Baillie Gifford manager calls analyst certificate 'travesty'

Baillie Gifford manager calls analyst certificate 'travesty'

Chartered Financial Analyst qualifications are useless and should be scrapped, according to James Anderson, who runs the £6.95bn Scottish Mortgage investment trust at Baillie Gifford.

Mr Anderson said the qualifications focus on things he feels don’t help clients in the long-term.

He said: “The industry, the commentators and the market participants, don’t talk about how markets actually work.

"Academic research we have seen shows that not many stocks actually go up by much over the long term, the performance of markets is always driven by a relatively small number of stocks.

"Moving between value strategies and growth strategies doesn’t matter over the long-term, it doesn’t matter about moving asset allocation between the US and Europe or whatever. There is no such thing as mean reversion. [Short termist] quarterly earnings numbers don’t matter.

"It is a travesty what the market talks about,” he said.

Mean reversion is the idea that sentiment drives stocks to points beyond their true price, and that over time the valuations move back towards the mean valuation.

Mr Anderson’s trust has returned 219 per cent over the past five years, compared with 105 per cent for the average trust in the AIC Global sector in the same time period.

His funds are heavily invested in technology companies Amazon and Google parent Alphabet, which have been very strong performers.

He said the idea that mean reversion will lead traditional retailers, whose valuations have in some cases plummeted as Amazon has grown, to catch up with the new technology giants is “laughable.”

The fund manager also said he won’t engage in short-term forecasts such as about the oil price.

“I could say anything, it would get reported, and it might even be right in any one particular year, but over the long term it is the the secular changes that matter.”

Secular refers to market activities occurring over a long-term time frame, trends which are not considered seasonal or cyclical and instead remain consistent over time.

He said the major secular changes in the world are the impacts of technology and the mapping of the human genome.

Mr Anderson reflected that the most important phase of his career was a nine month period in the depths of the financial crisis in 2008-09. The fund manager owned shares in Amazon and Google at that time, and watched them lose a huge amount of their value, but continued to own them. They have soared in value since.

“What I would say to anyone out there is, if your fund manager starts to change what they believe in in times of crisis, get rid of them immediately,” he said.

Paul Gibson, managing director of Granite Financial Planning in Aberdeen said his firm doesn't take tactical decisions, "as these don’t add any value other than adding transaction costs to the client”.

James Pigott, who runs Pigotts Investments, an adviser firm in Dorking, said the Scottish Mortgage investment trust is one “you couldn’t be without”.