Flagship Baillie Gifford Scottish Mortgage Investment Trust sacked one of its non-executive directors at a board meeting on Thursday, following what it said was a disagreement over the appointment of new board members at the £13.4bn FTSE-listed company.
The breakdown of ties at the board of one of the UK’s best-known investment vehicles comes after a year in which the trust’s share price fell by more than 30 per cent due to a surge in shares that have underperformed over the past decade. it is curbed by higher interest rates.
It also follows a change in management at Scottish Mortgage after James Anderson, who led the pioneering shift at Baillie Gifford over the past decade to venture capital investment, retired last year after nearly forty years in the Edinburgh-based private partnership. He was replaced at Scottish Mortgage by co-manager Tom Slater, and Lawrence Burns.
Amar Bhidé, director of Scottish Mortgage from 2020, told the Financial Times that he had clashed with chairman Fiona McBain over the process of appointing two new board members, and the assessment of the risks posed by the Trust’s investment in unquoted companies, valued at £3.8bn at the end January.
Bhidé, a 67-year-old business academic and author, who has no other director, said he could not go quietly. “I am very concerned about the performance of share prices and discounts, and trying to make people understand that there is a structural reason for this.”
Bhidé said he has tried to add to his concerns about portfolio exposure to illiquid investments, while selling in the public technology market expressed his reckoning in the private sphere. Scottish Mortgage’s early bets on companies such as Tesla, Amazon and e-commerce giant Alibaba are partly responsible for its rise to prominence.
Comparing the resources of the trust and the low cost structure with venture capital companies and other specialists, he said: “In my opinion, they do not have the capabilities and influence of the government to monitor illiquid investments where there is no audited information. public domain. The fact that you have been held back for the last 10 years because of the wrong time in financial history.Don’t kid yourself that you can keep playing this game.
McBain said: “Current topics such as short-term volatility, share prices and private companies are regularly discussed with shareholders in various forums by Scottish Mortgage managers. They are also discussed at length and scrutinized by the board.
“As chairman of Scottish Mortgage, I am confident that the Scottish Mortgage board provides strong governance and oversight. We remain confident that managers are taking the right long-term investment approach, and building a portfolio of transformational companies that can deliver for shareholders over five years or more.”
Scottish Mortgage has a strong long-term track record. In the 10 years until the end of February has gained 361.7 percent, ahead of the FTSE All World benchmark index, which rose 183.1 percent in the same period.
Bhidé is a professor of business at Tufts University in Massachusetts and an author A Call for Judgment: Sound Finance for a Dynamic Economywhich supports human decision-making in financial institutions through a centralized financial model.
Last year, Baillie Gifford suffered its worst ever annual fall in assets under management. The Edinburgh-based partnership’s AUM fell by a third, from £336bn at the end of 2021 to £223bn at the end of 2022. The fall was driven by a decline in the value of its investment portfolio.