By Mark McSherry
Baillie Gifford’s troubled £730 million Edinburgh Worldwide Investment Trust has announced changes to its team structure and investment process in an effort to put the fund “on a path to renewed growth” after several years of underperformance.
The fund requires shareholder approval for the changes.
Luke Ward and Svetlana Viteva will become co-managers of the fund alongside Douglas Brodie.
Edinburgh Worldwide also announced a commitment to shareholders “to a capital return opportunity of up to £130m in 2025.”
The fund announced “changes to process and approach to improve decision-making and portfolio discipline” and outlined a restructuring of its portfolio “to focus on a reduced number of holdings enabling more regular and deeper engagement with those companies.”
The fund will now focus on 60-100 companies in its portfolio versus 75-125 at present.
Edinburgh Worldwide also said it will increase the market capitalisation threshold for target companies.
Edinburgh Worldwide’s biggest investments include Space Exploration Technologies, Alnylam Pharmaceuticals, PsiQuantum, AeroVironment, Zillow, Oxford Nanopore Tech, Axon Enterprise, Exact Sciences, American Superconductor Corp and Sweetgreen.
The investment trust told shareholders in a stock exchange statement: “For many years the Trust has delivered strong returns for Shareholders by investing in transformative businesses operating at frontiers of innovation.
“However, in the last few years the Trust has underperformed against its objectives and peer group …
“We have collectively agreed an action plan to return the Trust to a path for growth: enhancing team composition and structure with Luke Ward and Svetlana Viteva becoming co-managers alongside Douglas Brodie; rebalancing the portfolio to increase focus and resilience; broadening access to a larger pool of global Small Cap businesses and tightening execution decision making and discipline …
“The Board is continuing to execute an active share buy-back programme while the shares trade on a meaningful discount and will consider other potential routes to return capital to Shareholders in 2025. Subject to normal capital adequacy requirements and receipt of Court and Shareholder approvals, the Board expects to have the ability to return up to £130 million of capital to Shareholders.”
Explaining its plan to increase the market capitalisation threshold for target companies, Edinburgh Worldwide said:”The Company currently has a market capitalisation limit at the point of initial investment of an investee company setas being typically in companies with a market capitalisation of less than US$5 billion – there is no market capitalisation limit once a company is held.
“This limit was set in 2014 and the size of global small cap companies has since increased. The Board and the Manager believe an increased threshold will increase the Company’s ability to access global small cap investment opportunities.
“It is therefore proposed to increase the maximum market capitalisation limit to match the largest constituent of the Company’s comparative index, the S&P Global Small Cap Index. This index rebalances annually in September and as at 30 September 2024 the market capitalisation of the largest constituent of the index was US$29.5 billion (source: S&P Global). The move from an explicit fixed limit to one that is linked to the Company’s comparative index should reduce the need to make further future changes to the investment policy.”
Edinburgh Worldwide chair Jonathan Simpson-Dent said: “Today, we are sharing the outcome and actions from a detailed review of Edinburgh Worldwide’s strategy, execution and recent performance.
“Our vision, to identify and manage a carefully selected portfolio of transformative businesses, has the potential to deliver outsized returns for shareholders.
“We have developed a comprehensive action plan to improve execution and, in addition, are committing to return up to £130 million to shareholders following a share buyback programme that has recently reduced our discount and been value accretive for shareholders.
“We believe that this wide-ranging package of changes will put the Trust back on a path for growth.”