Chris Hohn’s TCI Fund Management has posted its best annual gain in six years, partly due to a strong performance in the fourth quarter.
The activist hedge fund surged 40.6 percent last year, according to a person with knowledge of the performance. The fund had been up 29.3 percent through the third quarter.
This is TCI’s best year since 2013, when it produced gains in the mid-to-upper-40 percent range, depending on the share class, according to a TCI document obtained earlier. TCI declined to comment.
The firm is mainly a long-only special situations fund that frequently takes activist positions. A Financial Times report at the beginning of December pegged TCI’s assets under management at $28 billion. The London-based firm had $19.3 billion invested in U.S. listed equities at the end of September, according to its most recent 13F filing.
Charter Communications and Airbus were among the firm’s best performers last year, according to the person familiar with TCI’s results. Charter’s stock surged about 70 percent in 2019, while shares of Airbus, the European aerospace and defense manufacturer, were up about 55 percent last year.
In late March, TCI offered all investors the opportunity to redeem up to 5 percent of their investment to help balance their portfolios, II reported last year. But few investors took advantage of the offer, a good decision in retrospect.
About a month ago, TCI released details of its environmental, social and governance policy, saying it plans to require companies in which it invests to make “appropriate and timely public disclosure” of carbon and other emissions. “Such disclosure should include targets for emissions intensity reduction and absolute level reduction,” according to the ESG policy.
TCI said in the policy statement that it would vote against all directors of companies that do not publicly disclose their emissions or have a credible plan for emissions reduction.
“Divestment is always an option,” the hedge fund firm said in a related ESG presentation. “TCI advocates that asset owners should fire investment managers that do not require such disclosure.” The firm also warned that it would “typically vote against the auditors where the annual report fails to report material climate risks.”
In the presentation, TCI disclosed the CDP scores for its portfolio companies. CDP is “a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts,” according to its website.
Seven of TCI’s portfolio companies received a grade of “A” from CDP, including Alphabet, Canadian National, Ferrovial, Microsoft, S&P, Union Pacific and Vinci, the hedge fund firm’s presentation shows.
Interestingly, one of the two companies that have no disclosures at all is Charter, which has also been one of TCI’s top performers since it established its investment in the company nearly four years ago.
In a November 30 letter to Charter’s chief executive officer Tom Rutledge, Hohn said TCI would support a Charter shareholder resolution to issue an annual sustainability report “that includes policies, performance and improvement targets for material ESG risks and opportunities, including GHG emissions reduction targets.” Hohn also warned that TCI would vote against Charter’s directors and auditors if the company failed to introduce these measures.
