Baillie Gifford’s Anderson blasts 'self-indulgent' investors

Baillie Gifford’s Anderson blasts 'self-indulgent' investors

Investors with short-term views have been branded "self-indulgent" James Anderson, who runs the £7bn Scottish Mortgage investment trust for Baillie Gifford.

Speaking at the trust’s annual investor forum in London yesterday (January 10), Mr Anderson said: "Markets are messed up.

"There are too many people who view the market simply as a place for them to make money, rather than as a place where companies and funders of companies can meet.

"Investors worry about indices, we don’t care about those, and some investors look at the three month, six month, or one annual performance of an investment, that is self-indulgent."

The Scottish Mortgage investment trust performed strongly in the 2018 calendar year, returning 4 per cent, while the average trust in the AIC Global sector lost more than 3 per cent.

The performance was largely driven by returns in the first half of the year, as the trust’s heavy exposure to technology businesses meant it lagged the market in the second half.

But Mr Anderson said the recent weakness in the share price of some technology shares had not changed his view about how he should be investing.

He said: "The lesson I have learned lately is to be more extreme in my view, more extreme in the view that what we are seeing is the first steps to a new world, a world where the post World War 2 model of markets and economics is irrelevant.

"That the market can’t handle US interest rates where they are now, even after the sugar rush of a tax cut at the top of the cycle, that shows you the world is changing."

He believes a relatively small number of shares will drive all of the returns for investors in the coming years, in particular companies in areas such as technology and healthcare.

Mr Anderson expects the UK market, which he said was stuffed with companies in areas such as oil and commodities, to be "dead" within a decade as those companies are usurped by businesses in the new economy.

He said many investors have become focused on those traditional areas in the belief that the value style of investing would now perform better than the growth style which had dominated the past decade.

Technology companies are generally owned by growth investors, as they value those businesses on the returns they expect to be generated far into the future.

Value investors tend to pay attention to the shares that have fallen furthest in value, in expectation that those shares will revert back to the long term average valuation when market sentiment or economic conditions shift.

Much of the market volatility that has occurred since October last year has been as a result of investors shifting towards the stocks that perform best when value investing is in vogue.

Mr Anderson said the value approach had merit on many occasions, because it was based on navigating economic cycles, but he warned this approach would not work at a time of structural change.