Baillie Gifford is an investment giant which has existed for longer than a century. They are based in Edinburgh Scotland, but they have offices in the United States and Asia. They are focused on long-term investment strategies with particular interest in growth stocks. Baillie Gifford Portfolio stocks are divided into 280 holdings valued at $133 billion.
The biggest holdings in their portfolio are Nvidia Corp, MercadoLibre Inc, and Amazon Inc. Their latest trades include reducing positions in Mercado Libre Inc., Tesla Inc (NASDAQ:TSLA), and Illumina Inc (NASDAQ:ILMN). Among the biggest recent buys are Meta Class A stocks (NASDAQ:META) and Enphase Energy Inc (NASDAQ:ENPH).
They invest in diverse asset classes including bonds, cash, and commodities. When they pick companies to invest in they often prefer those that have a positive impact on society and the environment. Baillie Gifford has a worldwide investment network with massive investment capital on hand, which deserves a deeper analysis. Stay with us while we discuss their current portfolio and their approach to investing.
Key Holdings
- Nvidia Corp (NASDAQ:NVDA) with 8.21% of the portfolio
Baillie Gifford bought over 55 million Nvidia stocks in 2016 when they were worth below $20. They have been trading their stocks since, but most trades were sales. Now they own 13.8 million stocks valued at $10.9 billion. Nvidia’s recent stock boom is going Baillie Gifford’s way since they are still the biggest stakeowner of the tech giant. In 8 years while they traded Nvidia stocks the firm generated a gain of 2976%.
- MercadoLibre Inc (NASDAQ:MELI) with 6.53% of the portfolio
In 10 years since Baillie Gifford has been investing in MercadoLibre its share price skyrocketed from $88 to a current $1,417.00. Now the company owns 5.38 million stocks valued at $8.67 billion. In Q3 and Q4 they sold 1 million stocks at prices between $1,271.00 and $1,417.00. Their total investment is $1.67 billion, resulting in a gain of 419% so far.
- Amazon Inc (NASDAQ:AMZN) with 5.35% of the portfolio
Baillie Gifford is the biggest stakeholder at Amazon just behind Ken Fisher with 40.7 million stocks in the holding. Its current value is $7.11 billion and it brought a gain of 1026% so far. Amazon is another long-term investment dating back to 2013 when their stocks were under $15 and it was difficult to predict this massive increase in value over the decade. They invested a total of $631 into Amazon and in 2023 they bought three times increasing the holding to 3.3 million and sold 665 thousand when the price was at the peak of $140.
Sector Allocation
Although Baillie Gifford has 280 holdings, it is not very diversified among industry sectors. They are highly dependent on the technology sector, and their current sector allocation is divided in this order:
- Technology with 52% of the portfolio valued at $69 billion
- Consumer Discretionary with 20.8% of the portfolio valued at $27.5 billion
- Healthcare with 12% of the portfolio valued at $15.9 billion
- Finance with 5% of the portfolio valued at $6.67 billion
- Industrials with 3.6% of the portfolio valued at $4.75 billion
- Materials with 1.9% of the portfolio valued at $2.46 billion
- Energy with 0.7% of the portfolio valued at $975 million
- Consumer Staples with 0.7% of the portfolio, are valued at $934 million
- Telecommunication with 0.4% of the portfolio valued at $522 million
- Companies specified to the “Other” sector with 2.5% valued at $3.33 billion.
Baillie Gifford Investment Philosophy and Approach
Long-Term Growth Strategy
Bailie Gifford prefers investing for the long term with a focus on companies that have a potential for growth in a decade or even longer. They want companies that can produce compounded returns, which often include big names with significant market shares. Some of the best examples include Microsoft Corp (NASDAQ:MSFT), Nestle, Pepsi, and Procter & Gamble Co (NYSE:PG).
Alongside their long-term growth strategy, Baillie Gifford holds in high regard companies with above-average environmental, social, and governance (ESG) standards. This in reality transfers to companies that can produce high returns but at the same time their growth is sustainable and has a positive impact on the environment and society.
Risk Management Strategies
Baillie Gifford Co has a whole sector dedicated to risk management strategies. They are responsible for ensuring that the risk management strategies comply with the company’s overall strategy and corporate culture.
Before they make a definitive investment decision several executives responsible for decision making look at the opportunity from different angles. They discuss possible downsides and look for a way to minimize the risks. Only once they make an agreed and mutual decision they proceed with the investment.
Other important strategies that they use to lower the risk are geography and sector diversification, and constant monitoring of all holdings. Their stock growth strategy tends to be a bit more risky which demands regular overseeing of the investment metrics and acting at the right time.
Diversification and Risk Mitigation
Diversification plays a major role in Baillie Gifford’s risk mitigation. First, they are a company working on a global scale. This means that they are investing in different markets, which allows them to lower the risk in case one market goes down.
Second, from their portfolio, we can see that Baillie Gifford doesn’t concentrate their investments in one or two sectors. Their investments are divided among several sectors, which also helps in reducing risk from a sector-aimed downturn.
Take A Look At Baillie Gifford’s Take on Investment Research:
Baillie Gifford Performance Analysis
Historical Performance Evaluation
Evaluating Baillie Gifford Co’s performance can be a nuanced task, due to a different number of funds that have an orientation towards different markets and strategies. But overall in the two last decades, Baillie Gifford generated 8.3% annual returns.
In the last five years, problems began to increase. In that period the fund delivered 39.1% returns when compared to an average IA North America sector average of 57.63%.
In the period 2020 to 2023 like most other hedge funds had to combat high volatility. Volatility has played an important part in their strategy, but even they couldn’t cope with the extreme levels that we saw in the last period.
In the last three years, their prime fund Edinburgh Worldwide took an 80% downturn. Right behind it was the BG US Growth finishing with -75%. Other five major funds also underperformed with performance reaching an abysmal negative 40% to 60%. Two more funds couldn’t brag about their -20% to -30% returns, while only one (Pacific Horizon) outperformed the benchmark.
Future Outlook
Baillie Gifford Co’s growth stock approach has been put to a test in the last couple of years. The biggest problem is the funds focused on equity investments, due to lack of demand for their investments.
Their open-ended funds are not in grave danger but are still in most cases underperforming. Some of their funds with bad track records were closed, due to both losses and lack of future perspective.
Last year proved to be a bit more stable for the entire company. Until Q4 2023 they returned a growth of 34.92% compared to 11% of the sector average.
So from this perspective, the last two years could be seen as a bump in the road. They seem to be back on track, but their future outlook can be impacted by numerous factors. The inflation is currently stabilized, and volatility is lowering, and that is going their way.
But, they may need to switch their tactics. It was already reported that they invested in fossil fuel companies which triggered a dispute with the climate activist Greta Thunberg.
FAQs
What Is Going on With Baillie Gifford Funds?
After a two-year bad spell and major underperformance, 2023 has shown signs of recovery. Both 2021 and 2022 were bad years for long-term growth investing, and investors acted by moving their investments elsewhere. However, due to inflation and interest rates reducing, it may trigger a turnaround and attract old or new investors.
Who Owns Baillie Gifford?
Baillie Gifford Co. is owned by over 60 partners. The current ownership distribution data is not available, while Andrew Telfer is the Senior Partner.
Final Thoughts
The current global crisis that has been going on for more than 3 years first with the COVID pandemic, and now with the Russo-Ukrainian War is wreaking havoc in the whole financial sector. After an abysmal 2021 and 2022 for most hedge funds Baillie Gifford needed to close doors on some funds.
During those two years, they dealt with massive losses left and right. That didn’t go well with the remaining investors who started pulling out their investments mostly during 2022.
But with the market partly stabilizing in 2023 that brought them some time to reorganize and start anew. 2023 was overall a good year, and they delivered solid returns when compared to the competition. But, they may need to rethink their approach if they want to attract bigger individual and institutional investors in the future.
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