Shareholders in the Baillie Gifford UK Growth trust can expect to receive fewer dividends from their investment, the board of the trust has said.
Baillie Gifford took over the management of the £260m trust four months ago.
It had previously been run by Schroders, and was at one time managed by Richard Buxton, before he departed for Merian Global Investors.
Schroders appointed Julie Dean and then Philip Matthews to the trust, but after a period of underperformance, the board of the trust removed the investment mandate from Schroders and awarded it to Baillie Gifford.
In a statement to the stock exchange this morning (December 12) the board of the trust confirmed that, in the four months since the new managers took the helm, they have changed the majority of the investments, with the majority of the 49 holdings in the trust sold by the new managers, and 42 new holdings purchased.
The board of the trust confirmed this cost 1 per cent of net asset value to achieve, comprised of dealing costs and stamp duty costs.
It said it believes the improved performance of the trust will justify this cost, and in addition, Baillie Gifford has agreed to waive its management fee of £732,000 for the current financial year, reducing the costs to shareholders.
Baillie Gifford deploys a growth style of investing, and as a result expects to own fewer dividend paying shares. This means the trust will no longer pay two interim dividends and a final dividend, and instead pay one interim dividend and one final dividend.
The company expects the total amount, in cash terms, paid in dividends by the trust, to decline in the coming years.
The growth style of investing favoured by Baillie Gifford has fallen sharply from favour with investors in recent months as bond yields have risen.
This has caused the performance of the trust to lag the wider market in the first four months of Baillie Gifford’s management. The trust has lost 10.8 per cent in four months, compared with 5.97 per cent for the FTSE All Share in the same time period.
Baillie Gifford regards such volatility as inevitable and the managers prefer to take a longer-term view.
david.thorpe@ft.com
