Chris Hohn’s hedge fund TCI beats markets with 33% gain

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Sir Christopher Hohn’s activist hedge fund TCI rose 32.7 per cent last year, well ahead of equity markets, helped by bets on stocks such as Alphabet and Moody’s, according to people who have seen the numbers.

The gains by The Children’s Investment fund, which manages just over $49bn in assets, mean it has more than recovered losses suffered in 2022, when it fell 18 per cent as global stock markets tumbled.

The fund’s performance in 2023 compares with a 24.2 per cent rise in the S&P 500 index and the FTSE 100’s 3.8 per cent gain. Equity hedge funds gained 6.6 per cent on average last year to the end of November, according to data group HFR.

TCI’s largest holdings include Alphabet, Canadian National Railway, Visa, General Electric and rating agency Moody’s as at the end of September, according to a regulatory filing.

Alphabet’s shares surged 58 per cent last year, driven in part by investor enthusiasm over the potential for large US technology firms to implement artificial intelligence in their services.

Moody’s was up 40 per cent, while Visa rose 25 per cent.

TCI held a $4bn position in Microsoft as of June last year, but sold it by the end of the third quarter, according to filings.

TCI invests in a concentrated portfolio of stocks that it tends to hold for long periods. British billionaire Hohn has a reputation for shareholder activism, pushing for change when he disagrees with the direction taken by company directors.

In February last year Hohn pushed for Airbus to drop its efforts to acquire a stake in the cyber security arm of French IT company Atos.

He also called for three board members to resign at Spanish telecoms company Cellnex and was partly successful, with two of the three departing. The stock was up 15 per cent in 2023.

TCI was not the only big name equity hedge fund to harvest big gains from last year’s stock rally.

Tiger Global, one of the best known firms in the sector, was up 28.5 per cent last year, according to sources who had seen the numbers.

Philippe Laffont’s Coatue Management gained 21.5 per cent in its $13bn hedge fund in 2023, while its $3bn long-only fund was up 55.1 per cent, investors said.

An important driver of returns was a large holding in US chipmaker Nvidia, while the fund also benefited from long positions in Microsoft, Meta and Adobe.

The hedge fund’s gain of 21.5 per cent last year follows an 18 per cent loss in 2022 as tech stocks tumbled, prompting Laffont to ditch most of its holdings and build up the biggest cash holding in the fund’s 23-year history.

Overall firm assets have fallen from $70bn in May 2022 to $46bn at the end of September, reflecting a drop in performance and a writedown in assets in the part of its business that invests in private companies. Coatue said in an internal memo this week that it was closing its European office in London two years after it opened. The firm declined to comment.

Meanwhile, macro hedge fund manager Brevan Howard had a disappointing year. The firm’s master fund was down 2.1 per cent, while its alpha strategies fund was up 2.4 per cent, according to people who have seen the figures. Both funds manage around $13bn, together making up a large portion of the $36bn managed by the firm.