Baillie Gifford win £335m trust mandate

Baillie Gifford win £335m trust mandate

Baillie Gifford has fulfilled a long-term ambition by winning the mandate to run the £335m European Investment Trust.

Advisers who have placed capital with the trust in recent years have seen stark underperformance, with the trust being the worst performer in the AIC Europe sector over six months, and one, three and five years. 

In a stock market announcement, released this morning, the trust's board accepted the value investment style deployed by Edinburgh Partners, which currently holds the mandate, had been out of favour for most of the past decade, but the board also said the trust had performed poorly against other value funds in the same sector. 

Baillie Gifford as a fund house employs the growth style of investing. The trust will own between 30 and 60 stocks and will be renamed the Baillie Gifford European investment trust.

Baillie Gifford runs investment trusts in all other major equity market sectors, with European equities the sole exception until now. FTAdviser understands the company had been eager to win a European equity investment trust mandate for some time.

As part of the agreement, Baillie Gifford will receive an annual management fee of 0.55 per cent on either the net asset value of the trust or its market capitalisation, depending on which is lower, and 0.50 per cent of the lower of those figures if the trust grows above £500m.

Baillie Gifford agreed to waive the management fee for the first six months, and committed to spending £100,000 on marketing the trust in 2020.  

The trust will be managed by Stephen Paice and Moritz Sitte, who run the Baillie Gifford European fund, which has returned 22 per cent over the past three years, compared with 19 per cent for the average fund in the IA European sector in the same time period. 

Darius McDermott, managing director at Chelsea Financial Services, said: “By replacing a manager with a value style of investing with Baillie Gifford, who are a growth fund management firm, the board are taking a big bet on the style that the market will favour in future.

"Baillie Gifford won a UK equity trust mandate two years ago in similar circumstances, when a value fund management firm had underperformed. There is an argument that the growth style of investing has performed well for the past decade of low interest rates and quantitative easing, and those conditions could continue in Europe, but value shares are generally very cheap relative to growth shares.”

Over the past three years the European Investment Trust has returned 18.36 per cent while the AIC Europe sector returned 29.27 per cent.