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Baillie Gifford US Growth Trust: November 2021 update

In this investment trust update, Investment Analyst Joseph Hill shares our analysis on the manager, process, culture, cost, and performance of the Baillie Gifford US Growth Trust.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

  • The managers invest in companies they think will grow faster than the average company over the long term
  • Gary Robinson and Kirsty Gibson are prepared to hold onto companies for long periods to generate long-term capital growth
  • The trust has outperformed the FTSA USA index since launch in March 2018

How it fits in a portfolio

The Baillie Gifford US Growth Trust invests in US companies that the managers think have the potential to grow faster than the average company. They then try to hold onto them for long periods of time, to generate long-term capital growth. These companies can be public or private. We think this trust could work well as part of an adventurous investment portfolio and could diversify portfolios which have little invested in the US. Investors in investment trusts should be aware that they can trade at a discount or premium to net asset value (NAV).

Manager

Gary Robinson joined Baillie Gifford in 2003 and has experience of working in their Japanese, UK and European equity teams prior to joining the US equity team. Kirsty Gibson joined Baillie Gifford after graduating in 2012 and has been a co-manager of the trust since March 2021. Robinson and Gibson are co-manager of a few other strategies at Baillie Gifford, including the Baillie Gifford American fund. These are run in a similar way though and share some of the same companies, so we think they are able to devote enough time to each.

Process

Robinson and Gibson invest in US companies they think have the potential to grow faster than the average company, and then try to hold onto them for long periods of time. The managers think this will maximise their chances of achieving capital growth for investors, as over the long term strong business models and cultural strengths become the drivers of valuations.

The trust consists of both companies which are publicly traded on the stock market, and private companies. The managers think companies in the US are choosing to remain private for longer, and as such believe being able to invest in public and private companies offers them a wider opportunity set. Investors should be aware that private, or unquoted, companies carry more risk than public ones. Investing in smaller companies is also a higher-risk approach.

The vast majority of the trust is invested in the Consumer Discretionary, Information Technology and Health Care sectors. They account for just over three quarters of the trust’s total assets. The top three holdings (as of the end of October) include e-commerce platform Shopify, electric car maker Tesla and medicinal leader Moderna.

The trust can invest in a maximum of 90 companies, typically with at least 30 of these being publicly listed companies. Robinson and Gibson can also invest up to 50% of the trust’s assets (at the time of investment) in unlisted companies. At the end of October the trust had 24 unlisted investments, making up 18.9% of the trust’s assets. Currently, the trust invests in 72 companies, but it does have the flexibility to operate a concentrated approach and invest in derivatives, which if used adds risk.

The trust’s largest unlisted investment, accounting for 2.8% of the portfolio is payments platform Stripe. Stripe tries to simplify the process of sending and receiving money for businesses scaling up and dealing with the complexities and nuances of operating in different regions.

The trust also borrows money to invest with the intention of increasing returns (sometimes known as gearing). This could magnify losses in a falling market and increases risk.

Culture

Baillie Gifford is an independent private partnership founded in 1908. It's owned by partners who work full time at the firm. Gary Robinson, one of the trust’s co-managers is a partner at the firm. This ownership structure means senior managers have a vested interest in the company, and its funds and trusts under management, 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 managers are incentivised in a way that aligns their interests with those of long-term investors and should retain talented managers.

Baillie Gifford recognises the risks posed by Environmental, Social and Governance (ESG) issues and uses its position to encourage companies to act in a sustainable way. The company has a dedicated Governance and Sustainability team who are responsible for producing ESG research which challenges and contributes to the investment decision-making process. They also monitor companies' progress on an ongoing basis, engaging with them on ESG matters where appropriate.

Cost

The trust's ongoing annual charge is 0.68%. Investors should refer to the latest annual reports and accounts and Key Information Document for details of the risks and charging structure.

If held in a SIPP or ISA, the HL platform fee of 0.45% (capped at £200 for a SIPP and £45 for an ISA) per annum also applies. Our platform fee doesn’t apply if held in a Fund and Share Account.

Performance

Since the trust launched in March 2018, it's grown by 234.83%*, significantly outperforming the 81.08% gain for the average trust in the AIC North America sector. Past performance is not a guide to future returns. The trust’s investments in companies like electric car maker Tesla, e-commerce platform Shopify and software company The Trade Desk have been among the most important contributors to performance.

As well as stock selection, part of the trust’s performance can be attributed to the strong tailwind provided by its growth style of investing. Investors should note that while growth-style investing has done very well in recent years compared to value investing, a well-diversified and robust portfolio should include a variety of styles, as well as different asset classes and geographies.

Although the trust has performed very well since launch, it’s not performed as well as the average trust in the AIC North America sector over the past year. Some of the trust’s investments in companies that did very well as a result of the pandemic have been more of a drag on performance. Among the biggest detractors were Zoom Video Communications and e-commerce platform Wayfair. This is a short timeframe to consider performance though and you should consider annual performance in the context of the longer term. The managers typically invest in companies with a five year time horizon or longer.

Remember all investments fall as well as rise in value, so investors could get back less than they invest. It’s not possible to provide annual performance data before October 2018 as the trust only launched in March 2018.

Annual percentage growth
Oct 16 -
Oct 17
Oct 17 -
Oct 18
Oct 18 -
Oct 19
Oct 19 -
Oct 20
Oct 20 -
Oct 21
Baillie Gifford US Growth Trust N/A N/A 10.49% 101.54% 28.93%
AIC Investment Trust – North America 11.68% 3.24% 10.70% 3.32% 45.58%

Past performance is not a guide to the future. Source: *Lipper IM to 31/10/2021.

N/A - full year performance is not available.

Find out more about Baillie Gifford US Growth Trust, including charges

Baillie Gifford US Growth Trust Key Information Document



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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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