Fund spotlight: Baillie Gifford Positive Change

by Dzmitry Lipski from interactive investor |

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interactive investor’s head of funds research offers a view on one of our ACE 40 fund picks.

The ACE 40 fund

Listen or read about our ACE 40 fund, it’s your choice. 

Extract taken from the latest Funds Fan podcast

Baillie Gifford Positive Change, a recent addition to interactive investors ACE 40 list, has two objectives of equal importance: to deliver attractive long-term investment returns (2% ahead of the MSCI All Country World index) and to contribute towards a more sustainable and inclusive world. There are no compromises – each holding must be able to deliver on both objectives.

The fund adopts a team-based approach. It is run by two investment managers, Kate Fox and Lee Qian, and two senior impact analysts who have access to Baillie Gifford’s extensive resources. All four individuals bring different expertise to the investment process.

Core to the managers’ philosophy is a belief that investment returns and impact are complementary, so that both are considered throughout the investment process.

Stock selection is driven by fundamental company research and strong impact criteria. A company has to deliver positive change in one of four areas: social inclusion and education, environment and resource needs, healthcare or quality of life.

What does it invest in?

The team are bottom-up stock pickers as opposed to focusing on the macro. The fund is a high-conviction portfolio of around 25 to 50 stocks, with a focus on high-quality growth companies. The portfolio is actively managed and does not seek to track the index. A very long-term investment horizon with a low turnover (around 20% per annum) of holdings within the portfolio.

Among the top holdings are Tesla (NASDAQ:TSLA), an electric vehicles and clean energy company (9.3%), M3, a medical platforms provider (6.1%), and TSMC (NYSE:TSM), a semiconductor manufacturer (5.6%).

It is a global portfolio covering both developed (US 48.3% and Europe 25%) and emerging (18.4%) markets, although the split by its contribution to the United Nations Sustainable Development Goals (SDG) provides a clearer picture. In 2015, the UN set 17 goals seeking to address the world’s biggest challenges and all countries are aiming to achieve them by 2030. The portfolio has the biggest contribution to the following goals: good health and well-being, industry, innovation, infrastructure, climate action, and affordable and clean energy.

Performance

The fund has delivered strong outperformance relative to the index and peers since inception and has been one of the top performers in the Investment Association’s Global sector. This year (to the end of October), the fund returned 55%, outperforming the benchmark by 37%. Covid-19 helped the fund owing to its heavy weighting to healthcare companies, particularly US biotech firm Moderna (NASDAQ:MRNA), which saw its share price advance into the triple digits, while developing a vaccine against the virus.

Please note that the returns are unlikely to be sustained at their current pace and past performance does not guarantee future results. 

The fund has experienced huge inflows during 2020, with assets rising from £200 million at the start of the year, to more than £1.2 billion as of October.

The fund is competitively priced: the B share class has annual ongoing charges of 0.53%.

Fund/index/category 01/11/2019 - 31/10/2020 01/11/2018 - 31/10/2019 01/11/2017 - 31/10/2018 01/11/2016 - 31/10/2017 01/11/2015 - 31/10/2016
Baillie Gifford Positive Change Fund 71.14 9.40 14.47
MSCI AC World Index 4.97 11.18 3.39 13.27 29.09
Morningstar Global Large-Cap Growth Equity 17.17 12.62 1.69 14.91 24.39

Source: Morningstar Direct. Total returns in GBP.

The ii view

The Baillie Gifford Positive Change fund is included on the ACE 40 list as a Global Equities, Adventurous recommendation. The fund is managed by a very experienced and diverse management team with access to Baillie Gifford’s extensive resources. The managers investment horizon is long term and relies on building a high-conviction portfolio of quality growth stocks and is unconstrained by its benchmark.

As such, the portfolio may look very different from its peers and performance is likely to substantially deviate from the benchmark. The fund should appeal to investors with a high-risk tolerance seeking sustainable growth over the long term.

 

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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