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“Once you get to a certain size, if you mess up they are going to roast you alive,” Griffith says. “We had a bad 2008. Do I deserve some criticisms for that? Of course I do.”
Amid the wreckage, Griffith and Dear decided to hit the reset button. The duo would now back multiple funds. Griffith would focus on European equities, and he managed to raise $100 million in 2009 for a new and improved Polygon hedge fund and a separate Polygon convertible bond fund. Griffith and Dear still had Tetragon, with its portfolio of bank loans. So they used Tetragon to buy a small collateralized-loan manager from a distressed French bank. In addition to its investments in bank loans and other credit securities, what emerged at Tetragon was an investment holding company that owned and invested in five different asset managers.
Not everyone was happy with Griffith and Dear’s maneuverings. Cooperman’s Omega Advisors hedge fund bought up a 10% stake of Tetragon, and in 2010 he began writing angry public letters to the board claiming mismanagement. Cooperman filed a lawsuit in Manhattan’s federal court in 2013 and moved the battle to CNBC, saying that “Tetragon management and board members should be barred from ever being associated with or running a public company.”
Cooperman’s antics were an annoyance, but Harvard Law-trained Griffith was confident that his fund hadn’t crossed any contractual lines. In 2014 Cooperman’s lawsuit was thrown out by a federal judge for failing to state a claim. “I have nothing bad to say about the guy except he made it difficult for us for a while,” Griffith says. These days Cooperman, still a major Tetragon shareholder, is recommending its stock.
GRIFFITH’S BOOTS-ON-THE-GROUND multifund strategy has one big advantage. He has an insider’s understanding of the peculiarities of international securities law and business practices. Last year, for example, his Polygon fund began to build up a stake in German machine-tool maker DMG Mori Seiki after its Japanese partner, which already owned 25%, made a bid for the rest of its shares. Griffith decided to piggyback the Japanese, figuring that DMG Mori Seiki was a European operation on the cusp of serious growth. For months Griffith waited as the Japanese company ownership rose from 25% to 50%, giving it control of DMG Mori Seiki’s board, and then to 75%, allowing it to share DMG Mori Seiki’s balance sheet in a tax-efficient way. Almost as if it were a passive version of greenmail in slow motion, Griffith and billionaire Paul Singer’s Elliott Management hedge fund played the same game, buying up stock and then finally agreeing to sell their shares as the Japanese bid up the price. Griffith scored a 70% profit.
Today Griffith maintains that Europe offers value investors a smorgasbord of opportunities, including more DMG Mori Seiki-type situations. He says many companies have yet to fix their balance sheets, and there has been a sharp reduction in both sell-side research and institutional ownership of smaller companies.
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Last year, for example, in a clever risk-arb-inspired ploy, Griffith used Tetragon’s balance sheet to make a quick profit effectively trading into a U.K. asset-manager feeding frenzy among big private equity firms. Griffith approached London asset manager Ashcourt Rowan and agreed to buy a big chunk of it to finance its purchase of another asset manager, which Griffith believed would make Ashcourt attractive to PE buyers. Sure enough, a bidding war resulted in Ashcourt Rowan being acquired, giving Tetragon a $25 million profit.
Griffith and Dear’s long-term plans are obvious: Tetragon is rolling up asset managers that it will one day spin off in an IPO. Its CLO manager LCM, which Tetragon purchased in 2010, currently manages $6.2 billion. Another holding, Equitix, which invests in U.K. infrastructure projects such as waste facilities and hospitals, has $2.6 billion in assets. Another promising holding is real estate manager GreenOak, run by three former Morgan Stanley hotshots. “We had plenty of compelling offers, but they didn’t come close with the infrastructure they offered us,” says Sonny Kalsi, cofounder of GreenOak, which now manages $7.1 billion. GreenOak recently invested $600 million for equity in the first new office building on Manhattan’s Park Avenue in 40 years–Citadel is paying a record $300 per square foot to lease its penthouse.