- 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 utilises a significant amount of their allowance to invest in private companies
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-managers 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 strategy.
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. 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 trust can invest in a maximum of 90 companies, typically at least 30 of these are 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 the trust’s financial year in May, it had 25 unlisted investments, making up 34.5% of the trust’s assets. This is a marginal decrease from the 36.4% invested in private companies one year earlier. 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 6.5% of its assets at the end of May is Space Exploration Technologies. The business designs, manufactures and launches advanced rockets and spacecraft. In the trust’s last financial year, the managers invested in one new unlisted company, the cosmetic and skincare company Oddity. Given the difficult market environment none of the current unlisted investments went public over the trust’s financial year.
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. At the end of the trust’s financial year gearing stood at 6%.
Over its last financial year Robinson and Gibson made some changes to the trust’s investments. Roblox, the online gaming and game creation platform was added. A small position was made in salad restaurant chain Sweetgreen and finally Doximity, the online networking service for medical professionals was added. A number of companies also exited the trust. This includes Peloton, Teladoc, Appian, Butterfly Network, Carvana and First Republic.
The managers think that the pandemic has boosted the prospects of many companies they hold in the portfolio. They believe many of the companies they hold were already beneficiaries of technological shifts in the economy, and the Covid period has just accelerated this.
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.
ESG Integration
All of Baillie Gifford’s funds are run with a long-term investment horizon in mind – they see themselves as long-term owners of a business, not short-term renters. So, assessing whether society will support, or at the very least, tolerate, the business model over the long term, and whether management will act as good stewards of shareholders’ capital is an important part of the investment process.
Dedicated ESG analysts sit with and report into their respective investment teams, and the firm’s ESG efforts are supported by a dedicated Climate team, an ESG Services team (responsible for voting operations and ESG data) and an ESG Client team (responsible for ESG-related client communications). Individual investment teams are responsible for voting and engagement for the companies they invest in. Investment in controversial weapons is prohibited across the firm.
The firm reports all its voting decisions and provides rationale in situations where it voted against management or abstained, in a detailed quarterly voting report. There is also a quarterly engagement report which details the companies engaged with, and the topic discussed, and further engagement case studies are available on the website. All this information is brought together in the firm’s annual Stewardship Activities report.
Cost
The trust's ongoing annual charge in the year to May 2023 was 0.69%. 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.
As investment trusts trade like shares, both a buy and sell instruction will be subject to the HL share dealing charges.
Performance
Since the trust launched in March 2018 to the end of July 2023, it's grown by 59.88%*, underperforming the 72.90% gain for the average trust in the AIC North America sector. In this time the trust’s NAV has risen 106.20%. Past performance is not a guide to future returns.
Over the trusts financial year to the end of May the trust share price returned -13.81% compared to -6.84% for the average trust in the AIC North America Sector. The trust’s NAV also returned -1.58%. The trust has had periods of strong performance but more recently the managers’ growth-focused investment style has fallen out of favour with investors. That’s mainly because inflation and interest rate expectations have been rising. The result is investors focusing more on nearer term growth and being less willing to pay up for companies with growth further in the future. This has seen stock prices of some of the trust’s investments fall significantly.
The managers also realise some stocks have not performed as well as they would have liked. This includes private companies Stripe, Faire Wholesale and Brex. It wasn’t all negative though, with investments in Shopify, Nvidia and Netflix all contributing to performance. One year is a short timeframe to consider performance though and the focus should be on the longer term potential. 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. The trust currently trades at a discount of 20.23%.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| July 18 – July 19 | July 19 – July 20 | July 20 – July 21 | July 21 – July 22 | July 22 – July 23 | |
| Baillie Gifford US Growth Trust | 23.14% | 42.28% | 59.91% | -48.38% | -5.71% |
| AIC Investment Trust - North America | 13.47% | -5.64% | 42.86% | 0.31% | 0.49% |
Past performance is not a guide to the future. Source: *Lipper IM to 31/07/2023.
FIND OUT MORE ABOUT The Baillie Gifford US Growth Trust PLC INCLUDING CHARGES
VIEW Baillie Gifford US Growth Trust KEY INFORMATION DOCUMENT
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