ISA investors keep faith in Baillie Gifford amid rout

Baillie Gifford's current Edinburgh HQ

ISA investors have kept faith in Baillie Gifford and its flagship fund Scottish Mortgage despite the turbulent start to 2022 for stock markets and the Edinburgh-based investment giant, according to research from AJ Bell.

Baillie Gifford also topped both of AJ Bell’s lists of best-performing funds and trusts when it comes to “The funds and trusts that have made an ISA million.”

Laith Khalaf, head of investment analysis at AJ Bell, wrote: “Only 14 funds and 22 investment trusts would have made you an ISA millionaire if you had invested your full ISA allowance year in, year out, since 1999.

“That equates to just 4% of funds and 17% of trusts which have been around all that time.

“US and technology-heavy funds have led the pack, with Baillie Gifford topping the list of both best-performing funds and trusts.

“An annual ISA investment in Scottish Mortgage Investment Trust would now be worth £1.8 million …”

Other funds also making the “ISA millionaire” list include Baillie Gifford American and Baillie Gifford Pacific — as well as Abrdn Indian Equity, ASI UK Smaller Companies, Aberdeen Standard Asia Focus and Abrdn UK Smaller Companies Growth.

The share price of Baillie Gifford’s Scottish Mortgage is down about 35% so far this year after a spectacular rise in 2020 and 2021 — but is still up about 135% over five years.

Khalaf added: “ISA investors are keeping the faith with Fundsmith Equity and Scottish Mortgage, despite some weak performance in the first two months of this year …

“All active approaches will go through periods of underperformance, and so investors are absolutely right to look through the short term noise, particularly in light of the glittering returns these two funds have delivered in the last decade.

“Growth investing may have suffered a setback in global markets, but it still remains popular with DIY ISA investors, with Baillie Gifford continuing to capture investor flows, and Blue Whale Growth joining the top ten party too.

“The specialist investment trust Blackrock World Mining also features in the most popular trusts of 2022 so far.

“This trust invests predominantly in the shares of global metal mining companies, and as such is likely providing investors with a way to buy some protection against inflation

“ESG funds also appear to be making more inroads than last year, with three funds and trusts hitting the top ten list compared to just one over the same period in 2021.

“This year Baillie Gifford Positive Change, Liontrust Sustainable Future Global Growth and Impax Environmental Markets all make the top ten, while just the Baillie Gifford fund made the leaderboard this time last year.

“We’re now heading into the business end of the tax year when the 5th April deadline acts as a perennial catalyst for ISA investors to make the most of their allowance.

“The tax rises coming in April clearly make it even more of a priority for investors to shelter their savings from tax wherever possible.

“Those who are worried about inflation eroding cash returns, but also wary of the ups and downs of the stock market, might consider that they don’t need to invest their ISA as a lump sum.

“They can park it as cash and drip feed it into the stock market gradually, making for a smoother ride.”