Actual investors see people’s aspirations. Not assets under management.

Investment management firms often trumpet growth in assets under management as some kind of victory. It’s an odd way to measure success. At Baillie Gifford, we’re pretty sure that our clients care more about the returns we generate on their investments than whether or not our own firm is growing.

Sure, it matters that an investment company has critical mass, is stable, can attract and keep top-quality talent, and can afford to fund original investment research. But delivering excellent returns should take precedence over gathering more clients. We’re an investment company, not a sales and marketing machine.

Actual investors have a duty to those who choose them to look after their investments. In Baillie Gifford’s case, this is partly a function of our unlimited liability partnership structure – meaning that partners are personally on the hook if things go wrong. But it’s also because we believe that satisfying people’s aspirations is the best way to build a long-term business.

Our industry sometimes seems like a perpetual motion machine of fund launches and company mergers, predicated on building scale and ‘efficiencies’. Annual reports of investment management companies tell you lots about maximising shareholder returns and profits but precious little about honing research and investment capabilities for the benefit of clients or, in the case of growing companies, about sharing economies of scale.

Baillie Gifford has never increased assets by a single penny by acquiring other firms. We have cut our fees many times as we have grown. We rarely launch new investment strategies; when we do, we incubate them for long periods before making them available externally. It’s not pure altruism: the more we deliver for clients, the better we secure the future of a business we can pass down through generations of partners.

The equation of assets with strength has spawned the odd idea that ‘outflows’ of assets from investment companies are necessarily a bad thing. Instability and changing management in some firms can create outflows, but managers sometimes forget that the whole point of the exercise is to give clients back more money than they gave us (preferably many years later). If we can do this we should be pleased that we’ve helped investors to meet their long-term goals, or pensioners to live comfortably when they reduce their working hours or retire.

Because the goal for Actual investors is to understand our clients’ aspirations and to help those entrusting their savings to us to achieve their aims. We also understand the increasingly urgent wish that the companies we invest in for clients should, at the very least, not be the cause of environmental and societal ills. More positively, we spend a lot of time seeking out investments that solve society’s challenges. Those are often the companies likely to benefit from prolonged and rewarding growth.

As long-term investors, we use what influence we have with the companies we invest in to support those aspirations. And if that dialogue encourages a company to raise its standards, that helps all of its long-term investors, not just our clients.

Among institutional clients, over 250 have invested with us for over 10 years, and 62 have been with us for 20 years or more. We have no business growth or sales targets as they’re inconsistent with putting clients’ interests first. The firm’s structure is aligned with that priority. The partners who own the business serve for an average of 20 years. The turnover of investment staff is low, so those making investment decisions on behalf of clients will often still be around, and still answerable, when outcomes become clear.

Because accumulating assets beyond a certain point is inconsistent with the best outcomes for clients, Baillie Gifford has always been ready to close popular investment strategies before they become difficult to manage. It costs us short-term revenue, but it works out better for everyone.

Why? Because companies pursuing asset growth targets, not client satisfaction targets, tend not to be around for long. And we’ve been around since 1908.