Activist hedge fund keeps lid on compensation after stellar year
The Children’s Investment Fund Management, the activist hedge fund manager that has been slowly recovering since posting a 43% loss at the height of the financial crisis and losing a number of investment staff, has posted a £42m operating profit and set aside a comparatively modest £10.5m to share between its senior staff.
The hedge fund run by Chris Hohn has traditionally channelled a portion of its profits into charitable foundation The Children’s Investment Fund Foundation (CIFF) managed by his wife Jamie Cooper-Hohn. However, it stopped doing this during 2012, according to a report in Financial News.
It also set aside £31.5m for ‘discretionary division’ among its 20 members for the year to February 2013, compared to £36.4m for the same period in 2012, according to accounts filed on Companies House. This works out as an average of £1.57m per head, but this is comparatively small beer in hedge fund partner compensation terms. CIFF was listed as one of the members.
The Children’s Investment Fund is known for its aggressive tactics as an activist investor, something that it was believed to have scaled back on following a change in lifestyle of its founder Hohn. Recently, he gave up eating meat and now regularly practices yoga, something that has prompted him to be more constructive, and less confrontational with executives of companies he invests in.
This year has, however, proved that there’s still an antagonistic streak. In September, it asked the European Aeronautic Defence and Space Company (EADS) to sell its €4bn stake in Dassault Aviation, which makes fighter jets, directly to investors. It also bought a 5.8% stake in Royal Mail in October, and was therefore the biggest private investor, giving it more influence on the company’s future.
The $7bn hedge fund’s main fund, The Children’s Investment Master Fund, returned an impressive 32.5% to the end of Q3, following a 30% return in 2012. After making some big bets on underperforming stocks in 2008, the fund lost 42% and underwent a period when investors pulled out and front office staff left.
So far this year, headcount has been relatively stable, however. It currently has 23 staff registered with the FCA, which is broadly in line with the start of 2013, and hasn’t added any new employees throughout 2013.
Although the vast majority of charitable donations are through CIFF, the Children’s Investment Fund Management was also decidedly more philanthropic this year. It donated £366k during the year, compared to £25k in 2012.
In 2012, £12.6m was set aside as an expense for member remuneration, compared to £10.5m this year. It only reveals administrative staff as listed employees in its accounts. Six were employed to February 2013, sharing nearly £700k, or an average of £116.6k.