Tetragon Financial Group Limited (TFG) Earnings Call Transcript & Summary

Good afternoon. Thank you for joining Tetragon's 2021 Annual Report Investor Call. [Operator Instructions] The call will be accompanied by a live presentation, which can be viewed online by registering at the link provided in the company's conference call press release. This press release can be found on the home page of the company's website, www.tetragoninv.com. In addition, questions can be submitted online while watching the presentation. As a reminder, this call is being recorded. I will now turn you over to Paddy Dear to commence the presentation.

As one of the Principals and Founders of the Investment Manager of Tetragon Financial Group Limited, I'd like to welcome you to our investor call. We're going to focus on the company's 2021 results. Paul Gannon, our CFO, will review the company's financial performance for the period. Steve Prince and I will talk through some of the detail of the portfolio and performance, and Steve will spend some time discussing the outlook. As usual, we will conclude with questions, both taken electronically by the web-based system at the end of the presentation as well as those received since the last update. The PDF of the slides are now available to download on our website, and if you're on the webcast, directly from the webcast portal. Before I go into the presentation, some reminders. First, Tetragon shares are subject to restrictions on ownership by U.S. persons and are not intended for European retail investors. These are both described on our website. Tetragon anticipates that its typical investors will be institutional and professional investors who wish to invest for the long-term and are capital appreciation and income-producing investment. These investors should have experience in investing in financial markets and collective investment undertakings and would be capable themselves of evaluating the American risk of Tetragon shares, and they should have sufficient resources, both to invest in potentially illiquid securities and to be able to bear any losses, which may equal the whole amount invested that may result from the investment. I'd like to remind everyone that the following may contain forward-looking comments, including statements regarding the intentions, beliefs or current expectations concerning performance and financial condition on the products and markets in which Tetragon invests. Our performance may change materially as a result of various possible events or factors. So with that introduction, over to Paul.

Thanks, Paddy. Tetragon continues to focus on 3 main metrics. We look at how value is being created via NAV per share total return. We also look at investment returns measured as a return on equity. And finally, we monitor how value is being returned to shareholders through distributions, mainly in the form of dividends. Fully diluted NAV per share was $29.86 at the 31st of December 2021. After adjusting for dividends reinvested at the NAV, the NAV per share total return for the year was 14.1%, which compares to 9.5% in the prior year. Since IPO in 2007, Tetragon has now achieved an annualized NAV per share total return of 11.5%. For monitoring investment returns, we use an ROE calculation, which was 17.3% for 2021, net all fees and expenses and above our target ROE range of 10% to 15%. With reference to that target, the average ROE achieved since IPO is now plus 12.5%, which is in the middle of the target range I just mentioned. Later on the call, we'll give more color as to how the different asset classes contributed to the return this year. Finally, moving on to the last key metric, dividends. Tetragon declared a dividend of $0.11 for the fourth quarter, an increase on the previous quarter of $0.01 and represents a dividend of $0.41 for the full year. Based on the quarter-end share price of $8.50, the last 4 quarters' dividend represents a yield of approximately 4.8%. Finally, on to an NAV bridge. This breaks down into its component parts of the change in Tetragon's fully diluted NAV per share from $26.57 at the end of 2020 through to $29.86 per share at the end of 2021. Some of the component parts here; investment income increased NAV per share by $6.38 per share. Operating expenses, management and incentive fees reduced NAV per share by $1.82 with a further $0.06 per share reduction due to interest expense incurred on the revolving credit facility. On the capital side, gross dividends reduced the NAV per share by $0.41 and there was a net dilution of $0.81 per share, which is labeled as other share dilution. This bucket primarily reflects the impact of dilution from spot dividends plus the additional recognition of equity-based compensation shares. I would now hand over to Paddy.

Thanks, Paul. As on previous calls, I'd like to put the company's performance in the context of the long term. Tetragon began trading in 2005 and became a public company in April 2007. So the fund has approximately 17 years of trading history. This chart shows the NAV per share total return, which is the thick line on the top and the share price total return, which is the dashed line. The chart also includes equity indices for the MSCI ACWI and the FTSE All-Share and the Tetragon hurdle rate of LIBOR plus 2.65%. As you can see, Tetragon has returned 393% since IPO on a NAV total return basis; and over the last 12 months, has returned 14.1% on a NAV total return and that compares with 18.3% for the FTSE All-Share and 19% to the MSCI ACWI World Index. So, 2021 was a good year for Tetragon returns and this is reflected in the increase in NAV per share, the increase in the dividend, and indeed, the proposed share buyback, which was announced this morning. Continuing the theme of looking at the long term, here are some more performance metrics. Our return on equity or the investment return target is 10% to 15% over the cycles. And as Paul said, the average return since IPO is 12.5%, so that is in the middle of that range. Notwithstanding the last few months' inflation numbers as the world tries to emerge from COVID induced lockdowns and the volatility this has created in longer-dated bonds, risk-free rate interest rates still remain very low. The implication being that we should naturally expect all risk assets to return at the lower end of long-term expectations. And as with respect to Tetragon, this means ex ante, our return expectations are at the bottom end and could even possibly be below the 10% to 15% range. The last figure on this table shows that 35% of the public shares are owned by the principals of the Investment Manager and the employees of TFG Asset Management. We believe this is very important as it demonstrates a strong belief in what we do as well as a strong alignment of interest between the Manager, TFG Asset Management employees and Tetragon shareholders. This next slide shows the composition of Tetragon's assets. So looking at the breakdown of the $2.9 billion of net asset value. These color disks show the percentage breakdown of the asset classes and strategies as of the year-end 2021 on the right and compares them with year-end 2020 on the left. So the notable changes are; firstly, the TFG Asset Management has increased to 44% of our NAV and that's up from 34% last year -- sorry, the end of 2020. And the driver for that, which we'll obviously get into in some detail has been the growth in existing businesses, particularly Equitix and LCM. The second area of note is that our private equity and venture capital exposure is 11%, and that is down from 16%, and that is mainly due to the partial divestment of Ripple equity. Ripple generated gains of approximately $100 million in 2021, and Steve will cover this and the investment in more detail when he discusses this segment of the portfolio. Our other asset classes have moved give or take, pro rata with those 2 movements. And I would just note, we have a small investment allocation to legal assets and that is through the Contingency Capital fund as an LP. Now let's move on to discuss the year's performance in more detail. The NAV bridge that Paul showed was a high-level overview of the NAV per share and this table shows a breakdown of the composition of Tetragon's NAV at the end of 2021 versus the end of 2020 and it does that high level by asset classes and shows the factors contributing to the changes in NAV. Thus this table shows investment performance plus capital flows and so ties back to the change in NAV. As you can see from the bottom row of the table, the aggregate investment performance which is labeled gains and losses, generated a gross profit for the period of $609.6 million. Now specifically within that, TFG Asset Management, which is our private equity holdings and asset management companies had gains of $442.2 million and thereby being the strongest performing asset class. These asset management businesses continue to perform well and grow and aggregate AUM increased to $37 billion from about $30 billion a year ago. And we'll talk in more detail on that in a moment. Event-driven equities, converts and other hedge fund strategies gained $13.8 million. Bank loans, and these are investments through CLOs generated a gain of $48.4 million. Real estate had a small gain of $2.1 million. Our private equity and venture capital gained $120 million. And as I've mentioned, we'll talk a little bit about Ripple in a moment. Legal assets had a small gain of $0.6 million and other equities and credit had a loss for the year of $18 million. So that's a high-level look. And now let's move into more detail on each category and we'll start at the top with TFG Asset Management. And with that, over to Steve.

Thanks, Paddy. Before we go into the investment performance, I wanted to discuss Tetragon's longer-term investment strategy with respect to TFG Asset Management. As we communicated to investors last year, Tetragon's longer-term investment strategy with respect to TFG Asset Management has included transactions relating to individual businesses within TFG Asset Management, such as the merger/acquisition of GreenOak by Sun Life in 2019, in addition to the consideration of an initial public offering or other strategic transaction at the TFG Asset Management level. The ability to do a transaction for TFG Asset Management as a whole is impacted by the fact that notwithstanding its growth, TFG Asset Management is currently at a substantially smaller scale than the large multi-strategy organizations that lead the publicly traded alternative asset management sector. As we laid out last year, Tetragon's ability to do a successful transaction at the TFG Asset Management level depends on further growth in assets under management and EBITDA and each case, obviously, taking into account the amount, sustainability and blend of management fees and performance fees as well as diversification, historic and projected growth as well as the relative stages of development of the various businesses on the platform. Although currently BentallGreenOak and LCM may be considered mature businesses, Equitix, Polygon and Acasta Partners, which is the Polygon Convertible business that we rebranded on March 1 are left out to varying degrees. And the 4 other businesses, Contingency Capital, Hawke's Point, Tetragon Credit Partners and Banyan Square Partners are relatively early in their development. Therefore, at this point, these key elements have not yet been satisfied for an IPO or other strategic transaction involving TFG Asset Management as a whole. At the same time, however, the high valuations reflected in public and private transactions involving asset management companies as well as the strong performance of Equitix and LCM in particular have enhanced the attractiveness of individual business transactions as an alternative way of realizing the value inherent in TFG Asset Management. As such, the strategy for TFG Asset Management over the coming years will continue to include individual business transactions, potentially both private and public that would take advantage of this value enhancement. Although transactions such as these could have the effect of shrinking TFG Asset Management's portfolio of relatively mature market-leading businesses, thereby possibly delaying progress toward a strategic transaction at the TFG Asset Management level, they would enable TFG Asset Management to reap the benefits of its success in growing successful asset management businesses without having to wait for an IPO or other strategic transaction at the TFG Asset Management level. So now I'd like to move on to the performance of our Asset Managers during 2021. Our private equity investments in asset management companies, through TFG Asset Management represented the largest and strongest performing asset class in the portfolio during the year. It produced total gains of $442 million, driven primarily by Equitix, which increased by nearly $350 million in value. That made it the most significant contributor to the portfolio. The gain at Equitix was driven by a number of factors. First, the business continued to raise capital at a significant rate, both in funds and managed accounts seeing a 23% increase in assets under management during the year. In addition, during 2021, a number of more directly comparable asset managers listed on major trading exchanges, bringing additional market-led valuation transparency to a manager like Equitix that had not been available in prior years. TFG Asset Management investment and LCM gained $59.8 million in 2021. LCM, which is our specialist manager in below-grade U.S. broadly-syndicated leveraged loans, successfully launched 6 new CLOs during 2021. The aggregate assets under management of those offerings were $2.8 billion, which brought LCM's AUM to $11.2 billion. The BentallGreenOak investment made a gain of $34.3 million. While performance amongst our other asset managers was more modest, I want to share a few of their notable developments. Tetragon Credit Partners, which is TFG Asset Management's structured credit investing business increased in value by $2.4 million in 2021. During the year, Tetragon Credit Partners TCI III vehicle deployed the remaining 17% of its un-invested capital and began to raise capital for its TCI IV vehicle. Contingency capital, which sponsors and manages litigation finance-related investment funds was valued for the first time as of the end of the year at $6.1 million. Tetragon has provided a loan to Contingency of $4.9 million. Tetragon's investment in Polygon reported a loss of $3.4 million, and our investment in Hawke's Point reported a loss of $0.9 million during the year. Tetragon's investment in Banyan Square Partners was valued at $0.8 million, which was unchanged versus the end of the year 2020. Moving on to the EBITDA of TFG Asset Management. In 2021, TFG Asset Management's EBITDA was $50.7 million, just 33% lower than the prior year. Higher operating costs and lower performance fees were the primary factors behind the decrease. Management fee income continued to grow during the year. It increased by $17.6 million or 14%. Of note, Equitix' management fee income increased by $8.4 million or 13% as AUM continued to grow. Polygon's management fee income increased by $5.3 million or 28% due to increased AUM. LCM added $1.6 million in management fees following the issuance of their CLOs. Contingency Capital lost $1.3 million and Banyan Square lost $0.6 million. Both of these businesses appeared in the income statement for the first time during the year. Overall performance and success fees were down $22 million on the prior year, driven primarily by decline in Equitix primary income as well as decreases in performance fee income earned in aggregate by our hedge funds. As noted previously, unlike management fee income, performance and success fees can be quite volatile in nature and subject to timing differences. The other fee income category includes 2 different buckets of fees. One, income generated by Equitix on management services contracts, which is known as their EMS business. And two, certain cost recoveries from Tetragon relating to seeded Polygon hedge funds. EMS continues to be the main driver and this increased 21% year-on-year. Distributions from BentallGreenOak reflects 3 various categories; one is quarterly fixed distributions; two is quarterly variable distributions; and three is distributions of carried interest. Variable distributions increased by $6.2 million and fixed payments contributed $14.1 million. Carried interest accounted for the remainder. Operating expenses increased by $32.5 million year-on-year with a little over half of this coming from Equitix. This business added head count to support its continued growth as it added assets during the year. The scaling up of the team and infrastructure for Contingency Capital contributed close to half of the remaining growth as this business had an initial close on its first fund and managed accounts. I'm going to turn it over to Paddy now who's going to go over our hedge fund investments.

Thanks, Steve. Tetragon invests in event-driven equities, convertible bonds and some other strategies through hedge funds. Majority of these investments are through Polygon managed hedge funds. Our investment in the Polygon European event-driven strategies gained $4.1 million for the European event-driven investments, offset by a loss of $3.9 million in the global equity strategy. Our investment in the Polygon convertible bond fund made $15 million for the year. And of note, the fund was nominated for the 11th time since its inception for the 2021 with Intelligence EuroHedge Award, in the convertibles and volatility category and it's actually won that award 5 times. I would note that this business, as of March 1 has been renamed to Acasta Partners and the fund renamed to Acasta Global Fund, and this is in line with my [ compress ], obviously the majority owner of that business. So in future reporting, you will see that split up as Acasta. Investments in hedge funds managed by third parties lost $1.3 million for the year. And in terms of some cash flows, during the year, we redeemed $50 million from the European event-driven strategies and added to the position in the global equities fund and made a small new investment in a third-party hedge fund. Moving now on to bank loans. Tetragon predominantly invests in bank loans through CLOs, by taking majority positions in the equity tranches. Tetragon's investments are split as shown here between LCM deals, non-LCM deals, and funds managed by Tetragon Credit Partners. As you can see, in aggregate, our bank loan exposure recorded a gain of $48 million for 2021 and this was as corporate credit fundamentals rebounded strongly from the depth of the COVID crisis. Directly owned LCM CLOs generated $24.2 million of that P&L during the year, and that was a fair value benefited across the board from sustained improvement in the underlying loan fundamentals as well as a recalibration of certain modeling assumptions used to value the positions to take into account the strong recovery in economic conditions. These investments also returned $36 million of cash income to Tetragon. During the period, Tetragon purchased securities in 6 new LCM deals for a total of $26.1 million. And this was a majority stake in the equity tranche of LCM's 31 Limited and minority investments in the equity tranches of LCM's 32, 33, 34, 35 and 36. Tetragon also made investments in the debt tranches of LCM 32, 33, 34, 35 to support the compliance of EU risk retention rules for those transactions. Tetragon's investments in vehicles managed by Tetragon Credit Partners generated profits of $20.6 million. And similar to the LCM deals, this was driven by sustained improvement in underlying loan fundamentals as well as a recalibration of certain modeling assumptions used to value the positions. During the year, Tetragon Credit Partners completed refinancing in 3 CLO transactions and reset 2 CLOs, reducing the interest cost of debt and increasing the cash flow generation ability of such equity investments. Tetragon Credit Partners fund at TCI IV also had its first close during the year. Overall, these investments returned $32.5 million of cash income to Tetragon. In addition, during the year, Tetragon Credit Partners Opportunity Fund was closed in the first half with principal and profits being returned to investors, and this was at the dislocation prices that it was established to take advantage of during the crisis over 2020 had been reversed in the market during 2021. And finally, the non-LCM managed CLO segment generated a gain of $3.6 million and distributed $4.3 million of cash income during the year. Next is Real Estate. Tetragon holds most of its investments in real estate through BentallGreenOak managed funds and co-investment vehicles. The majority of these are private equity style funds concentrating on opportunistic investments, targeting middle-market opportunities in the U.S., Europe and Asia, where BentallGreenOak believes it can increase value and produce positive unlevered returns by sourcing off-market opportunities or at least pricing discounts and market inefficiencies. Investments in the U.S. funds lost $8.9 million, and this was primarily driven by revaluations in properties held in U.S. Fund II, where the fund has exposure to some hospitality and commercial assets in New York -- in the city of New York and L.A. in particular. European investments had a small loss of $0.2 million in 2021. BentallGreenOak's European-focused products have primarily targeted distressed opportunities and deep value acquisitions in markets with solid underlying fundamentals. And historically, these assets are focused on logistics and office space, but there is now an increasing focus on logistics, life sciences, cold storage, and data centers. Geographically, the focus has become more diversified with investments across multiple countries in Western Europe. The Asian funds gained $4.4 million and investments in debt funds had a small gain of $0.3 million. The last section here entitled other real estate increased in value by $6.5 million. This is our commercial farmland in Paraguay managed by Scimitar, a specialist manager in South American farmland. During 2021, the farmlands were revalued by an independent valuation specialist, reflecting the improvements in the land held by Tetragon and the general market conditions in Paraguay. So with that, let me hand back to Steve.

Thanks, Paddy. Tetragon's private equity and venture capital investments are split into the following subcategories; investments managed by Hawke's Point, investments managed by Banyan Square Partners, other funds and co-investments where Tetragon invests in a non-affiliated fund as a limited partner or in a special purchase vehicle as a co-investor, and direct which comprises direct private equity investments on the balance sheet. Those include venture capital investments. This segment generated gains of $120.2 million during the year, which was mainly driven by gains from the investment in Ripple. That investment appears in the direct segment. Total gains in the Direct PE segment were $114 million in 2021 with close to $100 million of that gain coming from the December redemption of Ripple Labs Series C shares plus accrued interest by the company. Those shares were redeemed for cash. Tetragon became interested in investing in Ripple in early 2018, viewing it as an attractive -- viewing it as attractive because of XRP, Ripple's digital asset, has certain characteristics that make it more energy-efficient, less expensive and faster to use in transactions than other crypto currencies. Tetragon also felt at the time that Ripple's Series A and B preferred stock were trading on the secondary markets at prices that did not reflect the full value of the XRP that Ripple held. In late 2019, Tetragon became the lead purchaser in Ripple's Series C preferred stock offering, acquiring $150 million of the security. In late 2021, Ripple elected to redeem the entire class of Series C preferred stock, including Tetragon's holding at the time of 1.5 times the purchase price plus accrued paid-in-kind dividends. Tetragon remains invested in Ripple preferred stock acquired in the secondary market over the last year and is supportive of the company's current position as well as its direction, and maintains its conviction in Ripple's prospects. Tetragon's mining finance investments managed by Hawke's Point generated a loss of $39.4 million during 2021. This was driven primarily by weak operational performance at one of its Australian gold mining investments and the associated financial impact of that. Tetragon invested $6 million into a new co-investment vehicle managed by Hawke's Point during the first half of the year. Banyan Square Partners investments made gains of $11.7 million during 2021. And at the end of the year, those investments comprised 10 positions. Capital called during the period was $52.4 million. Investments in externally-managed private equity funds and co-investment vehicles in Europe and North America made gains of $33.9 million. Those were spread across 22 different positions. Capital called by these investments during the period totaled $24.3 million. Moving on to a new segment on the list of allocations we have legal assets. Tetragon makes investments in legal assets through vehicles managed by Contingency Capital. Tetragon made its first commitment into the asset class in 2021, $29.7 million of which was called, a gain of $0.6 million was generated for the year. Moving on to the last category of investments on our balance sheet. These are our direct balance sheet investments in the other equities and credit category and those produced losses of $18 million during the year. Our other equities bucket generated losses of $24.2 million and those investments comprise European and U.S. listed public equities in technology, biotechnology and financial services. The other credit bucket generated a gain of $6.2 million during the year, and that was driven by corporate bonds. Lastly, our cash position. Tetragon's net cash balance, which is cash adjusted for known accruals and liabilities, short and long dated was $7.6 million as of the end of the year. Tetragon has in place a 10-year $250 million revolving credit facility. At year-end, $75 million of this facility was drawn and this liability has been incorporated into the net cash balance calculation. The company actively manages its cash level to cover future commitments and to enable it to capitalize on opportunistic investments and new business opportunities. During 2021, Tetragon used approximately $330 million in cash to make new investments and $24 million to pay dividends. $557 million of cash was received as distributions and proceeds from the sale of investments. Future cash commitments are approximately $109 million; those comprise hard investment commitments, which include commitments to BentallGreenOak of $43 million, private equity funds of $18 million, Tetragon Credit Partners $11 million, Contingent Capital funds, $10 million and our loan to contingent capital of $8 million. Also, our future cash commitments comprised some soft investment commitments where we have ultimate discretion on making the allocation at Banyan Square Partners of $8.5 million and Contingency Capital of an additional $10 million. The following table lays out some of our expectations for the overall portfolio resulting from these moves. Before we go to that table, however, I do want to mention that this morning, Tetragon announced its intention to repurchase approximately $50 million of shares which, based on Tetragon's current NAV and share price should be accretive to NAV per share. We're pleased that the company has returned approximately $1.5 billion to investors through dividends and share repurchases since our initial public offering in 2007. Tetragon will continue to seek to return value to its shareholders, including through dividends and share repurchases. Moving on to the final slide, our future investment expectations. I'll go through a few of our expectations, some of which are reflected by the cash movements I laid out on the prior slide, but it's always worth pointing out that one of our advantages is our ability to be opportunistic as it relates to investing in what we see as the most compelling opportunities at any given time. As you're aware, we launched Contingency Capital with Brandon Baer at the end of 2020 and Tetragon will continue funding its commitment to this business. While we continue to look at new businesses to buy and build on the TFG Asset Management platform, there's nothing we are considering imminently. We expect our event-driven equity exposure to remain stable, but we do expect to slightly reduce our exposure to our convertible strategy as that position has increased due to investment gains. Our pre-crisis CLOs are now fully amortized, but we expect to invest in CLOs via various Tetragon Credit Partners vehicles while at the same time, receiving cash back from some of their initial funds. While we do have commitments to BentallGreenOak funds, as I mentioned, we would also expect some of our existing investments to continue distributing capital. So on the whole, we would expect our real estate investments to be relatively stable over the next 12 months. We expect our private equity allocations to grow over time. There are a few small additional LP commitments we have yet to fund as mentioned and we expect our Banyan Square allocation to continue to grow. The other equities and credit bucket is one similar to TFG Asset Management. We expect to continue to invest in these opportunities, but the timing of those investments is less certain. Lastly, we are hopeful that in this current environment, there will be additional allocations we will be making to new asset classes. I'm now going to turn the call back over to Paddy to answer our Q&A.

Great. Thank you, Steve, and thank you, everyone, as always, who has sent in questions, both those we've received over the last few weeks and also those that have been entered today. The first question I'm going to go to, if it's okay, is actually more of a generic question in the sense as you'd expect, we have several questions concerning the fact that our company's shares trade at a very large discount to their net asset value. And variously, people ask the question as to what are we doing about it, how are we aligned? And so rather than read out specific questions, I thought I'd sort of tackle that one first, that it is certainly one of the more important questions to tackle. Maybe if I touch on the second piece first, which is how are we aligned. One of the things we mentioned in the presentation and indeed, we have in the fact sheet is the amount of Tetragon's shares that are owned by principles of the manager and employees of TFG Asset Management, and that figure is about 35%. And I can assure you that the owners of those 35% of the shares care hugely about not just the shares representing or trading at a value that represents fair value, but also the liquidity is incredibly important. So I think the fact of alignment is a very strong one and is evidenced by that. Secondly, what are what are we doing about the discount and how can we help in narrowing that discount as a starting point on a path to fair value. And I suppose in the very short term, we would hope that today's announcements and the annual report itself will help in that regard. And by that, I mean we've got -- obviously, we had a strong NAV per share growth for 2021 across a diverse portfolio and ultimately producing non-correlated returns is what we have to do as a starting point to deliver to the share price. Second thing, we've increased the dividend by 10%. So if one is to annualize that on the current share price dividend over 5%. And thirdly, a proposal to buy back $50 million of the company's shares, which will hopefully be not only accretive to the NAV per share hopefully, but also may deal with any form of overhang of potential sellers. So that's in the short term. I think we accept that in the longer term, it's going to take more and will be a sustained effort on multiple fronts. As I say, we need to continue to perform well. We need to deliver good, lowly correlated performance, and that is a key objective. We will continue with communication, introducing new potential investors to the company, keeping the dialogue with existing shareholders. And we do recognize that liquidity is obviously an important process as well. So moving on, question wise, a very specific one about the share count. So the share count went down 400,000 shares, i.e., there was positive share count accretion. I assume that means the company bought $4 million to $5 million worth of shares in January. And I think that's a specific one, so I'm going to ask Paul to ask that, if I may.

Sure. Yes, so in January of this year, some of the TFG Asset Management employee LTIP awards vested. These shares are delivered to the recipients net of taxes withheld and the shares acquired here by Tetragon are from TFG Asset Management to facilitate the payment of that withholding. As the questioner identified, this acquisition was accretive to NAV per share.

Thanks, Paul. Next question. What is the company's policy regarding the company's ordinary shares? There appears to be no effort to promote their value which is contrary to the normal approach. So I'm not entirely sure what the meaning of promote is in this context, but let me have a stab at it. One of the things we said at the beginning of this call, and I think everyone is well aware is that Tetragon shares are not for retail. They're complex financial instruments and we would expect our investors to be both professional and institutional or at least institutional -- at least professional and hopefully, many institutional investors. So we're not, in a sense, in the business of promoting the company. But we do have 2 very important brokers who are available, both Jefferies and JPMorgan, who write regularly on the company. We do have an IR department. We probably do upwards of a 100 meetings a year with investors and potential investors and obviously very keen and happy within reason to talk to anyone who has an interest. So I'm not sure if that answers the question specifically, but I hope it does. Next question is this. I have long felt that Tetragon is an attractive company in principle with strong underlying NAV returns. However, the governance structure makes it effectively uninvestable for us and many other institutional shareholders. This is undoubtedly the key reason of the underlying large discount. It would therefore be in shareholders' interest to move to a more orthodox governance structure. My question is therefore, whether the Board are considering making any changes to the governance structure and if so, over what time horizon? So Again, I'd -- just to make sure I answer this correctly, I'm not entirely sure what is meant by governance structure, but I assume it's referring specifically to the non-voting shares. I mean it looks from the question that that is. And the simple answer is, no, there are no current plans to change the non-voting share structure. But if I haven't answered that question and it was meant to be tacking a different angle, then obviously please do come back to us probably on our website. Next question is about liquidity. My question is direct and to the point, with the discount remaining persistently wide, it's clear that the marketing efforts of the fund have failed. I've attached 2 graphs showing monthly trading volumes sourced from Yahoo! Finance and attached. Over the long term, trading volume has significantly declined. This suggests that the problem is deeper than a marketing problem and given the investor's ability to influence the company -- sorry, given the investor's inability to influence the company, given the non-voting share structure, what's the Board's plan to demonstrate their interests are aligned with minority shareholders for the discount to be closed at an acceptable level? So, some of that obviously I've tackled with what actions are we taking, how do we think about the discount and the like. But I did want to -- I think this brings up another important point, and that is one of liquidity. I am unsure of how Yahoo! Finance does their calculations. But I can say this, that the trading volumes have 2 areas where they trade on the London Stock Exchange, which is a U.S. dollar line and a U.K. sterling line. Also, our primary listing is Amsterdam, so the Euronext listing. And plus, there are anywhere between 10 and 20 different OTC exchanges upon which Tetragon shares were exchanged. So when we look at liquidity, we are adding all of those OTC exchanges to the London Stock Exchange and the Euronext. And we are focused on, obviously, our share being as liquid as possible because as we all know, liquidity begets liquidity. So I haven't necessarily answered the question, but I don't think that Yahoo! Finance is measuring it correctly. Next reads as follows, could you please give me some color on the direct bucket of private equity and venture capital and the other equities and credit allocation. I'm not looking for specific names, just trying to get a better idea about the role of these exposures, hedging other positions, opportunistic, thematic, et cetera? So I think the best way to think of this is, as you know many of our investments are either LP investments in funds and those can either be TFG Asset Management funds or third-party fund managers. So what these 2 buckets are is where we're not making an LP investment or an SPV investment. In other words, we're buying it directly for Tetragon and not as someone else's, someone's LP. So, as you might expect and I think is raising the question, obviously, this is an opportunistic approach. We might be upsizing a position that we really like that's in one of the funds or it might be that we can hold it at Tetragon, but it's illiquid, so it couldn't be held in one of the underlying funds. So those are sort of opportunistic. But to answer the question, yes, we do have a few themes. I think Steve mentioned a few, but maybe to give a little more color, what we're looking for is, in the equity segment was, whether it'd be private or public, is growth; where the growth and the growth dynamics are not too correlated to the market. So what do we mean by that? Well, we're looking at -- as Steve said, biotech or more broadly life sciences. We have technology. We have health care. So all in areas where we think that the growth is, as I say, it may be binary in the case of biotech or it may at least be not particularly correlated to market activities. And that's how we think about it in terms of thematics. Next question. In the past, the company has often elected to conduct a tender offer to repurchase shares in the fourth quarter. Were there any particular factors that led to the decision not to conduct an offer in 2021? Well, interesting question, obviously, given today's announcement that we are putting a buyback in place, and maybe that is the best answer to the question. But I just think it's worth noting that it may well be that we have historically conducted buybacks in the fourth quarter, but I wouldn't want anyone to interpret that as a particular pattern. We try to be opportunistic based on cash availability, other investment opportunities, the discount at the time. So it's much more of an opportunistic approach rather than a particular annular approach. Next question. What led to the revaluation of equity in December? And does the change in valuation affect how you view that investment going forward, given that it now represents 25% of the overall value in Tetragon? And I think -- I mean there are 2 bits to that, obviously, why don't we start with the valuation, which is one for Paul to take.

Sure. So each of the TFG Asset Management businesses including Equitix is revalued by the third-party value agent experts on a quarterly basis. As you will have seen, the investment in Equitix had a significant increase in value and a post-novel gain across 2021 at approximately $350 million. And this was driven by a number of factors. Firstly, exits continue to raise capital at significant rate, seeing a 23% increase in AUM during the year. Secondly, active plans to add further capital in the near future across the U.K., Europe and North America. And in addition, during 2021, a number of more directly comparable asset managers listed on major trading exchanges bringing some additional market-led valuation transparency to the valuation of a manager like Equitix, which hadn't been available in prior years. So correspondingly, the valuation agent added a market multiples approach and EV over EBITDA to the overall valuation methodology such that the valuation is now the mean of the market multiple and discounted cash flow approaches.

Thanks, Paul. And I'll address the second part of the question which was does it change our view? And I suppose the sort of the easiest way to say is, no, it doesn't change our view. We've always been strong believers in Equitix as a business and as an investment, and we continue to be so. We believe that Equitix delivers -- I mean, it delivers a great product and service to its LPs and clients, very strong management team and it's growing strongly, and we continue to be very excited about its continued growth and hopefully our ability to assist in that growth. So yes, it has become an increasingly important part of the NAV of the portfolio. But no, it doesn't change our view. And the next question is investment performance outside your mark-to-model private assets has been disappointing. Why continue to allocate capital to strategies with mediocre returns instead of reinstating prior dividend levels or instituting further share buybacks? Shareholders have negative 5 year returns due to, in large part, the sentiment resulting from your cutting of the dividend. In my view, you could easily end this drought in the stock price if you started putting shareholders first. So I think really, there are 3 parts to this question; there is buybacks, dividends and allocation of capital. Now I addressed the issue of share buybacks and dividends as the first question. So really here, I want to address the capital allocation. And I think, obviously, ex ante one doesn't know the returns on investments. So this is an observation of performance ex post. And I think it's -- obviously it's easy to -- well, to look with hindsight and say that one is allocated poorly when you have a poorly performing asset. And not to say that you shouldn't look at how the assets have performed. Obviously, it's a good discipline. But I think the way Tetragon manages money, it is likely that we will always have some poorly performing assets when we're looking in the rearview mirror. So it's not a great surprise. The cause what we're looking to do is achieve stable returns across various different investment cycles. And one of the ways we do that is to try to have a diversified portfolio and that's sort of across many different asset classes and strategies. So I guess the answer to the question is ex post, we will -- we do expect that we're always going to have some underperforming assets. But obviously, ex anti, one doesn't know which those are going to be. And so it isn't a great surprise to us. I've got -- hang on one second, just looking through here. One more on valuation, and it reads as follows. At the end of the period, so that will be the Q4, so the end of 2021, the basis of valuation on LCM and Equitix changed to include EV to EBITDA, is the EBITDA of the last 12 months, the current year or the next 12 months. And I think Paul is probably the best person to answer that.

Sure. The valuation agent looks at both historic and forward expectations in determining the valuation through this methodology. And as I said on an earlier question, for LTM and Equitix, there's currently a 50-50 weighting between the multiple methodology and the DCF methodology.

Thanks, Paul. And one here, why do you have 2 separate platforms for investing in bank loans. So this obviously is with reference to LCM and TCP. And I think the answer to the question is, it's partly quite bit history, but also they concentrate on different parts of the bank loan market. So LCM concentrate on the underlying bank loans, so broadly syndicated bank loans in the U.S. whereas TCP has a focus -- is a multi-manager platform and therefore, it focuses on CLO managers, and therefore, it's obviously a slight difference in the underlying decision-making process. I appreciate there are few more questions on the discount to NAV, which I'm not going to read out in detail. So apologies if I haven't read yours specifically, but the purpose was to try and tackle that with the first question as a generic question for all. But given that, that brings us up to about the hour mark, I would like to leave it there. I thank everyone very much for the interest in the company and participating with questions and listening today, and we'll say thank you from all of us.

This now concludes our presentation. Thank you all for attending. You may disconnect.