INVESTING
31 December 2019
What is ‘Actual Investing’?
L
ate last year, the normally publicity-shy Edinburghbased asset manager Baillie Gifford launched its first large advertising campaign entitled Let’s Talk About Actual Investing. The reason: the firm was reluctant to go on being bracketed together with what is conventionally seen as active management. “We consciously came to the view, over the last three or four years, that we’re no longer happy to be deemed as being part of the asset management industry in the same way as everyone else does,” Stuart Dunbar, partner at Baillie Gifford, tells MoneyMarketing. “We’ve always thought like this, but we’ve just become a bit bold about it now,” he adds. “We think our industry is losing its way and that’s showing in huge flows from active to passive management, as well as a focus on fees. We believe in low fees but the whole debate is unhelpful. It’s more and more apparent to us that most asset managers are self-serving, rather than focused on serving their clients. We’re seen as just another asset manager who’s trying to enrich our sales at the expense of our clients – and that’s not what we’re trying to do”. He explains that the genesis of the Actual Investing campaign was the making of internal films for clients about how Baillie Gifford is different
to other asset managers. “This led us mainly about what people are going to sharpen our thinking as to how we to do next week – it’s a case of if I’m are different.” smarter I’ll do the opposite to what For Dunbar, it’s important to focus you’re doing and I’ll get rich at your on the fundamental job of investing. expense. We don’t think that this “Most investors seem to have serves a social purpose.” forgotten – both asset management Dunbar sees his firm’s job as companies and customers of asset outperforming for its clients. “If we management companies – that focus on wealth creation and longthe fundamental definition of termism, we understand where the investment is to take capital from returns are coming from – not share those who have surplus and make prices but from businesses that are it available to those who need it to doing very well.” use in wealth-generating projects. This implies a five-year-plus view. And I say projects rather than “We say don’t invest with us if companies because you don’t have a companies are three-, or better, RATHER BIZARRELY, just a collection of five-year horizon. projects. Investing If you want to THE WAY TO is not speculating invest for a year OUTPERFORM FOR on share and you think we CLIENTS IS TO IGNORE can outperform prices. Imagine if there was no the market, forget THE STOCK MARKET stock market at it. Over five years all – that’s how people would think there’s a strong correlation between about investing – and they’d ask: How share prices and the fastest growing am I deploying my capital, how am companies. Over less than five I working with the management of years, this doesn’t exist at all. Rather companies to make sure that we’re bizarrely, the way to outperform for successful in doing this?” clients is to ignore the stock market.” Asset management companies Dunbar has had a lot of feedback have moved away from this type of from people he knows – and those he thinking, Dunbar believes. “Instead doesn’t – about the Actual Investing of investing being about wealth campaign. “Feedback has been creation, business management, quite positive as I’ve had a lot of imagination and entrepreneurism, people at other asset management we work in an industry that is companies saying they agree with
what we’re doing, but they work in organisations that don’t allow them to think the way we do. That shows how different we are.” Baillie Gifford operates as a private company with no outside shareholders. “We don’t have to pay a dividend every year, much less a rising dividend, and if our business makes half as much money this year as it made last year, we won’t change a thing. We don’t have to play the game that other asset managers do: if revenue is under pressure, they merge. But this has nothing to do with doing a good job for clients.” Due to the United Kingdom giving more say in retirement planning to individuals, there are now fewer defined benefit pension schemes in existence. This means that Baillie Gifford’s core client base is changing and the firm wants to reach new audiences – including those in South Africa. “We’ve seen our client base starting to decline, but this is not precipitous and we’ve seen it coming. We had to act – reluctantly – in anticipation of that and we now have wholesale businesses in different countries that are in their very early stages. Here in South Africa, we’re starting to work on building relationships with local financial institutions,” Dunbar says. “It’s more about maintaining positive morale and positive momentum than it is about growing, as we have no asset growth targets, but if we want to attract good people, we have to be a reasonably thriving business to offer opportunities – we can’t sit back and watch the world evolve around us.” Founded in 1908, Baillie Gifford currently manages over £200bn for clients all over the world, mainly in equities. SA’s Financial Sector Conduct Authority is now approving three more of the company’s funds that will bring the total to eight funds given FSCA approval.
Stuart Dunbar, Partner at Baillie Gifford
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