by Val Cipriani, Investors Chronicle, July 17, 2024:
Baillie Gifford has dialled down the risk in its global investment trust, Monks Investment Trust (MNKS), in an attempt to turn around poor numbers – but all of the company’s global strategies are still some way off recovering from the 2022 rout.
Despite posting better numbers in the past six months, Baillie Gifford’s three global growth trusts, Scottish Mortgage (SMT), Monks and Edinburgh Worldwide (EWI) performed well below their respective markets on a three-year basis, as the chart shows.
Monks remains firmly growth-focused, but in the year to April 2024, its managers looked for “growth equities with the characteristics to perform well even in the more challenging economic environment” and put an emphasis on valuation discipline, its recently released annual results said. The trust’s repositioning started after the 2022 crash, with the most growth-focused area of the portfolio (‘rapid growth’) going from accounting for 52 per cent of the portfolio in October 2021 to 34.4 per cent in April 2024..
While all three trusts run Baillie Gifford’s growth philosophy, Monks is now the less racy option, with lower exposure to unquoted companies compared with Scottish Mortgage (4.6 per cent as of April 2024 against 26.2 per cent as of March 2024). Unlike the other two, Edinburgh Worldwide focuses on small caps, investing in earlier-stage and riskier growth companies, and also has about 28 per cent of the portfolio in private companies. The performance of the past three years reflects the trusts’ positioning, with Monks doing better and Edinburgh Worldwide struggling the most.
Recovery drivers
Matthew Read, senior analyst at QuotedData, said that he expected the recovery of Baillie Gifford’s strategies to be linked to interest rates. “Bar the odd blip, inflation is on a path of retrenchment and, although interest rates aren’t going back to where they were, we think that the first rate cut in the US should be a catalyst for a re-rating of these sorts of companies,” he said. “If stock selection is correct, these companies will have faster revenue and earnings growth than the market and so it is only a matter of time before they pull ahead again.”
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