Baillie Gifford has so far had a “much more stable year” for flows compared to 2022, according to director of marketing and distribution James Budden, who told Portfolio Adviser the amount of investor money leaving the firm’s funds has fallen “quite considerably”.
Budden’s comments come shortly after the publication of Baillie Gifford’s Assessment of Value (AoV) report, which found that 35 of the 36 funds in Baillie Gifford’s UK range delivered value for investors despite half of them being flagged for performance concerns.
The only fund to have not provided sufficient value was the £141m Baillie Gifford British Smaller Companies mandate, which was shuttered on 27 June.
The report, which is required by the Financial Conduct Authority (FCA), found that although 18 Baillie Gifford strategies underperformed their respective benchmarks, the asset manager’s fees meant the strategies still provided value, with 32 out of 36 mandates residing in the top quartile for their charges relative to peers. The Edinburgh-based asset manager has also reduced its charges 27 times over the last decade.
Budden (pictured) said: “The latest report shows our funds have continued to deliver value for investors against a difficult macro-economic backdrop.
“Our objectives remain to provide outperformance over the long term and enable our clients to gain exposure to exceptional companies that deliver innovation and beneficial changes in society.
“We assess the performance of our equity funds on a five-year horizon and bond funds over three years. Although returns have been weak of late in absolute terms they are not out of step with expectations for growth assets in the prevailing environment.”
Flows have stabilised
Baillie Gifford was hit with sizeable net redemptions in 2022, with £1.95bn being pulled from its strategies in October alone, as investors turned away from growth stocks amid a market downturn.
On the recent outflows, Budden said: “If you go back to 2001, we were the leading asset manager in the UK in terms of net inflows. That went into reverse in 2022 and we gave quite a lot back as performance slipped. This year has been stable, and much more stable than last year.
“We are still seeing net redemptions, there have been outflows in the first half of this year, but the levels of those outflows have come down quite considerably.
“I think this is because a lot of people are sitting on the fence waiting to see what happens and thinking: ‘Are we going to see a soft landing? Are we going to see recession avoided? Are we going to see interest rates come down?’ And they’re waiting to press the button there. They’re lower outflows – they have stabilised – but they are still outflows.”
He added that while returns had been “weak” of late, they are not out of step with expectations for growth investors in the recent market environment.
See also: Baillie Gifford closes £141m British Smaller Companies Fund
Despite the hostile market environment for growth stocks over the last 18 months, Budden also noted the firm has witnessed signs of a growth rally over the last few months.
He added: “Generally speaking, this year has been better [for growth stocks]. We’ve seen a growth rally, albeit quite narrow, driven by artificial intelligence stocks in America.
“In a lot of the companies we’ve been invested in there, we’re seeing that operational progress has continued to be good and that’s beginning to be reflected in share prices.”
Baillie Gifford currently manages and advises on £234bn of assets across specialist equity, fixed income and multi-asset portfolios for clients globally, as at March 2023.
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