It has been changing of the guard at investment trust Baillie Gifford UK Growth – and already change for the better as far as investors are concerned with a resulting boost in the fund’s share price.
Previously known as Schroder UK Growth, the trust’s board took the unusual step earlier this year of sacking the incumbent manager following a sustained period of underperformance against similar funds. Edinburgh- based Baillie Gifford were installed as the new managers.
Since the end of June, the new kids on the block – Iain McCombie and Milena Mileva – have been busy overhauling the trust’s portfolio. It has been a drastic revamp. Of the 52 stocks inherited from Schroders, all bar a handful have been sold.
Changes: Milena Mileva has overhauled the portfolio with new holdings including Burberry
They have been replaced by smaller companies – in terms of market capitalisation – with the focus on holding durable businesses run by quality management (Baillie Gifford’s forte).
Although it is still early days, the rebooting of the trust has been welcomed by wealth managers who determine whether clients’ money should be invested in such a vehicle.
The change, prompting renewed investor demand for the trust’s shares, has triggered a sharp reduction in the discount that the shares trade at – double figures last year and now down to around five per cent.
So, over the past year, the trust is a top five performer within its peer group of UK-invested trusts. Over the past five years, it is a bottom five performer.
‘It has been a radical transformation of the trust that we have undertaken,’ admits Mileva.
‘We have got rid of most of the FTSE 100 holdings such as British American Tobacco, BP, HSBC, Lloyds Banking Group, Marks & Spencer, Shell and Tesco.
‘Only a handful of the portfolio’s old stocks – Legal & General and Just Group – are being retained. The overall result, once we have sold a small residual of remaining holdings, will be a more concentrated portfolio comprising growth companies in line with the trust’s objectives and name.’
Most, she says, will be FTSE 250 or FTSE 350 listed companies. New positions have been taken in retailer Ted Baker and Gloucestershire-based precision engineering company Renishaw.
Mileva says: ‘Of course, there is a lot of noise about retail Darwinism but Ted Baker has a sustainable branch network, a good online presence and is expanding into Asia. It will survive.’
Renishaw, she says, is an ‘innovative company’ producing precision machines used in measurement for applications including dentistry and surgery. She is sure it will keep growing as it innovates in exciting areas such as 3D printing and neurological robotics.
‘It is a world-leading UK engineering business,’ she proclaims. Other new holdings include luxury goods business Burberry which last week stopped burning unsold goods, instead recycling or donating them to charity.
Although it is a coup for Baillie Gifford to have won the investment management contract from Schroders, more important is the fact that the fund sits nicely within the business’s portfolio of investment trusts.
James Budden, director of marketing and distribution, says: ‘UK-focused investment trusts do not come up for grabs very often. The fund complements our four existing global investment trusts.’
These are Edinburgh Worldwide, Monks, Scottish American and Scottish Mortgage.