- The managers invest more in shares than many other mixed asset fund managers
- Both recent and long-term performance has been better than the benchmark
- We think this a great option for balancing long-term growth potential with bonds
It’s sometimes said that what matters most to your long-term investment returns isn’t what individual investments you pick. It’s your asset allocation. Or in plain English, how much you invest in different types of assets like shares, bonds and cash.
Baillie Gifford Managed provides investors with a ready-made asset allocation of around three-quarters in shares, with bonds and a little cash. The duo behind the fund are Steven Hay and Iain McCombie. They invest in shares for their long-term performance potential. Bonds reduce the fund’s volatility and cash is used to take advantage of opportunities they uncover.
The managers invest more in shares and less in bonds than many other funds in the Mixed Investment 40-85% Shares sector. This makes it a more adventurous option. That means the fund could perform quite differently from others in the sector.
Hay and McCombie are both very experienced managers. We like their sensible and straightforward approach to investing, and we’re confident they’ll stick to it through the good times and the bad. They’re long-term investors so there are no knee-jerk reactions to sudden price movements or news stories, which we think is important. The fund’s deserving of its place on the Wealth 50 list of our favourite funds.
How do the managers invest?
The shares portion is fairly evenly split among its four main areas of investment: UK; North America; Europe; and developed Asia and emerging markets, which are higher risk. The managers look for companies they think will be long-term winners. They aim to stay invested in them for many years. But if they lose confidence in a company they’ll normally quickly sell it rather than hope for a recovery.
They try to make sure that the bonds portion performs very differently to the stock market, to provide a good level of diversification. So if they invest in some bonds that can perform similarly to shares, they’ll balance it out with some less volatile bonds. A small part of the portfolio is also held in cash and derivatives. The use of derivatives adds risk.
Diversification is important to the managers. With nearly 400 investments the fund’s got plenty of it. That means a few poor performers shouldn’t have too much of an impact.
How’s the fund performed?
The fund’s long-term performance has been strong. It’s grown 98.1%* since the managers took over in November 2012. The IA Mixed Investment 40-85% Shares Index grew 57.4% in that time. The fund’s achieved this by growing more than the benchmark when markets have been rising. When markets have fallen, however, the fund’s normally lagged behind. That’s what we’d expect from a mixed asset fund with a high proportion invested in shares. Remember past performance isn’t a guide to future returns.
Baillie Gifford Managed - ten year performance
Past performance is not a guide to the future. Source: Lipper IM to *31/05/2019
|Annual percentage growth|
|May 14 -
|May 15 -
|May 16 -
|May 17 -
|May 18 -
|Baillie Gifford Managed||9.3%||0.8%||26.1%||10.0%||2.8%|
|IA Mixed Investment 40-85% Shares||10.1%||-3.5%||19.5%||4.4%||-0.3%|
Past performance is not a guide to the future. Source: Lipper IM to 31/05/2019
What’s changed in the portfolio?
The managers have increased investment in companies from the UK, Europe and developed Asia. They’ve reduced some of their bond investments, but have invested more in emerging market government bonds, after previously trimming them in the portfolio. Most changes are down to where the managers have found the best opportunities though, rather than tactical decisions on how much to invest in each area.
New company investments include Yext, which helps businesses improve the quality of voice-powered searches about them, Brazilian oil and gas corporation Petrobras, and German sportswear company Adidas. The managers like Adidas’s strong brand and its targeting of emerging market consumers.
Companies that have recently been sold include Chinese internet giant Baidu, Spanish discount supermarket chain Dia, and American sportswear company Under Armour. The latter’s performance had previously been strong, but the managers don’t think the company responded well to many of its retail distributors going bust.
Hay and McCombie know their approach, investing in companies for their growth potential, had done well for many years. They also know eventually the winds will change and their style will fall out of favour. But when it does, they’re not going to change the way they invest. As long-term investors, they’re not concerned about short-term ups and downs. They’re confident of a bright future for companies they expect to grow, although there are no guarantees.
This fund has a holding in Hargreaves Lansdown plc shares.