Baillie Gifford has opened its Diversified Growth fund back up to new investors, which has more than doubled in size since shutting.
The mixed asset fund, which is managed by James Squires (pictured), David McIntyre, Scott Lothian, Felix Amoako and Nicoleta Dumitru, soft closed in 2013 on capacity grounds. At that point it had around £3bn in assets, having expanded rapidly since launch in 2008.
However, on Tuesday the Edinburgh fund house said, “with markets having grown significantly, the managers now believe there is sufficient headroom to re-open the fund”.
‘Baillie Gifford is not just an asset grabber’
AJ Bell head of active portfolios Ryan Hughes said the decision to re-open may come as a surprise considering the fund has more than doubled in size since its soft-close to £6.2bn.
Chelsea Financial Services managing director Darius McDermott suspects the rationale behind the fund’s initial soft-close has a lot to do with the pace of inflows coming into the fund.
Frequently he thinks it is more difficult for managers to cope with the size of the inflows than the size of the asset pool.
“If you’re getting tens of millions of inflows every day, you’ve got to reinvest it and add to your equities and your alternatives and whatever else,” McDermott said.
“Baillie Gifford is not just an asset grabber,” he continued. “They would not open this strategy if they didn’t feel that they can very sensibly invest further monies.”
Market depth in alternatives has improved
Hughes said that given Diversified Growth’s core investments are held in other Baillie Gifford funds “it does have excellent visibility in the liquidity of the underlying holdings”.
The fettered fund-of-funds’ top holdings include Baillie Gifford Cyclical Recovery, Baillie Gifford Global Income and Charles Plowden’s former fund Baillie Gifford Global Growth, according to Trustnet.
The fact that market depth in alternative areas like infrastructure has improved over recent years has also probably given Baillie Gifford more confidence to reopen, Hughes added.
Around 30% of Diversified Growth is exposed to international equities but it also has 10% in property as well as 8% in hedge funds and global emerging markets fixed interest.
Baillie Gifford cuts more fees
In addition to reopening the fund Baillie Gifford said it was reducing the annual management fees on Diversified Growth.
From 1 July the fee on class B shares, which is available to retail investors, will drop from 0.65% to 0.55%.
“The cutting of the charge is very Baillie Gifford as well,” McDermott said. “They were already one of the cheapest asset managers and the bigger they get, the more they cut their fees.”
See also: Active equity funds still charging too much despite 15% drop in annual fees in four years
This is the 13th time Baillie Gifford has cut charges across its range of open-ended funds and investment trusts since 2013. Most recently it reduced fees on the £731.7m Global Income Growth fund, the £241m Baillie Gifford Responsible Global Equity Income fund and the £879.6m Scottish American Investment Company.
Baillie Gifford director of marketing and distribution James Budden said: “We aim to be competitive on fees as they are the only element of investment returns which can be guaranteed. We regularly review the costs associated with our funds to ensure they remain fair and reasonable. This latest fee reduction is part of our continued commitment to provide investors with value for money.”
See also: Baillie Gifford renames bond fund and cuts fee by 50%
