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.


In Depth

Exotic Assets: Investing In Rare Violins

Jan 17 2017 | 4:43pm ET

By definition, alternative investments include exotic assets far beyond your typical...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

The Trump Administration: What It Could Mean for Carried Interest

Jan 19 2017 | 5:25pm ET

The arrival of the Trump administration brings the potential for a repeal of the...

 

From the current issue of

The healthcare sector went on a tear beginning in 2011, thanks in large part to the passage of the Affordable Care Act and its impending implementat