Partner Content - Baillie Gifford sponsor of the Investment Week Leaders Summit. Rachael Callaghan looks into AI and market dynamics.
As a group, how have you been boosting your investment capabilities, including taking advantage of technological advances in areas like AI?
As a group, Baillie Gifford benefits from a team of ~180 investors engaged in a wide range of strategies. Collectively, they aim to take long-term positions in promising businesses across the world and have built up a deep pool of historic company notes. That research is shared through a common repository amounting to 75,000+ documents, allowing any individual strategy to leverage the knowledge and experience built up across the investment floor. AI has been of long-standing interest, with investments in companies like Nvidia, Tesla or indeed ByteDance. We believe there is a reasonable probability that generative AI will materially change the nature of investment research. Hence, we have explored systematic approaches to identifying investment prospects, human-AI collaboration to generate first-pass research notes and launched an internal tool to answer complex questions based on our aforementioned research repository. We expect this area to become of increased importance over time.
Over time, the firm has extended from public into private markets, with mutual benefit. The public side makes Baillie Gifford compelling to companies seeking long-term investment partners. The private side allows public market colleagues greater understanding of exciting companies that list, as well as visibility on emerging threats to incumbent holdings.
What do you see as the big opportunities and risks for investors in 2025? How are you responding to these in a particular strategy?
While we seek to be aware of shorter-term trends and market dynamics, as these influence the valuations we see and the types of companies that are raising, our primary focus is on those longer-lasting emerging trends that will allow for outlier companies to be built.
These include the disruption of large industries across healthcare, financial services, manufacturing, … In recent years, often these companies sat at the intersection of using AI alongside their core domain: true for large public market names like Tesla, Microsoft or Meta, but also of our holdings like ByteDance, Databricks, Oddity or Tempus. More recently over the past two years, generative AI across modalities is now promising to become the next core technology on which a new generation of start-ups will be built. The lesson however of the rise of the internet from the mid-90s is that the great majority of successful outcomes were only founded in the subsequent decade: we balance our excitement with the possibility that this time again the great winners may yet have to be founded.
Specific to the opportunities and risks in the market: we observed a much lower pace in 2023 of attractive companies raising capital, as companies worked on their cost structure and extended runway. The only two new deals we did sat outside of the traditional venture space. In 2024 we have observed a much larger number of attractive companies raising at lower valuations. This has been reflected in our higher pace of deployment. We believe that 2025 will likely bring more of the same, with companies having found a more rational cost structure and benefiting from operating leverage with reasonable growth. That should reflect in attractive deal flow and possibly a higher pace of IPOs.
What are your priorities as an asset manager for the year ahead?
Our overriding business objective and therefore ongoing priority is to provide our existing client base with a first-class service that encompasses investment performance, administration and client care. This is particularly relevant in times of market volatility and uncertainty.
Over the next 12 months, we will continue to focus on uncovering the next generation of growth companies on behalf of our clients, in both private and public markets. In that vein, we continue to build our private companies offering and reputation. Our private companies effort is significant as part of our broader investment research into companies that could, in time, be held in clients' and funds' portfolios once they are public.
Rachael Callaghan is an Investment Specialist at Baillie Gifford
