Baillie Gifford 

Baillie Gifford’s Plowden shuns banks and pharma

Baillie Gifford’s Plowden shuns banks and pharma

Charles Plowden, who runs the £1.6bn Monks investment trust, won’t invest in banks or AstraZeneca and Glaxosmithkline as he believes such companies are being swept aside by technological change.

Mr Plowden said traditional banks risk being displaced by fintech companies and challenger banks to the point where “the traditional banking sector may not exist” in years to come.

He said the model is already under threat in emerging markets, where consumers have moved to mobile payments, skipping the need for traditional banks.

Mr Plowden added that the legacy issues of fines and bad loans, mean traditional banks will struggle to achieve returns on a scale that makes them a good investment relative to fintech companies.

He is also scathing of the investment case for FTSE 100 stalwarts Astra Zeneca and Glaxosmithkline.

The fund manager said those companies have been left behind by US rivals in the biotech space.

Mr Plowden said: “When global economic problems happened, Astra and Glaxo responded by cutting their research and development budgets. They should have cut the number of salesmen and managers.

"In contrast, Google have started to look at healthcare, and it is possible they could be one of the biggest healthcare companies in the world in five years."

Mr Plowden currently has gearing (borrowing money to buy more shares) on the trust of 7 per cent, below what he said is the “normal” level of 10 per cent.

This lower level of gearing is not, he said, because he is cautious on the outlook for equities.

Instead, he said it is because he is waiting for a market correction at which point he will take advantage of the falling equity prices to buy more shares.

The Monks investment trust has returned 45 per cent over the past year to 13 November, compared with 28 per cent for the average trust in the IA Global sector in the same time period.