Baillie Gifford £800m fund up 16% as index falls 13%

Baillie Gifford

The £800 million Edinburgh Worldwide Investment Trust plc said on Monday its net asset value per share increased 16.4% and its share price rose 21.7% in the six months to April 30 while its benchmark, the S&P Global Small Cap Index, fell 12.9%.

However, no interim dividend is being recommended by the fund.

Edinburgh Worldwide is managed by Baillie Gifford, the Edinburgh based fund management group with around £240 billion under management and advice as at June 5, 2020.

“A number of the company’s holdings contributed to the positive relative and absolute performance, notably: Tesla (electric cars, autonomous driving and solar energy); Alnylam Pharmaceuticals (therapeutic gene silencing); Teladoc, (telemedicine services provider); and Ocado (online grocery retailer),” said Edinburgh Worldwide in its half-year report.

“As at 30 April 2020 the company’s unlisted exposure was 5.2% of total assets, comprised of eight unlisted investments: Akili Interactive Labs; Graphcore; KSQ Therapeutics; Oxford Nanopore Technologies; PsiQuantum; Reaction Engines; Space Exploration Technologies and Spire Global.”

The Edinburgh Worldwide fund had assets of £689 million at April 30 and has a current stock market value of around £800 million.

In the six months to April 30, Edinburgh Worldwide issued 7.3 million new shares at a premium to its net asset value, raising net proceeds of £15.3 million.

Since April 30, a further 11.14 million new shares have been issued, raising a further £26.3 million.

“The portfolio’s performance at present is striking compared against its respective index over the past six months,” said Edinburgh Worldwide.

“We believe this partially reflects an investment environment that, for the foreseeable future, will be in fast-forward mode further driving a widening divergence between the emerging winners and the structurally challenged.

“In backing companies championing a wide breadth of technology and innovation we feel we remain on the right side of this fast-forwarding.

“Furthermore, we actively avoid the numerous structurally challenged or overtly cyclical companies whereas the index, by default, cannot …”

In its portfolio update, Edinburgh Worldwide said: “Several of the portfolio’s larger holdings posted encouraging developments over the period.

“Tesla shares have performed strongly on the back of some healthy production numbers and an improving cashflow profile (albeit with some near-term challenges as COVID-19 has restricted production).

“We have a renewed enthusiasm for the business and see a clear medium-term roadmap for production of around 1.5 million cars per annum, a near tripling of existing volumes.

“The speed and ambition with which Tesla has recently been able to build a production facility in China contrasts hugely with the ongoing inertia of the automotive incumbents regarding electrification.

“While some competing products have appeared from the likes of Nissan, Audi and Jaguar the sizable price premium these automakers place on their electric offerings hints at the growing competitive strength of Tesla.

“Teladoc announced the acquisition of Intouch Health in a cash and share transaction.

“Intouch extends Teladoc’s reach beyond the GP clinic and into US hospitals and healthcare providers.

“Through interacting with electronic records and various medical equipment/datasets, Intouch has built a sophisticated offering with a higher technology component than that used in a typical GP-centric telemedicine offering.

“Although Intouch is initially complementary to Teladoc’s existing business we are intrigued by the potential long-term synergies that could build given Teladoc’s prominent position as the leading Telemedicine company for healthcare payors and, now, providers.

“Alnylam Pharmaceuticals announced that the FDA had expedited the approval of its second RNAi drug,

“Givlaari, for treating a rare debilitating disease called Porphyria.

“Subsequently Alnylam also announced it had sold a portion of the royalties it had been set to receive from a RNAi-based Cholesterol lowering therapy expected to be launched by Novartis.

“The sizable cash inflow of $1 billion from this sale represents an attractive source of non-dilutive funding and gives further firepower to develop its exciting pipeline of RNAi therapies.

“We alluded earlier that some of our holdings had proved exceptionally resilient, even advantaged, by the fallout of the Coronavirus pandemic.

“Although such a scenario was clearly not part of our original hypothesis it is emblematic of an exogenous shock being a catalyst for behavioural change and the push for better and cheaper alternatives.

“Heightened volatility and liquidity-induced stress in bond markets has helped drive increasing volumes towards MarketAxess’s bond trading platform.

“The enforced closure of education establishments has increased the importance of online learning tools provided by Chegg.

“The COVID-19 crisis has pushed Telemedicine to the top of the agenda in the provision of large swathes of healthcare.

“As both patients and care givers increasingly place a premium on engagements outside of conventional medical practices we think there is growing recognition that a ‘virtual first’ model, as developed by Teladoc, can represent a highly relevant channel for future care.

“Closer to home, business at Ocado has seen a marked acceleration and we would expect this to help underpin increased inbound interest in their platform for grocers all around the world …

“We acquired five new listed holdings: LiveRamp, EverQuote, HUYA, Tabula Rasa Healthcare and ShockWave Medical …”