What I’ve learned in four decades of investing

Charles Plowden’s first day at Baillie Gifford is etched on his memory: “I was very keen, and I think I turned up about an hour before I was supposed to, which caused some confusion in reception”.

Little did he know he was embarking on a career with the firm that would last 38 years, not the brief apprenticeship he had in mind.  

“I had a masterplan, which was I was going to move to London and work for one of the big merchant banks there. I thought the way to get on there is to have a proper grounding in investment markets,” he recalls. “So, I thought two years as an investment analyst would be the best possible training for advising the titans of industry.”

Charles Plowden, joint senior partner.

Plowden, manager of The Monks Investment Trust and joint manager of Global Alpha Growth Fund, has no regrets over the revised plan, his career having witnessed seismic changes at Baillie Gifford and in the industry generally, an evolution he divides into distinct phases.

“The 1980s and 1990s for us were all about growing into pension funds”, he points out, highlighting expansion in the UK and then North America. “But I think that market taught us some bad habits. It taught us to be quite limited in our ambition, to be very risk averse, never to stray too far from the benchmark or from our peer group. And it encouraged a focus on short-term investment performance, which eventually, we concluded, was detrimental to the clients’ best interests.”

That prompted a revision of Baillie Gifford’s approach, fuelling an ambition to differentiate the firm from other players in the investment market.

“That has actually worked hugely well. Performance over the last 20 years has been on a different level from the previous 20 years, and we’ve done it largely through taking risks, but conscious and well-judged risks. And there’s been, associated with that, big internal changes, which we’ve managed because it’s been a continuous process”, he says with understandable pride.

That brings us to what Plowden describes as a possible third big reset, following the move into pensions then the substantial changes of the early 2000s. He is hopeful that this latest phase is driving a greater purpose in investment.

“We think investment increasingly has an important role to play in terms of allocating capital to the most deserving, beneficial, helpful sectors of industry,” he says.

Looking ahead, Plowden sees the climate crisis as a significant issue, positing the view that investment companies must help to drive change.

“The answer is going to be companies having to come up with the products and implement them, and we think the investment industry has a big role in making sure that the capital goes to the right companies that come up with the solutions,” he says before pointing to Baillie Gifford’s stance. “We think that investment, certainly in our firm, is becoming more purposeful. We’re on a mission, if you like. And we sum it up by what we call Actual Investing, which is focusing on the long term, on supporting the right companies and having a positive impact on broader society.”

Turning to his contribution to Monks which he has managed since 2015, Plowden states, “Over the six years, there has been a shift within the portfolio from more cyclical growth towards more secular growth, so mainly technology-focused, whether healthcare or internet-driven cloud computing. Then, very recently, we’ve begun to consider whether that shift has gone far enough and we should be returning a little bit towards maybe some more cyclical recovery stocks, as we come out of the pandemic.”

Plowden leaves behind an established team, ensuring continuity in the management of Monks and its institutional equivalent, Global Alpha. As he prepares to depart, he reiterates what he sees as his greatest lesson learned: “The single most important thing is that you have to be long-term in both your thoughts and your deeds. And when you’re investing in a company, you have to be confident you’d be happy to own it for five or 10 years and not touch it.”

What’s next? He plans to take a holiday before applying his expertise to help some smaller companies. He may also work on an area of growing importance for him and for the financial sector more broadly.

“I strongly believe that the solution to the environmental crisis will come through new technologies which will need funding. It may be that there’s some role there I could find. Otherwise I will simply read about it and follow it with interest”. The latter seems less likely, as it’s hard to imagine Plowden being content on the sidelines.

Words by Colin Renton

You can hear more of Charles’s thoughts in the Baillie Gifford podcast Short Briefings on Long Term Thinking.

You can listen to the podcast at bailliegifford.com/podcasts