The board of the European Investment Trust has dumped its underperforming value manager Edinburgh Partners and appointed Baillie Gifford to take a growth approach on the mandate.
The board of the £367.8m European Investment Trust revealed in June it was seeking to replace Franklin Templeton subsidiary Edinburgh Partners on the closed-ended fund. It was trading at a 12.5% discount before this morning’s announcement.
It is the latest change to the Europe sector, which last week saw confirmation that Alexander Darwall will take the top-performing Jupiter European Opportunities to his new boutique Devon Equity Management.
It has underperformed both the FTSE All World Europe ex-UK and the MSCI Europe ex UK Value Index over three and five years. It has underperformed the former since Edinburgh Partners swiped the mandate from F&C Investments, first with Dale Robertson as manager and then Craig Armour from 2016.
‘Growing capitulation of value fund managers’
It will now be managed by Stephen Paice (pictured) and Moritz Sitte, who co-manage the Baillie Gifford European Growth fund.
Investors would need to be made well aware of the changes given the switch from value to growth, said Willis Owen head of personal investing Adrian Lowcock.
“There has been a growing capitulation of value fund managers and although it is unwise to predict when value will come back into favour I am confident it will,” Lowcock said. “The most dangerous words in investing are ‘this time it’s different’ and there more and more people now suggesting value investing is dead.”
Baillie Gifford set to absorb transition costs
It will be repositioned with between 30 to 50 stocks in European growth companies with a minimum market cap of €500m. Unquoted companies will eventually be added taking up to 10% of the portfolio.
The annual management charge will be 0.55% of the first £500m and 0.50% after that. Baillie Gifford will waive the management fee for the first six months after appointment to offset costs of the termination of the existing AIFM.
Baillie Gifford, which manages £13.7bn in investment trusts and companies, will contribute £100,000 to marketing the trust.
Chairman Michael MacPhee said: “Baillie Gifford offers a compelling investment process with a proven record of long-term returns, a successful team well-aligned with shareholders and a breadth and depth of supporting in-house resources.
“We feel this gives us the best combination of factors to deliver an attractive and distinctive investment proposition, improve liquidity, lower the discount and do the best job we can for existing and future shareholders.”
Sue Inglis will step down from the board due to her position on the board of the Baillie Gifford US Growth trust. Inglis recused herself from the board’s decision to appoint Baillie Gifford to the mandate.
Franklin Templeton acquired Edinburgh Partners in January 2018. Founding partner Sandy Nairn was a former employee of the US funds giant and worked alongside John Templeton at the firm.
The boutique will now only run Nairn’s £133.5m EP Global Opportunities Trust in the investment trust space. The rest of its global value strategies are for institutional investors.
