Yuri Khodjamirian

Yuri Khodjamirian started his investing career in July 2009, in the depths of the financial crisis, at a London boutique called Majedie Asset Management. He spent over a decade there, working from analyst to running a UK income fund that peaked at about $2 billion in assets. After leaving Majedie, he connected with Maurits, the founder of Tema ETFs, and joined about a year before this recording to help pioneer active ETFs focused on long-term structural themes. On this episode, Yuri breaks down the Tema Monopolies and Oligopolies ETF (ticker: TOLL), explaining the five sources of monopolistic competitive advantage and why these companies deserve a spot closer to the core of a portfolio than the satellite.

Five Sources of Monopolistic Advantage

Yuri defines monopolies more strictly than typical "moat" investing. He identifies five concrete sources of competitive advantage. First: non-replicable physical assets. Railroads are the prime example. There used to be 180 Class I railroads in the US in the 1920s. Now there are six. Nobody will ever build another one because the permitting environment makes it prohibitive. Second: network effects, where every additional user creates more value for existing members, with financial exchanges being a textbook case. Third: high switching costs, particularly in medical devices where changing between competitors is expensive, time-consuming, and carries real risk. Fourth: regulation, where concessions often run 70, 80, or 90 years, as with toll roads and airports. Fifth: economies of scale, with semiconductor manufacturing as the defining example. Yuri references a Wired article about visiting a TSMC fab that described it as "like seeing God," noting the fab produces more transistors than every factory has produced of anything in the history of mankind.

Notably absent from his framework: intangible value like brand. "For us, that's just too weak of a reason for competitive advantage," Yuri says. "That can be broken much easier than people think." This is a deliberate departure from the Buffett-style moat framework that puts brand loyalty at the center.

Why Good Monopolies Are Not Evil

Yuri pushes back hard on the idea that monopolies are inherently harmful. The good ones exist because they produced what he calls a "mission critical product" that created enormous customer value over time. Visa controls about 84% of the network payments business alongside Mastercard, but it's accepted in roughly 140 of the world's 150 countries and takes just a tiny toll on each transaction. Railroads have actually seen pricing come down in real terms despite consolidation, and they compete actively against trucking. The key: these companies don't gouge pricing or exploit their position. They reinvest profits into constant innovation.

He points to information services companies like Moody's, which holds the biggest database of private and public companies in the world and is now investing heavily in AI layers on top of that proprietary data. The companies in TOLL have pristine financials, highly recurring revenue, and high returns on invested capital. But what matters most is the durability of those returns. The market consistently struggles to price durability correctly, which is why these stocks tend to beat expectations over time and why quality as a factor has worked in almost every environment going back to the 1920s, per AQR's research.

Portfolio Construction and Risk Management

TOLL targets about 30-35 holdings, built bottom-up through fundamental analysis: financial models, company meetings, and conference transcript reviews. The investment process has four pillars: strong operating base, solid balance sheets and cash flow, a valuation case, and a defined edge. All four tests must pass before a security enters the portfolio. Turnover runs about 15-20% annually.

Position sizing uses a three-tier conviction system (high, medium, entry) with minimum and maximum position sizes designed to counter behavioral biases. Moving between tiers requires a deliberate conviction decision and a substantial trade, not incremental nibbling. Rebalancing happens actively on a three-to-six-month cadence based on risk-reward reassessment rather than a calendar. Yuri notes that alpha generation in really good ideas has about an 18-24 month lifespan, so they avoid letting winners run indefinitely. The CIO reviews risks with fund managers every two weeks, cutting portfolios by geography, currency, market cap, interest rate sensitivity, and proprietary subsector classifications.

Key Takeaways

• TOLL defines monopolies through five sources of advantage: non-replicable physical assets, network effects, high switching costs, regulation, and economies of scale. Brand and intangible value are explicitly excluded.
• The portfolio holds 30-35 names with 15-20% annual turnover, using a three-tier conviction sizing system and active rebalancing every 3-6 months based on risk-reward analysis.
• Visa and Mastercard control about 84% of network payments, accepted in roughly 140 countries, yet charge only a tiny toll per transaction, illustrating why good monopolies benefit consumers.
• US railroads consolidated from 180 in the 1920s to 6 today, and no new railroad will ever be built due to the prohibitive permitting environment.
• Yuri positions TOLL as a quality upgrade for core equity allocations, noting that quality is one of the few factors that has worked in almost every environment since the 1920s per AQR research.

Listen to the full conversation on Spotify, Apple Podcasts, or YouTube.