BOSS OF THE WEEK: RICHARD BURNS
ON the massive investment floor of Baillie Gifford & Co’s Edinburgh offices, explosions and screams of pain are rarely, if ever, heard. Silence reigns, as 60 highly-paid investment professionals closely study their screens and choose where to put billions of pounds of investors’ money.
However, for Richard Burns, the firm’s 59-year-old chief investment officer who retires this month after more than 30 years with Baillie Gifford, there are strong parallels between running a fund management business and leading troops into battle.
“The job is similar to being a general. You have your plan at the beginning, you know roughly what’s happening and where your own chaps are. You also have some idea of where the enemy is and what weapons he’s got – although you don’t know the whole story. And n fund management, as in warfare, knowing when to beat a retreat is critical.”
But Richard Burns, who was born in Gourock and raised in Dundee, is not convinced by the quality of financial information in today’s globalised theatre of war.
“The fact that information comes more quickly and in real time [through 24-hour rolling business news resources such as CNBC and Bloomberg terminals] probably makes the job of sorting information more difficult. Much of what they put out is totally trivial.”
Despite the military metaphors, Richard Burns is disarmingly frank about his own management skills. He admits he has not been “all that good” at managing Baillie Gifford’s investment team, which has now grown to around 60 fund managers. “My appraisals over the last six years have consistently been ‘out of the office too much and not available for people to come and talk to me’.”
Investment management has changed considerably since Richard Burns joined Baillie Gifford from corporate law firm W&J Burness in 1973.
“You could go out to the States and find investments that weren’t even on Wall Street’s radar screen. The sources of information were much more limited then, which enabled you to find tremendous value in odd places.” Burns says one reason such an approach has become less worthwhile is the rise of regulation, limiting what a company can tell investors.
“Regulation has made going to visit companies on the ground less rewarding than it used to be. It’s made getting an informational edge more difficult.” Generally, Richard Burns believes some of the rules constraining investors’ freedom of manoeuvre have had a harmful effect on the markets. He has interesting views on insider dealing – a practice which a Financial Services Authority study found to be rife in the UK stock market.
“I think insider dealing should be allowed because it’s the best way to get to the efficient price the quickest. There is a respectable intellectual case for it.”
But he doesn’t endorse activities such as those of the Daily Mirror’s City Slickers columnists, Jame Hipwell and Anil Bhoyrul : “That’s different. They were writing stories they knew would have an effect on the price.”
Richard Burns is not convinced that the surge in corporate governance requirements since the 1990s has benefited business. “These codes are trying to set out how a company should be run, but if you’re running a company properly in the first place there’s a great deal of unnecessary hoops that have to be jumped through.”
However, he believes there have also been changes for the better during his 30 years in investment. Burns says UK based asset managers can now buy into previously inaccessible geographic territories thanks to the end of exchange controls and the end of the Cold War. “To be investing clients’ money in countries such as Russia and China is incredible,” says Burns.
BAILLIE Gifford has seen assets under management grow from £500 million when Richard Burns joined to more than £45 billion today. In the process it has eclipsed all its independent rivals in Scotland, with the sole exception of Martin Gilbert’s Aberdeen Asset Management. Many of its rival firms simply ran out of steam in the 1990s and have since become part of larger rival investment groups.
Richard Burns says it is sad that so many investment names of the recent past – Ivory & Sime, Murray Johnstone, Edinburgh Fund Managers and Stewart Fund Managers – have effectively disappeared.
Wondering out loud why these firms lacked Baillie Gifford’s staying power, he blames poor succession planning, citing Jimmy Gammell, who built Ivory & Sime into a financial power house in the 1970s, as an example: “He left no succession plan as far as I can tell, possibly deliberately.”
The net result was that Ivory & Sime was for years beset by internecine feuding. Many of its best fund managers left to set up on their own, and the firm is now a small constituent part of London-based F&C Asset Management.
Baillie Gifford has been a much steadier ship. This is partly because it has remained a partnership, with some 30 or so of its most senior staff owning the business. “We’ve been lucky, managing to avoid any serious political battles, and we’ve had a pretty good consensus about which way we should be going, “ says Richard Burns.
“Much of our success is down to things we have not done. Not getting taken over, not getting into technology funds, not getting into hedge funds or split capital funds.”
He says one of the “smartest” things the firm did was to start promoting its investment services to UK pension schemes in the late 1970s.
Previously focused mainly on managing investment trusts, the firm improved its investment performance in the UK equities arena and managed to get onto the “buy list” for UK pension schemes from about 1984. Today, the biggest portion of money Baillie Gifford manages is for pension funds.
Burns is adamant there are no plans to sell the business, even though each partner could potentially make a windfall of some £16 million from a sale. “Everyone in this organisation buys into the way we’re organised, which is to stay private and a partnership, and carry on being investment managers.”
There has clearly been no shortage of offers from other investment management groups and European banks though, and Burns concedes that there is a possibility Baillie Gifford may have to review its partnership status. “If we were to keep on growing, say from 30 to 100 partners, I don’t know how viable that would be as a partnership.”
After he retires, Richard Burns’s role is being split between two existing Baillie Gifford partners. Charles Plowden takes over managing investment staff while James Anderson will drive investment policy.
Richard Burns seems to be planning to hang up his boots rather than stage any further military-style campaigns. He is a generous donor to the arts in Scotland, continues to sit on the court of Dundee University and is a governor of Donaldson’s School for the Deaf, currently based in Edinburgh.
He will also remain a non-executive director of several investment trusts including Mid Wynd, Bankers and Sandy Nairn’s EP Global Opportunities.
But Burns has no desire to emulate his predecessor, Max Ward, who launched his own investment trust on retiring in 2000. “I haven’t managed a hands-on portfolio for a long, long time, “ he says.
NEED TO KNOW
CAREER: Richard Burns, 59, was brought up in Dundee and educated at Glenalmond College, Merton College, Cambridge and Edinburgh University. He qualified as a lawyer with W&J Burness before joining Baillie Gifford in 1973. He became a partner in 1978 and senior partner in 2000.
FAVOURITE BOOK: Jane Austen’s Pride And Prejudice.
MENTOR: Douglas McDougall, former senior partner at Baillie Gifford.
FAMILY: Wife Catherine; daughter Mary (7); children from previous marriage James (30), Claire (27) and Peter (24).
DRIVES: Volvo estate.
This article was published in the Sunday Herald on 2 April 2006