Baillie Gifford joins Mindful Money

6th August 2012

MM: Baillie Gifford – an ancient Scottish institution?

JB: Indeed. It has been around since 1908, starting its life as a partnership between Colonel Augustus Baillie and Carlyle Gifford, who combined money and business nous. It began by advising Scottish Mortgage. This was a group of Scottish entrepreneurs who saw an opportunity in lending money to rubber plantation owners, who were developing their businesses ahead of the global splurge on rubber created by Henry Ford's automobile. Baillie Gifford was founded to run their investment trust.

MM: Has the investment process changed much since then?

JB: It's fair to say that the philosophy has developed over the years and we have honed it considerably in recent times. But ultimately, we have always been active investors, looking for high returns. Our philosophy is based on stock-picking. We are, at heart, growth investors looking for superior earnings growth. Perhaps most importantly we are long-term. Turnover on our portfolios is around 20%, so we hold stocks for an average of five years.

MM: Your managers also seem to stick around for a long time – why is that?

JB: Yes, our managers tend to stay. Across our investment trusts, the eight managers have been with us for, in total, 142 years. People will spend the whole of their careers at Baillie Gifford. We encourage people to do different things. They are not pigeon-holed as a Japan or emerging markets manager, for example. The analysts move around. There also a collaborative culture across the group. Managers talk about stocks and there is plenty of cross-pollination of ideas. It's a good environment and people like it.

MM: The business was built on investment trusts, but when did you start to build the open-ended fund side?

JB: We were solely managing investment trusts until the 1970s. At that point, we lost a large mandate and it prompted a move to diversify the business. We went into pension fund management in the UK and overseas. Smaller institutional investors needed open-ended funds, so we created a business out of that institutional demand. In retrospect, responding to institutional demand rather than being buffeted by retail market sentiment has been a good way to do it.

MM: How much money do you run?

JB: We now run around £75bn, of which around £20bn is in emerging markets. This weighting in emerging markets is really a consequence of the type of business we run rather than because we are ‘emerging market specialists' as such. We are a growth manager with a long-term perspective and we see the best opportunities in those markets.

We are mostly equities-based, but we do have around £5bn in fixed income strategies. Areas such as emerging market debt are important growth areas for the business.

MM: What is the culture of the firm?

JB: It's pretty intellectual. We have an emphasis on treating investment as if it were an intellectual pursuit. We prioritise research and analysis and look broadly for our information. So, for example, we largely steer clear of broker research, preferring to do the leg-work ourselves. We talk to universities, for example, or others on the coal-face for research and innovation. We like to think of ourselves as quite nerdy, but in a good way.

MM: What are your real concerns about the current state of the markets?

JB: We believe one of the biggest problems investors face is the wall of noise. Every day, the world is coming to an end, or it isn't. The best thing investors can do is sit tight and stick with their investment decisions. This is what we do. We concern ourselves with the fundamentals of companies rather than Spanics and Grexits. It is a whole lot easier to do that from Edinburgh.

 

For more insights from Baillie Gifford see their MM blog.

 

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