As with any investment, your capital is at risk.
A new paper by investment specialist Jonny Greenhill explores why innovation often moves to a different rhythm from public markets. In markets where the near term trumps the long term, where quantitative models attempt to quantify the impossible, and where more capital is mechanically deployed based on index positions rather than company fundamentals, what sort of investment approach is optimised to unlock the returns from transformative innovations?
The innovation advantage: investing on the right side of change
Why unlocking exceptional returns from innovation calls for patient stock-picking.
Click here to read the paper (PDF)
In short
Transformative innovation typically isn’t neat, linear or predictable. The sorts of exponential changes heralded by such innovation are inherently difficult to quantify and therefore extremely hard to price. Moreover, the companies that turn bold ideas into transformational growth often do so over many years, through periods of uncomfortable volatility, scepticism and uncertainty. Yet when a company optimises for innovation – and only very few do this well – it can create extraordinary value for businesses, shareholders and society. Therein lies our opportunity.
Meanwhile, public markets appear to be becoming less supportive of long-term innovation. Passive investing, quantitative trading and shorter holding periods mean more capital is being allocated with little attention to individual company fundamentals or long-term potential. In a market increasingly shaped by such impatience and indifference, what is the incentive for the average company to reinvest in future and uncertain innovation instead of prioritising near-term profitability, even if such innovation may ultimately prove transformational?
Fortunately, patient stock-pickers do not need to concern themselves with the average company. Instead, they can focus exclusively on identifying a small number of innovative companies with outlier potential, holding them over time and accepting the inevitable volatility along the way. Through a concentrated portfolio, they can own those companies in size, allowing their payoffs to meaningfully move the dial on portfolio-level returns. Of course, this is easier said than done. Yet this is precisely the craft that Baillie Gifford has been honing for over a century.
Risk factors and important information
The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.
This communication was produced and approved in June 2026 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.
Potential for Profit and Loss
All investment strategies have the potential for profit and loss, your or your clients’ capital may be at risk. Past performance is not a guide to future returns.
This communication contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research, but is classified as advertising under Art 68 of the Financial Services Act (‘FinSA’) and Baillie Gifford and its staff may have dealt in the investments concerned.
All information is sourced from Baillie Gifford & Co and is current unless otherwise stated.
The images used in this communication are for illustrative purposes only.
Important Information
Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). Baillie Gifford & Co Limited is an Authorised Corporate Director of OEICs.
Baillie Gifford Overseas Limited provides investment management and advisory services to non-UK Professional/Institutional clients only. Baillie Gifford Overseas Limited is wholly owned by Baillie Gifford & Co. Baillie Gifford & Co and Baillie Gifford Overseas Limited are authorised and regulated by the FCA in the UK.
Persons resident or domiciled outside the UK should consult with their professional advisers as to whether they require any governmental or other consents in order to enable them to invest, and with their tax advisers for advice relevant to their own particular circumstances.
Financial Intermediaries
This communication is suitable for use of financial intermediaries. Financial intermediaries are solely responsible for any further distribution and Baillie Gifford takes no responsibility for the reliance on this document by any other person who did not receive this document directly from Baillie Gifford.
10064149
