Regular readers of my articles will know that Chris Hohn's TCI Fund Management is one of my favorite hedge funds. It is also one of the most successful asset management groups of all time.
In 2021 alone, the $44.4 billion hedge fund earned a profit of $9.5 billion. Since its inception, the fund has earned a total of $36.5 billion for its investors. For comparison, the best performing hedge fund of all time is Ray Dalio (Trades, Portfolio)'s Bridgewater. This company has produced total gains of $52.2 billion since 1975.
TCI's investment approach is relatively simple. The fund has been known to use its size and scale to encourage companies to unlock value for shareholders in the past.
Today, it is more focused on pushing companies to adopt stronger ESG policies rather than generating large profits for investors (although profitability is still the main aim). The fund managers hold that stronger ESG policies will result in better long-term gains.
TCI has faced criticism for its aggressive approach in the past. For example, it was instrumental in forcing Dutch bank ABN Amro into the arms of U.K.-based lender Royal Bank of Scotland (LSE:45BQ, Financial). Shortly after the deal, Royal Bank of Scotland had to be bailed out thanks, in part, to the liabilities acquired as part of the ABN deal.
Still, while the hedge fund has faced some criticism for its aggressive approach in the past, there is no denying that the firm is in a league of its own when it comes to making money.
That is why I like to keep an eye on TCI's portfolio. I am always on the lookout for potential investment opportunities, and considering its track record, the hedge fund seems to know how to find potentially lucrative investments.
Portfolio changes
According to its latest 13F report, which covers the three months to the end of December 2021, TCI made a few small changes to its equity portfolio in the last three months of the year.
The largest holding in the portfolio, accounting for around 19% of total assets under management, was Google's parent company Alphabet (GOOG, Financial). This position was unchanged compared to the previoius quarter.
However, Hohn and his team did make a small adjustment to the second-largest holding, Charter Communications (CHTR, Financial). They reduced the holding size by 5%, although it still makes up around 14% of the overall equity portfolio.
The most significant change to the top five holdings was a near 16% increase in Visa (V, Financial). TCI started buying this position in the second quarter of 2019, accumulating less than a million shares as an average price of around $173. It has continued to increase the holding over the past couple of years. The fund now owns 23 million shares, giving Visa an 11% weighting in the overall portfolio. In the last quarter alone, TCI added 3 million more shares.
The fund also boosted its position in Union Pacific (UNP, Financial) by nearly 10%. TCI already has a significant interest in the North American railroad sector. Canadian National (CNI, Financial) and Canadian Pacific (CP, Financial) make up 20% of the portfolio. Combined, they would be the largest single position. Including Union Pacific, TCI has around 23% of its assets invested in railroad companies.
Hohn and his team also doubled the fund's position in IHS Markit (INFO, Financial) during the last quarter of 2021. This position is relatively small for TCI, but it is large by many funds' standards. The firm's position is worth $1 billion.
TCI's equity portfolio only contains 13 positions, which illustrates the fund's preference for concentrating its assets in the equities it likes best. This high-conviction approach is one of the reasons why the firm has been able to achieve such fantastic profits for its investors.
