The Last Active Manager

Chris Hohn just posted a record year. His industry didn't.

“In many ways, the dream of the active manager should be to be the last active manager left – but I think it could be rather painful getting there.” — Terry Smith, January 2026

No hedge fund manager in history has made more money in a year than Sir Chris Hohn. Last year, his fund, TCI, generated profits of $18.9 billion for investors, exceeding even what John Paulson achieved in “The Greatest Trade Ever”. Its record performance takes TCI’s lifetime gains to $68.4 billion, catapulting it into the top five hedge funds of all-time – up there with Citadel and Millennium, firms we have spotlighted here before.

Except TCI doesn’t really look like a hedge fund. Hohn manages a concentrated portfolio of stocks. He hasn’t put a short on for three years and holds positions for an average of eight years, with some having been on his books for 13. He runs an investment team of seven or eight people and although his back office inflates the numbers, his headcount is much smaller than the 6,500 Millennium, say, employs across 330 teams.

Hohn espouses a simple philosophy. He looks to buy companies that are immune from competition and disruption. He likes growth, but thinks it’s over-rated. “I think this is something a lot of people get wrong,” he says. “They think it’s about growth, often. Or something new. Neither of them, those things in themselves, to us, matter by themselves. The most important thing for the types of investing that we do, is high barriers to entry.”

Hohn lists the kinds of barriers he looks for: irreplaceable physical assets, intellectual property, an installed base, scale, network effects, brands, customer switching costs. His holdings often encompass a number of them. GE Aerospace and Safran sit on intellectual property and an installed base of long-term contracts; Visa enjoys scale and network effects. Perhaps because it’s his favorite, the one he checks off first is usually irreplaceable physical assets, where he has exposure through Aena (airports), Ferrovial (toll roads and airports), Canadian Pacific Kansas City (railroads), Canadian National Railway (railroads) and Cellnex (telecom infrastructure). All-in, Hohn reckons there are only 200 companies worldwide investible under his framework.

Once he’s found one of these companies, he holds on, often working with management to realize value. At his latest investor event, CEOs from GE Aerospace, Airbus, Moody’s, Vinci and a top executive from Visa all showed up to present to clients. “I value predictability,” he says. “Most investors are looking for the next hot thing… Investors say, what’s new? I say, do you need to change your wife every year?”

Hohn’s edge is his long-term focus and his willingness to act as an owner in the businesses he invests in. He also has a lot of skin in the game. Of the $77 billion of assets the firm currently manages, $14 billion is internal capital. Like all the best investors, his strategy has evolved as assets have grown and the environment has changed. Known for his aggressive shareholder activism when he launched the fund in 2003, he now uses activism as a tool rather than a strategy.

“I owned bad businesses long ago, like ABN AMRO,” he says. “They didn’t know what they were doing. We didn’t know what we were doing. And it was all, you know, a madness… a lot of activists end up being activists in bad businesses.”

These days he steers clear of banks (low quality of earnings, leveraged, opaque).¹ There are a number of other industries he steers clear of, too – including one he knows well. Despite running a highly profitable business – TCI Fund Management Ltd earned revenue of $1 billion in the year to March 2025 – Hohn avoids asset managers. “Traditional asset managers – bad businesses,” he says. “Yeah, speaking as one.”

Through his lens of competition and disruption, the industry certainly looks challenged. Hohn has compounded his fund at two times the market rate of return over two decades, but few others get anywhere close. According to S&P Global, 88% of large-cap US funds have underperformed the S&P 500 index over 15 years. Passive products provide a cheaper alternative and, as Michael W. Green pointed out on my Net Interest Extra podcast this week, the prevalence of passive flows is changing the structure of the market in ways that stack the deck against the active managers that remain.

“Active management as an industry has been a failure and is dying,” Hohn said at an event I attended this week.

To explore why Hohn’s model works while the rest of active management bleeds, read on.