Baillie Gifford and the three quandaries of fund management

THE HOMESMITSMITFTSE of the Scottish Mortgage Investment Trust () is an office a mile down the road from Edinburgh Castle. Aside from that it has little to do with Scotland, and nothing at all to do with mortgages. This makes it an apt flagship for Baillie Gifford, a British investment manager that prides itself on its unconventionality. Baillie Gifford’s 12 trusts and 33 funds together oversee assets worth £346bn ($466bn). That puts it well below the heavyweight category for global fund managers, whose members hold assets in the trillions. Yet the firm and its star vehicle hold wider lessons for other fund managers.Among the previous jobs of members of Baillie Gifford’s investment team are ballerina, soldier, doctor and concert pianist. One partner likes to tell potential clients that the firm’s equity-fund managers aren’t much interested in the stockmarket. Another describes her enthusiasm for a founder who is so focused on developing a breakthrough medical technology that he refuses point-blank to discuss what his company could be worth. But even those investors who insist on vulgar bean-counting will be impressed by the fact that £1,000 invested in the ten years ago would be worth around £11,600 today. By contrast, the same amount invested in the All-World index of stocks would be worth around £3,800.