Scottish Mortgage: guiding a giant

Fiona McBain, chair of Scottish Mortgage, discusses the unique challenges of steering a FTSE 100-listed fund and the importance of its unusual board…

Article updated: 7 October 2019 1:00pm Author: Alice Rigby

Our guest writer Alice Rigby recently spoke with Fiona McBain, chair of Scottish Mortgage to discuss the FTSE 100 Investment Trust's recent successes. This article "Guiding a giant" originally appeared on Kepler's website.


Fiona McBain could rightly be considered one of the most important people in the investment trust industry. As chair of Scottish Mortgage since 2017 she, along with the rest of the board, has overseen the management of more than £8bn of investor money.

But Fiona is well-prepared for this responsibility. She joined the Scottish Mortgage board on the back of a rich and varied career in financial services, beginning with qualification as a chartered accountant and including stints as a CEO and finance director.

In fact, she says, chairing an investment trust board has its advantages over some of her previous jobs.

“As a CEO, you have a whole range of responsibilities to your clients and stakeholders. Whereas Scottish Mortgage has no employees, instead it is centered on the relationship with the managers, which allows you to be more focused.”

So, what is the key to a successful board-manager relationship?

She says, “it is absolutely critical that the relationship between board and manager for it to work well is based in trust. The directors are not going to stock pick. We need to let managers get on with the job - within the agreed parameters.”

She sees the role of the board in investment terms very much as an oversight position, while governance is a functionary responsibility – although, that doesn’t mean the board leaves the managers to their own devices.

“We try to make it so that 50% of the time, if not more, is focused on discussion of the investment management. Once a year, we have a strategy meeting that is for investment only and not governance. But then obviously there is a lot of governance that sits alongside that.”

A different type of trust

While size does matter, the potential challenges of steering Scottish Mortgage go beyond its status as Britain’s largest investment trust.

The trust now has a healthy allocation to private companies, giving investors access to high growth businesses at an earlier stage than they would be able to achieve alone. However, both the public and private companies in the portfolio tend towards rapidly developing industries and technologies, such as electric vehicles, and require a fresh investment approach.

To address this, Scottish Mortgage has taken a distinct approach to formulating its board.

Fiona explains: “the most important thing is diversity in the broadest sense, in terms of skills and knowledge. There are only two non-professors on the board and a variety of experiences across business and academia. We wouldn’t consider former investment managers appropriate for the board, as we already have investment managers running the fund.”

This fresh approach extends beyond the experience of appointees – the board also considers the type of people it should consist of.

“We also look for a softer skill set in potential appointees: the ability to listen, to offer constructive advice and a lack of grandstanding. The board ultimately has a collective responsibility, so we want to reflect that.”

Communication is key

Fiona’s own experience brings a particular lens to the board’s oversight – particularly in terms of speaking to retail investors. Several of the companies she has been involved in have been consumer-facing, which means she understands how communications in this market should be structured.

“Clear communication with shareholders is key. In the context of Scottish Mortgage, that is making sure the market is aware that this is a high conviction, long term proposition – while at the same time, emphasising that it is also low cost. We try to make these things explicit in our communications – for instance our annual report disregards 1 year figures, as these do not suit the proposition.”

The trust also puts great emphasis on seeing shareholders face-to-face, facilitated by its strong relationship with Baillie Gifford.

Fiona says “we obviously have the AGM in Scotland, but we also hold forums elsewhere, with the locations rotated each year. It means shareholders can ask questions and can access us through whichever format works for them.”

It is clear through these measures that this trust values its shareholders – and with a steady and experienced hand on the tiller, is unlikely to change that attitude any time soon.


These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Alice Rigby

Marketing Manager, Kepler Partners

Alice manages the production and distribution of content at Kepler Trust Intelligence, an online research hub for professional and private investors. She was previously a financial journalist at Investment Week and an investment writer at Hermes Investment Management.