| TCI founder Christopher Hohn. Photo: (Bloomberg News) |
Christopher Hohn appears to be one of the best performing hedge fund managers of 2013.
The activist’s main fund, The Children’s Investment Master Fund (TCI), gained about 14.5 percent in the fourth quarter, finishing the year up 47 percent net of fees. Unlike other activists or long-short managers, Hohn hardly hedges. His fund entered the final three months 132.6 percent long equities and just 9.2 percent short, for a net equity exposure of 123.4 percent long.
The biggest contribution to TCI’s profits came from its activist campaign urging EADS (European Aeronautic Defence and Space Co.), the European aircraft maker best known for its Airbus division, to sell a key military airplane unit. The investment generated a 90 percent return in 2013.
On Wednesday, EADS changed its name to Airbus Group, adopting its most recognizable and successful business, Airbus airplanes. It also restructured, shrinking the number of units to three from four.
TCI also enjoyed a 57 percent gain from its investment in News Corp, which earlier this year split into two companies. TCI remains invested in Twenty-First Century Fox, which includes its cable television properties.
Hohn also gained 60 percent from its position in Safran, the French aerospace, defense and security company. In a letter to the board a year ago, two TCI partners urged the company to review past acquisitions, which they heavily criticized, to focus solely on the civil aerospace business and to boost the dividend-payout ratio, among other demands. Last year Safran agreed to sell several businesses, including part of subsidiary Morpho’s stake in Ingenico, a technology company that provides products for the electronic payments business.
TCI gained 44 percent from its activist campaign against Japan Tobacco. Last year the company replaced its chief executive officer, bought back shares and hiked the dividend-payout ratio. It also netted 26 percent from its investment in the luxury carmaker Porsche, a focus of Hohn’s presentation at July’s Delivering Alpha Conference in New York.
Hohn set up his firm, The Children’s Investment Fund Management, in 2004 after spending seven years at Richard Perry’s New York-based firm, Perry Capital. Hohn started in Perry’s New York office and eventually moved to London, where he ran Perry’s European fund.
From the outset, TCI has donated a portion of its fees and profits to the Children’s Investment Fund Foundation, or CIFF, which is managed by Hohn’s now ex-wife, Jamie Cooper-Hohn. CIFF has given away more than $1 billion in the five years ended 2011. The Children’s Investment Master Fund, also known as TCI, has generated a better-than 18 percent annualized return since its inception.
