The history of The Scottish American Investment Company

The US was emerging into its Gilded Age when a young Scots lawyer called William Menzies first crossed the Atlantic in 1864. That trip, and further visits in 1867 and 1872, convinced him that no ambitious investor could afford not to enter such an exciting and fast-growing market.

Thus in 1873, in an era when it was a lawyer’s job to offer investment guidance and administration, Menzies presented his plans for a company focused on the unbounded potential of the US.

SAINTS’ chosen investment areas were mainly railroad mortgages, but also government, state and municipal stocks. But it was the structure of the company that proved revolutionary.

Other early investment schemes in those days, including Foreign & Colonial (1868), and Robert Fleming’s Tayside-based vehicles, had been formed as legal trusts. Menzies’ genius was to take this idea and improve it.

He did this by introducing the structure of a limited company, a move made possible by the Companies Acts of 1862 and 1867.

In those days, any scheme to pool money and invest in other companies, each of which saddled you with unlimited liability for losses, would make today's cryptocurrency look as safe and predictable as government bonds. 

Menzies’ idea was borne out when F&C and all the other early legal trusts were forced to convert to the limited company form after a High Court ruling in 1879. 

Now every fund in the roughly £270bn UK investment company sector uses the limited company form. So SAINTS can claim to be the UK’s first investment company as we recognise the term today.

The new scheme was fully subscribed within a month, without, as William Menzies put it, “our having resorted to any pushing [ie marketing] such as is common in London.” The original investors, who included an Edinburgh plasterer and a fish curer from the Fife seaside town of Anstruther, gained a good return, despite all the market upheavals of the late 19th century.

One historian estimates that a founding investment of £1,000 in SAINTS’ ordinary shares in 1873 would, by 1929 have been worth some £70,000. Annual dividends on the same holding rose from £40 to £3,000 in that period. As the company’s fortunes rose, so did demands by shareholders for more transparency from managers. 1879 saw the stirrings of a shareholder revolt, successfully quelled by Menzies and his board, against the lack of information about the value of securities. 

Bankrupt investor Walter Thornton tries to sell his luxury roadster for $100 cash on the streets of New York City following the 1929 stock market crash.
© Bettmann Archive/Getty Images

By the late 1920s, the board was worried about the bull market. Manager Charles Munro travelled to the US in October 1928 and reported back that “our friends seem to be all at sea and nervy… profits are a grand thing to take just now”. By the following summer, just a few weeks before the Wall Street Crash, SAINTS had sold £2m, or about 40 per cent, of its US stocks.

Although the decision to start re-investing was taken a little too early in 1930, the Company survived the worst economic slump in global history. It lived on to pay out dividends every year, and has done so without a cut since 1938.

During the Second World War, SAINTS had to sell its numerous dollar holdings in US companies to the British Government, cannily using the proceeds to pay down short-term debt. By late 1941 equity share prices were so low the board decided they were unlikely to get any worse and started buying, a move that helped SAINTS to maintain its dividend through thick and thin.

As post-war recovery gathered pace, the value of the company’s investments would increase from £9m to £26m during the 1950s and to £56m by the end of the swinging sixties.

For nearly a century, SAINTS’ managed its own investment portfolio. In the more complex world that had emerged by the 1970s, the need to pool costs and fund investment research became more pressing. In 1970, Stewart Fund Managers, later Stewart Ivory, was appointed to manage the company’s investments. That company had morphed into First State Investment Management by 2004, when, following a review, Baillie Gifford was appointed the new manager.

By spring 2007, chairman Sir Brian Ivory reported that SAINTS had outperformed its benchmark for the third year in a row. The Great Financial Crisis made a dent, but SAINTS rebounded in 2009 with a total return of 49 per cent rise in net asset value (the total value of a trust's assets minus its liabilities), beating the FTSE All World Index's 25 per cent, marking the start of a 10-year bull market.

In 2015 Baillie Gifford partner Patrick Edwardson stepped aside as manager of what was by then a half-billion-pound investment trust. He was succeeded by his deputy Dominic Neary, supported by colleagues James Dow and Toby Ross. The latter duo took over as joint managers in 2018.

In the meantime, Sir Brian Ivory had been succeeded as chairman in 2016 by Peter Moon, a former chief investment officer of the Universities Superannuation Scheme. He was in turn succeeded in April 2022 by Lord Macpherson of Earl’s Court, former Permanent Secretary to the Treasury and a Principal Private Secretary to Chancellors Ken Clarke and Gordon Brown.

Under the new managing duo, the biggest contributions to performance were an eclectic international bunch

• Anta Sports Products (China, sportswear)
• Partners Group (Switzerland, private equity)
• Kering (France, luxury goods)
• B3 (Brazil, stock exchanges)  
• Cochlear (Australia, hearing devices)

Three years and three UK prime ministers later, despite Covid-19, inflation and war in Ukraine, the merits of SAINTS’ focus on dependable, growing streams of income have been borne out. 

With net assets now exceeding £900m, SAINTS has entered the Association of Investment Companies’ pantheon of ‘dividend heroes’. Membership requires an increase in total annual dividends for at least 20 years in a row. SAINTS’ 50th year of successive increases is on the horizon in 2023.

A century and a half of dividend payouts put SAINTS in the rare position of over-delivering over decades on a promise coined by marketeers: “income again and again”.