Omen of a better age (the harbinger of better times) … The motto of the prestigious Order of St. Michael and St. George has become that of Sir Chris Hohn. This double patronage was necessary to account for the personality of this Janus. On the tails, a top-flight financier, at the head of one of the city’s most bubbling investment funds, The Children’s Investment Fund (TCI). On the other side, a billionaire philanthropist, knighted three years ago by the queen for his charitable activities in favor of children in developing countries.
With $ 5 billion in endowments accumulated since 2004, the Children’s Investment Fund Foundation is an honorable institution that owes its good health to the performance of its fund, TCI. If it is doing well, the foundation benefits. So, for a good cause, all financial blows are allowed. And when it comes to defending the interests of his clients, savvy manager Hohn is no choirboy.
The French aeronautics group Safran knows something about it. For more than a month, TCI has vehemently opposed the marriage project between the French engine manufacturer and the Zodiac equipment manufacturer. An operation of nearly 10 billion euros. For the British billionaire, this wedding does not bode well. And, with 4.1% of Safran’s capital, this 50-year-old intends to make his voice heard and thus rally other opponents to his cause.
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A protector of minority shareholders?
Usually very discreet, Hohn came out of his silence in early March to give an interview to the daily The world, presenting himself as the white knight, the protector of minority shareholders in France. At the same time, the activist has stepped up calls to meet with representatives of the State Participation Agency, owner of 14% of Safran. Above all, he put pressure on the Autorité des marchés financiers by asking him to put his nose in the mysteries of the case and thus prove his independence.
“We believe that this is a bad transaction, at the wrong price, with the wrong structure, believes Jonathan Amouyal, partner at TCI. Let us not forget that Zodiac, on nine occasions, has not kept its promises results. ” The tenth breach occurred last week. TCI immediately took the opportunity to request the immediate abandonment of the operation.
Amouyal is one of the seven partners of the London-based fund. A team reduced to muscular methods, at the head of 14 billion dollars invested largely in large American cable operators (Charter Communications, or Comcast) or in the Yahoo! Internet portal.
In Europe, TCI participated in the privatization of Spanish airports (Aena) and holds 2% of the capital of the telecommunications operator Altice (owner of SFR, itself owner of L’Express). “Unlike a hedge fund traditional, which takes a lot of small short-term tickets in companies, TCI focuses on a few large groups and stays for a long time, in order to influence their strategy, explains Colette Neuville, president of the Association for the Defense of Minority Shareholders. Even if I do not always share their points of view, this kind of fund, like us, plays an essential role of checks and balances in the face of increasingly powerful boards of directors. ”
A pure product of the Thatcher years
Created in June 2003, TCI has forged a solid reputation by campaigning for a split of the Dutch bank ABN Amro, in 2007, in order to better promote the establishment, or by successfully opposing the project in 2005. merger between the City Stock Exchange and that of Frankfurt. His activism then forced the director general of the latter, Werner Seifert, to resign. And too bad if, a decade later, Chris Hohn has changed his mind and is now pushing for this marriage.
This father of four, from a very modest family in the county of Surrey, in the south-east of England, is a pure product of the Thatcher years and of English meritocracy. Son of a mechanic, he turns out to be a brilliant student who even graduates from Harvard, in the United States, where he meets his wife, Jamie Cooper.
It will then be finance in New York, in the hedge fund Perry Capital, before going solo. The success is rapid and impressive. TCI displays a maddening profitability of between 38 and 50% for the best years, until the financial crisis of 2008. The markets are rocking, the couple too. His wife asks for separation and asks him for a share of the fund.
Investors, already cooled by falling yields, fear a drop in performance under the “divorce effect”. Several studies show that the emotional troubles of a manager during a separation or a marriage influence his prowess. The soap opera panics the gazettes and ends up in court in 2015. The ex-wife obtains a record amount across the Channel of 337 million pounds (388 million euros).
Frenzied activism crowned with success
Whatever, the crisis passes and business continues. In France, Hohn succeeded in forcing, in 2014, the aeronautical group Airbus to sell its stake in the manufacturer of the fighter plane Rafale. With success. “There was no point in keeping these titles without having control of Dassault Aviation,” said Jonathan Amouyal. The transaction generates a capital gain of 868 million euros for Airbus.
On the other side of the Rhine too, the fund’s frenzied activism is bearing fruit. At the end of last year, the automaker Volkswagen conceded a revision of the bonus policy paid to its directors. “We sent them a letter asking them to change the almost automatic allocation system,” said Ben Walker, partner at TCI.
Sending letters to management has become a specialty and all of them are made public on the fund’s website. At the beginning of March, the same strategy was used with Safran managers. “If they believe so much in their marriage with Zodiac, they just have to receive their bonuses according to the achievement of objectives”, adds Jonathan Amouyal. The group’s managers did not like the proposal at all.
Chris Hohn will he get his way in this showdown? Nothing is less sure. Because the French state is keen on this wedding. François Hollande welcomed it. Faced with government interventionism, the billionaire warns: it is not by following this path that France will succeed in attracting foreign capital in global competition. The man who always wears a black Swatch on his wrist also knows that time is on his side. A political alternation after the presidential election could change the situation. Hohn is once again relying on his motto and awaits “the harbinger of better times”.
Hedge funds with their hearts in their hands
“Greed is good.” The famous phrase of the golden boy Gordon Gekko, in the film Wall Street (1987), by Oliver Stone, seems obsolete. Hedge funds seek to improve their image by supporting charities. Sir Chris Hohn, with TCI, is not one of a kind. The Robin Hood Foundation of the American investor Paul Tudor Jones intends to fight against poverty, while that of John Arnold, of the Centaurus fund, helps, in particular, to reform the education system.
There are other ways. Managers are creating charity events from scratch. Every year since 2007, in Hong Kong, financiers compete in the ring during a boxing night, thus making it possible to collect 1 million Hong Kong dollars for charities.
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Others prefer musical notes to straight brackets. Last year, the Rocktoberfest Hedge Fund brought together rock groups The Autopilots (with musicians from HSBC or Wedbush), The Warriors from Mars (with BlackRock, Greenlight Capital) at the Hard Rock Cafe in Time Square, New York. …). In 2015, the concert grossed over half a million dollars for children with disabilities. Tax deductible, of course.