Episode summary
Why You Might Miss Big Opportunities With Passive Investing, CEO Says | At Barron's
At Barron's
· · 22 min · Hosts: Andy Serwer · Guests: Tim Campbell
Summary
Tim Campbell argues that active investing still matters because markets are increasingly dominated by passive strategies, algorithmic trading, and factor-based approaches. He says public markets work best when long-term shareholders engage with management and support difficult, risk-based decisions, and he cites studies suggesting companies with “quality shareholders” outperformed faceless shareholder bases by 3.4% over long periods.
He frames Baillie Gifford’s job as finding a small number of extraordinary growth businesses, even if that means enduring volatility and temporary drawdowns. Campbell points to Amazon, Apple, Tesla and Netflix as examples of companies that looked controversial at the time but created major long-term value. He says the firm’s biggest mistake has often been not being optimistic enough, and he thinks active managers can benefit from AI-driven disruption because the winners and losers are not yet obvious.
Campbell also argues that more of the best growth opportunities now sit in private markets, where companies can raise capital without going public. He highlights Anthropic and SpaceX as favorite private holdings, sees huge opportunity in AI-related bottlenecks like energy, and says Baillie Gifford continues to invest in emerging-market companies tied to semiconductors, copper, lithium, and healthcare.
Key takeaways
- Campbell says passive investing is now over 50% of public markets, and that can weaken the engagement public companies need from shareholders.
- He cites research that companies with long-term, engaged “quality shareholders” outperformed faceless shareholder bases by 3.4% over decades.
- Baillie Gifford’s approach is to seek a tiny number of exceptional growth companies and stay invested through volatility, even when stocks fall sharply first.
- Campbell thinks AI will create both casualties and winners in software, giving active managers more opportunity to discriminate between the two.
- He says private markets now contain more of the steepest growth curve, which is why the firm favors names like Anthropic and SpaceX.
- His biggest current themes are AI bottlenecks, energy, emerging markets, and healthcare, where he sees cheap valuations and important long-term demand.
Notable quotes
“It is a small handful of companies that do wonderful things”
“passive absolutely has its place in the investment landscape”
“those companies that enjoyed quality shareholders on the register and by that he meant shareholders who hold a few positions in size hold it for a long period of time and then genuely engage with management”
“the biggest mistake we tended to make was not being optimistic enough about what they were going to achieve”
“you have to give yourself the best possible chance of having those stocks that really can go parabolic”
How the episode opens
Hello everyone and welcome to At Barons. I'm Andy Serur and welcome to our guest Tim Campbell, CEO of Bailey Gford. Tim, great to see you. Thanks so much for joining us. — Nice to be here, Andy.
So, uh, Bailey Gford is a Scottish investment management company. Um, you have about $260 billion of AUM. very old school on the one hand, but on the other hand, your investment outlook is anything but.
And I'm wondering if you could sort of start us off with that. What is the thesis, the investment thesis of Bailey Gford? Yeah.
So, so you're right. Look, we've been around for 120 odd years. Um, and we see our role as trying to find the greatest growth businesses on the planet.
Um you know we we spent a lot of time studying what what drives markets and you know it's it's not a perfectly distributed bell curve of companies. It is a small handful of companies that do wonderful things. Um and so we are trying to find that very small handful of companies that are driving progress and innovating and trying to give clients exposure to those whether they be in public markets or private markets.
And I think that you've been talking recently about how the market is sort of so oriented towards indexing benchmarks that structurally it's sort of veering off course. Is that the case?
Uh yeah. So you're you're probably um alluding to a concern which I I confess I have about the direction that public markets are heading in. You know, I think there's a reason why so many businesses are choosing to stay private or indeed go from being public to private.
And this really comes down to the structure of public markets today. Um if if you think about it now over 50% of uh public markets are dominated by passive and then you add into that things like algorithmic trading, factor-based investing and look you know passive absolutely has its place in the investment landscape but but interesting what we're hearing from the companies themselves is that not really knowing their shareholders um is is a fairly unsatisfying experience.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- passive investing
- mutual funds
- asset management
- long term investing
- opportunity cost
Companies and tickers mentioned
- Baillie Gifford
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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