Fund house Baillie Gifford saw its "highest ever" monthly outflows in October as market sentiment shifted away from growth and a pension fund withdrew its cash.
Data from Morningstar, published last week (November 21), showed investors pulled a net £536m from Baillie Gifford funds during the month of October — a total primarily hurt by the £729m withdrawn from the Baillie Gifford Global Alpha Growth fund.
The research company stated this was the largest amount ever withdrawn from Baillie Gifford funds in a single month.
It stated: "Baillie Gifford saw its highest ever monthly net outflow, with the main contributor being the £729m that left Bronze-rated Baillie Gifford Global Alpha Growth.
"While the recent rotation away from growth stocks into value stocks may have put off some investors from the typically growth-focused house, it was a large local authority client moving its assets into one of the new local government pension schemes that caused this large net outflow."
The Baillie Gifford Global Alpha Gowth fund is managed by a team led by Charles Plowden, the joint senior partner at Baillie Gifford. It has returned 95 per cent over the past five years, compared with 62 per cent in the IA Global sector in the same time period.
The performance over the past three months — when growth stocks have lagged value stocks — has been muted however, broadly tracking the performance of the sector with a return of 0.10 per cent.
The fund was £3.7bn in size as at November 20, 2019. It has significant exposure to areas such as US technology, which have performed well over the past decade when the growth style of investing has been to the fore, but have experienced muted growth over the past six months.
FTAdviser understands Baillie Gifford had net inflows in its retail business of £150m during the month, meaning institutional investors were the main source of the outflows.
One of the withdrawals from the fund came from Kent County Council's pension scheme. The council's most recent fund position statement showed the market value of its investment has dropped £30m in the three months to the end of September and that it had pulled some money out, though it did not specify how much.
Kent County Council has also been affected by the Woodford saga which has led to a loss of £63m, or 24 per cent, of the value of its investment in Woodford Equity Income.
But a shift away from growth funds was also likely to have contributed to the outflows, according to Darius McDermott, managing director at Chelsea Financial Services.
Mr McDermott said: "Baillie Gifford funds tend to be run with the quality growth style, and that has done very well over recent years.
"I wonder if perhaps clients have been taking profits on their holdings in these products, and rotating the profits into more value type funds."
Value stocks have rallied over the past few months after a decade of growth being in favour with investors.
In fact Baillie Gifford’s Scottish Mortgage investment trust, which is run on similar principles, has recently been buying back shares, amid a downturn in short-term performance.
Outflows are being seen across the industry.
As FTAdviser previously reported, Gary Potter, who jointly runs a range of ten multi-manager funds at BMO, said investors who were not shifting capital away from the large funds that have performed well for a decade were “naive”.
The shift away from growth to value has happened despite bond yields remaining low, and interest rates not rising, those being the traditional conditions when value investing thrives.
Wayne Berry, investment manager at Brewin Dolphin, told FTAdviser the reason for the shift in market sentiment may simply be the valuations at which some of the better known growth stocks trade.
Baillie Gifford declined to comment.
david.thorpe@ft.com
What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.
