Institutional Investor's Alpha Magazine - September 2008 - (Page 34)

Christopher Hohn funds Adamas Partners. “Only those who could tolerate more interim volatility were welcome to join him.” Within months Hohn had recruited a French-born friend and fellow fund manager, Degorce, who was then running the European Dynamic Fund for Merrill Lynch Investment Managers in London. They were joined by Snehal Amin, an American private equity specialist with an MBA from Stanford University who had been working in Goldman, Sachs & Co.’s merchant banking division. Timothy Crowe, former chief investment ofﬁcer at preposterous at the time) and that China would have a huge impact on the global markets. “We see so many managers who are myopic,” Crowe says. “They can tear apart a balance sheet and come up with what they believe is value, but they don’t put that value in the context of the global economic scene. When I met Chris, I was thinking, ‘This is exactly the kind of manager we want,’ because if you’re going to do event-driven arbitrage in Europe, you need to know how macroeconomic forces are going to affect a company’s valuation.” Thanks to his previous track record, Hohn started with more money than most young hedge fund managers, and the ﬁrst few years were heady times for his investors. In 2004, TCI’s Master Fund was up 43 percent. The next year was even better: The fund delivered a return in excess of 50 percent, driven in part by Hohn’s successful battle with Deutsche Börse. In 2006 it posted a gain of more than 40 percent. And last year, despite the nascent credit crisis, the fund delivered a return of 37 percent. Hohn invited a few like-minded colleagues and fund managers to launch their own hedge funds alongside him. In exchange for an equity share in the management companies of those funds, TCI provides technology, back-ofﬁce, administrative and legal services to the ﬁrms, which share its operational platform but invest independently of one another. TCI currently has links to three such homegrown hedge fund firms: Algebris Investments, co-founded by Davide Serra, who previously ran Morgan Stanley’s global banking equity research team, and Eric Halet, a former bank analyst for Wellington Management Co.; Parvus Asset Management, started by Edoardo Mercadante, a former European small-cap ex- “Chris has had second thoughts about activism, because the fight with CSX has become this all-consuming thing.” — RICHARD ELDEN, PRINCIPAL, LAKEVIEW INVESTMENT MANAGER the John S. and James L.Knight Foundation (he now runs Coral Gables, Florida–based Anchor Point Capital, a fund of hedge funds), ﬁrst met Hohn and Degorce in London at a hotel in the summer of 2003 before they even had ofﬁce space. He was struck, he says, by Hohn’s blend of fundamental research and macroeconomic insight — Hohn was convinced that the euro would strengthen to $1.50 against the dollar (which seemed THE ACTIVIST’S QUIET CAUSE hen he quit his job as lead portfolio manager of the Perry Capital European Fund in 2 0 0 3, Christopher Hohn thought hard about whether he wanted to continue as a hedge fund portfolio manager — or strike out in a completely different direction. Hohn, then 36 and a multimillionaire thanks to his sterling investment record at Perry Capital, knew that starting his own hedge fund was the natural next step, but he was tempted by the possibility of applying his talents to a more humanitarian cause. He turned to his wife, Jamie CooperHohn, for advice. The couple spent many hours talking about what kind of legacy they wanted to leave, including the impor tance they placed on funding their own charity, the Cooper-Hohn Family Foundation, which they had started in the U.S. in 2002 (they later set up another family foundation, the CooperHohn Foundation, in the U.K.). W “Chris wanted his life to be about more than just making rich people richer,” says the 43-yearold Cooper-Hohn, a petite woman with short blond hair and a commanding presence. “But he was struggling, because he felt that investing was still his best skill, his natural strength — as opposed to, say, running an orphanage. Chris was searching for something that would keep him motivated and wanted to help children, but it wasn’t until I came up with the idea of locking the two concepts together — hedge fund and foundation — that it all clicked.” The structure that the Cooper-Hohns devised was novel. In late 2003, as Hohn established his new hedge fund ﬁ rm, the Children’s Investment Fund Management (UK), the couple formally linked their new London-based charity, the Children’s Investment Fund Foundation (UK), to the ﬁrm. TCI’s relationship with CIFF is inscribed in its offering documents: Each year one third of TCI’s 1.5 percent management fee goes directly to the foundation’s coffers, and if the hedge fund earns more than 11 percent net, the foundation receives another 0.5 percent of TCI’s assets under management. Hohn, who pays himself a relatively modest annual salary — it ranges between £500,000 ($898,565) and £800,000, a fraction of what most managers of his scale take home — also makes additional donations from the ﬁrm’s proﬁ ts to the charity on a discretionary basis. No one, to the CooperHohns’ knowledge, had ever designed a contractual, legally binding relationship between a hedge fund and a foundation, where a percentage of the fund’s management fees help fuel the growth of the foundation’s assets. Some investors were leery of being forced to make donations — and remain so. “I’m not a fan of the arrangement,” says one, who declines to be named, “but I do think that Chris has done a great service by raising the proﬁle of philanthropy in the U.K.” Others, like Timothy Crowe, who was then chief investment ofﬁcer of the John S. and James. L. Knight Foundation, overcame their initial reservations to support the structure. 34 • INSTITUTIONAL INVESTOR’S ALPHA • SEPTEMBER 2008

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - September 2008

Institutional Investor's Alpha Magazine - September 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Culling the Herd The Good Guys: Ending the Cycle Interview: Press Credentials Cover Story: Rethinking Chris Hohn Strategies: At the Edge of the Earth Profile: Alpha Femals Strategies: Tails, You Lose Research Center: The Top Equity Trading Firms Alpha Bytes: The Light Is On Unhedged: Commentary: Not-So-Dire Diagnosis

Institutional Investor's Alpha Magazine - September 2008

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