Future Focus forum: 2025 summary

As with any investment, your capital is at risk.

Future Focus included a series of sessions hosted by Baillie Gifford investment professionals and a client panel session. A summary of each follows.

From emerging to emerged – Emerging Markets Equities

Qian Zhang, emerging markets investment specialist, began by highlighting the potential contributions emerging markets could make by 2050. 

When looking long term, the opportunities presented by intra-EM trade and domestic markets are compelling, as the size of the middle class in Asia could grow to be bigger than the US and Europe combined.

She discussed the impact of global trade shifts and the role of emerging markets in providing key resources, stating: “We need a lot of key minerals to build the renewable transition, many semiconductors to power the era of AI, and a lot of steel and cement to retool the supply chain and to re-industrialise."

Seventy per cent of EM trades now involve other emerging market countries. Qian noted that urban density helps innovation and allows innovative business models for domestic consumption, service and logistics. “In emerging markets, you have more people who don't own a bank account than people who don't own a smartphone," she said.

Qian concluded by discussing the challenges and opportunities for emerging market investors. Although EM investors have had a disappointing decade compared to the US market, she suggests the next decade could be much better. 

“We've got good valuations, macro resilience, and a lot of great growth companies. . . . We have world-class companies in emerging markets that could compete with or even supersede the best in the rest of the world,” she said.

To illustrate the point, she highlighted TSMC, MercadoLibre, BYD, Samsung Electronics and Nubank. Zhang noted that EM companies of this calibre have the potential to grow disproportionately to how they are presented in the index, and that the beneficiaries for the next EM cycle will be homegrown. 

Paulina McPadden in conversation with Dan Wang - International Equities

Engaging deeply with academics and founders allows Baillie Gifford’s investors to see possibilities where others see problems. Building relationships with more than 25 academics worldwide gives valuable insight into long-term trends and encourages us to think differently from our competitors. 

Baillie Gifford’s International Concentrated Growth Team engages in external third-party risk reviews to gain fresh perspectives from beyond the financial industry. The most recent review involved Dan Wang from Yale Law School’s China Center. 

Dan discussed two competing narratives about China:

• the rise of domestic consumption and champions in industries, such as clean tech and electric vehicles
• the increasing centralisation of power under President Xi Jinping, dampening entrepreneurial enthusiasm.

He emphasised that both narratives are “equally valid” but acknowledged the headwinds facing China's growth, such as property market corrections, demographic challenges and doubt about the political situation.

Despite a stalling economy, China is dominating clean technologies and electric vehicle batteries. Dan noted “in almost any area of technology that we want to look at, whether that’s consumer internet, artificial intelligence, any sort of advanced manufacturing, we are seeing ... broad improvement in every field.”

He referred to China as the “engineering state,” which excels in scaling up industries, while the “lawyerly” US is better at inventing new technologies. For example, solar panels are a US invention, but today, solar is an entirely Chinese industry.

Dan explained: “China has focused a lot on making advanced manufacturing work. It has built a lot of the supply chain in places like Shenzhen. The government is invested in making China a tech superpower.”

He concluded by discussing the potential for China to transition from an engineering state to a more innovation-focused society. 

The continued rise of growth equity: lessons from the frontline – Private Companies

Investment manager Robert Natzler focused his presentation on how growth-stage private companies have navigated the last three years to become bigger, better and bolder.

Robert noted a fundamental shift in how capital markets operate globally. The number of listed US companies has declined by approximately 30 per cent, while the number of privately held at-scale companies in the US has increased by approximately 20 times. Eighty-seven per cent of companies in the US with more than $100m in revenue are now privately held. And Baillie Gifford’s private equity companies have shown significant growth and innovation despite recent valuation spikes and subsequent doom and gloom. 

Robert emphasised that the message is “One of resilience. It’s one of strength. And it’s one of aggression. Because there are still a ton of amazingly innovative companies being created all over the world. And disproportionately, that still means being created in the United States.”

Robert highlighted the skewed risk-reward ratio in private equity, which has lower loss ratios than venture capital and significant growth potential. When comparing the forecasts for growth rates in private equity with other investment landscapes, private companies are expected to grow at an average rate of 70 per cent over the next 12 months. 

He drew attention to Stripe, SpaceX, Databricks, ByteDance and US defence company, Anduril as examples of successful investments. “We see businesses forecasting, on average, a 70 per cent next 12 months growth rate compared to single digits in the buyout landscape or public markets,” he said.

Reflecting on the lessons learned from the 2021 bubble, Robert emphasised the importance of valuation discipline and considering operational growth. When evaluating the current state of price revenue multiples for deals at Series C and later stages, US prices remain high, while global prices have fallen to long-term averages. 

Finally, Robert highlighted the importance of not getting sucked into a single cluster or echo chamber, spotlighting the Italian company Bending Spoons. It has shown significant growth by acquiring and improving American consumer-facing apps, such as Evernote, while reducing costs. 

Bridging the gap between private and public markets

During this session, Robert and Paulina McPadden discussed how our investment floor collaborates with companies that move from the unlisted to the public arena.

Baillie Gifford made its first private company investment in 2012 with Chinese tech giant Alibaba. “This felt like an area where we could get access, but also where our public markets growth underwriting would let us understand the exit multiples so we could also carry out the analysis,” Robert explained.

Since then, Baillie Gifford has deployed more than $9bn across over 150 private companies, more than 50 of which have gone on to IPO. 

He emphasised the importance of engaging with private companies to understand potential disruptors, suppliers and competitors of public businesses: “We’ve always focused on building relationships with management teams to give us that insight and that access.”

Paulina saw two main benefits for public market investors from the work done by the Private Companies Team. First, the knowledge gathering and relationship building done before IPOs is crucial. 

“Because of Rob's work, we will have had months, years of relationship building and knowledge and insight,” she said. She mentioned Wise, a cross-border payments platform, to illustrate where the private market experience had provided valuable insights. 

Second, there is a significant crossover and collaboration between the two areas. Paulina recalls that when researching NVIDIA, “We were fortunate that thanks to the work in private companies, we were getting access to companies like Cerebras, which was a potential competitor to NVIDIA, but also Graphcore.” These helped the investors form their views.

Robert discussed the skewed risk-reward ratio in private equity and explained how it differs from public markets: “we have much greater go-to-zero risk in two senses. First off, many more of our companies go to zero. Second, when we’re seeing a company go to zero, it’s illiquid. We can’t get out of it.” That said, the potential upside is significant, and we embrace the concept of the power of asymmetrical returns. 

Paulina talked about the challenges of being a good long-term owner of public companies: “Holding on in those periods sets us apart from other investors, but it also means that we can’t sell at the perfect time.”

This collaboration between Baillie Gifford’s private and public market teams, helping companies through the IPO process, speaks to the benefits of knowledge sharing, relationship building and valuation discipline in achieving successful investments.

Why ants, scaffolding and long jumps matter to growth investors

Kirsty Gibson, investment manager in the US Equity Growth Team, delved into the significance of culture in driving organisational success and innovation. She emphasised that culture enables creativity, fosters adaptability and allows organisations to thrive.

Kirsty reminded the audience that, “Management teams cannot command creativity, passion or ingenuity. Employees choose whether to bring these to work with them every single day.” 

The right culture encourages employees to exhibit these qualities more often, making culture crucial for long-term investors. 

She shared her approach to cultural analysis, which she has developed over the past decade. Using analogies from evolutionary biology, Kirsty categorised companies into three types: stewards, followers and explorers. 

Stewards protect and maintain, followers try new things but are not the first to do so, and explorers are the dreamers and innovators. “Nobody wants an explorer-style CEO [chief executive] like Elon Musk managing a steward-style company like Hermes,” Kirsty suggested.

She highlighted the importance of adaptability for companies to survive and thrive in an ever-changing environment, and introduced the concept of a fitness landscape, where companies must adapt and evolve to remain fit in a dynamic industry. 

Kirsty discussed the McKinsey framework of the three horizons of growth: Horizon 1 focuses on the existing core business, Horizon 2 leverages new business opportunities, and Horizon 3 explores ideas for businesses that do not yet exist. 

According to Kirsty, successful companies invest in strategies that span all three horizons: “Companies maintain nimbleness and adaptability by making short jumps, but also big, bold ones.”

Kirsty emphasised the importance of scaffolding in fostering adaptability within an organisation’s culture. 

She described foundational culture as deeply held beliefs unique to the chief executive or founder. In contrast, created culture manifests foundational culture and evolves to unlock long-term opportunities. 

She provided examples of companies with strong scaffolding, such as Netflix, Apple, and Baillie Gifford, stating, “foundational culture is a company’s scaffolding. Understanding it is important to me because it gives me insight into a company's cultural DNA.”

Kirsty concluded with a formula for assessing the effectiveness of a company’s culture: aligned motivation, scale of ambition and ability to execute. She asked, “Do you see alignment? Do you see ambition? And do you see an ability to execute? Because you need all three.”

We have received favourable feedback from clients and prospects who joined us in Chicago, and we are already planning next year’s event. We hope you can join us for the Future Focus forum in 2026.

Words by Gillian Christie

View the Future Focus forum image gallery

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