Swipe at culture
Markets have stifled risk takers, says fund manager
James Anderson: deep sickness
Scottish fund manager James Anderson says a short term investment culture and an unwillingness to take risks is holding back entrepreneurialism in the UK.
Mr Anderson, one of the world’s most successful investors, has spoken of a “deep sickness in UK capital markets ” that has stifled the growth of tech entrepreneurs.
The joint manager of Baillie Gifford’s Scottish Mortgage Investment Trust says it has left London’s blue chip FTSE 100 looking like an index from the 19th century when compared to the innovation in the US.
Mr Anderson, whose early bets on Facebook, Amazon and Tesla rewarded him with star manager status and made fortunes for his clients, said in an interview that too many fund managers “are happy to take high pay for relatively undemanding things” and asks why they don’t dream of creating great companies.
“I find that sort of depressing, and there must be so many different causes of it. Plenty of them are on my side of the fence. But something’s quite wrong, it seems to me,” he told the Financial Times.
“Why have we not grown any giant companies? Of course I’m not expecting everybody to be like [Amazon founder] Jeff Bezos. But it seems to me there is a real problem here.
“The FTSE 100 is really a 19th century and not even a 20th century index,” he added, pointing to a scarcity of innovative and fast-growing companies in Britain.
Through a series of bold bets on US and Chinese entrepreneurs, including Amazon’s Bezos, Tesla’s Elon Musk and Tencent’s Pony Ma, Mr Anderson has turned the £18 billion Scottish Mortgage Trust into a star of tech investing over the past two decades.
The Edinburgh-based trust has delivered 1,500% returns for shareholders over that time, compared with 277% for the FTSE All World benchmark.
Mr Anderson will retire from Baillie Gifford next April and hand over Scottish Mortgage to Tom Slater, who has been its joint manager since 2015.
He made his comments about the sector three months after publication of a government-backed review which called for an overhaul of listing rules, including the introduction of dual-class shares favoured by entrepreneurs. A key objective in the review was to encourage more tech companies to float their shares in London instead of Wall Street.
Mr Anderson said shareholders generally fail to support UK companies facing takeover approaches, giving as an example the £23.4bn takeover of smartphone chip designer Arm Holdings by Japan’s SoftBank in 2016.
Some shareholders, including Baillie Gifford, opposed the deal but Mr Anderson said “we couldn’t find enough shareholders to back a serious effort to make Arm remain independent.”
He also questioned the “box-ticking” process of meeting environmental, social and governance issues.
“Bad managers have a much easier time, because if they just obey what the combination of their bonus system and ESG tells them, they can survive . . . and get paid extremely well. It’s become more difficult for companies to really think about the task of building their competitive moats,” he said.