Without doubt, the single most important differentiator for Baillie Gifford is our corporate structure. We’re an unlimited liability partnership. That means we’re owned and run by 43 individuals, all of whom work within the business on a day-to-day basis. That frees us from some of the trappings that go with listed ownership structure – most importantly, it means we are not constantly striving to make next quarter’s numbers, so we can focus on running our business for the next decade and beyond. This gives us tremendous stability - we’re in the fifth generation of this partnership structure and have been going for 110 years so far.
That stability is important to our clients – our staff turnover is exceptionally low and our client relationships are long – but it’s also important for our investors because it allows them the freedom to think in decades, not quarters. It means that our investors can focus on what a company might be in five or ten years and direct our clients capital accordingly, rather than trying to make a call on whether or not it will exceed expectations at the next earnings announcement. In short, we’re actual investors, not short term speculators.
Our long term focus seems obvious to us but it takes lots of imagination and certainly lots of bravery. That’s why our average holding period 5 years is quite a lot longer than most market participants.
Of course, if you are truly long term in the way you invest then there are some factors which you absolutely must consider. Good stewardship is one. If a company is not considering environmental, social and governance factors in the way they run their business, they simply might not be around at the end of our time horizon. For this reason, we look for businesses that are contributing positively to society, that consider all stakeholders when they make decisions, and that exhibit a culture of responsible business. There are also businesses we simply would not invest in and these includes tobacco, alcohol, armaments and gambling. This gives our clients reassurance their assets are invested responsibly but the main reason we do it is that it is beneficial for returns in the long run. In a world of 24/7 news coverage and social media scrutiny, this is increasingly the case.
Now, these companies are hard to find. That’s why our team is comprised of regional specialists with their ear close to the ground in their respective markets. They’re tasked with bringing forward the best ideas forward for inclusion in our global portfolio. We take a highly selective approach, investing in just 70-100 of the 6,000 or so companies in the global universe, so really only the best make the cut. The result of combining regional expertise with global perspective is a portfolio of global champions and local heroes.
Global champions are companies like Amazon that are disrupting existing industries as well as creating entirely new ones all around the world. Local heroes are the likes of Abiomed, a medical devices business that is revolutionising the way we treat heart problems – a niche industry and primarily just in the US. Both types of growth company have merit in a global portfolio and both have driven the excellent returns we have delivered for clients so far.
In summary, the Baillie Gifford Global Stewardship portfolio:
- Is a long term growth portfolio that draws upon Baillie Gifford’s partnership culture
- Seeks businesses that are contributing positively to society, that are considering all stakeholders when they make decisions, and that are exhibiting a culture of responsible business.
- Most importantly comprises of both Global Champions and Local Heroes.