ROBERT FLEMING has a claim to be a pioneer of active asset management. His First Scottish investment trust pledged to invest mostly in American securities, with choices informed by on-the-ground research. Fleming saw that shareholders needed to act as stewards in the governance of the businesses that they part-owned. So once the fund was launched, in 1873, he sailed directly to America. It was the first of many fact-finding trips across the Atlantic over the next 50 years, according to Nigel Edward Morecroft’s book, “The Origins of Asset Management”.
The art of asset management is capital allocation. It is easy to miss this amid confusing talk of alpha and beta, active and passive, private and public markets. For investors of Fleming’s kind the work of finding the best investment opportunities and engaging with business was inseparable. Walter Bagehot believed the rapid growth of the mid-Victorian economy owed much to the efficient channelling of capital. In England, he wrote, “Capital runs as surely and instantly where it is most wanted, and where there is most to be made of it, as water runs to find its level.”
Most of today’s financiers will say they are engaged in capital allocation. There are many dedicated stockpickers who take this social role seriously and see it as a vocation. But for the most part ties between...