Last Word
Perspective
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Square Mile
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strategy directly from the fund manager himself.
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research and market views together with an explanation of the
Baillie Gifford American is a long-term growth fund that invests in exceptional US companies. It is a concentrated fund of around 40 companies with a particular focus on technology. The fund retains the stocks for five years (or more) and there is very little turnover.
Axis analyses the fund from four perspectives to bring you insight,
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Review By Gary Corcoran
COMPANY_ Last Word
The Baillie Gifford American fund managers can draw on the expertise of Baillie Gifford's wider investment team when deciding which stocks have the most potential for growth. The fund will suit investors with a long-term perspective.
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“Picking exceptional US stocks delivers capital growth over the long term.”
JOB TITLE_ Director
YEARS IN INDUSTRY_ 25+
LOCATION_ London
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at Last Word
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GARY CORCORAN
Baillie Gifford American is an admirable fund
COMPANY_ Square Mile Investment
To view Square Mile Investment Consulting and Research Ltd's disclosure on their involvement on this site, please click here.
JOB TITLE_ Head of Research
V_
“Edinburgh-based Baillie Gifford is an investment house with a strong heritage. The firm has been operating over 100 years and its strategy has several elements conducive to providing investors with satisfactory investment outcomes.”
Asset management group Baillie Gifford has many attributes we admire. The firm was established over 100 years ago and its emphasis on investing for the long-term is clearly evident through its well-defined investment philosophy as well as the length of service of many of its senior staff. The fund operates a growth investment style. This can result in shorter-term periods of more variable returns but overall we believe this fund should provide investors with solid exposure to the US equity market.
Scroll down to read more...
YEARS IN INDUSTRY_ 16
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VICTORIA HASLER
Last Word
Perspective
Baillie Gifford American was launched in 1997 and is a long term, concentrated fund focusing on US stocks. The fund aims to produce good returns, mainly through capital growth, and holds around 40 names on average. It has assets under management of £560.9m.
The fund is overseen by an experienced team including fund manager Tom Slater. They can draw on the expertise of Baillie Gifford’s wider investment team when making stock decisions. The three largest holdings are Amazon at 9.3%, Tesla Motors 8.0% and Alphabet at 6.1%. The fund is 92% active with an ongoing charge figure (OCF) of 0.52%. Six month returns were 16.2% compared with the S&P index at 6.9%; over one year they were 41.7% compared with the S&P index of 31.6%; and over three years they were 87.3% compared with the S&P index of 70.3%.
The fund will invest in any economic sector in the US but is overweight in consumer and IT and has no utilities holdings. The portfolio is extremely concentrated, the idea being that exceptional businesses are not diluted. The company aims to identify the stand-out growth businesses in the region and is not constrained by any index. The question Slater and the team ask when investigating a potential firm is “How can we make 2.5x our money over the next five years.” He argues that the top 20% of firms tend to do this.
Slater doesn’t see Trump as a particular problem for the fund and argues that the global disinflation that seems to have coincided with his election is a structural phenomenon built on the lowering costs of production, goods and services.
The US produces half of the fastest growing companies globally, and it is on this that Baillie Gifford is looking to capitalise. Slater argues that the US boasts a collection of companies that are unique for their growth potential. The likes of Amazon, Google, Facebook and Tesla have entrenched market positions and are still growing fast.
The US is the most short-term market in the world and so assessing stocks over the long term helps capitalise on the market’s asymmetry of returns. It also provides a different exposure to the underlying index.
Quality US stocks deliver long-term growth
AUTHOR_ GARY CORCORAN
Baillie Gifford divides its companies into three categories. First is ‘transformational growth’ (60.6% of the fund) - these companies comprise disruptive tech firms such as Amazon and Facebook; second is 'dynamic growers' – made up of physical not digital companies such as First Republic and Mastercard (20.3%); and third is 'enduring growers' (17.4%) which offer duration and value – American Express and Harley Davidson come under this category.
The managers of this fund have a particular interest in transformational growth companies, with the three holdings of internet-enabled disruptors Amazon, Alphabet and Facebook comprising one fifth of the total weight of the portfolio. A company report released last November states that what is most remarkable about these companies is that contrary to popular economic theory, which states that what gets large must slow down, these businesses have seen revenue growth accelerate over the last year.
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Kames Global Diversified Income Fund
Fund
Vincent McEntegart has been managing the Kames Global Diversified Income Fund for six years and is well-versed to the changeable financial climate. Curabitur blandit tempus porttitor. Aenean lacinia bibendum nulla sed consectetur.
Manager
Vincent McEntegart
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In line with its investment approach, we believe that this fund would need to be held for the long term. Investors more likely to switch in and out of funds over the shorter term are unlikely to fully benefit. We believe that the fund is most likely to do best when the market steadily advances and is likely to lag when the market sells aggressively or gets ahead of the fundamentals. We would stress that it adopts a long-term strategy and holders should bear in mind that the most attractive opportunities can often present themselves during periods of market distress. This is likely to exacerbate short-term losses and holders should not expect smooth quarter-on-quarter returns.
AUTHOR_ VICTORIA HASLER
“The fund's strategy has many aspects that differentiate it from its competitors. We consider the heritage of the firm and the strength of the team to be attributes that are not easily replicated. We believe the fund is suited to investors seeking exposure to growth characteristics within the North American equity market.”
The firm invests for ‘growth’ which very much underpins the fund’s approach. The team seeks to identify companies with a clear sense of purpose and vision driven by founders or employees with significant wealth tied up in the business. The fund also invests for the long term with portfolio turnover of around 20%, indicating an average holding period of around five years. Indeed, the group looks to invest in businesses and for timeframes that share principles and characteristics with themselves.
Baillie Gifford is also a conviction-based investment firm. This is demonstrated by the concentrated holdings (typically 40-60) in Baillie Gifford American constructed with minimal reference to its S&P 500 benchmark. In practice the fund can look vastly different from the index. Risk is not ignored, however, and the fund is managed with sensible but not restrictive limits including a maximum individual stock weighting of 10% with investment in at least nine of the 11 standard sector groupings.
Edinburgh-based Baillie Gifford is an investment house with a strong heritage. The firm began operating over 100 years ago and its strategy has several elements conducive to providing investors with satisfactory investment outcomes.
From its partnership structure to its investment philosophy and process, longevity is at the heart of the company. This is made evident by its commitment to holding stock over the long term and the low turnover of its staff members, many of whom have spent their entire investment careers with Baillie Gifford.
Investment desks at the firm are encouraged to share information and it is testament to the company’s consistently applied investment approach that skill sets are transferrable across multiple geographies. It should be noted that although the three named managers of this fund (Gary Robinson, Helen Xiong and Tom Slater) do not appear to have a lengthy association with the strategy, they have all been with Baillie Gifford a number of years. We also take comfort from the impressive level of resources available within the company.
Quality US stock investments should yield good returns
Victoria Hasler, Head of Research, Square Mile Investment Consulting and Research Limited
Square Mile
Perspective
Fund buyers' perspective
Baillie Gifford American is a concentrated fund invested in quality US stocks. Four US experts give us their view on the market’s fundamentals.
Market Reaction
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Jonathan Woo_ investment research_ Santander Asset Management
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“There has been considerable structural reform in giant markets like India, China and the Pacific Tiger economies. It’s a time of change from investment in infrastructure to innovation. Baillie Gifford looks for superior growth, meaning its style is suited to this change. They make some debatable valuations but are valiant investors and can spot businesses with great fundamentals early. They are picking the sort of businesses that have the potential to steam ahead and accrue multiple years of earnings growth for investors.”
Scott Spencer_ Investment Manager_ F&C Multi-manager solutions, BMO Global Asset Management
“The key rationale behind Income Maximiser is the delivery of a 7% yield. The use of derivatives in the portfolio means the upside is therefore limited but we find the fund is a lower beta way of getting equity exposure as well as some downside protection.”
“The fund managers of Schroder Income [Nick Kirrage and Kevin Murphy] pick the stocks, and the derivatives for Income Maximiser are then written accordingly. We like the fact that derivatives provide a diversification element and we have a great deal of confidence that the derivatives are run by a separate team. It is a very different skill set and is a USP of theirs.”
Richard Philbin_ CIO_ Wellian Investment Solutions
Mona Shah_ head of collectives_ Rathbones
“After years of lacklustre performance, Asia and the emerging world experienced a resurgence last year, driven by rising commodity prices and a fundamental shift in favour of more cyclical sectors like financials, energy and materials. But many of the fortunes of Asia and emerging markets are driven by sentiment from the West, which was negatively affected by the US election in November. While markets have regained their initial losses, we’ve had no more clarity on what Donald Trump’s policies will mean with regards to global trade and protectionism. For this reason, we believe that diversification should offer benefits in a period where markets are likely to be volatile. In addition, the economies in Asia-Pacific are showing increasing dependence on domestic demand, and we believe funds exposed to growing demand from consumers in China, for example, may be better placed to withstand headwinds from the US.”
Robert Shepherd_ Director_ Bright & Co.
We were on the lookout for something different and, let’s face it, 4% or lower is the norm in this environment. So this is attractive”
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Achievable, sustainable, reliable
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Fund
Manager
Perspective
Fund Buyer
Perspective
This demo version has been optimised for desktop, laptop and tablet. Smartphones, iPhones will be supported in the next version.
to bring you insight, research and market views
together with an explanation of the strategy
directly from the fund manager himself.
Axis analyses the fund from four perspectives
Baillie Gifford divides its companies into three categories. First is ‘transformational growth’ (60.6% of the fund) - these companies comprise disruptive tech firms such as Amazon and Facebook; second is 'dynamic growers' – made up of physical not digital companies such as First Republic and Mastercard (20.3%); and third is 'enduring growers' (17.4%) which offer duration and value – American Express and Harley Davidson come under this category.
The managers of this fund have a particular interest in transformational growth companies, with the three holdings of internet-enabled disruptors Amazon, Alphabet and Facebook comprising one fifth of the total weight of the portfolio. A company report released last November states that what is most remarkable about these companies is that contrary to popular economic theory, which states that what gets large must slow down, these businesses have seen revenue growth accelerate over the last year.
Baillie Gifford American was launched in 1997 and is a long term, concentrated fund focusing on US stocks. The fund aims to produce good returns, mainly through capital growth, and holds around 40 names on average. It has assets under management of £560.9m
The fund is overseen by an experienced team including fund manager Tom Slater. They can draw on the expertise of Baillie Gifford’s wider investment team when making stock decisions. The three largest holdings are Amazon at 9.3%, Tesla Motors 8.0% and Alphabet at 6.1%. The fund is 92% active with an ongoing charge figure (OCF) of 0.52%. Six month returns were 16.2% compared with the S&P index at 6.9%; over one year they were 41.7% compared with the S&P index of 31.6%; and over three years they were 87.3% compared with the S&P index of 70.3%.
The fund will invest in any economic sector in the US but is overweight in consumer and IT and has no utilities holdings. The portfolio is extremely concentrated, the idea being that exceptional businesses are not diluted. The company aims to identify the stand-out growth businesses in the region and is not constrained by any index. The question Slater and the team ask when investigating a potential firm is “How can we make 2.5x our money over the next five years.” He argues that the top 20% of firms tend to do this.
Baillie Gifford American was launched in 1997 and is a long term, concentrated fund focusing on US stocks. The fund aims to produce good returns, mainly through capital growth, and holds around 40 names on average. It has assets under management of £560.9m.
The fund is overseen by an experienced team including fund manager Tom Slater. They can draw on the expertise of Baillie Gifford’s wider investment team when making stock decisions. The three largest holdings are Amazon at 9.3%, Tesla Motors 8.0% and Alphabet at 6.1%. The fund is 92% active with an ongoing charge figure (OCF) of 0.52%. Six month returns were 16.2% compared with the S&P index at 6.9%; over one year they were 41.7% compared with the S&P index of 31.6%; and over three years they were 87.3% compared with the S&P index of 70.3%.
The fund will invest in any economic sector in the US but is overweight in consumer and IT and has no utilities holdings. The portfolio is extremely concentrated, the idea being that exceptional businesses are not diluted. The company aims to identify the stand-out growth businesses in the region and is not constrained by any index. The question Slater and the team ask when investigating a potential firm is “How can we make 2.5x our money over the next five years.” He argues that the top 20% of firms tend to do this.
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Income
target_
Size of
fund in £_
m
Launch date_25/02/2014
Performance
year to date_
Number of
holdings_
%
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Kames Diversified Monthly Income Fund
pa paid monthly
Performance
since launch_
Total return
target_
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Tom joined Baillie Gifford in 2000, initially working in the Developed Asia and UK Equity Teams. In 2015 Tom was appointed Head of the US Equities Team and joint manager of Scottish Mortgage Investment Trust, as well as being the investment manager for Baillie Gifford American.
Investment Manager, Baillie Gifford American Fund
Tom Slater
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Asset management group Baillie Gifford has many attributes we admire. The firm was established over 100 years ago and its emphasis on investing for the long-term is clearly evident through its well-defined investment philosophy as well as the length of service of many of its senior staff. The fund operates a growth investment style. This can result in shorter-term periods of more variable returns but overall we believe this fund should provide investors with solid exposure to the US equity market.Scroll down to read more...
Edinburgh-based Baillie Gifford is an investment house with a strong heritage. The firm began operating over 100 years ago and its strategy has several elements conducive to providing investors with satisfactory investment outcomes.
From its partnership structure to its investment philosophy and process, longevity is at the heart of the company. This is made evident by its commitment to holding stock over the long term and the low turnover of its staff members, many of whom have spent their entire investment careers with Baillie Gifford.
Investment desks at the firm are encouraged to share information and it is testament to the company’s consistently applied investment approach that skill sets are transferrable across multiple geographies. It should be noted that although the three named managers of this fund (Gary Robinson, Helen Xiong and Tom Slater) do not appear to have a lengthy association with the strategy, they have all been with Baillie Gifford a number of years. We also take comfort from the impressive level of resources available within the company.
Quality US stock investments should yield good
“The fund’s strategy has many aspects that differentiate it from its competitors. We consider the heritage of the firm and the strength of the team to be attributes that are not easily replicated. We believe the fund is suited to investors seeking exposure to growth characteristics within the North American equity market.”
Victoria Hasler, Head of Research,
Square Mile Investment Consulting and Research Limited
Quality US stock investments should yield good
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Subtitle of introduction panel
Baillie Gifford American is a concentrated fund invested in quality US stocks. Four US experts give us their view on the market’s fundamentals.
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market viewpoints, together with the
to bring you incisive analysis, research and
Fund Manager’s own investment strategy.
Axis interrogates the fund from four perspectives
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The Baillie Gifford American fund managers can draw on the expertise of Baillie Gifford's wider investment team when deciding which stocks have the most potential for growth. The fund will suit investors with a long-term perspective.
Review By Gary Corcoran at Last Word
Slater doesn’t see Trump as a particular problem for the fund and argues that the global disinflation that seems to have coincided with his election is a structural phenomenon built on the lowering costs of production, goods and services.
The US produces half of the fastest growing companies globally, and it is on this that Baillie Gifford is looking to capitalise. Slater argues that the US boasts a collection of companies that are unique for their growth potential. The likes of Amazon, Google, Facebook and Tesla have entrenched market positions and are still growing fast.
The US is the most short-term market in the world and so assessing stocks over the long term helps capitalise on the market’s asymmetry of returns. It also offers a different exposure to the underlying index.
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the US Equities Team and joint manager of Scottish Mortgage Investment Trust, as well as being the investment manager for Baillie Gifford American.
Tom joined Baillie Gifford in 2000, initially working in the Developed Asia and UK Equity Teams. In 2015 Tom was appointed Head of
Asset management group Baillie Gifford has many attributes we admire. The firm was established over 100 years ago and its emphasis on investing for the long-term is clearly evident through its well-defined investment philosophy as well as the length of service of many of its senior staff. The fund operates a growth investment style. This can result in shorter-term periods of more variable returns but overall we believe this fund should provide investors with solid exposure to the US equity market. Disclaimer »
Edinburgh-based Baillie Gifford is an investment house with a strong heritage. The firm began operating over 100 years ago and its strategy has several elements conducive to providing investors with satisfactory investment outcomes.
From its partnership structure to its investment philosophy and process, longevity is at the heart of the company. This is made evident by its commitment to holding stock over the long term and the low turnover of its staff members, many of whom have spent their entire investment careers with Baillie Gifford.
Investment desks at the firm are encouraged to share information and it is testament to the company’s consistently applied investment approach that skill sets are transferrable across multiple geographies. It should be noted that although the three named managers of this fund (Gary Robinson, Helen Xiong and Tom Slater) do not appear to have a lengthy association with the strategy, they have all been with Baillie Gifford a number of years. We also take comfort from the impressive level of resources available within the company.
“US financial markets face an interesting balancing act – on the one hand the economic and corporate fundamentals look good, on the other, the political and geopolitical risks have far from disappeared. For example, serious disruption to global trade flows is still a possibility. Fiscal decisions combined with Fed policy help drive the US bond market and the US dollar. On balance, the outlook for equities is buoyant as long as promised fiscal easing and business deregulation do actually appear. While valuations are not historically attractive, dividend payments and share buybacks still support investor confidence.”
Bambos Hambi_ head of funds management_ Standard Life
Cameron Falconer_ multi manager analyst_ Aviva Investors
“Despite strong macroeconomic fundamentals, we believe the US equity market looks richly valued. While there may be the potential for tax cuts and fiscal stimulus to develop into further tailwinds for equity markets, uncertainty generated by the new administration and the likelihood of counterproductive trade policy give us sufficient reason to be cautiously positioned and well-diversified in the region.”
Eren Osman_ director of investment management_ Arbuthnot Latham & Co
“For UK investors seeking diversification via overseas equity markets, the US offers many attractive features. Firstly, the S&P 500 provides access to many of the leading global technology businesses (the sector represents circa 20% of the market versus just 2% in the UK). Secondly, earnings quality is significantly higher in the US than elsewhere. Return on equity currently stands at approximately 14% versus 10% in Europe and 5% in the UK. Thirdly, with more than two thirds of S&P 500 revenues generated domestically, investors are exposing themselves to a resilient consumer-led economy. Finally, and by default, investors are also gaining exposure to the US dollar, a high-performing asset class in itself in recent years.”
Iona Garton_ Senior_ investment manager_ JM Finn & Co
“The US is probably the most interesting market in the world currently. Large multinational US company profits currently face a number of challenges, including financial sector spending on regulatory compliance, resource and manufacturing sector weakness, and headwinds from the very strong US dollar. President Trump could reverse some of these through his proposed de-regulation and tax reform, with the latter likely to have the greatest impact as it would directly benefit company earnings. There is also the expected benefit from his planned increase in infrastructure spending which is also pro-growth, although this could take some time to come through, and some of this potential benefit has already been priced into markets. On the flip side, there are the largely unknown potential trade policy changes, where erection of barriers to the free mobility of capital and labour could act as a drag on economic growth.”
Baillie Gifford American
and market views together
Axis analyses the fund
strategy directly from the
from four perspectives to
bring you insight, research
fund manager himself.
with an explanation of the
Baillie Gifford America fund was launched in 1997 and is a long term, concentrated fund focusing on US stocks. The fund aims to produce good returns, mainly through capital growth, and holds around 40 names on average. It has assets under management of £560.9m.
The fund is overseen by an experienced team including fund manager Tom Slater. They can draw on the expertise of Baillie Gifford’s wider investment team when making stock decisions. The three largest holdings are Amazon at 9.3%, Tesla Motors 8.0% and Alphabet at 6.1%. The fund is 92% active with an ongoing charge figure (OCF) of 0.52%. Six month returns were 16.2% compared with the S&P index at 6.9%; over one year they were 41.7% compared with the S&P index of 31.6%; and over three years they were 87.3% compared with the S&P index of 70.3%.
The fund will invest in any economic sector in the US but is overweight in consumer and IT and has no utilities holdings. The portfolio is extremely concentrated, the idea being that exceptional businesses are not diluted. The company aims to identify the stand-out growth businesses in the region and is not constrained by any index. The question Slater and the team ask when investigating a potential firm is “How can we make 2.5x our money over the next five years.” He argues that the top 20% of firms tend to do this.
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Baillie Gifford American is an
admirable fund
Victoria Hasler, Head of Research,
Square Mile Investment Consulting
and Research Limited
The firm invests for ‘growth’ which very much underpins the fund’s approach. The team seeks to identify companies with a clear sense of purpose and vision driven by founders or employees with significant wealth tied up in the business. The fund also invests for the long term with portfolio turnover of around 20%, indicating an average holding period of around five years. Indeed, the group looks to invest in businesses and for timeframes that share principles and characteristics with themselves.
Baillie Gifford is also a conviction-based investment firm. This is demonstrated by the concentrated holdings (typically 40-60) in Baillie Gifford American constructed with minimal reference to its S&P 500 benchmark. In practice the fund can look vastly different from the index. Risk is not ignored, however, and the fund is managed with sensible but not restrictive limits including a maximum individual stock weighting of 10% with investment in at least nine of the 11 standard sector groupings.
Bambos Hambi_ head of funds management_
Standard Life
Eren Osman_ director of investment management_
Arbuthnot Latham & Co
Active
share_
Baillie Gifford American Fund
Size of
fund (£)_
3 year
returns_
Management
charge to OCF_
Data correct as at 31.05.2017
Annual
turnover_
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Baillie Gifford American
The difference between 5-year annualised returns and the S&P 500
* 12 month forward estimate
Source: UBS, Baillie Gifford. As at 31 December 2016
Debt/equity ratio
%
20
Forecast earnings
growth* %
60
30
0
40
Price/earnings
ratio* (X)
10
Price/book
ratio
50
Yield* %
S&P 500 Index
Baillie Gifford American – the difference between 5-year annualised returns and the S&P 500
Cameron Falconer_ multi manager analyst_ Aviva Investors
Iona Garton_ Senior, investment manager_ JM Finn & Co
Source: FE Analytics February 2017
Baillie Gifford American - rolling 5-year annualised returns relative to the S&P 500
1
-1
2
Aug ‘04
-2
3
6
Dec ‘12
Oct ‘08
Jul ‘02
Jan ‘15
Nov ‘10
Sep ‘06
Feb ‘17
0
4
5