THE FUND house behind the £8 billion actively managed Scottish Mortgage Investment Trust has thrown down the gauntlet to other fund managers, challenging the industry to partake in “actual” rather than active or passive investment management.
Edinburgh-based Baillie Gifford, whose stable also includes the Scottish American Investment Company and Monks Investment Trust, said the industry owes it to investors to take bolder investment decisions and not be afraid of getting things wrong.
The firm said its aim is to raise awareness among the public about what makes a successful active manager, with too many believing that simply being different from an index is enough to generate superior returns.
Baillie Gifford partner Stuart Dunbar added that the firm believes “actual” managers should “direct capital into attractive company projects” with the aim of “creating wealth that society needs to fund our future obligations, such as investing in technological progress, medical breakthroughs or building better infrastructure”.
“Defining active management as being different from an index is to start in the wrong place,” he said. “This is why most active investors fail to deliver returns that outperform passive investment strategies over the long term.”
In its results for the first half of this year Scottish Mortgage highlighted that investing in unquoted companies has lifted returns over the past eight years. Between June 2010 and September this year the trust’s unquoted investments collectively returned 419% while the portfolio as a whole made a total return of 344% and its benchmark FTSE All-World Index returned 163%.
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