The £400 million Baillie Gifford European Growth Trust plc said its net asset value per share (NAV) total return was 5.5% over the year to September 30, 2025, compared to a total return of 15.5% for its comparative index, the FTSE Europe ex UK Index.

The share price total return of Baillie Gifford European Growth Trust for the same period was 14.5%.

“In the second half of the company’s financial year, the net asset value total return and the share price total return were ahead of the benchmark by 1.0 % and 1.4% respectively,” said the Baillie Gifford fund.

Baillie Gifford European Growth Trust’s principal investment objective is to achieve capital growth over the long-term from a diversified portfolio of European securities.

“All of the relative underperformance occurred in the first half of the year …” wrote portfolio managers StephenPaice and Chris Davies.

“While this outcome was disappointing, it was encouraging that both NAV and share price total returns outperformed the index in the second half of the year, by 1% and 1.4% respectively. This improvement reflects the steps taken to reposition the portfolio and to broaden the range of growth companies we invest in.

“Recent results have also benefited from improving momentum, particularly among our private holdings such as Bending Spoons.

“Although the environment has been challenging for growth investing – the European growth index has underperformed its value counterpart for five years – these results strengthen our conviction in the portfolio’s underlying quality and our belief that performance should continue to recover as market conditions evolve.

“The macroeconomic outlook for Europe is improving, and valuations seem to us to be very attractive. In the absence of inflation or interest rate shocks, we would expect that the share prices of our portfolio companies will revert to following fundamentals. We also expect that these companies will continue to increase sales and profits faster than the average company in Europe, giving us confidence that we are moving past the trough of our performance cycle …

“Several holdings delivered strong operational progress that translated into meaningful valuation gains over the period. The standout performer was Bending Spoons, our largest private holding, which generated a 258% return and now represents approximately 10% of NAV. We also saw strong performance from other holdings, including Spotify, Ryanair, and Prosus …

“Portfolio turnover remained high in the second half of the financial year as we identified new opportunities and rebalanced towards holdings with greater resilience and growth potential. This is most evident in our relative sector positioning versus the index shown below.

“A year ago, we were nearly 9% overweight in Industrials and 7% underweight in Health Care. Today, our exposure to Industrials is closer to neutral, while Health Care has moved to a 2% overweight. To be clear, these changes primarily reflect where we have found the most attractive companies trading at the most mispriced valuations …

“We initiated positions in five companies – Grupa Kęty, Amplifon, Roche, Sandoz, and Tekever – spanning industrials, healthcare, and defence technology. Each shares the defining characteristics we seek: underappreciated growth, strong and improving competitive advantages, disciplined management, and attractive entry valuations.

“Grupa Kęty is a leading producer of aluminium products and packaging. The company has demonstrated a decade‑long record of profitable growth, delivering approximately 13% annual sales growth and 17% operating profit growth while maintaining consistently high returns on capital. Its ongoing reinvestment programme continues to shift the business mix toward higher‑value segments. Grupa Kęty also pursues selective acquisitions to enhance its capabilities.

“Despite these strengths, it remains under‑researched outside its domestic market. We were able to establish a position at what we judged to be an undemanding valuation, one that did not fully reflect the company’s quality or long‑term prospects. We believe steady demand in construction and automotive, combined with product‑mix improvements, will support attractive compounding returns …”