The rotation away from growth stocks reared its head in the latest set of annual results for Baillie Gifford’s UK fund arm, which revealed a £7.2bn hit to funds under management.
After a bumper year in which Baillie Gifford & Co Limited saw FUM shoot up 75%, it has experienced a reversal of fortunes as its growth-biased funds lagged the market, prompting investors to head for the exit.
Accounts posted to Companies House show total assets in the UK division stood at £84.4bn for the year ended 31 March 2022 compared to £91.6bn a year ago.
While the Edinburgh-based manager recorded net inflows in the first nine months of its financial year, this was offset by net outflows in the first quarter of 2022.
Baillie Gifford & Co Limited is one of several subsidiaries that falls under parent company Baillie Gifford Group.
As the fund manager is independently owned by its partners it does not have to publish consolidated group accounts. But the UK division, which oversees its range of UK-domiciled Oeics and investment trusts, provides a steer on the performance of the wider business.
‘Disappointing’ performance drives outflows
The 8% hit to FUM also offers an initial glimpse of how shifting investor sentiment in response to rapidly rising inflation and resultant interest rate hikes have taken a toll on the manager.
Its UK-domiciled Oeics leaked £5.6bn during the year, taking assets down to £54.4bn, while investment trusts saw £1.6bn shaved off their total, ending the period with £27.2bn. Canadian pooled funds were flat at £2.8bn.
Net redemptions have continued gathering pace, with Morningstar estimating investors had pulled £3.7bn between January and May.
The strategic report acknowledged short-term performance has been “disappointing for a large number of funds”, and that the board would continue to review this.
Only one of its Oeics – Baillie Gifford Climate Optimism – has generated a positive return year-to-date, according to FE Fundinfo, though it has only risen 0.45%. The biggest loser, Baillie Gifford American, is down 32%.
Going forward, the main business risk is that its funds suffer from long-term poor performance, making them “unattractive” to the marketplace.
Profits rise 22% as management fees climb to £399m
Despite its tumbling assets, profit for the year after tax rose from £22.5m to £27.4m. This was driven by an 18% increase in management fees to £399m from £336m a year ago.
Turnover for the year was higher even after factoring in an 18% rise in administrative expenses to £365m.
Directors’ remuneration also ticked upward from £159k in 2021 to £165k in 2022.
