A performance “blip” on some of its flagship funds, combined with a slowdown in sales, has led to a difficult second half of the year for Baillie Gifford.
The Scottish asset manager’s fund range is unified by a long-term, low-turnover approach and a strong bias towards growth strategies.
This style relies on investing in companies that managers think have the potential to deliver high earnings above the average, but this strategy has fallen out of favour given recent market volatility, which has sent investors towards areas they deem more defensive.
In the past year, funds such as Baillie Gifford European and Baillie Gifford American have slipped into the fourth quartile of their respective sectors, a sharp contrast to the long-term sector outperformance of both vehicles.
Rising star manager Douglas Brodie has been unable to repeat his exceptional performance on the Baillie Gifford Global Discovery fund from 2013, as he has dropped to the fourth quartile of the IMA Global sector in the past year.
This dip in performance has coincided with the Baillie Gifford Worldwide trust moving over to a similar mandate to that followed by the Global Discovery fund, resulting in underperformance for the trust too.
James Budden, director of marketing and distribution at Baillie Gifford, said the year had been characterised by a lot of high-growth companies being “hit as people took profits”, which he said had hurt some funds’ performance figures and had started to affect fund sales.
Numerous high-growth companies were sold off through March and April this year as many investors who had enjoyed a stellar 2013 decided to sell out.
Mr Budden said that, following an “incredible” first half of the year for sales, things have “slowed down” since July, which he suggested may have been down to a pick-up in market volatility hitting performance and also the uncertainty preceding the Scottish independence referendum.
Mr Budden said investors seemed to have been focusing on alternative sources of income, buying up property and equity income funds, two areas in which Baillie Gifford is not well-represented.
In spite of these issues, Mr Budden said the firm was still in a “net positive” state for fund sales so far this year, which he said was better than many other firms, which had also been hit by falls in sale numbers.
IMA figures showed September was the worst month for net retail sales since January 2013, with just £702m flowing into UK retail funds, most of which went into UK equity income, property or passive tracker funds.
But Mr Budden said the market tended to go in “cycles”, so while growth companies may be out of favour now, the long-term outlook of the Baillie Gifford funds meant he saw such circumstances as buying opportunities.
In spite of the sell-off that hit some Baillie Gifford funds, the group still has a large number of vehicles in the top quartile in their respective sectors, both over the short and long term.