Fund in Focus: Placing their trust in the long term is still the key after 100 years

Published on Friday 27 November 2009 19:44

THE founders of Baillie Gifford cannot possibly have imagined that 100 years after they established the Scottish Mortgage Investment Trust, history would provide such uncanny parallels with the current economic climate. As current manager James Anderson said: "I like to think of both periods as a time of great innovation and great opportunity in the Far East".

Since 2007, the trust has been benchmarked against the FTSE All World index, giving the manager greater flexibility to seek out the hidden gems in the emerging markets. It is a term that Anderson is reluctant to use, as he is keen to point out that some of these countries emerged long before our own.

He said: "It is inappropriate to lump together Brazil, China and India as each country is unique and provides very different opportunities."

Anderson is also quick to respond to the charge that the large exposure to the Far East and emerging economies added to the volatility of the trust's performance.

"You could argue that these economies, which will soon provide half of the world's growth, are less risky than the western economies which are so reliant on financial engineering. People seem to ignore what is wonderful elsewhere in the world and end up with a strong home bias to their portfolios."

Although the manager is benchmark aware, the portfolio is constructed from the bottom up. Anderson explained, that despite being underweight in the US as a region, there are "fantastic individual corporate opportunities" in the US.

"The quality of companies is astounding compared to the UK. Take Amazon and Google for example. One of the major puzzles of 2008 was that these companies got bashed like everything else despite the fact that they are hugely cash generative."

One stock that Anderson is particularly enthusiastic about is Baidu, the Chinese internet search engine.

"The company has a 65 per cent market share, beating Google into second place. With a market cap of $15 billion, the company is relatively small but with the Chinese economy growing at 10 per cent a year and with an undervalued currency, this might just be the most valuable asset in the world."

However, Anderson concedes that the trust may not be suitable for everyone. "It is definitely not for people who want to trade short term. We want to make money over the long term, at least five years and preferably much longer."

&#149 For more information call 0800 027 0133 or visit www.bailliegifford.com

&#149 Barry O'Neill is a chartered financial planner with Thomson Shepherd Limited (incorporating Coggans Wood).