Baillie Gifford US Growth: golden era may be ahead

Baillie Gifford's current Edinburgh HQ

Shares of the tech-focused £1.1 billion Baillie Gifford US Growth Trust plc rose as much as 5% after the closed-end fund company said in its half-year report that the “golden era” of technology investing “may yet, be ahead of us.”

In its results for the six months to November 30, 2021, the fund said it share price and net asset value (NAV) returned 9.4% and 17.2% respectively, compared with a total return of 17.2% for the S&P 500 Index.

Shares of Baillie Gifford US Growth Trust soared during 2020 and 2021, reaching a peak of around £3.88 in February last year — but have fallen to around £2.20 amid the sell off in tech stocks to give the fund a current stock market value of roughly £678 million.

Baillie Gifford US Growth Trust is co-managed by Gary Robinson and Kirsty Gibson.

The fund’s biggest investments include Shopify, Moderna, The Trade Desk, Tesla, Affirm, Amazon and Stripe.

“Carlota Perez in her book ‘Technological Revolutions and Financial Capital’ identified five major waves of innovation in the past 250 years …” said the fund.

“Perez calls the turbulent phase the installation phase and the golden era the deployment phase.

“There is a possibility we are at the turning point between the two phases in the current information technology wave.

“The ascendance of the internet, mobile and AI have driven this wave.

“For the last twenty years or so these technologies have been narrowly deployed; mainly in retail and advertising where we have seen the rise of e-commerce giants and big tech platforms.

“But when we look at the market today, these technologies are spreading out and impacting a far broader range of industries.

“The golden era may, yet, be ahead of us.”

Baillie Gifford US Growth Trust seeks to invest predominantly in listed and unlisted US companies which it believes have the potential to grow substantially faster than the average company, and to hold onto them for long periods of time.

The Trust had total assets of £1.1 billion as at November 30, 2021.

Edinburgh-based Baillie Gifford & Co has £290 billion under management and advice in active equity and bond portfolios for clients in the UK and throughout the world as at January 24, 2022.

In its report, Baillie Gifford US Growth Trust said: “During the period from 23 March 2018, launch date and first trade date, to 30 November 2021, the company’s share price and NAV (after deducting borrowings at fair value) returned 235.3% and 254.3% respectively.

“This compares with a total return of 101.7% for the S&P 500 Index (in sterling terms). We have a long-term approach and would ask shareholders to judge performance over periods of five years or more.

“We made six additional private company investments over the last six months, Blockstream, Databricks, Discord, Faire Wholesale, Snyk and Solugen, whilst three of our existing private company holdings, Aurora Innovation, Ginkgo Bioworks and Warby Parker, went public in the period …

At the end of November, we held positions in twenty-three private companies which collectively comprised 20.8% of total assets …”

In its outlook, the fund said: “New innovations often feel odd at first. They don’t sit naturally in our view of the world, and the early user experience is often subpar.

“However, we work to ensure we don’t dismiss innovation out of hand. We look to buy exceptional businesses, not themes or sectors. We are bottom-up stock pickers.

“But to do so, we must build our foundational knowledge. We recognise that many new ideas are often met with derision.

“However, as mid-century industrial designers Charles and Ray Eames stated, ‘toys are preludes to serious ideas’ and we strive to remain open minded to potential.

“In times of change, it is valuable to recognise those things that will remain constant. We are long-term. We are growth. We have a fundamental belief in the asymmetry of stock market returns.

“We look for opportunity in change. We, and you as our investors, are venturing.

“The path for companies driving structural change may not be straight; some paths will weave and wend and turn out to be dead ends.

“Other paths will branch new opportunities and take us in directions we might not be able to imagine currently.

“But our rucksack is laden with optimism, patience and excitement. In a world of asymmetric returns, we believe it is better to venture, than not venture at all.”

About the Author

Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.