Institutional Investor's Alpha Magazine - December 2007/January 2008 - (Page 6)

managing partner of the Children’s Investment Fund Management (UK). In mid-December, TCI, which controls more than $10 billion in assets and owns approximately 4.2 percent of CSX’s outstanding shares (worth an estimated $740 million), announced that it had joined with several other CSX investors, including New York– based 3G Capital Partners, to nominate ﬁve directors for election to the rail company’s board at its annual shareCSX CEO holder meeting this spring. Michael Ward: The group, whose members own a combined 8.3 perNot going down cent of CSX’s outstanding shares — and derivatives prowithout a ﬁght. viding economic exposure equivalent to an additional 11.8 percent — is gearing up for a ﬁerce proxy battle. It will not be Hohn’s ﬁrst: In 2005 the slim, bespectacled hedge fund manager burst onto the European investing scene when he spearheaded a shareholder revolt that derailed Deutsche Börse’s bid for the London Stock Exchange and forced out its top management. He and fellow CSX investors are seeking a similar shake-up of the railroad group. “CSX management does not fully understand the economics of the business, is cavalier about potential risks, is undisciplined about spending, is unrealistic about future prospects, is complacent about operational underperformance and is unnecessarily adversarial toward labor, shippers, and shareholders,” wrote Hohn in a scathing letter to CSX’s board of directors in mid-October. While TCI is challenging the board over Ward’s leadership, the ﬁ rm is also wooing other investors with InvestorForum Despite the summer’s market volatility, institutional investors are entering 2008 with performance expectations for hedge funds similar to those they held at the beginning of 2007, according to the responses to our latest InvestorForum survey. Roughly half the respondents expect hedge fund returns to rise 1 to 9 percent this year, with funds specializing in distressed, long-short credit, high-yield and emerging markets expected to fare the best. What type of institution do you represent? Corporate pension fund Public pension fund Taft-Hartley pension fund Endowment Foundation Other What is the size of your fund? Less than $100 million $100 million to $499 million $500 million to $999 million $1 billion to $2.49 billion $2.50 billion to $5 billion More than $5 billion large is your hedge fund allocation? More than 50 percent 1.6% 26 to 50 percent 7.8 16 to 25 percent 9.4 11 to 15 percent 21.9 6 to 10 percent 25.0 Less than 6 percent 34.4 Up 1 to 9 percent Up 10 to 19 percent Up 20 percent or more Fixed income Down 20 percent or more Down 10 to 19 percent Down 1 to 9 percent Unchanged Do you think the summer’s volatility and Up 1 to 9 percent its impact on hedge funds will slow Up 10 to 19 percent Up 20 percent or more the ﬂow of new money into the sector? Yes 37.4% Crude oil Down 20 percent or more No 43.0 Down 10 to 19 percent Don’t know 19.6 Down 1 to 9 percent Unchanged How do you expect the following Up 1 to 9 percent asset classes to perform next year? Up 10 to 19 percent U.S. equities Up 20 percent or more Down 20 percent or more 0.0% Hedge funds Down 10 to 19 percent 3.8 Down 20 percent or more Down 1 to 9 percent 18.1 Down 10 to 19 percent Unchanged 21.9 Down 1 to 9 percent Up 1 to 9 percent 51.4 Unchanged Up 10 to 19 percent 4.8 Up 1 to 9 percent Up 20 percent or more 0.0 Up 10 to 19 percent Non-U.S. equities Up 20 percent or more Down 20 percent or more 0.0% Down 10 to 19 percent 3.9 Down 1 to 9 percent 6.9 Which of the following hedge Unchanged 15.7 fund strategies do you expect 47.1 24.5 2.0 0.0% 1.0 16.4 36.5 44.2 1.0 1.0 0.0% 1.0 29.3 18.2 39.4 11.1 1.0 0.0% 0.0 6.1 31.6 49.0 11.2 2.0 to perform best in 2008? Convertible arbitrage Distressed, long-short credit, high yield Emerging markets Equity market-neutral Event-driven and merger arbitrage Fixed-income relative-value Long-short equity Macro Multistrategy Statistical arbitrage 1.6% 26.6 26.6 1.6 9.4 3.1 17.2 0.0 14.1 0.0 21.1% 28.4 2.8 39.5 3.7 4.6 25.9% 20.4 11.1 22.2 6.5 13.9 Do you currently invest in hedge funds or funds of hedge funds? Yes 62.0% No 38.0 If you answered “no” to the previous question, are you considering investing in hedge funds or funds of hedge funds in the future? Yes 35.9% No 64.1 If you do invest in hedge funds, how Which of the following hedge fund strategies do you expect to perform worst in 2008? Convertible arbitrage 8.8% Distressed, long-short credit, high yield 17.5 Emerging markets 10.5 Equity market-neutral 8.8 Event-driven and merger arbitrage 15.8 Fixed-income relative-value 10.5 Long-short equity 7.0 Macro 5.3 Multistrategy 5.3 Statistical arbitrage 10.5 * Responses may not total 100 percent because of rounding. 6 • INSTITUTIONAL INVESTOR’S ALPHA • DECEMBER 2007/JANUARY 2008 CSX CORP VIA BLOOMBERG NEWS

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - December 2007/January 2008

Institutional Investor's Alpha Magazine - December 2007/January 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Liberal Returns The Good Guy: Inner-city MVP Cover Story: Marathon Men Interview: Rizk Management Profile: Living on Hostile Ground Profile: Buy and Hold In Theory: The Fallacy of Portable Alpha Strategies: Changing Course Alpha Bytes: Behind the Scenes Unhedged: Commentary: An Activist Alternative

Institutional Investor's Alpha Magazine - December 2007/January 2008

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