This week, we speak with Tom Slater, who is head of the U.S. equities team and a decision maker on long-term global growth portfolios at U.K.-based investment firm Baillie Gifford. The firm has over $370 billion in assets under management. Slater serves as a decision-maker on Long Term Global Growth portfolios, and the U.S. Equity Growth Fund which is up +113% year to date. He also co-manages the Scottish Mortgage Investment Trust, which Baillie Gifford has been managing since 1908.
We discuss why only 4% of stocks account for nearly all equity returns. This makes the sell discipline so important for fund managers, who should think much longer term than they tend to do. However, a successful fund needs clients who exhibit patience and are willing to ride out the regular periods of volatility and weaker returns.
He explains why a concentrated portfolio is more likely to outperform than a closet indexer, and that active share is important in the pursuit if alpha. The Active fund industry has done a poor job justifying its existence, in part driven by high fees that have not been commensurate with its performance. The industry needs to both lower its fees and improve its performance if it wants to stay in the game.
Slater defines his process as “Growth at an unreasonable price.” His role is to identify one of those small numbers of companies that can be one of the winner take all players. Their top holdings include Tesla, Amazon, Shopify, Zoom, Netflix, Alphabet, Chegg, and Mastercard.
A list of his favorite books are here; A transcript of our conversation is available here.
You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.
Be sure to check out our Masters in Business next week with Jeff Poggi, co-CEO of McIntosh Group, manufacturer of audiophile components widely regarded as among the finest in the world. Despite the pandemic, the company notched their best sales year in their 70 year history.
Tom Slater’s Favorite Books
On the Psychology of Military Incompetence by Norman F. Dixon
Deep Survival: Who Lives, Who Dies, and Why by Laurence Gonzales
The Checklist Manifesto: How to Get Things Right by Atul Gawande
Being Mortal: Medicine and What Matters in the End by Atul Gawande
No Rules Rules: Netflix and the Culture of Reinvention by Reed Hastings and Erin Meyer
Linked: How Everything Is Connected to Everything Else and What It Means for Business, Science, and Everyday Life by Albert-László Barabási
