The Children's Investment Fund Management (TCI) is proposing a fee cut and an easing of withdrawal restrictions in an effort to hang on to clients. The hedge fund manager has struggled following a year of poor performance as well as the publicized losses of several top fund managers. Following record losses last year and complaints from investors, many hedge funds are making an effort to reduce fees and allow clients easier access to their money. TCI, which splits its 2% fees between the fund and the Children’s Investment Fund Foundation, an affiliated charity, is lowering its fee to 1.5%. According to Bloomberg, the proposed terms would also allow clients to withdraw their money quarterly following a reduced lock-up period of six months. The proposal wouldn’t alter the 16.5% performance fee but would extend the collection time to when clients redeem or every three years rather than annually.
These efforts to appease investors follow a disastrous 43% loss last year. TCI had averaged an impressive 42% annual return between 2004 and 2007. In addition to the change proposal, Chris Hohn, co-founder and managing partner, is seriously reconsidering the shareholder activism that had once been so central to the fund’s strategy. In October of 2008, TCI suffered a $130 million loss in the sale of its investment in Electric Power Development. This April, following a two-year struggle with management, TCI sold its position on the board of CSX for $262 million less than the price it paid for it.
According to an investor, Mr. Hohn told clients this month that activism may no longer be effective. In an article published last September in Alpha magazine, he stated that the fund was going to take a more cautious approach at making new investment, scaling back the intensity of its shareholder activism.
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