In a recent article for Trust magazine, I took the opportunity to discuss my time at Baillie Gifford. What I had originally anticipated being a two-year stint before moving on to the big merchant banks in London had in fact been my first steps of a nearly four-decade-long investment journey.
Next month I’ll close the chapter on my time at Baillie Gifford, but before I do so I wanted to share some of the lessons that I’ve learned along the way.
- Start with a blank sheet of paper. Invest in what you think are the best companies, regardless of sector or geography. Thinking in terms of ‘oil and gas’ or ‘the US’ leads you to be influenced by what others allocate to these categories. Monks stopped reporting by countries and sectors five years ago to avoid that.
- Patience pays. Along with clarity of purpose and a long time horizon, a philosophy and a company structure that support patient investing are big advantages. Few investors have this luxury as, after a couple of years, their bosses or their marketing department start agitating.
- Small teams work best. Why? Because everyone is forced to take responsibility, which grows mutual reliance and trust. Having worked in big teams and small, I’ve found it works much better with two or three trusted colleagues. It also helps with business continuity. One reason I don’t believe in ‘star managers’ is that, by definition, they’re one-generation affairs.
- Root yourself in the real world. Investing should be more than an abstract exercise about percentages of outperformance. Your job is to look after people’s savings. Your success or failure has a real impact on their lives.
- Asymmetry is (almost) everything. Having tended to ‘trim my winners’ and reinvest the money, I learned latterly from Arizona State University’s Professor Hendrik Bessembinder that the vast majority of returns are generated by a tiny cohort of companies. His research taught Baillie Gifford to let our winners run and, unless the fundamentals go wrong, to stick with the companies we believe in.
- The old laws no longer apply. The combination of the technology revolution and the opportunities of Asia represent regime change in the investment world. ‘Reversion to the mean’ ain’t going to happen.
- I picked the right career. It didn’t take me all 38 years to learn that investment is the best possible career. It’s fun, absorbing, challenging and constantly changing. Even better, and increasingly recognised, is the fact that it’s actually useful to society. I’d recommend it to anyone.
It’s almost impossible to condense a lifetime of learning into just seven points but if I could leave one more lesson for Baillie Gifford’s investors of the future it would be this: Stay curious, stay patient and stay brave.
You can hear more about Charles’ career at Baillie Gifford and his reflections on a lifetime of investing in our latest podcast episode or read more about the lessons he’s learned in Trust magazine.