Baillie Gifford is monitoring a single bond fund for performance issues as it declares 97% of its Oeic fund range offers good value.
The Edinburgh manager’s fund board gave it a clean bill of health in its second assessment of value (AoV) report, with 34 out of 35 funds judged to be delivering value for money.
This was an improvement on last year when two funds, Baillie Gifford Active Gilt Investment and Active Long Gilt Investment funds, were deemed not to represent value for money. Both funds were wound up last January.
Baillie Gifford said the combination of strong performance and low costs meant every single one of its funds provide value and were awarded a “green” score based on its traffic light rating system.
But a single fund, Baillie Gifford Emerging Markets Bond, fell into the amber category, meaning it “provided value, with action taken and/or further monitoring required”.
Baillie Gifford Emerging Markets Bond long-term performance ‘still disappointing’
Baillie Gifford Emerging Markets Bond has been monitored by the fund group for performance issues since last year’s report when it was one of two funds to receive a “red” rating.
The £302.4m fund underperformed its target over three years to 31 March 2021, falling 2.1% on an annualised basis, while its benchmark, the JP Morgan GBI-EM Global Diversified Index unhedged in sterling, declined 0.2%. This was chiefly down to a position in Argentina in 2018 detracting from performance.
Baillie Gifford said changes to the investment process and the strengthening of the team in 2019 have had a “positive impact,” particularly in the last 12 months, with the fund returning 3.6% and beating its 2.2% target.
The fund will continue to be monitored as longer-term performance is “still disappointing”.
Fixed income funds continue to dominate performance laggards
Most Baillie Gifford’s funds (27) received a green rating for performance, though six received an amber rating.
The Baillie Gifford Health Innovation and Multi Asset Growth Feeder funds were not given a score for performance as they were launched less than six months before the reporting period’s end.
Once again most of the funds lagging on performance were fixed income funds.
The Baillie Gifford Investment Grade Bond fund and Sterling Aggregate Bond funds, flagged in Baillie Gifford’s debut assessment, received an amber rating again for failing to meet their target benchmarks.
Underperformance in both funds as well as the Baillie Gifford Investment Grade Long Bond fund, which was also given an amber rating, was driven by the coronavirus crash in Q1 2020.
The Baillie Gifford High Yield Bond fund “marginally underperformed” its comparator benchmark, the IA Sterling High Yield sector, thanks to shakier performance in the final quarter of 2020.
In all four cases Baillie Gifford said no immediate action has been taken due to the “short-term nature” of the underperformance.
See also: Baillie Gifford value assessment flags underperformance in fixed income funds
British Smaller Companies fund
Baillie Gifford British Smaller Companies was the only equity fund to receive an amber rating.
Along with Baillie Gifford Emerging Markets Bond, the £344.3m fund was rated red last year but has seen “a significant improvement in performance this year,” the Edinburgh manager said.
The fund returned 78.8% in the 12 months to 31 March 2021, while the Numis Smaller Companies Index (excluding investment companies) returned 65.6%.
Baillie Gifford said the fund benefited from “good stock selection and effective asset allocation” with controversial fast fashion brand Boohoo, YouGov and Ceres Power among the biggest contributors to performance.
