In an interview with The Financial Times (FT), Anderson, who will retire as a fund manager at Baillie Gifford – a firm that acts as an investment manager for various trusts, including SMT – next April, bemoaned the UK’s ability to produce “giant companies”.
“Of course I’m not expecting everybody to be like Jeff Bezos but it seems to me there is a real problem here,” Anderson told the FT.
“The FTSE 100 is really a 19th-century and not even a 20th-century index,” he opined.
As joint manager of SMT’s portfolio, Anderson has succeeded handsomely by taking early positions in tech giants such as Amazon.com, Tesla and China’s Tencent Holdings.
“Why is it that people are happy to take high pay for relatively undemanding things, but they don’t dream of creating these truly great companies?
“I find that sort of depressing, and there must be so many different causes of it. Plenty of them are on my side of the fence but something’s quite wrong, it seems to me,” Anderson said.
Anderson said it was all too easy for fund managers to enjoy a comfortable life by just obeying “what the combination of their bonus system and ESG [environmental, social and governance] tells them”.
Anderson acknowledged that Britain has occasionally produced a world-beating company, such as chip-maker ARM, whose technology helped drive the boom in smartphones and mobile devices, but then Japan’s Softbank came calling and shareholders were only too happy to cash in their chips early.
Baillie Gifford opposed the takeover of ARM but could not find enough investors of a like mind to stop Britain’s computer chip champion from falling into foreign hands.
Tom Slater, who has co-managed the SMT trust with Anderson since 2015, warned of the perils of taking the money and running.
“The biggest mistake you can make is not failing to sell something you should have sold, it’s selling something that you should have held on to,” Slater told the Pink ‘Un.
Meanwhile, private equity firms continue to circle essentially sound British companies such as Senior PLC (LON:SNR) and Morrison (Wm.) Supermarkets PLC (LON:MRW), looking to take advantage of short-term conditions, such as Brexit and the pandemic, to pick up companies on the cheap.
Although much of Baillie Gifford’s initial success was based on its abandonment of UK equities for the “unicorns” to be found on the west coast of the USA, increasingly the company has been turning its focus to China.
“I’ve learned that you have to suspend disbelief when you’re talking to some of the founders there,” Slater told the FT. Because of the size of China, ambitions and targets that seem outlandish to European ears are achievable in the People’s Republic, Slater suggested,
Slater said he was aware of the political risk of investing in China but said it was not an issue that was unique to China, citing former president Trump as a loose cannon in a supposedly stable Western jurisdiction.
“The political decline of America is so great and so enormous and so threatening. Am I sure that America will be a democracy in 10 years’ time? I’m not sure at all,” Slater said.
Baillie Gifford was an early backer of Chinese companies Meituan, ByteDance and Alibaba, getting on board when they were still private.
E-commerce company Meituan has been one of Baillie Gifford’s best investments; since floating in 2018, the shares have risen more than fourfold.
If, as we’re told, global investors are rotating into value stocks then Slater conceded that is an environment in which Baillie Gifford would most likely underperform but Slater, quite literally, is not buying it.
“Personally, I’m pretty sceptical because I think there is such an abundance of growth. There are so many investment opportunities, there is such radical change,” Slater said.