Baillie Gifford, the Edinburgh-based investment management partnership, is challenging the investment industry to return to its fundamental purpose, namely deploying clients’ capital into tangible, sustainable activities, allowing companies to grow and prosper over the long term, whilst still generating positive returns for shareholders.
‘Actual’ investment requires a willingness to be different, says Baillie Gifford, to accept uncertainty and the possibility of being wrong. The company doesn’t believe that investment management is about processing power, trading and speed; it is about imagination, creativity and working constructively on behalf of clients with entrepreneurs and companies who have greater ideas than our own.
To highlight the need for the investment management industry to refocus on its fundamental objective, Baillie Gifford is launching an international campaign based on the concept of ‘actual’ investing.
While passive has its place, providing low cost market access with, on average, better after fees results than active managers, Baillie Gifford does not believe investment decisions can be made on numbers alone, using super computers and complex algorithms. This has little to do with the process of targeting and subsequently allocating capital to the innovative companies changing the world.
Equally, Baillie Gifford is not a typical ‘active’ manager. In its opinion, this term has been hijacked by many fund managers who think active means ‘activity’ and simply being different from an index. Activity has more to do with trying to outsmart other fund managers, rather than with the creative deployment of capital.
Stuart Dunbar (pictured), Partner, Baillie Gifford, says: “Baillie Gifford is an ‘actual’ investor valuing its duty to direct capital into attractive company projects and in so doing, creating wealth that society needs to fund our future obligations, such as investing in technological progress, medical breakthroughs or building better infrastructure.”
“Passive investing has its benefits. Allocating capital with no reference to the underlying uses of that capital is certainly a low-cost way to gain market exposure, but it is not investing, in the purest sense. Similarly, defining active management as being different from an index is to start in the wrong place. This is why most active investors fail to deliver returns that outperform passive investment strategies over the long term.”
James Budden, Director of Retail Marketing & Distribution, Baillie Gifford, says: “With this international campaign, we are trying to make the point that active investors are not homogenous. The difficulty for the investing public is to understand what makes a successful active manager. We are challenging them, and the industry, to search for actual investors and discover a category of investment managers that truly believe in the fundamentals of investing and its benefits.”
