🚀Inside Chris Hohn’s TCI: Lessons from an 18% Compounder (1/2)
How one of Europe’s top-performing investors builds long-term alpha with a concentrated, high-quality portfolio
I recently came across a fascinating podcast interview between Chris Hohn, founder of The Children’s Investment Fund (TCI), and Nicolai Tangen, CEO of Norway’s $1.4 trillion sovereign wealth fund (NBIM).
You can listen to it —> here.
What I liked about the podcast is that Hohn has a very clear definition of business quality, which narrows down his investable universe to roughly 200 stocks. He also mentions a long list of industries he avoids—mostly those characterized by high competition and limited pricing power. In contrast, he focuses on companies with true moats and strong pricing power.
You’ll find a full summary of the podcast below, but these characteristics align closely with our approach as thematic investors. We also seek industries growing faster than GDP, with deep and defensible profit pools. So there’s significant overlap in investment philosophy.
As the chart below shows, Hohn’s performance has been nothing short of stellar. The fund has delivered an 18% annualized return since inception—remarkably close to Buffett’s outstanding 20% for Berkshire Hathaway shareholders.
Let’s take a quick look at the portfolio and identify a few patterns. Below are the fund’s top 10 positions. With five holdings each representing more than 10% of assets, it’s fair to say the fund is highly concentrated.
One pattern that stands out is the balanced mix of asset-heavy and asset-light business models—yet all are dominant players in their respective markets:
Asset-heavy models like Canadian Pacific (CP), Canadian National (CN), and Ferrovial (which operates toll roads and airports) are essentially natural monopolies.
Asset-light tech giants like Alphabet and Microsoft command over 50% market share in their core businesses—modern-day digital monopolies.
Moody’s and S&P Global, the leading rating agencies, are foundational to the financial system and operate in highly consolidated markets—similar to Visa in payments.
GE Aerospace, the fund’s largest position, deserves its own mention. It’s the leader in commercial aircraft engines with an estimated 50% market share. Hohn is negative on airlines but still wants exposure to the secular growth in air travel—GE lets him monetize that trend without the margin pressure of the airline industry.
Next week, we’ll attempt to reconstruct the 200-stock investable universe Hohn referred to. I’m convinced it will include many thematic winners.
Make sure to sign up—and enjoy the full podcast summary below.
1. Start With Moats, Not Growth
"The most important thing is high barriers to entry."
Hohn believes wide moats and defensible market positions are non-negotiable. He defines moats as anything that makes a business hard to replace or compete with: network effects, brand strength, intellectual property, switching costs, or irreplaceable physical infrastructure.
Examples:
Aena – Spain’s airport operator, a natural monopoly.
Deutsche Börse, LSE – Stock exchanges with network effects.
GE Aerospace, Safran – Jet engine duopoly with 50+ year product cycles.
Meta, Visa – Massive user networks create defensibility.
If a business lacks a moat, growth will likely invite competition and compress margins.
2. Only Own Essential, Irreplaceable Businesses
"We don’t like things which are discretionary."
Hohn focuses on companies that deliver must-have products or services. Think credit ratings (Moody’s, S&P), stock exchanges, and mission-critical software — areas where clients have little choice but to engage.
He prefers:
Steady, recurring revenues
Tangible asset value (e.g. infrastructure)
Real pricing power – the ability to raise prices above inflation
"There is a special group of super companies that can price above inflation. That’s the test of the moat."
3. Avoid "Profitless Growth"
"Airline travel has grown 5% a year, but airlines collectively have made minimal profits."
Growth without profitability or barriers is a red flag. Hohn warns against:
Airlines
Low-margin manufacturing
Trendy, unproven tech with weak earnings
He rejects businesses where earnings power is unpredictable or structurally weak, even if they appear cheap.
4. Know What Not to Own
"Most industries are bad… very competitive with existing players and new technologies."
Hohn maintains a "bad business blacklist," including:
Banks
Autos
Retail
Insurance
Commodities
Airlines
Telecom
Media
Ad agencies
Traditional asset managers
These sectors are often:
Highly competitive
Prone to disruption
Lacking pricing power
His investable universe is only ~200 stocks globally.
5. Think Long-Term
"The average holding period of our portfolio is eight years."
TCI holds public companies with the mindset of a private equity investor. Intrinsic value growth, not near-term stock moves, drives decision-making. Hohn prefers DCF analysis over multiples, and is comfortable paying up for a business that compounds over decades.
Case Study:
Moody’s (MCO) – Bought during the 2009 crisis. Despite cyclical headwinds, the business proved resilient and remains a top holding.
"If a company keeps growing, the price doesn’t matter that much."
6. Concentration = Conviction
"We don’t own 100 things. We own 10 to 15."
TCI’s top 5 holdings make up ~72% of the fund. Hohn believes in big bets on a few exceptional businesses, backed by deep research and seasoned intuition.
"Thinking without thinking… intuition is a higher form of intelligence."
He balances rigorous analysis with instinct – refined through decades of experience – to know when a business is truly exceptional.
7. Philanthropy Is Core to the Mission
Hohn gives away nearly all his earnings to charity through TCI’s philanthropic arm. His model is proof that purpose and performance can coexist.
"Very few things matter, and most things don’t matter at all."
Final Thoughts
Chris Hohn’s approach is a masterclass in long-term, fundamentals-based investing. He avoids noise, focuses on quality, and stays patient. The result? An outstanding track record built on simplicity, clarity, and conviction.
In next week's issue, we’ll try to reverse-engineer Hohn’s investable universe of 200 high-quality stocks – a shortlist that could help any investor narrow their focus.
In a world chasing the next big thing, Hohn quietly compounds wealth by sticking to the timeless truths of investing.
Don’t Miss Out
If you’re looking to stay ahead of the curve in thematic quality growth investing, subscribe today to receive fresh, insightful posts straight to your inbox.
Subscribed
Thanks for reading ThematicEdge! Your support means a lot.
If you enjoyed what you read, feel free to share it with your friends and colleagues!