Baillie Gifford UK Growth Trust’s short-term performance “continued to disappoint” due to persistent headwinds befalling the UK economy, the firm said in its latest set of half year results.
For the six months to 31 October, the trust’s net asset value (NAV) per share total return was -10.9%, while the FTSE All-Share Index lost -5.8%.
Of the performance, the UK growth trust said: “The paradox is that in operational terms the portfolio in general is continuing to perform satisfactorily and therefore portfolio activity was relatively low.”
The share price total return for the period was also down 11.9%, while its discount widened to 13% from 11.8% at the end of April.
Three main drags on performance were Howden Joinery, Autotrader, and Volution. The trust said: “In all three cases, despite strong trading, the market is worried about the impact of an economic downturn in the short term although all of these businesses have compelling growth opportunities over the longer term and strong balance sheets to weather any near-term turbulence.”
The firm exited Just Eat and labelled its decision not to sell sooner a “mistake” following the food delivery company’s “disastrous” US takeover. Meanwhile, stakes in IT firms Softcat and Kainos were added to the portfolio.
Looking ahead, fund managers Iain McCombie and Milena Mileva (pictured) said they were developing investment ideas that may be mispriced in the current economic environment.
They said: “We are not market timers or forecasters, but the evidence of a growing opportunity set of potential investments shows there is an interesting and growing disconnect between top-down perceptions of the UK market and what we are starting to see in terms of long-term opportunities for growth investors, notwithstanding the near-term economic challenges.”