James Anderson to successors: be eccentric, radical

James Anderson of Baillie Gifford. Picture by Matt Marcus.

Baillie Gifford investment manager James Anderson has delivered a fiesty farewell message to shareholders of the firm’s high-flying flagship fund, the £18 billion Scottish Mortgage Investment Trust plc, as he prepares to leave the Edinburgh investment giant next April to join Swedish company Kinnevik AB.

Anderson wrote in the Scottish Mortgage results statement that conventional investment management is “irretrievably broken” and urged his successors “to remain eccentric” and “become more so and more prepared to be radical.”

Anderson wrote of the fund’s successful investments in global companies like Amazon and Tesla and said “we should respect and endure uncertainty, try to identify where extreme upside might occur and observe patiently.”

He said Tesla is “but an example, if a crucial one, of the central issue for investing in our times … It isn’t growth versus value, it isn’t the level of markets, it isn’t the economic growth rate in 2021 or the progress of the pandemic but it is understanding change, how it happens, how much happens and its implications.”

His message came as Scottish Mortgage said on Thursday it produced its strongest ever return in the year to March 31, with its share price soaring 99% in the period and net asset value (NAV) total return rising 111% versus the 39.6% return of its benchmark, the FTSE All-World Index.

Anderson wrote: “After many years of anodyne reviews perhaps some bluntness is permissible in this final and twenty second version.

“There’s much that I have misunderstood and misjudged over the two decades but my ever-growing conviction is that my greatest failing has been to be insufficiently radical.

“To be blunt: the world of conventional investment management is irretrievably broken.

“It demands far in excess of the canonical ‘six impossible things before breakfast’ that Alice in Wonderland propounds …

“As the world changes so should we.

“Indeed this is an appropriate point of departure.

“The investment world changed profoundly in the mid 1980’s.

“It resembles that most famously described by Ben Graham, the apostle of value investing, paid homage to by Warren Buffett and perpetually embraced by the media, as little as Alice’s rabbit hole described the reality of the late 19th century …

“By engaging with visionary minds and their companies we are simply seeking insight into the world of tomorrow.

“Often we are overwhelmed and puzzled more than comprehending.

“That’s the plan.

“The investment outcomes are but the eventual outcomes of the mentality and process.

“We need to remain eccentric.

“In fact we need to become more so and more prepared to be radical.

“We’ve always claimed to learn from the remarkable leaders we are lucky enough to meet in managing Scottish Mortgage …

“There is no industry more suspicious of the unconventional than fund management.

“We need to reinvent from first principles.

“We need to help create great companies that embrace the extraordinary …”