This surely takes the biscuit for downright woolly thinking. Perhaps we don’t expect more from asset managers with vested interests, so it’s more depressing that this has come from an independent industry body who should be taking the wider perspective.
The guide ‘aims to demystify the concept of patient capital and private markets investing.’ Well, I have a mystery of my own: why is it that we don’t get beyond the first page before we carelessly equate ‘patience’ to ‘illiquidity’, and by the second page we have skipped directly to the substitution of ‘private markets investments’ for the phrase ‘Patient Capital’?
It’s clear that the endemic short-termism of capital markets is a major problem to the fundamental job of capital deployment and wealth creation, but it’s not clear that focusing on liquidity is the solution. ‘Patient Capital’ is not an asset class, it’s a state of mind. Just because an asset can be readily traded doesn’t mean it has to be. The guide goes on to say that ‘patient capital investments are generally expected to have a holding period of several years, unlike shorter term investments such as public equity.’ So public equity is now by definition a short-term investment? WTF?
There’s nothing wrong with private equity investing. In fact, as firms come to market later and are less capital intensive, it’s pretty much a necessity for growth investors to set about gaining exposure in this area. At Baillie Gifford we’ve invested over $2bn for clients in unlisted companies, but the fact they’re unlisted is really neither here nor there. There are a few companies with great long-term blue-sky growth opportunities. Some of them are listed and some of them aren’t. What matters is that they have strong management with credible execution plans, long-term funding to get to profitability, and supportive shareholders who understand the vicissitudes of trying to build a company.