TCI Fund Management, founded by Sir Christopher Hohn, is one of the most legendary hedge funds in history. However, as TCI is a private hedge fund, it is not open to public investment. This article will introduce TCI’s investment strategies, legendary founders, and analysis on how non-institutional investors can get exposure to TCI’s investment style. Common investors looking to invest like TCI can consider global equity long/short strategies, activist investing through total return swaps, or funds managed by TCI alumni.
TCI’s investment strategy and returns
TCI Fund Management pursues shareholder activism and global equity long/short strategies. It is known for taking significant stakes in undervalued companies and then engaging with management for operational improvements. TCI has compounded at 14% annually since its inception in 2003. Its flagship Master Fund has returned over $30 billion to investors lifetime. TCI’s size and reputation allows it to access information and voting rights ordinary investors lack. But elements of TCI’s approach are replicable for personal investing.
Invest in similar hedge fund styles
Although TCI itself is not open to outside capital, you can invest in hedge funds that employ similar equity long/short and activist styles. Look for global macro funds, especially those focused on event-driven and special situations. The skills to identify mispriced equities and catalyze change are rare. Accessing a talented hedge fund manager is the closest way to emulate TCI founder Chris Hohn’s approach. But the minimums are high and liquidity is low. You must qualify as an accredited investor to invest in private funds.
Use total return swaps
Total return swaps allow you to enjoy the economics of a hedge fund without direct investment. Your counterparty essentially undertakes the investment for you, and you receive the return in exchange for financing costs. The downside is you have no control and are exposed to the credit risk of your swap counterparty. But for sophisticated investors, this derivatives-based approach provides efficient exposure to leading hedge fund styles.
Invest with TCI alumni
A number of successful investment managers have spun out from TCI, starting their own hedge funds that take a similar approach. These include Chris Hohn’s former co-manager at TCI, Sir Paul Marshall, who founded Marshall Wace, which now manages over $39 billion. Other prominent TCI alumni include Odey Asset Management founder Crispin Odey. While their funds may still have high minimums, investing with TCI alumni allows you to access the knowledge and skills learned under Hohn.
While directly investing in TCI is not feasible for ordinary investors, you can gain exposure to its investment style through similar hedge fund strategies, using derivatives, or investing with its former employees. The fundamentals of shareholder activism and liquidity arbitrage can enhance portfolio returns.