Investment managers can learn more from Marxism than the media or US hedge funds, James Anderson has said.
In an article in Baillie Gifford’s Trust magazine, the joint manager of the Scottish Mortgage Investment Trust, who is due to depart the firm this month, said he had been “redoubling” his efforts to speak to economists, historians and political theorists with “deep knowledge” of Marxist thought.
“That’s much more valuable than listening to the media or US hedge fund titans pontificating about China,” Anderson said.
In the piece, Anderson outlined how Scottish Mortgage’s investment philosophy has evolved during his tenure at Baillie Gifford.
He said that for many years the trust's managers have noticed that investment outcomes were dominated by a very small number of stocks - normally between three and five.
“But while we observed this, we could not explain it,” he said.
To try and work out what was going on, Anderson said the trust’s managers have had to look to academics who have refused to be “trapped in preconceived ideas”.
Anderson quoted Hendrik Bessembinder, a finance professor at Arizona State University, whose findings “invalidate” most standard investment approaches.
He summarised Bessembinder’s theories which say essentially that most equities do not outperform short-term government bonds, and there is no normal bell curve of stock performance distribution.
“Thereby the whole edifice of modern finance trembles,” Anderson said, adding that stockpickers’ task is then to “relentlessly pursue the few” companies that do succeed for shareholders.
“Only one per cent of companies really matter.”
Anderson added that, furthermore, less than one per cent of the available information is of significance.
“We overcomplicate at our peril.”
Anderson quoted researcher Carlots Perez, who highlighted that the current margins between global success and failure are so finely balanced that “we must all try and find our better selves - not our financialised selves”.
He ended on a quote from Swedish academic Hans Rosling, who decried negativity, saying “fundamental improvements that are world-changing but are too slow, too fragmented or too small one-by-one to ever qualify as news.
“I’m talking about the secret silent miracle of human progress.”
Anderson announced in March last year that he will leave Baillie Gifford this month after more than two decades running the Scottish Mortgage investment trust.
He has run the trust since 2000, and since 2015 he has shared the role with Tom Slater.
Slater will continue as manager after Anderson leaves and, as part of the transition process, Lawrence Burns will become Scottish Mortgage's deputy manager with immediate effect.
Burns joined Baillie Gifford in 2009 and since 2017 he has co-managed the international concentrated growth strategy.
The trust has stuttered recently, returning -9.52 per cent in the year to April 4, according to FE Fundinfo. This is in comparison to the sector average, which is -1.51 per cent.