B Gifford US Growth Trust laments ‘poor’ performance

The £609 million Baillie Gifford US Growth Trust plc said its share price and net asset value (NAV) returned -13.8% and -2.7% respectively in the year to May 31, 2023, compared with a total return of 4.7% for the S&P 500 Index.

The investment trust’s shares moved from a discount of 12.3% in the prior year to a discount of 22.4%.

For the five year period since its launch date in March 2018 through May 2023, the fund’s share price and NAV have returned 44.1% and 90.4% respectively — compared with a total return of 102.0% for the S&P 500.

Turnover in the investment trust’s portfolio in the financial year to May 31 was 7.1%. The fund’s 10 largest holdings were Space Exploration Technologies, Shopify, The Trade Desk, Stripe, Tesla, NVIDIA, Amazon, Moderna, Netflix and CoStar Group.

The investment trust, managed by Gary Robinson and Kirsty Gibson, sold its holdings in Peloton, Teladoc, Appian, Butterfly Network, Carvana and First Republic during the year, and added three listed holdings to the portfolio: Roblox, Sweetgreen and Doximity.

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

As at May 31, 2023, the fund held 25 private company investments — 34.5% of total assets.

Edinburgh-based Baillie Gifford has £230 billion under management and advice in active equity and bond portfolios for clients in the UK and throughout the world.

In the managers’ review of the fund, Baillie Gifford’s US Equity Team wrote: “We are disappointed. We asked you to judge us over the long term, and as shareholders and managers of the Baillie Gifford US Growth Trust, we are dissatisfied with our five-year performance. These are not the numbers we looked to deliver at the company’s fifth anniversary …

“As managers of the Baillie Gifford US Growth Trust, the worst thing we could do right now is to go against the philosophy that underpins our approach and try and ‘fix’ performance, focusing on the short term at the expense of the long term.

“Performance has been poor, and we are disappointed.

“No one sets out to underperform. Even if we know periods of underperformance are inevitable for a long-term growth investor, it does not make it easier.

“However, given the opportunities in front of the companies the company invests in, we cannot panic and pro-cyclically turn defensive.

“We will not get every investment right. But we have underwritten the investment cases for the companies held in the portfolio and are excited about their long-term potential. The forest has been razed; we must not trample on the seedlings before they have had a chance to flourish.”

Baillie Gifford US Growth Trust chairman Tom Burnet wrote in his report: “The company’s shares moved from a discount of 12.3% last year to a discount of 22.4% at 31 May 2023 as sentiment continued to turn against the company’s growth investing style. Having bought back 2,206,300 shares, to be held in treasury, at a total cost of £3.6 million in May 2022 with limited impact on the discount, the board took the decision to use the capital to invest in new growth opportunities instead …

“The board acknowledges the discount is a challenge to many shareholders but notes that, from the data provided to the board, there continues to be natural buyers of the company’s shares in the market.”