Moneywise First 50 invterview: Mike Gush, Baillie Gifford Emerging Markets Growth

4 September 2019

Mike Gush, is co-manager of the Baillie Gifford Emerging Markets Growth fund, worth £1.07 billion. Edmund Greaves talks to him about his investment choices, pitfalls and tips for beginners

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What is the Baillie Gifford Emerging Markets fund?

The fund aims to capitalise on emerging market company growth. We have a relatively diversified portfolio of the best growth investments across emerging markets.

We have an excellent track record. Baillie Gifford has been investing in emerging markets since 1994.

What are emerging markets?

The term emerging markets refers to a collection of economies at an earlier stage of development than developed markets such as those in the UK, the US and Japan.

We are talking predominantly about markets such as Brazil, Russia, India and China – the so-called Bric nations. But we are also talking about some smaller markets in Asia, Africa and Latin America.

These are the three big regions that make up the emerging markets sector. China, which represents more than 30% of the the total, is the largest component of the emerging markets as a whole.

Why should people invest in your fund?

We focus on finding businesses that will be much larger tomorrow than they are today, and we have the right people in place to identify them: a long-standing and experienced management team that has been through multiple market cycles.

Within emerging markets, we are guided by a philosophy that has stood the test of time: we seek to make investments for multi-year periods, for the long term and for growth and we are willing to be very different from the benchmark.

What gets you out of bed in the morning?

The appeal of investing is that it is always different. No two days are alike for me, and that brings fresh challenges and new information to consider every day. It is never boring.

The most important attraction for me is that we are working in a challenging area, one where we rarely have all the answers we need. We are dealing with uncertainty, and that keeps our work really interesting. Every day there is a new challenge.

What was the first thing you invested in?

I read engineering at university, but during my final year I decided engineering wasn’t for me. I had taken some finance modules along the way, however, and I started making some amateur personal stock market investments.

It was a collection of UK mid-cap and large-cap stocks back in the late 1990s such as Vodafone, which did reasonably OK, until it didn’t. I had decidedly mixed fortunes, as I was very much an amateur investor coming from an engineering background. What got me interested in finance was wanting to know more about how the world works and what drives financial markets.

What’s the best decision you have made for the fund?

Our approach at Baillie Gifford is very team based. We try to avoid a star fund manager culture. If you look back at some of the companies that have made us the most money – companies such as Baidu, which has gone up in value tenfold since we bought it in 2008 – it’s evident that a real team effort got us there.

More broadly, we have done a very good job of identifying technology winners, and that is something that remains a feature of the fund today.

That said, our success has been helped by getting into tech firms such as Alibaba, Samsung and Tencent early. Baidu sticks out because it was bought at an uncomfortable time to be making that sort of call on that investment – during the 2008 global financial crisis – yet the investment has done staggeringly well.

And the worst?

In any portfolio, when you are looking for big winners, the exceptions in the market, the fast-growing companies – which is what we are trying to do – you inevitably make a few mistakes along the way.

There are a number you could point to, particularly in areas such as resources: investments in firms such as Niko Resources and Chariot Oil and Gas, for example, which have detracted from performance.

The key to success is ensuring you have enough money in the investments that do work out. We run a diversified portfolio of about 70 names, and that gives us the latitude to take several positions and keep the amount of capital invested in any one measured.

Typically, the maximum position size in the fund is 6%. The resulting diversity in the fund allows for some mistakes, but that maximum enables us to make the most of the big winners when they come along and we have had a lot of those.

What one tip would you give a beginner investor?

I help organise the graduate training here at Baillie Gifford. I speak to a lot of people entering the industry for the first time. The one piece of advice I would give is read widely.

In my earlier years as an investor I read at least one or two books a week on a wide range of subjects, from how industries work to the investment styles of super-investors.

Part of your role as an investor is to take an interest in the world around you and increase your knowledge about a broad range of subjects. Reading widely is one of the best ways of doing that. You can also learn an awful lot from other experienced people, in the investment industry and beyond.

Baillie Gifford Emerging Markets Growth

Launched: March 1997
Fund size: £1.07 billion
OCF: 0.79%
Yield: 1.1%
Source: Baillie Gifford, July 2019

The manager behind the fund

Mike Gush graduated with a MEng in mechanical engineering from Durham University in 2003.

He joined Baillie Gifford in the same year and worked in its UK and Japanese equities teams before moving to its emerging markets equity team in 2005, where he is an investment manager. Mike is one of the five portfolio managers of Baillie Gifford’s Global Stewardship strategy and is a CFA charterholder.

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Discrete performance of the fund over five years (%)

Period 0-12 months 12-24 months 24-36 months 36-48 months 48-60 months
Baillie Gifford Emerging Markets 12.7 9.7 41.0 0.1 2.5
Sector average 6.2 3.7 27.5 3.9 0.9

Source: Baillie Gifford, July 2019

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