Baillie Gifford  

Baillie Gifford UK Growth to stick to guns despite performance drop

Baillie Gifford UK Growth to stick to guns despite performance drop
(Simon Dawson/Bloomberg)

Baillie Gifford’s UK Growth Trust has seen its performance slump against its benchmark in the year to April 30, as it suffered from the rotation away from growth stocks.

The trust, which invests in UK equities, saw a loss of 16 per cent, compared with a total return of 8.7 per cent for the FTSE All-Share Index.

The share price in that time lost 27.9 per cent.

In its full year results, submitted to the stock exchange today (June 10), the trust's managers said its relative and absolute returns have been impacted by the rotation away from the growth businesses it invests in.

“The past year has not been a supportive period for growth investing,” they said in their manager's report. 

"It's hard to generalise but part of this can be attributed to the fact that the broad UK index is heavily skewed to a small number of large companies particularly in the oil & gas, banking and pharmaceutical sectors, which we typically don't own and, which have been outperforming as oil prices hit record highs, interest rates rise (and are expected to rise further), and some investors seek safety in more defensive names."

Despite this, the managers said they will be sticking to their investment process.

"All too often we see underperformance in the investment world leading to style drift.

"The time-honoured investment process is jettisoned when the punch in the face of (inevitable) poor performance arrives."

The trust's performance was stuttered by the likes of Genus, an animal genetics company whose share price fell 50 per cent in the year to April 30, and online luxury fashion retailers Farfetch and Boohoo.

The trust's chair Carolan Dobson said the fundamentals for many of the trust's investments remained strong, particularly for those with pricing power which can increase their earnings.

He said: "Those UK growth companies that can exploit their competitive strengths over the long term and take advantage of the opportunities that follow severe economic dislocation will reward the patient long term investor in due course.

"The board believes that the portfolio managers are well placed to select such names."

In the course of the year the trust took five new positions. These were pharma-tech company Exscientia, online wine retailer Naked Wine, DNA sequencing developer Oxford Nanopore Technologies, online money transfer platform Wise, and private company Wayve, which is developing software for self-driving vehicles. 

The trust sold positions in three companies during the year, these were the marine and energy equipment and services provider James Fisher & Sons, defence business Ultra Electronics, and Jackson Financial following its spin-out from Prudential.

Bunzl, a distributor of consumable products, was the notable standout positive contributor to relative performance of the trust.