Beyond the benchmark: why being different pays off

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As with any investment, your capital is at risk.

Baillie Gifford’s new chief executive faces a paradox: the company must change to remain true to its investment philosophy. New technologies and evolving client needs mean standing still isn’t an option. So our mission is to be progressive in methods but conservative in sticking to our purpose.

“Are we out of step with the market? In many ways, I hope so,” Tim Campbell tells the Short Briefings on Long Term Thinking podcast.

“If you go back to first principles, the investment industry is here to make discretionary decisions around allocating people’s savings to businesses that are driving progress and creating jobs.”

But, he adds, its priorities increasingly lie elsewhere. Passive tracker funds, which simply replicate a stock market index or other benchmark’s performance, are gaining in popularity. And algorithmic trading, where computers use advanced mathematics to trade stocks, is on the rise.

“To be clear, I think things like passive investing have their place. But if you have fewer market participants trying to meet with management teams, understand what they’re trying to achieve and investing in their research capability – actually trying to match up savings capital with ideas – then you get to quite a bleak endpoint.”

‘Think in decades, not quarters’

If Baillie Gifford’s active, human-led style better serves society’s needs, its first loyalty remains to those who entrust it with their savings.

“Ultimately, we’re here to find the best growth businesses on the planet for our clients and deliver exceptional returns,” Campbell says.

That starts with adopting a long-term, optimistic mindset, he explains. When our investment teams first discuss a company, they consider what might go “really right” before exploring the potential pitfalls. Then, if they decide it has a credible path to success, they encourage its management to prioritise ambition, adaptability and execution over short-term gains.

We invest on the basis that share prices follow earnings growth over the long term, and that best way to deliver outperformance is to find and retain ownership of the companies contributing most to progress.

“If you think about the stocks that have been the largest contributors to our clients’ performance, they will commonly have seen their share prices fall by over 50 per cent or more at times,” Campbell says.

“Amazon, NVIDIA and MercadoLibre have all experienced that pattern, and at times it was incredibly painful owning them. So it’s been very important to have ‘hold discipline’ to ultimately enjoy the returns they delivered.”

This conviction-led approach differentiates our portfolios highly from the benchmarks we use for comparison. And the extended holding periods help us minimise transaction costs, resulting in lower fees.

“When you look at our strategies, turnover is typically 20 per cent or less per annum, so that’s consistent with a five-year-plus holding period,” Campbell says. “But our long-termism goes beyond that.

“It’s important that everything aligns if you’re asking your client base to judge you over long periods. So, the performance bonus for our investors is based solely on five-year rolling performance. There’s no one-year element. There’s no three-year element. I think it is hugely important we have this unusual incentive structure in place.”

Campbell acknowledges that one consequence of Baillie Gifford’s idiosyncrasy is occasional increased volatility. He says that makes us best suited to clients who share our patience, but those who do can find the results rewarding.

“The one metric of success that I hold above all others for our firm is that it is the tenure of our client relationships,” he says. “We’ve had our second-largest client for 116 years. That’s extraordinary.”

Private company investments

Having established what’s staying the same, Campbell moves on to changes ahead, including increased activity outside the public markets. Growth companies are floating on stock exchanges later in their lives, if at all. So to provide our clients with the exposure they want, we must invest earlier.

“Of the companies in the US generating more than $100m of revenues, 83 per cent are private, and that profile is mirrored globally,” Campbell says. “So it’s vitally important that if we’re trying to find great growth businesses, that we have a presence.

“The more we can be part of giving as many people access to these companies, the better. And our investment trusts are a fantastic low-cost way of doing so.”

Recent deals include stakes in two of the leading artificial intelligence startups – Anthropic, the maker of the AI assistant Claude, and Runway AI, which specialises in video generation tools for film studios and others. The holdings provide our clients rare access well before any potential listing. Moreover, they give us an additional edge when making other investments.

“Being able to sit down with Anthropic’s chief executive and co-founder, Dario Amodei, and talk about developments – what he’s seeing, what he’s trying to achieve – gives us a ringside seat in terms of what’s going on in AI,” Campbell says. “Likewise, speaking to Runway and others at the forefront of this is vital for both our public and private investment work on how AI could disrupt different industries and sectors.”

AI-augmented investment research

Campbell also discusses the ways Baillie Gifford itself is using AI. These include developing a proprietary platform that integrates our many thousands of in-house research notes and write-ups of conversations with companies and academic experts, as well as external insights, company filings and other materials.

“It can interrogate everything out there and look for nuance and trends and changes in tone and so forth,” he explains. “So it’s an incredible tool.

“It used to be that you would spend weeks just aggregating all the data and a smaller amount of time thinking about your insight. Now that’s totally flipped. The aggregation takes place at the press of a button, meaning we spend the bulk of our time on what really matters.”

Looking further ahead, Campbell mentions exploring new ways to provide our clients access to our strategies. These range from offering exchange-traded funds as a tax-efficient alternative to our existing mutual funds in the US to the possibilities of ‘tokenisation’.

“My children expect to be able to buy fractions of shares on the blockchain, so we need to think very carefully about how we distribute our capability,” he says.

So, Baillie Gifford must advance to hold its ground. And Campbell wouldn’t have it otherwise.

“The nature of our firm is that we’re always trying to get better, always trying to improve,” he says. “This is a period of colossal change. And typically, we’ve done a very good job of delivering during periods of significant disruption.”

Read more about Baillie Gifford’s distinctive investment approach

Words by Leo Kelion

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This communication was produced and approved in September 2025 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.

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