The Last Active Manager

 In the context of Chris Hohn being described as "The Last Active Manager," TCI Fund Management’s performance is characterized by record-breaking returns that stand in stark contrast to a declining active management industry,.

Record-Breaking Financial Performance

TCI recently achieved a historic milestone, generating $18.9 billion in profits for investors in a single year. This performance exceeded John Paulson’s famous "Greatest Trade Ever," and it brought TCI’s lifetime gains to $68.4 billion. This achievement places TCI among the top five hedge funds of all time, alongside massive firms like Citadel and Millennium. Over the course of two decades, Hohn has managed to compound his fund at twice the market rate of return.

The "Last Active Manager" Philosophy

While TCI is categorized as a hedge fund, its operational model differs significantly from its peers, contributing to its status as a standout "active manager":

• Concentrated and Long-Term: Unlike many high-frequency or multi-strategy funds, Hohn manages a concentrated portfolio with an average holding period of eight years, with some positions held for as long as 13 years.
• No Shorting: Remarkably, for a hedge fund, Hohn has not placed a short position in three years.
• Small Scale: TCI operates with a lean investment team of only seven or eight people, compared to the thousands of employees at firms like Millennium.
• Skin in the Game: Of the $77 billion currently under management, $14 billion is internal capital, aligning the manager’s interests directly with investors.

Investment Strategy: Barriers to Entry

Hohn’s performance is driven by a philosophy that prioritizes high barriers to entry over simple growth. He focuses on companies that are "immune from competition and disruption," identifying only about 200 companies worldwide that meet his criteria,. These businesses typically possess:

• Irreplaceable physical assets: Examples include airports (Aena), toll roads (Ferrovial), and railroads (Canadian Pacific Kansas City).
• Intellectual property and scale: Examples include GE Aerospace, Safran, and Visa.

Contrast with a "Dying" Industry

The sources place TCI’s success against a backdrop of failure within the broader active management sector. Hohn himself has stated that "active management as an industry has been a failure and is dying". This is supported by data showing that 88% of large-cap US funds have underperformed the S&P 500 over a 15-year period.

Hohn attributes his survival and success to evolving his strategy—moving from aggressive shareholder activism to using activism as a tool—and avoiding "bad businesses" like banks or traditional asset managers, which he views as having low quality of earnings or being structurally challenged,. By acting as an owner of predictable, high-quality businesses, Hohn remains a rare exception in an industry increasingly dominated by passive flows,.

In the context of Chris Hohn being described as "The Last Active Manager," his investment philosophy is defined by a rigorous, concentrated approach that prioritizes structural defensibility over speculative growth. While Hohn acknowledges that the active management industry is "dying" and has largely been a "failure," his philosophy has allowed TCI to compound at twice the market rate over two decades.

According to the sources, the core pillars of his philosophy include:

1. Barriers to Entry Over Growth

Hohn argues that many investors mistakenly prioritize "the next hot thing" or simple growth. In contrast, his philosophy is centered on high barriers to entry, which he considers the most important factor in investing. He targets companies that are "immune from competition and disruption," specifically looking for:

• Irreplaceable physical assets: This is his preferred barrier, represented by holdings in airports (Aena), toll roads (Ferrovial), and railroads (Canadian Pacific Kansas City).
• Intellectual property and installed bases: Exemplified by GE Aerospace and Safran.
• Scale and network effects: Seen in his investment in Visa. Hohn estimates that only 200 companies worldwide meet these strict criteria.

2. Long-Term "Owner" Mindset

A defining characteristic of the "Last Active Manager" is a departure from the high-turnover nature of the modern hedge fund industry. Hohn’s philosophy emphasizes predictability and patience:

• Concentration: He maintains a concentrated portfolio rather than diversifying across hundreds of stocks.
• Duration: His average holding period is eight years, with some positions held for 13 years.
• Ownership: He acts as an owner rather than a trader, often working closely with management to realize value.
• Lack of Shorting: Despite running a hedge fund, Hohn has not placed a short position in three years.

3. Evolution from Aggressive Activism

Hohn’s philosophy has evolved from the aggressive shareholder activism that defined his early career (such as his involvement with ABN AMRO) to a model where activism is a tool rather than a strategy. He admits to having owned "bad businesses" in the past and now focuses on high-quality earnings, leading him to steer clear of banks (which he views as leveraged and opaque) and traditional asset managers, which he describes as "bad businesses" despite running one himself.

4. Alignment and Lean Operations

The philosophy is supported by a structural commitment to "skin in the game." Of the $77 billion under management, $14 billion is internal capital, ensuring that the firm's interests are aligned with its investors. Furthermore, Hohn maintains a lean investment team of only seven or eight people, a stark contrast to the thousands employed by "pod-shop" hedge funds like Millennium.

By focusing on companies that are structurally protected from the "madness" of the broader market and the "failure" of the active management industry, Hohn’s philosophy positions TCI as a rare survivor in an environment increasingly dominated by passive index flows.

In the context of Chris Hohn being described as "The Last Active Manager," the portfolio characteristics of TCI Fund Management (TCI) are defined by extreme concentration, long-term duration, and a focus on structural monopolies. These characteristics stand in sharp contrast to a broader active management industry that Hohn characterizes as a "failure" that is "dying".

According to the sources, the key characteristics of Hohn’s portfolio include:

1. Extreme Concentration and Long Duration

Unlike traditional hedge funds that may employ hundreds of teams to manage thousands of positions, Hohn manages a concentrated portfolio of stocks with a lean team of only seven or eight people. The portfolio is defined by its stability:

• Holding Periods: The average position is held for eight years, with some remaining on the books for as long as 13 years.
• Predictability: Hohn values "predictability" over "the next hot thing," comparing frequent portfolio turnover to changing a spouse every year.
• Lack of Shorting: Despite its classification as a hedge fund, the portfolio has not included a short position in three years.

2. The "Investible Framework" of 200 Companies

Hohn’s portfolio is governed by a strict framework that prioritizes high barriers to entry over simple growth. He estimates that only 200 companies worldwide meet his criteria for investment. His holdings typically feature:

• Irreplaceable Physical Assets: This is Hohn’s preferred barrier. Examples include Aena (airports), Ferrovial (toll roads and airports), Canadian Pacific Kansas City and Canadian National Railway (railroads), and Cellnex (telecom infrastructure).
• Intellectual Property and Scale: The portfolio includes companies with massive installed bases and network effects, such as GE Aerospace, Safran, Visa, Airbus, and Moody’s.

3. Strategic Industry Exclusions

Hohn deliberately excludes sectors he deems "bad businesses," even if they appear profitable or familiar.

• Banks: He avoids the banking sector because he views it as having low quality of earnings, high leverage, and opaque operations.
• Asset Managers: Despite running a firm that generated $1 billion in revenue in 2025, Hohn avoids investing in traditional asset managers, categorizing them as structurally challenged businesses.
• Evolution from Activism: While Hohn was once known for aggressive activism in "bad businesses" like ABN AMRO, he now views activism merely as a tool to realize value within high-quality companies rather than a primary strategy.

4. Massive "Skin in the Game"

The portfolio's performance—compounding at twice the market rate for two decades—is supported by a unique capital structure. Of the $77 billion currently under management, $14 billion is internal capital. This high level of personal investment aligns the manager’s interests with the long-term "owner" mindset that defines his philosophy.

By focusing on this limited universe of high-barrier companies and ignoring the "madness" of broader market trends, Hohn has positioned TCI to post record-breaking profits ($18.9 billion in a single year) while the rest of the active management industry struggles to keep pace with passive flows.

In the context of Chris Hohn being described as "The Last Active Manager," TCI’s operational model is defined by its extreme lean efficiency and a rejection of the traditional "hedge fund" structure. While Hohn views the broader active management industry as a "failure" that is "dying," his specific model has allowed TCI to compound at twice the market rate of return over two decades.

The sources highlight several unique aspects of TCI's operational model:

1. Lean Human Capital vs. Massive "Pod Shops"

A primary differentiator of TCI’s operational model is its small scale compared to its peers. While massive firms like Millennium employ approximately 6,500 people across 330 teams, Hohn operates with an investment team of only seven or eight people. Despite this small headcount, TCI generated $18.9 billion in profits for investors in a single year, a record-breaking performance that surpasses even the most famous trades in hedge fund history.

2. Strategic "Skin in the Game" and Internal Capital

Unlike many asset managers who primarily invest client money, TCI’s operational model is built on significant personal alignment. Of the $77 billion the firm manages, $14 billion is internal capital. This high level of "skin in the game" supports Hohn’s long-term "owner" mindset, allowing the firm to prioritize stability over the short-term pressures typically felt by active managers facing passive index competition.

3. The "Owner-Activists" Framework

TCI’s operational approach has evolved from the aggressive shareholder activism of its early years (such as the involvement with ABN AMRO) to a model where activism is a tool rather than a strategy.

• Relationship with Management: Instead of constant friction, Hohn often works with management to realize value. His influence is significant enough that CEOs from major holdings like GE Aerospace, Airbus, and Moody’s attend TCI investor events to present to clients.
• Long-Term Horizon: The operational model is built for duration, with an average holding period of eight years and some positions held for 13 years. Hohn explicitly rejects the "madness" of frequent trading, stating that he values predictability over finding "the next hot thing".

4. Structural Exclusion of "Bad Businesses"

Hohn’s operational focus is limited to a narrow universe of approximately 200 investible companies worldwide that possess high barriers to entry, such as irreplaceable physical assets or intellectual property. His model intentionally excludes sectors he deems structurally flawed:

• Banks: Avoided due to low quality of earnings and opaque, leveraged operations.
• Traditional Asset Managers: Despite TCI’s own high profitability—earning $1 billion in revenue in the year ending March 2025—Hohn considers traditional asset management a "bad business" because of its general failure to outperform.

5. Simplified Portfolio Management

TCI’s operational model eschews the complexity of modern hedge funds. The firm manages a concentrated portfolio of stocks and has not utilized short positions for three years. This simplified, long-only focus on high-quality monopolies allows TCI to remain profitable and relevant even as passive flows change the market structure in ways that "stack the deck" against other active managers.

In the context of Chris Hohn’s record-breaking success, the sources paint a grim picture of the state of active management, describing an industry that is structurally challenged and largely failing to meet its objectives. While Hohn’s TCI Fund Management has generated lifetime gains of $68.4 billion, the broader industry is characterized by systemic underperformance and the existential threat of passive investing.

According to the sources, the current state of active management is defined by the following:

1. A Legacy of Failure

Chris Hohn is remarkably blunt about the condition of his own profession, stating that “active management as an industry has been a failure and is dying”. This assessment is supported by objective data:

• Widespread Underperformance: Statistics from S&P Global reveal that 88% of large-cap US funds have underperformed the S&P 500 index over a 15-year period.
• "Bad Businesses": Hohn classifies traditional asset managers as "bad businesses" and avoids investing in them entirely, despite the fact that his own firm earned $1 billion in revenue in the year ending March 2025.

2. The Pressure of Passive Investing

The decline of active management is accelerated by the rise of passive products, which offer a cheaper alternative to traditional funds. Beyond cost, the sources note that the prevalence of passive flows is fundamentally changing the structure of the market. These flows "stack the deck" against the remaining active managers, making it increasingly difficult to achieve alpha in a market dominated by index-tracking capital.

3. The "Pain" of Being the Last Active Manager

The sources suggest that the industry is in a period of painful consolidation. Terry Smith, another notable investor, is quoted as saying that while the dream of an active manager is to be the "last active manager left," the process of getting to that point is likely to be "rather painful". Hohn’s TCI stands as an outlier in this environment, having compounded at twice the market rate over two decades while the rest of the industry "bleeds".

4. Tactical and Structural Evolution

The sources suggest that the few active managers who remain successful have had to evolve away from traditional models. Hohn’s survival is attributed to:

• Moving away from "Madness": Hohn admits to having owned "bad businesses" and engaged in "madness" earlier in his career (such as the ABN AMRO trade). He now views many activists as being stuck in poor-quality businesses.
• Focusing on Predictability: In an industry obsessed with "what's new," Hohn focuses on predictability and high barriers to entry, identifying a very small universe of only 200 investible companies worldwide.

Ultimately, the sources characterize the state of active management as a "dying" field where only a few "owner-investors" with extreme concentration, long-term focus, and significant "skin in the game" ($14 billion of internal capital in Hohn's case) can hope to survive the shift toward passive dominance.