The managers of Baillie Gifford‘s UK Growth Trust have today accused UK investors of being “gloomy” and “more interested in what is happening now rather than in a few years’ time”.
Over the six-month period to 31 October 2023, the trust’s net asset value declined 11.9 per cent, compared to a decline of 5.9 per cent for the FTSE All-Share Index total return. The share price total return for the same period was negative 12.5 per cent.
The fund noted it had made a few mistakes over the period, which included the likes of Farfetch and Naked Wines — both of these holdings were sold in the first half. However, the managers remained committed to the investment trust’s focus on growth and noted they remain committed to long-term growth opportunities, something the market has been ignoring.
The UK Growth Trust gave the example of FD Technologies. The company recently announced it was going to spend money developing its database business, hitting profits in the short term. This hit the stock, but it was a commitment to a long-term investment in a growth business.
As the trust’s managers explained: “Is there a risk that this investment does not pay off? The answer is ‘of course’ but we think management has done a decent job in establishing the case for allocating resource to this division and deserves our support.”
Keystone Positive Change Investment, which the fund management house took over in February 2021, and has been run in line with the open-ended Baillie Gifford Positive Change fund, has recorded a small loss of 6.6 per cent since the takeover, compared to a gain of 1.7 per cent for the average global investment trust.
The Baillie Gifford European Growth Trust has also recorded a poor performance following a management change. Baillie Gifford took over the trust in November 2019, and since then its net asset value has risen 9.3 per cent, underperforming its benchmark return of 24.1 per cent.
Commenting on the market environment, the managers of the UK Growth Trust said: “There is a pattern of short-term, cyclical concerns overshadowing what the portfolio managers view as strengthening long-term prospects of the majority of the companies held, and where operational and strategic progress remains in line or ahead of expectations.”