Baillie Gifford Monthly Income: June 2026 fund update

• The fund aims to provide a resilient level of income for today and into the future

• We think this is a good option for diversified exposure to stock and bond markets across the globe, with a focus on paying an income

• While the income provided has been good, total returns have been weaker recently

• The fund has recently been added to our Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

Baillie Gifford Monthly Income invests across three investment areas: shares, real assets (such as property) and bonds. It aims to increase the income paid to investors by more than the increase in the consumer prices index (CPI - a measure of inflation) over the long term. The fund focuses on providing a resilient income over time, meaning that while the income provided may not be the highest available, it should be more consistent.

The real assets section is largely made up of companies listed on the stock market, so more than half of the fund is usually invested in shares.

The income focus means that Baillie Gifford’s growth investment style is less pronounced than in some of their other multi-asset funds. We think this is more appropriate for a fund focused on income and should mean it doesn’t exhibit the same swings in performance that other Baillie Gifford funds have seen in recent years. Although of course, there are no guarantees.

We think the fund could mainly be a useful addition to an investment portfolio focused on providing an income, but it could also be used to provide diversification to a portfolio focused on growth.

Manager

Steven Hay, Nicoleta Dumitru, Lesley Dunn and Jon Stewart are the fund’s managers. They each have different areas of investment specialism and, apart from Jon Stewart, manage other Baillie Gifford funds.

Hay is Head of Income Research and also manages the Baillie Gifford Managed fund, which features on the Wealth Shortlist. He focuses on asset allocation decisions (how much is invested in different assets, like shares or bonds). Dunn is Head of the Credit Team and also manages the Baillie Gifford Strategic Bond fund. Dumitru is a multi-asset investment manager, specialising in real assets and specifically infrastructure investments. Stewart is a real estate specialist and joined Baillie Gifford specifically to work on this fund, selecting the property investments.

The managers all have significant and relevant experience within their areas of specialism. Of the four, Stewart joined Baillie Gifford most recently in 2020 and became a manager of the fund at the end of January 2025.

Previously, James Dow, Head of Global Income and Growth, had been a manager of the fund since it launched. He stepped down from this role at the end of January 2025 due to an increase in other responsibilities within Baillie Gifford. He continues to manage the team that select the shares for the fund though, so his experience isn’t lost.

The managers also make use of their wider teams at Baillie Gifford to help with idea generation and wider economic views. This means the fund has a wide range of views and inputs, reducing key person risk on any single manager.

Process

There are three categories of investments in the fund: shares, real assets and bonds. All investments should contribute to the income paid by the fund, so it’s not reliant on any one asset class for income. This diversification helps the income to be more consistent over time. That said, bonds will likely be the largest contributor to the fund’s income.

The fund invests globally and is diversified across 200-300 investments. While there’s debate and challenge across the team, the individual managers are given authority to select investments from their specialist areas.

Most of the shares portion is invested globally in large companies that the team expect to be able to pay and grow their dividend over the long term. This includes some companies in emerging markets, which are higher risk. Around 5% of the fund now invests in shares that are focused on capital growth rather than dividend income. This change has been made to help increase the potential for future capital growth.

The bonds portion is currently largely made up of emerging market bonds. It also includes corporate bonds, some of which are high yield bonds. These bonds usually pay a higher income, however they’re higher risk.

The real assets section differentiates the fund from some of its peers and focuses on infrastructure and property. The team invests in both individual companies and investment trusts in each of these areas. These companies typically have revenues that are linked in some way to inflation, for example property rents that are increased in line with inflation each year. Because of the more consistent and predictable earnings that these companies achieve, their long-term performance is usually more consistent. That said, as company shares, they can be volatile at times too.

The amount invested in each asset class changes over time. The team’s long and shorter-term views on the world influence where they invest. Their current views mean they’ve increased the amount they’ll typically invest in shares by 5% to 40% of the fund, while the expected amount invested in real assets has reduced to 20%. The remaining 40% would therefore be invested in bonds.

This gives a good idea of where the fund might invest over the long term, but the amount invested can change over the shorter term. For example, at the end of April 2026, the fund invested 34.6% in shares, 28.6% in real assets and 34.4% in bonds, with the remainder in cash.

The fund also doesn’t invest in companies that are subject to UN Security Council sanctions or are non-compliant with the UN Global Compact initiative. They also don’t invest in companies that have revenues above particular thresholds coming from fossil fuel extraction and production, thermal coal distribution, tobacco production, controversial weapons and armaments.

The managers have the flexibility to use derivatives, which adds risk.

Culture

Baillie Gifford is an independent private partnership founded in 1908. It's owned by partners who work full time at the firm. This ownership structure means senior managers have a vested interest in the company, and its funds, performing well.

We think this has helped cultivate a culture with a long-term focus, where investors' interests are at the centre of decision making. We also like that fund managers are incentivised in a way that aligns their interests with those of long-term investors and should retain talented managers.

Of the four managers for this fund, Dunn is a partner of the business.

ESG Integration

All of Baillie Gifford’s funds are run with a long-term investment horizon in mind. The firm’s fund managers see themselves as long-term owners of a business, not short-term renters. So, assessing whether society will support, or at the very least, tolerate, the business model over the long term, and whether management will act as good stewards of shareholders’ capital is an important part of the investment process.

Dedicated ESG analysts sit with and report into both their respective investment teams, and the central ESG function. The firm’s ESG efforts are supported by a dedicated Climate team. Individual investment teams are responsible for voting decisions and engagement for the companies they invest in. Investment in controversial weapons is prohibited across the firm.

Baillie Gifford withdrew from the Net Zero Asset Managers’ Initiative and Climate Action 100+ in 2024, citing concerns that membership had become contested and risked distracting from its core responsibilities. We viewed this as a disappointing backward step, but the firm stated that this decision did not change its approach to analysing climate-related risks or engaging with investee companies.

This fund changed its name from Baillie Gifford Sustainable Income to Baillie Gifford Monthly Income on 31 January 2025. The previous name reflects the fact that the managers look at every investment through a sustainable investing lens.

The fund’s name changed as it hasn’t obtained a label under the Financial Conduct Authority’s (FCA) new Sustainability Disclosure Requirements. The process used to select investments hasn’t changed though and the key question, ‘is this investment compatible with a sustainable economy?’, remains central to the philosophy.

While it’s a shame the fund doesn’t have a label from the FCA, we’re pleased the way investments are selected remains unchanged.

The fund has a greater level of ESG integration than others at Baillie Gifford, but not compared with all peers. There are companies and industries that the fund invests in which some responsibly focused investors might consider to be sinners. An example could be electricity generation companies that are still using coal as part of their energy mix. They’re included in the fund because they have a plan to significantly reduce their use of coal in electricity generation. And to support the energy transition to greater use of electricity over fossil fuels (electric cars for example), these companies are important for future adoption of technologies that will reduce carbon output. From an investment perspective, this could boost long-term earnings.

Cost

This fund has an ongoing annual charge of 0.50%. We think this is a reasonable price compared to other funds in the sector. Our platform charge of up to 0.35% per year also applies, except in the HL Junior ISA, where no platform charge applies.

Please note that charges are taken from capital. This can increase the income paid by the fund, but it might reduce the potential for capital growth.

Performance

The fund’s underperformed the average fund in the IA Mixed Investment 40-85% sector since launch in September 2018, having returned 53.29%* versus the sector average of 58.22%. Past performance is not a guide to the future.

However, the fund has consistently not lost as much as its peers during market falls, though it hasn’t kept pace during market rises. This makes sense given the focus on generating income and our analysis suggests it’s reasonable to expect this type of performance over the long term.

The income paid by the fund has increased since launch, however it’s increased by less than CPI. This is partly due to the impact of Covid in 2020 when company dividends were significantly reduced. In some cases, the dividends were banned by governments if companies had received government support to help cover the costs of lockdowns. In that environment, it’s reasonable to expect the level of income paid by the fund to fall and this wasn’t the only fund impacted.

Inflation in 2022 and 2023 was also significantly higher than long-term expectations. The long-term aims of the fund are based on CPI being at or around the Bank of England’s target level of 2%. It’s therefore reasonable that the income paid by the fund didn’t increase in line with inflation when it was much higher. That said, we expect the fund to achieve its aim of increasing income in line with CPI inflation over the long term.

Over the 12 months to the end of May, the fund returned 9.84%, underperforming the sector average return of 18.44%.

Most areas that the fund invests in have provided positive returns over the last 12 months. Investments in infrastructure have been particularly positive, while emerging market bonds also performed well. Shares contributed positively to performance but had mixed returns over the year. The newly added growth focused investments initially fell, linked to a wider market sell-off in software stocks, before recovering more recently.

The bigger challenge has been how well things that this fund won’t invest in have performed. Having less invested in large US companies, including some technology names that pay little or no income, has hurt performance compared to wider global stock markets. Similarly, having no investments in European banks and defence companies has held back returns.

The energy and materials sectors have also performed well but this fund doesn’t invest much in these sectors because of the sustainable overlay applied when selecting investments.

The fund had a historical yield of 4.02% as at 30 April 2026. Income isn’t guaranteed, and yields aren’t a reliable indicator of future income.