By: Elliot Gulliver-Needham, Investment Reporter, CityAM
In the trust’s annual result, it revealed that its underlying assets grew by only 16.2 per cent throughout the year, compared to a 24.8 per cent gain in the S&P 500.
However, the discount of the trust’s share price to underlying assets halved from 22.4 per cent to 11.2 per cent, thanks in part to a 7.9m share buyback programme, sending its share price rocketing up 32.9 per cent.
Underperformance of underlying assets to the S&P 500 seems surprising, for despite such a strong market, the growth companies that Baillie Gifford specialises in have not kept up with the main US index.
“Investors’ patience will wear thin if the underlying performance doesn’t improve soon,” warned James Carthew, head of investment company research at QuotedData.
Since its launch in 2018, the trust’s share price has grown 91.4 per cent and its underlying assets have grown 121.2 per cent, compared to an S&P 500 gain of 152 per cent..
“That relatively high exposure to loss-making/cash consumptive companies has been the main factor in the trust’s poor relative performance,” explained Carthew.
“Rising interest rates put investors off ‘jam tomorrow’ companies and particularly those that were burning cash and the market feared might struggle to raise more.”
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