Interactive Investor

Baillie Gifford loses crown as active investors’ favourite fund firm

7th February 2023 11:54

Sam Benstead from interactive investor

The group behind Scottish Mortgage is under pressure as investors turn their backs on expensive stocks.

The crash in the value of “growth” stocks due to rising interest rates caused investors to sell Baillie Gifford funds last year.

The Edinburgh-based fund group, which manages high-profile funds such as Scottish Mortgage, Baillie Gifford American, and Baillie Gifford Positive Change, did not feature on the widely followed “Pridham Report” of the most-popular fund houses among UK investors last year, as measured by net retail sales.

This comes after topping charts for net sales last year, with £3.8 billion of new money, and coming third for gross sales, bringing in £14.2 billion.

Net sales averages out money flowing in and out of a group, while gross sales just includes money going in.

Baillie Gifford’s latest results, reported by the Financial Times, showed that its assets under management declined £113 billion last year, from £336 billion at the end of 2021 to £223 billion at the end of 2022.

The fall was largely due to declining values of its investments, with outflows accounting for £20 billion. The figures include money from large institutional investors, as well as retail investors.

Scottish Mortgage shed nearly half its market cap in 2022 as the share price dropped 46%. It lost its crown as Britain’s largest investment trust last spring when its market cap fell to £12 billion.

Another big blow came from Baillie Gifford American, whose assets fell from £6.4 billion to around £2.5 billion from the end of 2021 to the end of 2022, according to FE FundInfo, a data provider.

The latest Pridham Report shows that Fidelity was the best-selling fund group by net retail sales in 2022, at £3.6 billion of extra assets under management, followed by Legal & General Investment Management (£3 billion) and then HSBC Asset Management (£2.7 billion)

BlackRock was the best-selling group by gross retail sales for the ninth year running, attracting £28.6 billion in assets. The US firm is behind the popular iShares passive fund range.

Legal & General was second for gross sales at £16.3 billion, followed by Fidelity with £15.6 billion. Baillie Gifford saw £5.3 billion in gross sales, putting it in 10th place on this measure.

The report said that it was a “challenging” year for the funds industry as inflation, rising interest rates and fears of a global recession all weighed heavily on investor sentiment.

The Investment Association (IA), the trade body for the funds industry, found that a record £25.7 billion was taken out of investment funds last year, the first-ever year of outflows.

Amid the pressure on the industry, investment managers offering passive funds continued to attract money.

Anna Pridham, co-editor of the report, said: “Passive products continued to dominate the market in 2022, with new business among the top four managers underpinned by sales of tracker funds. BlackRock, Legal & General Investment Management, Fidelity and HSBC Asset Management all reported an increase in gross sales of passive funds compared to 2021.”

Fund managers with a distinguished active offering also attracted strong inflows last year, the report found.

These included Royal London Asset Management and EdenTree, which are known for their sustainable funds.

PositionTop five managers by net retail sales in 2022£m
1Fidelity3,636.3
2Legal & General IM3,053.6
3HSBC AM2,723.9
4Royal London AM2,013
5BlackRock1,906.9

Source and copyright: The Pridham Report 2023

PositionTop five managers by gross retail sales in 2022£m
1BlackRock28,621
2Legal & General IM16,342.2
3Fidelity15,618.6
4HSBC AM10,705.4
5Royal London AM9,791

Source and copyright: The Pridham Report 2023

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