Scottish Mortgage non-executive removed after boardroom clash

Baillie Gifford’s flagship company, the Scottish Mortgage Investment Trust, sacked one of its non-executive directors at a board meeting on Thursday after it said disagreements arose over the appointment of new board members at the £13.4 billion FTSE-listed company .

The breakdown in board relations of one of Britain’s most well-known investment vehicles comes after a year in which the trust’s share price fell more than 30 per cent as the rise in growth stocks propelled its performance over the past decade and was stymied by higher interest rates.

It also follows a change in management at Scottish Mortgage after James Anderson, who led a landmark shift to venture capital investing at Baillie Gifford more than a decade ago, retired last year after nearly four decades at the Edinburgh-based private partnership. He was replaced at Scottish Mortgage by his co-manager Tom Slater and Lawrence Burns.

Amar Bhidé, director of Scottish Mortgage since 2020, told the Financial Times he had fallen out with Chair Fiona McBain over the process of appointing two new board members and his assessment of the risks associated with the trust’s investments in unlisted companies were valued at £3.8bn at the end of January.

Bhidé, a 67-year-old economist and author who has no other directorships, said he felt he could not remain calm. “I was very concerned about the stock price performance and the discount and trying to get people to understand that there is a structural reason for this.”

Bhidé said he was trying to raise concerns about the portfolio’s exposure to illiquid assets at a time when a sell-off in public technology markets heralds a reckoning in the private sector. Scottish Mortgage’s early bets on companies like Tesla, Amazon and e-commerce giant Alibaba were partly responsible for its rise in importance.

Comparing the trust’s resources and low fee structure to those of venture capital firms and other specialists, he said: “In my opinion, they do not have the skills and leadership to oversee the illiquid investments, which there is little verified information on by the public Sphere. The fact that you’ve made it in the last 10 years is due to a completely different period in financial history. Make no mistake that you can keep playing this game.”

McBain said: “Current issues such as short-term volatility, stock prices and private companies are regularly discussed by Scottish Mortgage’s managers with shareholders in various forums. They are also discussed in detail and examined by the Board of Directors.

“As Chairman of Scottish Mortgage, I have every confidence in the Scottish Mortgage Board of Directors providing sound governance and oversight. We remain convinced that the managers are taking the right long-term investment approach and are building a portfolio of transformational companies that can offer something to shareholders for five years or more.”

Scottish Mortgage has a strong long-term record. In the 10 years to the end of February, it was up 361.7 percent, ahead of its FTSE All World benchmark, which was up 183.1 percent over the same period.

Bhidé is a professor of business administration at Tufts University in Massachusetts and the author of A verdict: sensible finances for a dynamic economywho advocated human decision-making in financial institutions over centralized financial models.

Last year, Baillie Gifford suffered its worst annual fall in assets under management. The Edinburgh-based partnership’s assets under management fell by a third, from £336bn at the end of 2021 to £223bn at the end of 2022. The decline was largely due to valuation declines across its investment portfolio.