The investment trust board revealed via a regulatory filing on 23 May that 23% of holders are invested via the Schroders Isa savings scheme.
The board said it would work with the administrator of the Isa to ensure any forced selling is conducted in an orderly manner to avoid or at least minimise any adverse impact on the share price.
However, Winterflood investment trust analyst Simon Elliott said similar situations in the past have resulted in a widening of the discount. It currently sits at 6.7%, according to the Association of Investment Companies (AIC).
“If this were to occur in this instance, we believe that this would present a value opportunity and note that every other Baillie Gifford investment trust is currently trading on a premium to its NAV,” Elliott said in a research note.
Elliott said the timing on the management transition is partially dependent on the discussions around the savings scheme, which also involve the Financial Conduct Authority. Schroders was served three months’ notice when the board made the decision in April.
AIC communications director Annabel Brodie-Smith pointed to Jupiter US Smaller Companies moving from F&C Investment Management as an example similar to the situation taking place with Schroders saving scheme investors.
Brodie-Smith said: “Sometimes the management group allows shareholders to retain their existing investments in the company that’s moved but removes it from their ISA schemes for future investments. In other cases, the investors in the company that moves are not allowed to continue to hold this company in the previous management group’s ISA scheme.”
A Schroders spokesperson told Portfolio Adviser the firm is examining all available options for Isa holders. It is being assisted by the investment trust board to put forward options in the best interests of those investors.
Baillie Gifford impresses
Baillie Gifford managers Iain McCombie and Milena Mileva (pictured) impressed Elliott when he met with them in May.
The pair’s ‘best ideas’ portfolio will consist of around 40 holdings. It will “run the winners” with turnover typically around 10-20% and active share around 85%.
Following the move, the investment trust’s name will be changed to Baillie Gifford UK Growth and the ticker to BGUK.
Proposed holdings include financial names, like Hargreaves Lansdown, Prudential, St James’s Place, and retail and luxury goods, such as Ted Baker Auto Trader and Burberry.
The proposed fee will be 0.5% of net assets. Baillie Gifford has pledged to waiver £732,000 of fees to offset transition costs.
Elliott said the investment trust would be differentiated by its concentrated growth investment approach.
“We believe that Baillie Gifford UK Growth will be a worthy addition to the investment trust universe,” he said.
