In a regulatory filing published today, the board confirmed the transition of the portfolio would take place at 11.59pm this evening, thanks to Financial Conduct Authority (FCA) approval granted on Wednesday.
The UK Growth Trust will become the only closed-ended product in Baillie Gifford’s stable trading at a discount, which currently sits at 7.1%. That could widen if Schroders Isa savings scheme investors sell their holdings.
Isa investors, who represented 23% of the share register in May, will ultimately be unable to hold the investment trust through their savings scheme, but the filing confirmed the status quo will remain immediately following the transition.
“The scheme administrator has been working with third-party savings scheme administrators and is exploring options whereby scheme participants will be able to transfer their existing holdings and continue to hold the company’s shares outside of the Schroder Isa saving scheme.”
Investors will be told shortly about their options and will have at least three months to decide what they want to do, the filing stated.
A Schroders spokesperson told Portfolio Adviser the timelines for the portfolio’s transition to Baillie Gifford and reaching a resolution for Isa investors are not automatically aligned.
Buying opportunity
Winterflood Investment Trusts head of research Simon Elliott said selling from saving scheme investors could widen the discount and create a buying opportunity. “That’s definitely the experience in terms of what we’ve seen before.”
Elliott said it was possible the investment trust could move into a premium, like Baillie Gifford’s other products.
“It’s probably dependent on three things: how it performs; people’s sentiment to the UK market; and the third thing is the nature of the shareholder base. We’re seeing quite strong retail demand and Baillie Gifford as a house has a strong retail following,” he said.
Baillie Gifford investment trusts stable
| Total assets | Premium/Discount | |
| Scottish Mortgage | £7.7bn | 3.6% |
| Monks | £1.9bn | 3.7% |
| Baillie Gifford Japan | £864.0m | 2.6% |
| Scottish American | £578.4m | 4.5% |
| Baillie Gifford Shin Nippon | £525.1m | 5.6% |
| Edinburgh Worldwide | £507.6m | 2.2% |
| Schroder UK Growth (to become Baillie Gifford UK Growth) | £323.6m | -7.1% |
| Baillie Gifford UK Growth | £ 226.5m | 3.5% |
| Pacific Horizon | £200.6m | 1.8% |
Source: AIC
Iain McCombie (pictured) and Milena Mileva will co-manage the trust, taking over from Philip Matthews, who had managed the investment trust since October 2014. Matthews has exited Schroders for Wise Funds.
Retail investors
Elliott added it was not unusual for portfolio management to move before asset managers flesh out plans for saving scheme investors, pointing to F&C Asset Management saving scheme shareholders as an example, when private equity investment trust Graphite Enterprise was taken over by Intermediate Capital Group (ICG).
The actions of Schroders saving scheme investors could affect the discount dynamic, he said.
“What tends to happen is some investors are very good, they get the paperwork or emails and they act immediately, and then there are a lot of people who leave it absolutely until the deadline.” Other investors would just automatically end up in the default option, he added.
BNY Mellon will become depository of the UK Growth Trust at the same time management duties transition this evening, taking over from HSBC.
The investment trust will be renamed the Baillie Gifford UK Growth Fund with the ticker BGUK, pending regulatory approval.
