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Baillie Gifford retail funds to reveal turnover figures

Baillie Gifford retail funds to reveal turnover figures

Baillie Gifford is to include portfolio turnover figures in its retail fund factsheets in a fresh attempt to highlight active managers’ credentials and throw down a gauntlet on fund transparency.

From December, updates on the firm’s retail offerings will include an annual portfolio turnover figure, providing a measure of how often assets are bought or sold.

The move follows the fund house’s decision to disclose a measure of active share in portfolios last year, in a bid to separate the firm’s offerings from so-called ‘closet tracker’ funds that differ only negligibly from their benchmark.

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Baillie Gifford said it was not aware of any other asset manager currently disclosing turnover on their factsheets.

“Well-documented research shows that managers with a high active share, low portfolio turnover, a long investment horizon and who engage with company management are more likely to outperform indices after fees,” said James Budden, director of retail marketing and distribution at the company.

He added: “These numbers are important because they provide evidence that we take a credible long-term approach to investing in an increasingly short-term environment. 

“Low turnover also points to lower trading costs, which is good for investors who, in turn, need this kind of transparency if they are going to be able to separate the genuinely active from the index huggers and high-turnover traders.”

While managers and other investment professionals are often quick to stress the need for a long-term investment approach, a number of significant and unexpected macro events may have boosted turnover for some, alongside tactical trading.

Recent examples include last week’s US election shock, which initially dealt a blow to risk asset valuations, as well as June’s surprise Brexit vote, which precipitated a violent lurch in markets.

Other events – such as the market downturn in early 2016, attributed by some to fears about global growth – have seen valuations shift significantly, potentially prompting portfolio churn from managers.

According to Baillie Gifford, the level of turnover ranged widely across its portfolios as at the end of October this year.

While the Baillie Gifford American fund had a rate of 33 per cent, the measure for the firm’s Global Discovery fund was just 5 per cent.

Most other products, such as the Global Income Growth fund, have a turnover rate of under 20 per cent.

The asset manager is not the first to stress the necessity of a long-term approach as markets appear volatile.

Last year, in the wake of a summer that saw markets tumble, partly because of concerns about the Chinese economy, Columbia Threadneedle manager David Dudding criticised skittish investors too ready to trade portfolios, telling them “what’s in the papers is [already] in the price”.

Baillie Gifford retail fund turnover figures

OeicAnnual turnover rate
American fund33.1
British Smaller Companies fund9.4
Developed Asia Pacific fund22.5
Emerging Markets Growth fund18.2
Emerging Markets Leading Companies fund9.9
European fund9.8
Global Alpha Growth fund15.6
Global Discovery fund5.2
Global Income Growth fund12.5
Greater China fund14.3
International fund16.5
Japanese fund9.4
Japanese Smaller Companies fund15.2
Long Term Global Growth12.7
Pacific fund15.4
UK Equity Alpha fund26.6
As at end October. 
Source: Baillie Gifford