James Anderson, outspoken manager of the £2.4billion Scottish Mortgage trust, has stepped up his attack on the fund management industry.
Mr Anderson, who earlier this year returned from a sabbatical, told a Baillie Gifford investment trust conference that fund managers were "almost as much to blame as bankers" for casino financial markets. "I worry a lot about the City of London, it is an assemblage of hedge funds, investment banks, short-sighted media and all in a circle that talks and communicates its own values - I think we have to be determined not to go there."
Mr Anderson said the stock market was supposed to incorporate all available information. "No it doesn't, what it incorporates is what traders in London and New York think...what the stock market tells you to do is almost always stupid, it is unbelievable that the market is meant to be a guide towards capital allocation. You are pummelled with this idea that because a share price has moved, something must have happened, but it hasn't."
He said the biggest single advantage an asset manager could exploit was low costs, and that was helped by relative inactivity rather than compulsive trading. In a reference to The Herald's report on last week's Alliance Trust agm, Mr Anderson said: "We are not that inactive, our turnover is in the 10 percent to 15 percent range, and since Alliance Trust regards 40 percent as normal that looks pretty low."
Baillie Gifford benefited from being seen by companies as long-term owners, in a capitalist system where "basically companies don't have owners any longer, and that is particularly acute in Britain", Mr Anderson said. "I think that is what we have done to the world and we need to take some responsibility for it."
Paul Faulkner, European equity manager, highlighted herd mentality, hyperactivity, and over-confidence, as three major pitfalls for investment managers.
Hamish Dingwall, global equity specialist, told the conference: "Practices that are commonplace in our industry are often worthless, but it does require an ability to experiment and use new methods of inquiry."
Tom Slater, Scottish Mortgage co-manager, said the trust was shifting its investments in China and Asia from infrastructure and export-led companies to domestic market players.