Our equity teams invest in public and private companies, with multiple teams focused on different industry sectors and geographical regions. We conduct detailed analysis with the aim of finding companies that have the potential to grow and add value for society over the long term. Our time horizon distinguishes us from other market participants. We look out five to ten years when analysing the growth prospects of a company.
Equity investors take ownership stakes in companies by buying ‘shares’, so called because they give their owners a percentage share of a company’s future financial performance. The purpose of equity investing is to provide cash to companies that want to invest in growth. Companies can issue new shares to investors in exchange for cash. Investors can also trade existing shares with each other through equity markets, but this does not raise new funds for the underlying companies.
Equities represent a claim on the future cash generation of a business. The value of a business is the discounted sum of these future cash flows. The future is unknowable so share prices represent market participants’ current views of the long-term prospects of a business. If the future performance of the business turns out to be better than expected, the shares will rise in value. If future performance is worse than expected, the shares will fall in value.
The job of an equity investor is to analyse a business and come to a view on its prospects. If their analysis leads them to be more optimistic than what is currently implied by the price of the shares, then they will buy the shares in anticipation of the share price rising. It can take many years for the growth characteristics of the strongest businesses to be fully reflected in share prices. This is why, at Baillie Gifford, we invest for the long term.
“Investing isn’t just about the numbers. It’s about imagining the future, so you need to be able to make connections across a wide range of topics and disciplines.”
After a three-to-four-month induction to the firm and our investment culture, the Equities stream offers three one-year rotations in different teams before finishing with a two-year placement in another.
There are more than 20 Equity teams at Baillie Gifford – including Long Term Global Growth, Global Alpha and Global Income. They provide the thinking behind our Scottish Mortgage, Scottish American Investment Company (SAINTS) and Monks Trusts. We have geographical teams such as Japan and UK, as well others with distinct themes such as Positive Change and Private Companies. You won’t have the chance to work with every team, but varied rotations will ensure you develop a broad understanding of the different approaches to equity investing.
As you research and imagine the long-term prospects for various companies, industries, and societal trends, we expect you to form robust opinions and write insightful reports. For example, we might ask you to research a mining company one-month, semi-conductors the next, and a fashion house after that.
Investing in equities carries an asymmetric risk. Good decisions can make our clients many times their original investment, whilst failure is limited to what they put in.
Our research tries to focus on the potential success of a company rather than the risk of what could go wrong.
I currently work in the Health Innovation team, which involves looking for companies that we think will create transformational improvement in the global healthcare industry. We view companies over a time frame of five years or more and try to assess their potential to grow in that time. I became particularly interested in a US software company called Doximity that offers a ‘LinkedIn’ platform for healthcare professionals.
Different teams have different approaches, but the main driver is that we all want to deliver returns for our clients. In the Health Innovation team, we have a list of ten standard questions we ask of every company we research. It’s about using that research to build confidence and conviction in your own opinions first, then spreading that to the team. But it’s important to stay humble too and appreciate that there are things you don’t know and that your opinions may be challenged.
Amongst the areas we want to build understanding and conviction on, company culture is a paramount one – we want to gain conviction that it is effective and differentiated. This leads to thinking about things such as, ‘what is the company’s talent retention rate?’, ‘is there a strong management team in place?’, ’how does the CEO think and what are their long-term aims?’ and ‘what is the company’s competitive advantage?’. How you go about delivering the answers to the questions is up to you, and it was up to me to find the right sources of information for my research.
I first heard about Doximity in January in a colleague’s presentation. Then, after discussions with the team, I carried out my first piece of in-depth research. In May, we went on an investment trip to the US and met the Chief Strategy Officer and Co-founder of Doximity. I also attended a conference in San Diego where I was able to learn about trends in the sector and speak to healthcare professionals about their challenges. Then, after gathering more opinions from fund managers around our investment floor, and another meeting with my team, the decision was made to take a position in Doximity.
The people here are always willing to carve out time for you, no matter how senior they are. Last year when we were all working remotely, lots of companies were coming to market and it was a really busy time for everyone in the firm. Despite this, when I asked for weekly catchups with the partners and senior managers who lead my team, they found the time. Everyone at the firm sees you as an investment and they spend time supporting your development and increasing your understanding of the role.
I always like to have more than one piece of research on the go. So, if I’m getting stuck on one, I can look at something completely different for a while. At the same time as thinking about Doximity, I was also researching BillionToOne, a company that makes genetic tests. A portfolio manager asked me to look at this over a short ten-day period, as the company were looking to release more shares in a series C round to help them grow. During my research period, I was also studying for my CFA level 1 exam, which required a considerable amount of work. On an ongoing basis, I’m also always looking to bring fresh ideas to the team and help build new contacts.
The learning curve is steep when you first start. Expectations are high, and the people around you are working at a high intellectual level. You’ll be asked lots of questions about your work and you need to be able to think about topics deeply and articulate your arguments clearly. I’m in the office from 9 to 5, but outside that time I’m still reading and thinking – working to gain new ideas and different perspectives on things. Passion and enthusiasm are important, as they’re what gets other people interested in your ideas. But you also can’t take it personally if your ideas don’t make it into the portfolio.