Baillie Gifford American – Focused on growth potential

Joseph Hill | Tue 03 December 2019

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• The managers look for companies with high growth potential
• The fund has performed ahead of its benchmark over the past five years
• The fund doesn’t feature on our Wealth 50 list of favourite funds

The fund is managed by Tom Slater, Gary Robinson, Helen Xiong and Kirsty Gibson and together they look to invest in companies with high growth potential that could be capable of delivering exceptional returns over the long run. The managers believe that businesses with resilient business models make for good long term investments and that cultural drivers can be a key component of company performance and ultimately investor returns.

Because they believe few companies are actually capable of delivering exceptional returns over the long run, they prefer to run a relatively concentrated fund of 42 stocks, but this does increase risk.

This fund doesn’t feature on our Wealth 50 list of what we believe are the best funds in each sector.

How’s the fund invested?

The consumer discretionary sector is the largest sector in the fund at 26%. The success of businesses in this sector are often considered to be related to the health of consumerism in an economy. And by many measures, the average US consumer looks in reasonable financial health. The labour market looks strong with unemployment standing at just 3.6% and wages growing at their fastest pace for nine years.

When consumers feel like their jobs are secure and they feel confident about their prospects for the future, they’re often willing to spend more of their income, which is good news for these kind of companies.

Investments by sector

Source: Baillie Gifford, 30/09/2019

Other sizeable sector exposures include technology, healthcare and communication services

Some of the fund’s largest investments include the online giant Amazon, MarketAxess - the electronic trading platform, and the e-commerce platform Shopify. And over the last five years, both Amazon and MarketAxess have been among fund’s best performers. The companies have accounted for just over a third of the fund’s performance. However, investors should remember past performance isn’t a guide to the future.

What’s changed in the fund?

The managers have recently added Chewy, the online pet food and grooming supplier, to the fund. They’re the biggest pet food retailer in the US, ahead of the likes of Amazon and currently have over 12m customers. The company could be well positioned to take advantage of the growing humanisation of pets trend, where owners consider their animals a family member and reflect this by spending more and more money on their pets.

The managers believe that the company’s strong reputation for customer service will help it stand out in a competitive marketplace. They have also added to their investments in some of the fund’s holdings such as Shopify, Glaukos Corporation and Yext and reduced their position in Wayfair.

How’s the fund performed?

The fund aims to outperform the S&P500 index by 1.5% per year after costs over any five year period. We think that in the US, the share prices of some well-known companies can react very quickly to new information. This makes it difficult for fund managers to find opportunities missed by others and to consistently perform better than the broader market over the long term.

Chart showing performance over five years

Past performance is not a guide to the future. Source: Lipper IM* to 31/10/2019

The fund has performed well recently and over the last five years it’s grown by 104.6% compared with 78.7%* for the FTSE USA index. Please remember past performance isn't a guide to future returns.

Past performance is not a guide to the future. Source: Lipper IM* to 31/10/2019

Baille Gifford American Key Investor Information

More about this fund including charges