Important note: Information in this article was accurate in 2005. The state of the art may have changed since the publication date.

Reuters NewMedia - May 12, 2005
Louise Heavens

The UK fund, set up by prominent manager Christopher Hohn in 2003, was one of the first hedge funds to donate a portion of its fees to charity -- helping children in developing countries, including those with AIDS.

Other hedge funds -- funds which typically trade aggressively and can sell shares short -- give money to charity. But the Childrens' Investment Fund, or TCI as it is known, set a precedent by building this donation into its fee structure.

The fund shot to wider prominence in the battle that pitched rebel shareholders against Deutsche Boerse Chief Executive Werner Seifert and his main backer, the exchange's Chairman Rolf Breuer, over the handling of the 1.3-billion-pound ($2.45 billion) bid for rival London Stock Exchange.

TCI, with eight percent, is Boerse's largest shareholder and Hohn criticised Seifert and Breuer for lack of consultation over the terms and strategy of its bid.

Seifert stepped down on Monday and Breuer agreed to leave.

Their removal fed into growing alarm in Germany over the power of investors like hedge funds. Franz Muentefering, party leader of the ruling Social Democrats, last month compared some financial investors to locusts that chew up firms and move on.

On Thursday Hohn denied market speculation TCI was selling its stake in Deutsche Boerse.

TCI, although keeping its investments a closely guarded secret, says it pursues a long-term approach.

The fund, with more than $3 billion of assets under management, locks in investors - institutions, universities, insurers and the fund's partners -- for three to five years.

CHARITY BEGINS AT HOHN

Hohn, who left giant U.S. fund Perry Capital after seven years to set up TCI, is no stranger to shareholder crusades.

In 1999 while at Perry, where he ran the European fund, he was among a group of investors who threatened to block the merger of Telecom Italia with Deutsche Telekom to force the company to get a better deal.

Although TCI has campaigned against Deutsche Boerse's bid in the press the company, like most in the shadowy hedge fund industry, is reticent about the background of its partners, does not have a website and declined to say how many staff it had.

Hohn has made his name as one of the UK's top fund managers. "He has a really excellent reputation," said one of his peers.

TCI, which like many other hedge funds is based in London's swanky Mayfair district in West London, donates one half of one percent of assets under management to a registered charity -- the Children's Investment Fund Foundation, which is run by Hohn's wife Jamie Cooper-Hohn.

The charity's trustees include Peter McDermott, the head of UNICEF's HIV and AIDS programme.

Hohn and his wife are also patrons of the children's charity Absolute Return for Kids (ARK). Last year European hedge funds gave 10 million pounds to the charity at its annual gala dinner.

Although TCI's use of its muscle to change how companies behave fits a growing trend, such activism usually comes from the biggest pension funds and managers and not from the arcane world of hedge funds.

Two years ago fund management giant Fidelity led a charge in 2003 to oust Michael Green as chairman-designate of media group ITV, which was created from the merger of broadcasters Carlton and Granada.

Last year, U.S. pension giant Calpers voted against re-electing billionaire investor Warren Buffett to the board of Coca-Cola.

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