Pending the results of its AGM on February 10th 2021, it is highly likely that the UK-focused Keystone Investment Trust [KIT], currently under Invesco management, will officially cross over into the Baillie Gifford fold. Moreover, the latter’s plan to shear their prospective ward of its current stocks — value-heavy, incl. a selection of dividend-rich sinners like BP & British American Tobacco — will transform Keystone into an IT version of BG’s Positive Change Fund, which they have arguably lacked in amongst their other IT offerings.
And so, this shedding of old wool for a clean fleece will be reflected in a name change: “Keystone Positive Change Investment Trust PLC”.
Upon reading this, my immediate thought was: ‘Has the KIT share price rallied pre-emptively?’ With time, one gains a sense of how the markets react, especially given the current ESG and green energy fever — and indeed, KIT did rise slightly when the news first broke in December. But not by much. The discount, which averages around -3% to NAV, has remained as of yesterday when I last checked. In any case, the general post-Vaccine Day rally has improved KIT’s fortunes: so it’s been on a solid upward trend, irrespective of the planned management change.
My second instinctive thought was: ‘Why hasn’t the share price rallied further, given the likelihood that BG will take over and change the fund mandate?’ And this is an interesting question, because the underlying assumption — that it ought to have — illustrates what I will be gradually articulating on this blog site in the time to come.
Over time, I’ve become convinced that there’s something about Baillie Gifford. And it has nothing to do with their stellar recent performance with a number of funds and trusts posting impressive gains of 80% and above for 2020 — as the cliche goes, the past is a crude and unreliable measure of future success. Their recent performance is, I believe, a byproduct of something more fundamental and intentional.
What is it about them, then? Why do I feel a desire to trust in BG as a collective of researchers and asset managers? One could cite the usual facts. Their firm is a unlimited liability partnership, a rare thing today, with all the healthy institutional pressures this can bring. More than any other asset management firm, they appear to foster a work culture which promotes deep understanding of phenomena and long term discernment as its primary aims. They talk a lot about ‘actual investment’ in contrast to the short-termism of speculators, traders and most investment banks.
Yet underlying all this, my overriding sense is that the long-term, as-yet-unarticulated set of intangible investments that BG has made in itself over the last 20 or so years (possibly longer) — quietly and behind the scenes — is now seeing a blossoming of institutional fruit in the context of global, covid-19 stress-testing: with corresponding financial success.
And with this remarkable success, the financial world generally (and retail investment world specifically) is noticing. BG, once a relatively small boutique investment firm, has become increasingly popular — certainly in the UK, but increasingly overseas. The Google Trends data reveals this clearly. In 2020, BG had record capital inflows from new clients, compared with a general belt-tightening elsewhere in the asset management sector — Invesco is a good (and somewhat sorry) case in point.
Because I trust BG’s active management, and I assume other people think like me, my instinct is that others will also trust BG. And if I’m right — there’s something fundamental which is only now revealing itself at large — then I wouldn’t be surprised if in a decade (or two), simply as a result of their research edge and consistently impressive returns, BG will become a competitor with the global asset management giants of BlackRock and Vanguard: a battle of active and passive investing (Aside: what Soren Kierkegaard would call a financial battle between the Knight of Faith and the Knights of Infinite Resignation).
Anyway, here I am spiraling off… and partially introducing the themes of this blog — but distracting myself from the more mundane news of KIT and its planned change of management to BG.
Suffice it to say, that I will be very curious to see what happens over the next couple months. So-called ‘Positive Change’ is in fashion. Baillie Gifford is certainly in fashion. But now that I’ve got some skin in this little game (as of a few days ago), I’m willing to hold KIT [now KPC] irrespective of popularity, for the long term — given that BG is involved.