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A global equity fund using an approach that is underpinned by a focus on earnings growth and draws on the ideas of the group's regional portfolio management teams. Within its sector, the fund features in our 'Larger-Cap, Growth' category.
The fund’s KIID Synthetic Risk and Reward Indicator (SRRI) is 6. This is a regulatory measurement that is, where possible, calculated from the volatility of its weekly performance over a five-year period. A score of 6 means the fund’s historic volatility is between 15% and 25%.
The fund’s five-year standard deviation is higher than that of global equity benchmarks. Given the fund’s overt style bias and the team’s long-range investment horizon, the relative risk outcome is likely to vary through time according to the underlying market dynamics. Absolute risk is mitigated by limits on stock weightings, together with the spread of businesses held across “Compounders”, “Disruptors” and “Capital Allocators”. Differing share classes could have differing SRRI scores.
The fund is managed by Malcolm MacColl, Spencer Adair and Helen Xiong and they form the core of the Global Alpha team. Messrs MacColl and Adair have been involved with the strategy since its inception in 2005. Ms Xiong was hired by Baillie Gifford in 2008 and joined the team in 2020. Messrs MacColl and Adair and Ms Xiong have each had roles with the group’s regional equity fund management teams before becoming portfolio managers on the global funds. They draw on the stock research and ideas of the teams running regional portfolios.
The team seeks to make long-term investments in well-managed businesses that enjoy sustainable competitive advantages. The managers’ core belief is that share prices ultimately follow earnings. Therefore, they aim to select stocks that offer the prospect of sustainable, above-average growth in earnings and cash flow.
The fund features 70 to 120 of the team’s best ideas. With minimal constraints versus the benchmark, it typically displays a high active share. New holdings are often introduced at 0.5% of the portfolio, especially if they are higher risk, and only the highest-conviction stocks are greater than 2%. The long-term mindset is evident in a very low name turnover. The maximum stock position is 6% and the portfolio must feature a minimum of 15 industries, with a maximum of 50% in the top four. Regionally, the maximum position is limited to the benchmark weight plus 20%.
As a philosophy, the bottom-up focus on growth is common across Baillie Gifford’s equity strategies. The investment managers and analysts spend the majority of their time researching stock ideas. The team also receives input and stock ideas from a selection of senior investment managers spanning both regional and the smaller companies’ equity teams, otherwise known as trusted advisors. A Portfolio Review Group incorporates the managers and an investor from each region and is a forum for debating the company recommendations in a global context. Further analysis may be undertaken by the managers, the regional teams or global sector researchers.
Company analysis considers the industry context of each business under review and its potential competitive advantages. This is combined with an opinion on management and an assessment of the expectations already embedded in the stock price. The managers seek strong ideas that diversify the existing portfolio and this principle of diversification also underpins the range of different growth categories that are typically included. These categories are defined as “Compounders”, “Disruptors” and “Capital Allocators”. Including stocks from across these three categories is helpful in creating a portfolio that is exposed to a range of business profiles, from long-term franchises that are relatively insensitive to the macro-economic environment, to companies that are dependent on the economic cycle but also have structural growth potential at the industry or company level. The portfolio is also assessed from the point of view of embedded thematic and factor risks, with the managers seeking to ensure that their views are reflected in a diversified manner.
Formal documentation, including the fund prospectus and the KIID, should be sought directly from the asset manager. For ease of reference, a link to the ASSET MANAGER WEBSITE can be found above, as well as a link to the ASSET MANAGER FACTSHEET.
At The Adviser Centre, our primary aim is to support financial professionals in their fund selection and suitability work through independently-minded research, borne of decades of industry experience. Our process is framed by the fundamental concepts of “quality”, “value” and “utility”, through which we answer the key questions of why to invest in a fund, how it is likely to behave and how it can be deployed.
The Adviser Centre team members are some of the most experienced in the fund research industry. We can always look forward to robust and constructive discussions and we have great respect for their views and perspectives, which, given the breadth of their fund and market knowledge, come from an extremely well-informed position.
We have known and worked with the team for several years and we value their experience and the insights they provide to our own investment process. The service differentiates itself by its more focused nature and the information on their factsheets is useful in emphasising a fund’s key mandate, exposure and style biases, helping to explain the risk/return journey that our customers can expect.
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