Baillie Gifford has removed Stephen Paice and Chris Davies as managers of its underperforming European Growth (BGEU) investment trust as it attempts to hold on to the mandate and avoid the £281m listed fund having to offer a 100% exit to shareholders in two years’ time.
Joe Faraday, a member of Baillie Gifford’s European equities team who has been with the firm for over 20 years, will take over on 1 April.
Chair David Barron said Faraday, who has helped run one of Baillie Gifford’s large global ex-US funds, would “continue the company’s growth focus whilst aiming to deliver a more diversified portfolio that captures growth opportunities across a wider range of sectors”.
“The board would like to thank Stephen and Chris for their longstanding contribution to the company. We’re delighted to welcome Joe and we believe that his investment approach better positions the company to deliver improved relative performance for our shareholders,” said Barron.
Unlike other Baillie Gifford growth trusts hit by the 2022 crash, BGEU has struggled to recover with its shares down 27% over five years. The trust, in which activist Saba Capital has a 5% stake, has promised shareholders a 100% tender offer if it does not beat its benchmark in the four years to mid-2028. It is currently well behind target.
Our view
QuotedData’s Matthew Read said: “It’s no secret that Baillie Gifford European Growth Trust has struggled with its performance in recent years, as its very growth-focused approach has faced significant headwinds from a higher interest rate environment. We think shareholders will be pleased to see steps being taken to try and alleviate these challenges, while still retaining BGEU’s core characteristics. In this regard, Joe Faraday’s appointment provides continuity in philosophy, while the move to broaden the portfolio and capture growth opportunities across a wider range of sectors should help improve resilience and reduce the trust’s reliance on a narrower group of holdings, which has been part of the problem. Joe is one of the managers on BG’s Developed EAFE All Cap portfolio, which holds stocks such as TotalEnergies, Unilever, and LVMH as well as some of the leading listed positions in BGEU.
“We think there are also reasons for cautious optimism based on experience elsewhere within Baillie Gifford’s stable. A similar evolution of Edinburgh Worldwide’s strategy had already begun to bear fruit, even if they were not given the chance to fully play out, and we think these changes should hopefully provide improved performance over time.”
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