Yahoo Finance Questor: James Anderson is leaving Scottish Mortgage – follow him to this Swedish ‘trust’
Once it was Neil Woodford, at other times it has been Terry Smith. But right now Britain’s most respected fund manager is probably James Anderson of Baillie Gifford, who jointly runs Scottish Mortgage. Anderson is due to leave Baillie Gifford next year but adventurous savers can continue to benefit from his abilities if they are willing to put money into what is in effect a Swedish investment trust.
Anderson has had a role at Stockholm-listed Kinnevik since 2014, but after his retirement from Baillie Gifford will step up to chair the company.
Kinnevik dates back to 1936 and, like some British investment trusts, came into being to manage the investments of wealthy families. Like Scottish Mortgage itself, it has evolved in the way it invests.
“You could say Kinnevik is what Scottish Mortgage would be if it invested all its money in unquoted companies,” says Gordon Smith, a funds researcher at Killik & Co, the stockbroker. “It’s an investment company that backs early-stage firms in areas such as e-commerce and healthcare. It has a big focus on digitally enabled businesses and those positioned to disrupt existing markets.”
There’s more than one way to invest in unquoted businesses: some investors back enterprises that have just come into being; others prefer to wait until firms are profitable. Kinnevik’s approach is to invest early and to stick with companies as they develop.
“It’s clear that there is a growing group of businesses that can scale without the need for enormous amounts of capital, often because they can reach their customers without a physical presence,” Smith says. “As a result there is no need for them to take the traditional route of going public and they stay private for longer.
“Kinnevik plays to that theme: it backs companies from an early stage because that’s where the real returns are. Not all will win but you only need a few to come good. You could call Kinnevik an ‘incubator’ investor that sticks with its companies all the way through. Some end up at a pretty decent size.”
The most obvious example is Zalando, the online fashion retailer. Founded in Germany in 2008 and first backed by Kinnevik in 2010, it floated in Frankfurt in 2014 and is now worth €25.5bn (£21.7bn). Kinnevik invested a total of £660m in the company and recently distributed a stake worth £4.6bn to its shareholders, on top of £1.1bn previously realised.
“It is one of the biggest technology investors in Europe and can write quite big cheques if it needs to,” Smith says.
What exactly will James Anderson bring to Kinnevik? He knows the company not just through his own role there but also because Baillie Gifford has invested in it.
This is what Cristina Stenbeck, a former executive chairman, had to say in March: “It is our understanding from our discussions with James during the recruitment process that it will be with the same bold and unwavering conviction that he and his team [at Baillie Gifford] allocated capital into Kinnevik that he will soon lead the board’s strategic and oversight work.”
Anderson himself said then: “I have long admired [Kinnevik] as a great exemplar of a patient, committed and quintessentially Swedish investment style. Kinnevik’s leadership has already made great strides towards embracing the abundant growth investments available given the repute it rightly enjoys and the permanent capital it can provide.”
Investing in early-stage private companies is very different from picking quoted shares: the latter is all about analytical skill but the former depends heavily on personal contacts and the ability to inspire trust in the companies you seek to back.
Anderson’s network of contacts in this world will stand him in good stead and should only make Kinnevik, already “the investor you would probably most want to meet if you are an entrepreneur in the Nordics”, in Smith’s words, even more appealing.
The shares have had a terrific run and trade at a substantial premium to net asset value, even if valuing unquoted companies is not an exact science. Investors must be prepared for setbacks and to hold for the long term.
Hargreaves Lansdown and AJ Bell are among the brokers to deal in the shares.
Questor says: buy
Ticker: STO:KINV-B
Share price at close: Skr 400.3
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