TCI's Christopher HohnA chastened Christopher Hohn is poised to offer investors in The Children’s Investment Fund a better deal after a disastrous year.

Under Hohn’s proposal, the famed London-based activist shop would cut its management fee from 2% to 1.5% for investors who stay with the fund after their three- or five-year lockup periods end. What’s more, those lock-ups would be cut to just six months, after which TCI plans to offer quarterly liquidity.

The new terms, first reported by Bloomberg News, don’t change the fund’s performance fee, which is 16.5%. Of course, that doesn’t matter, for the time being: TCI lost 43% last year and is down 7% this year, despite the turnaround for most of its hedge fund peers. Hohn’s plan would not reset the fund’s high-water mark for investors who remain with the firm, meaning it will be a long time before it collects any incentive fees from them.

But TCI is changing the way it collects those performance fees. Instead of taking its cut of profits every year, the hedge fund will now do so only after three years, or when an investor leaves the fund.

If approved, Hohn’s proposed changes will take effect on Aug. 1.

Hohn’s olive branch to investors comes after possibly the most difficult year or so in TCI history. In addition to the massive losses for a fund that had returned an average of 42% annually from 2004 to 2007, TCI also found that the shareholder activism that had served it so well for so long had become ineffective. According to Bloomberg, Hohn told clients this month that the strategy may in fact no longer be effective at all.

To add insult to injury, four top TCI executives, including two of the firm’s last three founding partners, have all left the firm this year. Bloomberg reports that the fund has hired at least two analysts to pick up some of the slack.