Morningstar

Baillie Gifford WW L/T Glb Gr B EUR Acc

Analyst Report
Morningstar's Take
|21/05/2024
by Daniel Haydon
Baillie Gifford Long Term Global Growth is focused on and invests in transformational growth companies. The erudite team has links to academics, industry "visionaries," and useful contact with unlisted companies. The approach has been consistently implemented, though performance can be volatile. It earns an Above Average rating across the People and Process pillars.

The distinctive philosophy, and the combination of experience, collegial interactions within the team and with other BG teams, and the firm's partnership structure, are key to our positive view. The managers bring a distinctive and differentiated approach to portfolio management, with careers dedicated to genuine, long-term thinking. It takes a specific type of investor to run this type of strategy, and their ability to stay the course is commendable. They have proved capable of stomaching significant price volatility.

The comanager structure has seen some evolution in recent years, but we still hold the team in high regard. Partners Mark Urquhart and John MacDougall are the more senior of the quartet of portfolio managers, with 28 and 24 years of experience, respectively, all at Baillie Gifford. There are two more junior portfolio managers, Gemma Barkhuizen and Michael Pye, who were appointed as decision-makers in January 2022. A fifth decision-maker, Robert Wilson, was also appointed in 2022, recently moved to be a decision-maker on Baillie Gifford’s international growth team. We would like to see some stability now. As we have come to expect from Baillie Gifford, recent changes were well-handled and do not detract from our positive opinion. People management remains a strength at this firm.

The process is research-intensive, and the philosophy well-established, finding its origins in institutional mandates launched in 2004. It aims to recognize genuine long-term growth and makes use of differentiated sources of information and pure long-termism. Portfolio construction is punchy, permitting these views to translate into tangible returns. Periods of heightened volatility and single-stock drawdowns are expected and tolerated by the team. The portfolio will naturally exhibit some extreme growth and sector biases. The managers now approach China with greater caution than in the early 2020s and exposure has come down markedly, though it is still overweight there compared with the Morningstar Category average (around 10% versus around 1%).

The fund has outperformed its Morningstar Global Growth Target Market Exposure Index and large-cap growth peers in 2023 and the year to date (through April 30, 2024). Long-term performance has also been strong, but it has been a bumpy ride. The strategy’s extreme growth bias leads to underperformance when value does well and at times of heightened investor caution. Meanwhile, valuations have on occasion looked stretched. Recent performance is testament to this, with an extreme drawdown in 2022 following a period of unprecedented outperformance. Investors should look to invest for the long term and be comfortable seeing through periods of elevated volatility. They may want to consider topping and tailing exposure depending on their views of valuations. Currently, the portfolio offers significant growth and attractive cash flow yields.
 
Morningstar Medalist Rating™Genuinely long-term growth investing from a talented team, but with volatile outcomes.
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Morningstar Pillars
PeopleAbove Average
ParentAbove Average
ProcessAbove Average
 
Morningstar Medalist RatingMorningstar assigns the Medalist Rating to funds that are qualitatively and quantitatively assessed through manager research and algorithmic processes. The assessment turns on three key “pillars” – People, Process, and Parent – that yield an estimate of how well a fund will perform before fees but after adjusting for risk.
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