Every now and then an investment comes along that makes you stop and look twice. Not because it’s flashy or heavily promoted, but because the numbers are simply too good to ignore – and yet almost nobody seems to own it.
That’s exactly how I felt the first time I dug into Tetragon Financial. Here was a listed vehicle that had turned money into more than five times the global stock market return over nearly two decades. And it was trading at half price. Half. My immediate reaction? There has to be a catch.
There is. Several, actually. But before we get to those, let’s look at why this obscure corner of the London market has been quietly compounding money at a rate most professional investors can only dream about.
An Investment Trust Unlike Any Other
Most investment trusts are fairly straightforward. They own a portfolio of stocks, bonds, or property, and you buy shares in the trust. Simple.
Tetragon Financial is different. Very different. Think of it less as a traditional fund and more as a publicly-listed private equity-style holding company that owns pieces of specialist asset management businesses and invests alongside them. It’s complicated, deliberately so, and that complexity is both its superpower and its biggest drawback.
From CDO Disaster to Reinvention
The story starts – like so many good financial tales – with near disaster.
Launched in 2007 by two hedge fund veterans, the original plan was to invest in the booming market for collateralised debt obligations. You might remember how that movie ended. Within a year the financial world was in flames, and anyone holding CDOs was getting badly burned.
Most would have folded. Instead, the founders pivoted hard. They used the crisis as an opportunity to buy distressed assets cheap, restructure the vehicle, and gradually build something entirely new. It’s one of the better examples I’ve seen of turning a lemon into very expensive lemonade.
What Does It Actually Own?
As of late 2025, Tetragon manages around $4.5 billion in gross assets. But here’s where it gets interesting – less than half of that is traditional investments. The real engine is something much smarter.
- 44% in TFG Asset Management – full or partial ownership of specialist investment firms
- 31% in funds managed by those same firms – eating their own cooking
- 22% direct private investments – private equity, venture, real estate, etc.
- Rest scattered across hedge funds, bank loans, litigation finance
The crown jewel is Equitix, an infrastructure manager they backed in 2015. Since then its assets under management have grown tenfold, and Tetragon recently sold a minority stake at a substantial premium to its previous valuation. That’s the kind of internal compounding most investors never get access to.
In total, the managers they own or part-own now run more than $41 billion for outside clients. Tetragon gets the benefit of both the management fees those businesses earn and strong performance in the underlying strategies.
Performance That Demands Attention
Since listing in 2007, Tetragon has delivered a 568% total return on net asset value. The MSCI World Index managed 276% over the same period. That’s not just beating the market – that’s embarrassing it.
Even accounting for the discount (more on that in a minute), shareholders have still made 385% – still crushing global equities.
And they’ve done this while paying a reasonable dividend (currently about 2.3%) and aggressively buying back shares – reducing the share count by 13% over the past decade.
It’s the kind of performance track record that would have fund marketing departments writing poetry if this was a normal vehicle.
Why Does It Trade at 55% Discount?
Ah yes. The elephant in the room.
If something looks too good to be true, it usually is. And Tetragon’s discount – currently around 55% – is screaming that something is wrong.
The issues are real:
- Non-voting shares – the founders control the only voting shares through a separate entity
- Dual listing complexity – primary listing in Amsterdam, secondary in London, dollar and sterling shares
- Fee structure – 1.5% management fee plus 25% performance fee with no high-water mark
- Extreme complexity – most investors (and many professionals) simply don’t understand it
The performance fee in particular raises eyebrows. It’s calculated quarterly over a low hurdle (US 3-month rates + 2.75%) with no high-water mark. That means they get paid handsomely even in mediocre years, as long as they’re above that modest benchmark.
In my view, this is the price you pay for accessing a structure that simply couldn’t exist in a more conventional format. The founders needed control to execute their long-term vision, and they weren’t going to give that up for the sake of conventional governance.
The Insider Ownership Argument
There’s one significant mitigating factor: alignment.
The founders and employees own more than 38% of the non-voting shares. That’s real money – hundreds of millions – riding on the same outcome as external shareholders.
When management has that much skin in the game, the usual agency problems become less severe. They’re not extracting value through fees alone – they’re building a business empire where everyone benefits from long-term success.
Who Is This Actually For?
Let’s be honest – Tetragon isn’t for most people.
If you want simplicity, buy an index fund. If you want conventional governance, there are thousands of options. If you’re uncomfortable with founders having total control, walk away.
But if you’re the kind of investor who gets excited by complexity, who understands that the best opportunities often come with structural quirks, and who can live with the knowledge that you’re permanently in a minority position – well, this might be worth very careful consideration.
I’ve owned a small position for years. Not because I think it’s perfect, but because the combination of proven capital allocation skill, internal compounding through owned managers, and a discount that seems to permanently undervalue the sum of the parts creates a margin of safety that’s rare in today’s markets.
The Bottom Line
Tetragon Financial is a fascinating anomaly – a vehicle that has delivered exceptional returns through a genuinely unique approach, yet remains permanently out of favor due to its structure and complexity.
For most investors, the governance risks and complexity make it uninvestable. For a small minority who can get comfortable with its quirks, the combination of proven performance, internal compounding, and a massive discount creates an opportunity that’s genuinely rare.
As always, this isn’t advice – just one investor’s perspective on one of the market’s most interesting oddities. But sometimes the best returns come from the investments nobody else wants to understand.
And right now, Tetragon Financial might just be the most misunderstood investment on the London Stock Exchange.
