TCI Proposes Fee Break For Loyal Investors

May 25 2011 | 11:13am ET

The Children's Investment Fund is offering its thanks to investors who stuck with it during the financial crisis.

The London-based activist fund, which lost 43% in 2008, is nearing its high-water mark, meaning it will be able to charge performance fees for the first time in more than three years. But rather than taking the opportunity to collect as much as it can as fast as it can, TCI wants investors who have suffered through the tough times to have a break.

To that end, the hedge fund is in talks with investors about creating a new share class—exclusively for those investors who have remaind with TCI since 2008—that would impose a performance hurdle on the firm before it could begin taking its 16.5% cut of profits. According to Financial News, loyal investors wouldn't start paying incentive fees until TCI managed a return of 3% above Libor.

TCI plans to put its proposal before investors shortly, allowing it to create the new share class this summer.

This is not the first time TCI has resorted to fee breaks to thank (or hold onto) its investors. In 2009, after the firm suffered its big loss, it agreed to cut its management fee from 2% to 1.5% for investors who stuck with the firm beyond their lockups.

TCI is up about 17% this year. Prior to the 2008 debacle, the firm had managed 42% annualized returns from 2004 through 2007.


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