Welcome to
MD Financial Management

Thank you for using MD Chat

Please fill in the fields below so we can get started.

Contact an
MD Advisor

Sub-advisor Spotlight: From Christmas Trees To The North Pole, A Kilted Money Manager Proves Endurance

Posted Dec 18, 2017, 04:06 PM | By MD

63445-MD-blog-advisor-Walter-Scott_730x320

MD’s global sub-advisors are hired for their investment philosophy, asset management expertise, investment research, innovation and, above all, their great people. In this series, you’ll meet a few of the faces behind our funds, pools and portfolios.

Picture1

Even Santa might agree that growing Christmas trees is no way to get rich quick—it takes patience and a long-term view to profit from a crop of festive fir.

“It’s not a short-term business to plant a tree and then wait ten years for it to mature,” says Jimmy Smith, owner of The Kilted Christmas Tree Company, a family-run enterprise based in Kinross, Scotland, about an hour’s drive north of Edinburgh.

“You’ve got a six-week selling cycle, once a year. Any Christmas tree that isn't sold by Christmas Eve becomes worthless. You have to be on top of supply and demand and inventory. We've got a full complement of workers cutting trees or selling trees right now—which allows me to focus on the day job,” says Smith.

No ordinary tree farmer, he grows equities by day

That “day job” is a world away from Smith’s rural tree farm in the Scottish countryside, from which he rides a BMW motorcycle to his office in the city. Smith is a director at Walter Scott & Partners Limited, a global equity specialist and independent subsidiary of BNY Mellon, based in Edinburgh’s historic Charlotte Square.

The firm works exclusively for pension funds and institutional investors, and has managed various global equity mandates as an MD sub-advisor for more than a decade, including the MD International Growth Fund and MDPIM International Equity Pool.

Smith has been with the company for 34 years; in fact, he was the first employee hired by the firm’s founder and namesake (who left the business a decade ago). Today, he co-heads investment operations and oversees trading, portfolio implementation and research operations.

Walter Scott employs about 100 people, but you’d have no trouble identifying Smith at the office: look for the fellow in the tartan.

 “I’ve worn my kilt to work for, I think it must be 30 years now. It’s part of who I am—the only kilted investment manager in the world.

“Or, at least, I have yet to meet somebody else,” he says, laughing.

Seeking stock investments with deep roots

While much has changed in equity markets since the 1980s—from a web of financial regulation to electronic trading to the rise of debt and derivatives—nothing has altered Walter Scott’s long-term, buy-and-hold view on investing, says Smith.

A core conviction is that, over the long term, return to shareholders can only ever be as great as the wealth generated by the underlying businesses in which they are invested.

“To keep it simple, our job is to find companies that can deliver returns that are necessary to get [ongoing] benefits. Once we find those companies, we never have a plan to sell them. Unlike some classes of investors, we do not have an end point,” says Smith, of the buy-and-hold approach.

This discipline and research capability has cemented a long-term role in MD’s investment platform, says Craig Maddock, Vice President at MD Financial Management, even through the firm’s transition in ownership a decade ago.

“The resilience of the firm and the strengths of its people are a big part of why we like them,” says Maddock, who leads MD’s team of portfolio managers and investment analysts. “We know what we get with Walter Scott, thanks to the candid nature of the team, and how open they are.

“And you’ll find that a leader like Smith is not only a fantastic investment professional and a great part of the team–he’s also a very interesting personal character.”

A discovery that money, indeed, grows on trees

Smith’s sideline into Christmas trees came out of a neighbourly act of kindness about 15 years ago, helping a farmer friend through a tough time with an illness in the family. The community rallied to harvest and sell a few meager trees in time for the holidays so the family wouldn’t lose much-needed seasonal income.

After a couple of winters helping out, “the money side kicked in,” says Smith. Calculating that it cost 35 cents to plant a tree that could be sold for $6, an idea formed. From buying trees wholesale to investing in an Internet Christmas retailer in 2006 to getting seedlings in the ground—now over half a million trees planted—The Kilted Christmas Tree has become a diversified enterprise and one of the top 15 Christmas tree suppliers in the UK.

Smith’s four grown children have all had a hand along the way, including a son who is managing operations during his holiday break from agricultural school.

In one respect, says Smith, success as an entrepreneur has much the same foundation as selecting good investments.

“When you have your own businesses, you really have to understand the value of cash flow. Analyzing a big business is no different: you need to get under the skin and understand what’s happening to cash, because cash is the most important thing. Without cash, businesses fail. It doesn't matter what your balance sheet or your order book looks like: without cash you cannot exist,” says Smith.

A love for adventure: From Canada’s arctic to the North Pole

Smith is as enthusiastic about his work as the day he started. He says he hopes to serve his clients at least another 16 years–that would make it 50 years with the company.

“The idea of flipping and changing jobs for new opportunities doesn’t appeal to me at all—I’m totally aligned with what we’re trying to do for clients, and what we’ve achieved for them.”

Any craving for adventure can be fulfilled in his personal time, where he is more at ease to push limits.

In 2005, Smith ventured to the North Pole as part of a Polar challenge, competing in a ski race from Canada’s Resolute Bay. “There were a couple of things to worry about: Polar bears and thin ice, both of which can be fatal. It was a great insight into the great vastness of Canada’s North,” he says.

More recently, he and his wife Wilma took a motorcycle trip from Anchorage, Alaska down to Oregon last year, travelling through the Yukon, British Columbia and Alberta. “The scale of Western Canada is just immense. Absolutely fantastic: great people, great food, great scenery, and great roads.”

Other journeys have included a trek through the Himalayas and walking part of the Great Wall of China. His motivation is not to take risks, he suggests; it’s to go the distance.

“I like to do things that require endurance and patience. To me that's what investment management should also be about. 

“Our founder, Walter Scott, used to say that our job is to find sequoias: the biggest trees in the world. We want to find them—and keep them.”

MD

Looking for a less formal take on market news and investment strategy? Read the MD Blog where we share our thoughts on events, trends and people shaping (or shaking) the markets and your investments. Each week, we aim to educate and entertain with the ultimate goal of empowering investors with insights to make informed investment decisions.