Baillie Gifford - Funds Vs Investment Trusts

[Deleted User]

What's your opinion on Baillie Gifford, do you prefer their funds or investment trusts and for which reasons?

SonOf

Fund house has a good reputation. Their funds are generally higher risk in their respective sectors than most funds in the same sector. Hence why they tend to do well in growth periods.

Linton

I prefer the funds - I dont want the higher risk of the ITs and dont need the higher return. Also, I find the funds fit better as part of a large portfolio.

Sue58

Linton wrote: »

I prefer the funds - I dont want the higher risk of the ITs and dont need the higher return. Also, I find the funds fit better as part of a large portfolio.

If you don’t mind me asking, which funds do you prefer to their ITs in particular? I only ask because I mainly prefer the ITs.

Prism

I like them - funds or ITs. I have used Scottish Mortgage, Global Discovery and their China fund - although non currently. I also like their US funds but have enough other US exposure at the moment

Linton

Sue58 wrote: »

If you don’t mind me asking, which funds do you prefer to their ITs in particular? I only ask because I mainly prefer the ITs.

I hold BG Japanese Smaller Companies, The IT equivalent is Shin Nippon. I have looked at BG American and SMT, but cannot see how they would fit into an broadly diversified portfolio. One would need extra funds to fill the gaps, but those extra funds would also duplicate all the investments in the BG ITs so using the ITs becomes pointless.



I wonder whether you will prefer the ITs in the next crash. SMT dropped about 55% in the last one.

Thrugelmir

Don't want to ever run the risk of being unable to liquidate my holdings when investors run for the door. IT's for me.

Sue58

Linton wrote: »

I hold BG Japanese Smaller Companies, The IT equivalent is Shin Nippon. I have looked at BG American and SMT, but cannot see how they would fit into an broadly diversified portfolio. One would need extra funds to fill the gaps, but those extra funds would also duplicate all the investments in the BG ITs so using the ITs becomes pointless.

I wonder whether you will prefer the ITs in the next crash. SMT dropped about 55% in the last one.

I realise the BG ITs are for growth and high risk so I don’t think anybody should hold them unless they can see out the 55% + crash scenario. However, the fund versions of their ITs won’t really be that far behind in terms of risk surely? I am personally fortunate enough to have a good cash buffer to hopefully see me through the dips or a crash.

Prism

Sue58 wrote: »

I realise the BG ITs are for growth and high risk so I don’t think anybody should hold them unless they can see out the 55% + crash scenario. However, the fund versions of their ITs won’t really be that far behind in terms of risk surely? I am personally fortunate enough to have a good cash buffer to hopefully see me through the dips or a crash.

As an example if we compare Baillie Gifford Global Discovery to Edinburgh Worldwide Investment Trust we find that the fund has a 3 year standard deviation of 17.4% and the IT has a 3 year standard deviation of 19.9%. So its more volatile, which is expected due to the variance of the premium/discount. So while contributing it likely doesn't matter but if selling or using equities to live on during retirement then the fund is probably the better choice. To be fair though its only an issue if all of a portfolio is volatile.

aroominyork

Thrugelmir wrote: »

Don't want to ever run the risk of being unable to liquidate my holdings when investors run for the door. IT's for me.

Surely depends what you hold. Long Term Global Growth, the open ended version of SMT, holds large/mega caps and is very unlikely to have a liquidity problem; the likelihood of SMT heading into discount territory is much greater, so wouldn't the OEIC serve you better? Whereas Japanese Smaller Companies, the open ended version of Shin Nippon, might have liquidity issues. Of course all that assumes that when a bear market hits and IT premiums turn into discounts you want to bail rather than buy.

bowlhead99

aroominyork wrote: »

Thrugelmir wrote: »

Don't want to ever run the risk of being unable to liquidate my holdings when investors run for the door. IT's for me.

Surely depends what you hold. Long Term Global Growth, the open ended version of SMT, holds large/mega caps and is very unlikely to have a liquidity problem; the likelihood of SMT heading into discount territory is much greater, so wouldn't the OEIC serve you better?

In SMT, half of the holdings (20.5% by value) are unlisted, and it has gearing, and is more economical to run (lower OCF; it's bigger).

Long Term Global Growth does not have those features.

If it "is very unlikely to have a liquidity problem" it is because it has a different portfolio. So, "wouldn't the OEIC serve you better" becomes a question of, 'wouldn't it be better to compromise your portfolio to make it easier to liquidate the holdings in a hurry if investors want to leave, and then you could probably cash out any time you like, if you really need to do that?'

The answer is perhaps 'no I don't want to compromise my portfolio to avoid problems when other investors want to exit, and I can already cash out any time I like, if I am using SMT'.

SMT noted in their second quarter manager's review that "Currently 34 per cent of the assets started out as investments in private companies, even if some of those are now public". An open ended vehicle can't have such high levels of unlisted exposure because (e.g.) if it has 20-25% unlisted and the fund halves in size due to investor redemptions over a short space of time while the illiquid holdings can't be exited, it will find itself with 40-50% unlisted, which is not what you want in a fund allowing daily redemptions (c.f. Woodford Equity Income's problems)

Of course all that assumes that when a bear market hits and IT premiums turn into discounts you want to bail rather than buy.

For many people, the ability to acquire a portfolio of holdings as a 'job lot' for less than their individual direct purchase prices - due to a disconnect between the IT's price and the underlying holding's valuation - is an attractive thing. We all like a bulk discount when we go shopping. So if an IT is discounted we would prefer to be buying it rather than selling it.

For many long term investors the reason they would look for the exit is because they need liquidity for something else going on in their life, rather than because they predict a fall in the value of the investments. They are not looking for an exit because 'a bear market hit' causing them to want to dodge further losses through prescient market timing, because they know such attempts at timing can be futile. They are simply looking to exit because they would rather be out than in. While for others, yes they are looking to exit because they are trying to be clever with market timing.

Either way, the price at which they can exit is a secondary concern to being able to exit at all. So a movement from premium to discount, or an increase in the discount, is not something that tops the list of importance.

If my goals are 'hold whatever asset mix I prefer, or believe to be optimal' and 'be able to exit that mix whenever I like, to access the cash for other opportunities or for my personal life', it seems that closed-ended vehicles will be useful for at least part of the strategy. Many decent investments are not liquid - but holding them through a closed vehicle such as an IT that you can sell on a whim to another person via the stock exchange, if it suits you to do so, is a sensible approach to accessing less-mainstream investments.

To the original question:

"What's your opinion on Baillie Gifford, do you prefer their funds or investment trusts and for which reasons?"

I would simply say there is no point in generalising that a fund house is good or bad, or that an IT or OEIC vehicle is conceptually better. Look at the individual product level and compare it to rivals from the same fund manager or a different fund manager ; evaluate each product on its merits.