Wim de Ruijter, head of Benelux, and Stuart Dunbar, partner at Baillie Gifford, an investment firm with £223bn in assets under management, seen during an interview in Luxembourg. Photo: Matic Zorman / Maison Moderne

Wim de Ruijter, head of Benelux, and Stuart Dunbar, partner at Baillie Gifford, an investment firm with £223bn in assets under management, seen during an interview in Luxembourg. Photo: Matic Zorman / Maison Moderne

Wim de Ruijter and Stuart Dunbar of the Scottish asset manager Baillie Gifford discussed the firm’s “long-term” culture during an interview in Luxembourg. Baillie Gifford has, the executives said, a unique structure that lets it look beyond daily stock market movements.

Despite being founded in 1908, Scottish asset management and investment company Baillie Gifford is still a relatively “unknown” player in continental Europe. Specialising in active management, it has €266bn in assets under management. It has adopted the legal form of a partnership, “an unusual structure for a company of our size,” explained Wim de Ruijter, head of Benelux. “The company has no external shareholders. Nor does it have any debts.” Not having pressure from shareholders concerned with short-term profitability is an advantage “in these difficult market times”.

De Ruijter said that a partnership implies a “long-term” culture, in the way of investing, as well as in the philosophy of the customer relationship. “We don’t focus on winning new customers: we focus on deepening the relationship we have with our customers.”

This is why Baillie Gifford opened an office in Amsterdam more than two years ago, from where it covers the entire Benelux market. It is a relatively new market for the firm. “Despite its 114-year history, we had very few European clients until five or six years ago,” stated Stuart Dunbar, partner. And Brexit has nothing to do with it. The company is not looking for all-out growth as an end in itself. “Our aim is to provide the best service to the customer. There are only a limited number of good investments. We invest in a limited number of companies with a strong conviction. This de facto limits our investment capacity. We don’t want to dilute the quality of what we were doing for our clients.” That is the philosophy that guides the company’s growth.

Focus on continental Europe

Initially, Baillie Gifford limited itself to the UK market, offering its investment strategies to Britain’s trusts and large pension funds. “We then opened an office in New York about 25 years ago and started to manage assets for US pension schemes, particularly defined benefit schemes.” And it was the decline in these products over the past decade or so that forced the company to evolve. “This has led us to develop a range of Irish-domiciled Ucits funds, and to hire additional staff to work on the client and distribution side. As a result, we now have a much wider client base including private banks and sovereign wealth funds alongside DC schemes, and in many more countries across continental Europe, the US as well as Asia.”

It was this “controlled” growth that led the company to open an office in Amsterdam, not to gain new clients, but to “ensure that existing clients have someone to talk to directly without going through Edinburgh,” said de Ruijter. He travels to Luxembourg at least once a quarter to meet clients and prospects. In the grand duchy, Baillie Gifford works for a large private bank, as well as for insurance companies.

This 'long-term' culture is ted in the investment policy.

I often tell our clients that, although we are an investment company, we are not really interested in the stock market
Stuart Dunbar

Stuart DunbarpartnerBaillie Gifford

"We actively manage our portfolios away from benchmarks,” said de Ruijter. “While we tend to like companies that have a growth style, growth alone is not enough. We invest in companies that provide services or products that help society. We are very good at combining financial profitability with social impact.” While Baillie Gifford invests in both listed and unlisted companies, in debt and equities, it is the latter that make up the bulk of the portfolios, “both global and regional equity strategies”.

“I often tell our clients that, although we are an investment company, we are not really interested in the stock market,” stated Dunbar.

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“One of the great challenges for the investment industry is that stock markets have become an end in themselves, which should never have been the case. Their purpose should be to provide liquidity and maturity transformation between investors. But over the years, the industry has developed around trading alone. And I think that doesn’t help the actual business of deploying capital. We want to invest in companies that invest in projects themselves, trying to create wealth in the real world. We don’t have people sitting around looking at Bloomberg all day… We focus entirely on fundamental research. We try to understand what becomes possible and anticipate that over a 5- to 10-year period. I think it’s easier to anticipate what’s going to happen over a 10-year period than over a 2-year period, because we know where the world is going, but we don’t know how it will get there. So we try to think on those time scales and the best way to succeed is not to develop relationships with brokers and analysts, but with scientists and entrepreneurs.”

This takes time, Dunbar acknowledged, but he believes it is the best way to find the right opportunities to invest in “the companies that can grow because they are on the right side of changing consumer behaviour and not because of economic growth.”

The main challenge he sees in the current period of economic and stock market instability is not finding the right opportunities, it is “persuading people to commit to the long term, to stay with us through the cycle.” That task is difficult “because there is so much noise in the markets today”.

You can’t do ESG properly if you reduce it to a data exercise
Stuart Dunbar

Stuart DunbarpartnerBaillie Gifford

‘Long-term’ also means ESG

Dunbar sees the new ESG rules applying to the asset management world as an opportunity. “But it is also a challenge for the industry. I think ESG is poorly implemented. It has become a data exercise when it should be a mindset. I strongly believe that you can’t do ESG properly if you reduce it to a data exercise. Firstly, because the data does not exist. And secondly, because ESG is a moving process, not a collection of snapshots at a point in time. So our approach is to look at companies in detail, talk to management and look at the progress they are making, not just at carbon emissions. That doesn’t make sense. We need to invest in helping companies improve.”

But while ESG should be a state of mind, Dunbar has recognised the impact of regulation. “Our starting point is to say that there will be increasingly strict regulation on carbon emissions and on the treatment of people, i.e., fair working conditions. Public opinion, and therefore the voters, are pushing for this. For us, in our 5-10 year investment horizon, the companies that are on the right side of tightening regulations will probably be the most successful.”

Read this interview in French on the site.