.9 $2.9 $3.0 $2.4 $2.3 $2.3 $2.0 $1.0 $0.0 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012
Slide 80: Hedge Fund AUM
Hedge Fund AUM* $1,400 Millions $1,200 $1,000 $800 Polygon Acquired $600 $400 $200 $- May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Event Driven Eq Convertible Opp Mining Eq Global Eq Distressed *AUM for Polygon Convertible Opp
Slide 81: GreenOak Joint Venture
GreenOak Joint Venture GreenOak Assets Under Management History ($BN)(i) $4.5 $4.1 $3.9 $4.0 $3.6 $3.6 $3.5 $3.2 $3.0 $3.0 $2.5 $2.3 $1.9 $2.0 $1.7 $1.7 $1.5 $1.0 $0.6 $0.5 $0.0 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Europe U.S. Japan 2014 | 81
Slide 82: Current Investment Portfolio
Current Investment Portfolio Investment Portfolio (Percentage of net assets at June 30, 2014) Other Net Asset Assets Managers 2.1% 5.0% Investible Cash(i) 12.5% CLO 1.0 29.6% Real Estate 5.3% Other Eq, Credit, CB & Dist.(ii) Polygon CB 4.7% & Credit 6.6% CLO 2.0 Polygon Equity 14.0% Hedges Funds Eur
Slide 83: Current Investment Portfolio and Future Investment Portfolio
Current Investment Portfolio Future Investment Portfolio(iii) Investment Portfolio (Percentage of net assets at June 30, 2014) Asset Other Net Managers Assets Other Net Asset 5.0% 2.1% Assets Managers 2.1% 5.0% 29.6% 12.5% Investible Real Estate Cash(i) 5.3% 12.5% CLO 1.0 29.6% Real Estate 5.3% Othe
Slide 84: How Do We Think About New Asset Classes?
How Do We Think About New Asset Classes? Does it have good risk adjusted returns? No Yes, then does it have sustainable Alpha? Possibly a trade No Possibly an external manager Yes, then can we find a high quality management team? No Yes, then can we negotiate to buy, build, or JV with the team? No Y
Slide 85: Seeking Sustainable Returns
Seeking Sustainable Returns Sources of Returns Uses of Cash Returns to Investors Investment Income New Investment Value Appreciation Allocations Investment Gains / Costs: Losses • Fund costs • TFG AM Operating Costs TFM fees Management fees Dividend Performance fees Distributions Share repurchases 2
Slide 86: Thank You
Thank You Contact us anytime: ir@tetragoninv.com 2014 | 86
Slide 87: TFG Financials Appendix
TFG Financials Appendix Selected Financial Tables from the H1 2014 Performance Report
Slide 88: Key metrics: Earnings Per Share
Key metrics: Earnings Per Share TETRAGON FINANCIAL GROUP TFG Earnings per Share Analysis (H1 2013 - H1 2014) H1 2014 H1 2013 Investment portfolio segment U.S. CLO 1.0 $0.74 $0.74 U.S. CLO 2.0 $0.12 $0.11 European CLOs $0.14 $0.39 U.S. Direct Loans $0.01 $0.02 Hedges ($0.08) $0.05 Polygon Equity Fund
Slide 89: Statement of Operations – Year on Year Comparison
Statement of Operations – Year on Year Comparison TETRAGON FINANCIAL GROUP Statement of Operations H1 2014 H1 2013 H1 2012 $MM $MM $MM Interest income 85.3 109.8 115.8 Fee income 33.0 30.7 11.9 Unrealised Polygon performance fees 4.7 1.5 - Other income - cost recovery 11.4 10.3 - Investment income 1
Slide 90: Statement of Operations By Segment
Statement of Operations By Segment TETRAGON FINANCIAL GROUP Statement of Operations by Segment H1 2014 Investment Portfolio TFG AM Total $MM $MM $MM Interest income 85.2 0.1 85.3 Fee income - 33.0 33.0 Unrealised Polygon performance fees - 4.7 4.7 Other income - cost recovery - 11.4 11.4 Investment
Slide 91: TFG Asset Management Statement of Operations
TFG Asset Management Statement of Operations TETRAGON FINANCIAL GROUP TFG Asset Management Statement of Operations H1 2014 vs. H1 2013 H1 2014 H1 2013 $MM $MM (i) Fee income 33.0 30.7 (ii) Unrealised Polygon performance fees 4.7 1.5 Interest income 0.1 0.1 Total income 37.8 32.3 (i) Operating, emplo
Slide 92: TFG's Financials – Definition of some important metrics
TFG’s Financials – Definition of some important metrics We use, among others, the following metrics to understand the progress and performance of the business: Net Economic Income ($86.0 million): adds back to the U.S. GAAP net income ($71.9 million) the imputed H1 2014 share based employee compen
Slide 93: Endnotes
Endnotes Page 27: Fund performance is being made available solely to assist existing investors, as well as other persons who have specifically requested such information, in making their own evaluation of the track record of the Fund and does not purport to be complete or to contain all of the infor
Slide 94: Endnotes (continued)
Endnotes (continued) Page 43: Fund performance is being made available solely to assist existing investors, as well as other persons who have specifically requested such information, in making their own evaluation of the track record of the Fund and does not purport to be complete or to contain all
Slide 95: Endnotes (continued)
Endnotes (continued) Page 47: Fund performance is being made available solely to assist existing investors, as well as other persons who have specifically requested such information, in making their own evaluation of the track record of the Fund and does not purport to be complete or to contain all
Slide 96: Legal Disclaimer
Legal Disclaimer This document has been prepared by TFG (together with the Master Fund, the “Company”). TFG is a Guernsey closed-ended investment company whose shares (“Shares”) are listed on Euronext Amsterdam N.V. The Company’s investment manager is Tetragon Financial Management LP (the “Investmen
Tetragon Financial Group — Investor Day (September 2014) on 6ix