The £340 million Baillie Gifford European Growth Trust plc (BGEU) said on Friday its net asset value per share (NAV) total return over the six months to March 31, 2026, was -9.2% compared to a total return of 4.4% for the FTSE Europe ex UK Index, in sterling terms.
The fund’s share price total return over the period was -8.8%, and the discount to NAV narrowed modestly from 8.6% to 8.2%.
“The company’s existing 100% performance conditional tender, over the four years to 30 September 2028, remains in place,” said BGEU chair David Barron.
“Since the start of the performance measurement period on 1 October 2024, the NAV total return has been -4.3% compared to a total return of 20.6% for the FTSE Europe ex UK Index, in sterling terms. This level of underperformance is clearly disappointing and underlines the need for change.”
BGEU announced on March 27 that Joe Faraday would succeed Stephen Paice and Chris Davies as the investment trust company’s portfolio manager with effect from April 1, 2026, “at a time when performance has fallen short of both our expectations and those of shareholders.”
Barron said: “Joe is a highly experienced investor within Baillie Gifford’s European Equities team, and we believe his approach, maintaining the company’s growth focus while seeking broader stock and sector diversification, positions the portfolio more effectively for improved relative performance.
“Joe assumed management of the portfolio after the period end.”
Faraday has made big changes to the fund’s portfolio.
Its biggest holdings currently include Italian mobile app software firm Bending Spoons, Dutch semiconductor firm ASML, Swiss pharma company Roche Holding, Belgian financial firm KBC Group, French energy firm TotalEnergies, German financial giant Allianz, Irish building materials firm Kingspan, Belgian brewer Anheuser-Busch InBev, Polish ecommerce platform Allegro.eu, Dutch merchants payment platform Adyen and Allied Irish Bank.
Baillie Gifford European Growth Trust is managed by Baillie Gifford, the Edinburgh-based global fund management group with £179 billion currently under management and advice. Baillie Gifford previously reported it had roughly £336 billion of assets at the end of 2021.
Faraday wrote: “Toward the end of the period, a deliberate repositioning was implemented. As a result, the portfolio is now built around a far broader range of growth types and earnings drivers. These now include structural rearmament in defence, infrastructure-like compounding in telecoms, capital strength and rate sensitivity in financials, and cash generation in energy.
“Among the new additions, Allianz, the insurer and asset manager, offers exposure to strong underwriting franchises and earnings that should travel better in a firmer inflationary environment than many investors assume.
“Swiss Re, with its strong position in reinsurance and dependable underwriting and investment returns, also has a defensive earnings profile. Deutsche Telekom, with its breadth of telecom operations across Europe and North America, offers a rare combination of infrastructure-like cash flows, scale, and strategic relevance.
“Airbus, the leading global airframer, adds exposure to a high-quality yet different industrial franchise. Rheinmetall, the German-listed defence business, provides the portfolio with direct exposure to Europe’s rearmament imperative, now seen as structural and lasting. A further example is LPP, an apparel retailer focused on Poland, Eastern Europe and beyond. It has exemplary financials, is growing quickly, and is backed by a combination of founder and professional management.
“The new inclusion of several banks was equally important. CaixaBank, AIB, KBC, UBS and Bank of Piraeus all feature a combination of bancassurance models, strong capital positions, and management that is driven and aligned. Importantly, they are all growing earnings at well above the market rate and are expected to generate strong overall capital returns to supplement that growth.
“New positions were taken in several long-term-focused, well-governed holding companies: Investor AB, which has an excellent collection of global industrial businesses and a century on is still managed by the Wallenberg family; Ackermans & van Haaren, with its marine and banking operations with a history back to 1876; and Groupe Bruxelles Lambert with its public and private combined investment portfolio.
“Other new positions also included the impressively well-run utility Iberdrola, and several German-listed businesses to add broader exposure there, including Nemetschek, Knorr-Bremse, Rational, and CTS Eventim.
“Lastly, a new holding has been taken in TotalEnergies, a differentiated energy company comprising a resilient upstream portfolio, a leading global LNG franchise, and a growing integrated power business. This mix provides resilience, drives strong cash generation, is underpinned by disciplined reinvestment, and, as well as growing, delivers substantial shareholder returns via dividends and buybacks.
“To fund these changes, a variety of holdings were exited outright. Hypoport, Edenred, LVMH, Novo Nordisk, Amplifon, Reply, EQT, Kinnevik, Topicus, Camurus and Sandoz were all sold, alongside several other smaller positions. Some had performed poorly and demanded a harder assessment of their opportunity cost.
“Others, such as Sandoz, had worked and were sold based on share price strength and valuation. In each case, the question was the same: is this still the best use of capital once valuation, concentration, timing, and the range of possible outcomes are considered together? Where the answer became less compelling, capital was recycled …
“The past six months have been tough. The right response to a difficult period is not to become theatrical about the macro, nor to pretend that a setback is automatically self-correcting. It is to take decisive action where the evidence is clear. That is what has been done.”