Why Baillie Gifford Stands Out in Global Asset Management

After more than a century of innovation, dedication to long-term growth, and a number of structural benefits, Baillie Gifford has established itself as one of the leading asset management firms in the world. They have over £230 billion of assets under management and are headquartered in Edinburgh, Scotland. Over the years, Baillie Gifford has carved its place in the global investment market by utilizing their own unique way of allocating capital and servicing their clients.

The Baillie Gifford Foundation: A Century of Excellence

The story of Baillie Gifford began in 1907, when Lieutenant Colonel Augustus Baillie and Carlyle Gifford opened up a partnership, a partnership which started life as a law firm, but which had to adapt to a lack of financial climate in 1908, so they transformed into investment management. With this simple transformation, arguably one of Scotland’s most successful financial businesses was born, and its adaptability and forward-thinking character were established. Baillie Gifford was set to emerge as one of the earliest predominantly Far East investment management businesses.

The firm navigated its way through two world wars, economic downturns, and countless cycles while influencing its global presence.  By the time Baillie Gifford reached its centenary in 2008, it had grown its assets to more than £50 billion as a manager of large institutional clients across the globe, including five of the seven largest US pension funds. This huge growth path indicates the firm’s effectiveness in consistently offering clients value through different market conditions.

Partnership Structure: The Baillie Gifford Advantage

The independent partnership structure of Baillie Gifford is perhaps its greatest competitive advantage. Where publicly listed asset managers are beholden to quarterly earnings pressure, Baillie Gifford has complete ownership by its 58 working partners, who have significant benefits from being a partnership. 

Key advantages include:

Forever partners carry personal liability for the business. This structure aligns partners’ self-interest with clients’ long-term outcomes rather than short-term profit maximization. Partners average 20 years of service, and Baillie Gifford has continuity and institutional memory, which dramatically improves decision-making.

The structure enables Baillie Gifford to genuinely take long-term views without being pressured by external shareholders. Baillie Gifford is free to make substantial investments that may take years or decades to bear fruit. Baillie Gifford gives clients exposure to transformational companies at the earliest possible stage before they become well-known.

Investment Philosophy: Long-Term Growth Focus

Baillie Gifford has excelled at acquiring and investing in remarkable growth firms across the world, which has enhanced its standing in the industry. An investment strategy that the company uses targets firms that possess a sustainable competitive advantage and can at the very least grow two-fold in five years. 

The strategy is based on company-focused fundamental research, rather than top-down economic predictions or trying to time the markets. The investment teams of Baillie Gifford conduct and develop transformational research in relation to particular companies that shift industry paradigms or hold robust competitive advantages. This strategy has given Baillie Gifford the ability to invest in and capture Amazon, Tesla, ASML, and other transformative companies many years prior to their recognition.

Baillie Gifford has developed an investment strategy that consists of three different growth profiles in order to achieve the best results. These include: compounders (firms that have durable franchises), disruptors (innovative firms that have a wide range of growth prospects), and capital allocators (firms with talented and skilled managers). This investment strategy provides an effective way to achieve the best results, which in turn is needed for the strong quality growth opportunities that the firm targets.

Global Reach and Client Relationships

Baillie Gifford has its head office in Edinburgh but also has offices in London, New York, Hong Kong, and Singapore, which makes it possible for the company to have a diverse client base and conduct practical market research.  

Baillie Gifford has over 250 institutional clients and has relationships longer than 20 years with 62 clients. This shows how much trust has been built over the years, since they have been working with Baillie Gifford for over 10 years.  Baillie Gifford has been and is still able to offer clients value during bad market conditions.  

Baillie Gifford has clients from all over the world, including individual investors, wealth managers, financial institutions, pension funds, and endowments. The firm prefers to focus on building positive, long-lasting relationships with its clients as opposed to client relationship management.

Innovation in Private Markets

Baillie Gifford has become a market pioneer in the field of investing in private companies, having invested over $9 billion in more than 140 private companies since 2012. The company has its own investment portfolio of high-profile businesses such as SpaceX, ByteDance, Stripe or Epic Games.

The strategy used by Baillie Gifford in its private investing is to build on its experience in public markets, whilst acknowledging the distinctiveness of the private company. The company will review 800 companies per year, but only invests in 10-12, illustrating its picky nature. This selectivity, plus Baillie Gifford’s capacity to offer patient capital through investment trust structures, makes it an interesting partner for ambitious entrepreneurs.

The company has a history of successful investment in the private markets, followed by taking them public, including Alibaba, Airbnb, Spotify, Tempus AI, and Oddity. Baillie Gifford usually holds interests in such companies after the IPO, enjoying the gains over the long run.

Performance Through Market Cycles

Baillie Gifford has not only stood the test of time, but it has bounced back despite the growth stock correction of 2021-2022. The firm’s commitment to its long-term investment philosophy has started to display signs of strength again as conditions in the markets have stabilized.

A number of the Baillie Gifford funds have shown good recent performance, and the Scottish Mortgage Investment Trust and American Fund are considered to be the best in their respective classes. The firm’s Long Term Global Growth strategy, which manages about $50 billion of assets globally, is a perfect example of Baillie Gifford’s ability to spot outstanding companies in various market situations.

Baillie Gifford’s performance track record spans several decades and market cycles, showcasing the firm’s ability to deliver long-term value to clients. Although growth-oriented strategies were caught up in the crosswinds of rising interest rate environments, long-term perspectives by investors have historically paid off at Baillie Gifford.

Environmental and Social Impact

Baillie Gifford incorporates environmental, social, and governance (ESG) considerations into its investment process while keeping an eye on long-term financial returns. The Positive Change strategy of this firm specifically aims at companies that are dealing with significant social issues in society in the four aspects, such as social inclusion and education, environment and resource requirements, healthcare and quality of life, and serving the poorest populations in the world.

Baillie Gifford’s approach to responsible investing focuses on engagement with portfolio companies, instead of exclusion. It is a positive ownership philosophy that allows Baillie Gifford to affect positive change and deliver on the growth of businesses that generate societal value.

Conclusion

Baillie Gifford is unique in global asset management because they combines structural advantages, investment expertise, and cultural strengths. Baillie Gifford is a unique player in the investment management industry because of its partnership framework, its long-term investment orientation, its ability to conduct research at a global level, and its past success in identifying outstanding growth companies.

With markets constantly changing and new opportunities arising, the patient capital strategy and readiness to invest in disruptive businesses are incredibly valuable to clients, who are looking to grow in the long term. The firm’s history, spanning over a century, and its forward-looking investment approach prove that Baillie Gifford is well-positioned to continue to provide exceptional results for their clients around the globe while continuing to hold that reputation as one of the most respected asset managers in the industry.

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