Baillie Gifford - Stick or Twist

aroominyork

Beddie said:

P1Fanatic said:

I have a little in BG Positive Change fund which is down 30%. I don't need the money out so holding out but I guess the question is for how long....

I foolishly followed the past performance and thought I'd jump in to that one and global discovery, just as it turned and is now massively down. Fortunately not a large amount of my portfolio, but still very annoyed that I got taken in by the BG hype when actually they were just lucky. My opinion is to leave it now and ride it out, no point selling . Might even make some money back eventually.

I don't agree "they were just lucky". BG focuses on companies with high growth potential that mostly play to changes in how societies and economies function. Those companies by definition carry high levels of risk and will, individually and sectorally, be volatile. I think we can all agree that societies and economies change; BG's USP is to pin their colours very firmly to that mast. If they pick the right companies they are likely to outperform the market and I think their stock-picking record is generally good. I do not think their funds have done anything which informed fundholders would not expect either on the upside or downside, except perhaps part of Tesla's crazily wild ride. You could say that recent years' market conditions, eg cheap credit, have been favourable to BG's holdings and that may not happen again to the same extent, but I do not think that is enough to call them lucky.

dunstonh

Beddie said:

P1Fanatic said:

I have a little in BG Positive Change fund which is down 30%. I don't need the money out so holding out but I guess the question is for how long....

I foolishly followed the past performance and thought I'd jump in to that one and global discovery, just as it turned and is now massively down. Fortunately not a large amount of my portfolio, but still very annoyed that I got taken in by the BG hype when actually they were just lucky. My opinion is to leave it now and ride it out, no point selling . Might even make some money back eventually.

It not luck.    As mentioned earlier on the thread, BG focus on growth not value.  Growth is out of fashion at the moment and that is why they are suffering in this period.  BG suffered the same in previous cycles.

Altior

Increased cost of borrowing and inflation are massive headwinds for the growth factor, their valuations are (were) inherently based on future cash flow. These are tangible changes to the macro picture. Inflation may be mitigated in the short (ish) term, but arguably the days of 'free' money are over for the foreseeable future. 

There was a recent talk I found interesting anyway, on an aj bell podcast, with a smt manager. Obviously a different fund, but reasonably similar strategies. 

aroominyork

Altior said:

Increased cost of borrowing and inflation are massive headwinds for the growth factor, their valuations are (were) inherently based on future cash flow. These are tangible changes to the macro picture. Inflation may be mitigated in the short (ish) term, but arguably the days of 'free' money are over for the foreseeable future.

Maybe we can differentiate two types of growth: transformational and organic. Transformational is for companies that are developing their products and probably still borrowing - BG's companies might be here. Organic is for established, low debt companies that are continuing to grow - Fundsmith et al's companies could be here. What do others think about this differentiation?

Altior

Growth as an umbrella is indeed very large. Some funds are more about the industries themselves. One might call them exotic such as space and AI. The common denominator I would argue is that  valuation is predominately predicated on earnings that have wide estimates, and hope. 

Personally, I feel like there is a strong case for retrenchment. Sub inflation lending for more than a decade has essentially brought forward expenditure and utility. Even the established growth stocks will struggle to maintain run rates as the western world goes on an enforced collective diet. I have also for a good while feared saturation for some of the biggest whales. 

Prism

aroominyork said:

Altior said:

Increased cost of borrowing and inflation are massive headwinds for the growth factor, their valuations are (were) inherently based on future cash flow. These are tangible changes to the macro picture. Inflation may be mitigated in the short (ish) term, but arguably the days of 'free' money are over for the foreseeable future.

Maybe we can differentiate two types of growth: transformational and organic. Transformational is for companies that are developing their products and probably still borrowing - BG's companies might be here. Organic is for established, low debt companies that are continuing to grow - Fundsmith et al's companies could be here. What do others think about this differentiation?

Good description.

The growth companies that still need to raise capital by borrowing and selling more shares will likely slow down as that borrowing gets more expensive. The older growth companies that are flush with cash and have good pricing power will likely do just as well as normal in terms of their financials, however the valuations will rightly have to change when compared to other types of investments - their share prices would not be immune from the drop.

Beddie

aroominyork said:

Beddie said:

P1Fanatic said:

I have a little in BG Positive Change fund which is down 30%. I don't need the money out so holding out but I guess the question is for how long....

I foolishly followed the past performance and thought I'd jump in to that one and global discovery, just as it turned and is now massively down. Fortunately not a large amount of my portfolio, but still very annoyed that I got taken in by the BG hype when actually they were just lucky. My opinion is to leave it now and ride it out, no point selling . Might even make some money back eventually.

I don't agree "they were just lucky". BG focuses on companies with high growth potential that mostly play to changes in how societies and economies function. Those companies by definition carry high levels of risk and will, individually and sectorally, be volatile. I think we can all agree that societies and economies change; BG's USP is to pin their colours very firmly to that mast. If they pick the right companies they are likely to outperform the market and I think their stock-picking record is generally good. I do not think their funds have done anything which informed fundholders would not expect either on the upside or downside, except perhaps part of Tesla's crazily wild ride. You could say that recent years' market conditions, eg cheap credit, have been favourable to BG's holdings and that may not happen again to the same extent, but I do not think that is enough to call them lucky.

Thanks for reminding me not to share my personal experiences, as someone will come along to nitpick probably the least relevant part of my post.

aroominyork

Beddie said:

aroominyork said:

Beddie said:

P1Fanatic said:

I have a little in BG Positive Change fund which is down 30%. I don't need the money out so holding out but I guess the question is for how long....

I foolishly followed the past performance and thought I'd jump in to that one and global discovery, just as it turned and is now massively down. Fortunately not a large amount of my portfolio, but still very annoyed that I got taken in by the BG hype when actually they were just lucky. My opinion is to leave it now and ride it out, no point selling . Might even make some money back eventually.

I don't agree "they were just lucky". BG focuses on companies with high growth potential that mostly play to changes in how societies and economies function. Those companies by definition carry high levels of risk and will, individually and sectorally, be volatile. I think we can all agree that societies and economies change; BG's USP is to pin their colours very firmly to that mast. If they pick the right companies they are likely to outperform the market and I think their stock-picking record is generally good. I do not think their funds have done anything which informed fundholders would not expect either on the upside or downside, except perhaps part of Tesla's crazily wild ride. You could say that recent years' market conditions, eg cheap credit, have been favourable to BG's holdings and that may not happen again to the same extent, but I do not think that is enough to call them lucky.

Thanks for reminding me not to share my personal experiences, as someone will come along to nitpick probably the least relevant part of my post.

I did not say a word about you. I wrote about whether BG has a defined strategy or is just based on hype, and whether their funds' rises (and more recent falls) were down to no more than luck (or the absence of it).

noclaf

A few years back I was in BG Long Term Global Growth (work pension), after an absolute barnstormer on performance it got hammered during the transition away from Growth stocks/funds. My only comfort is that I was able to get out before it fell even further though it was a painful experience.

My current work pension offers BG Global Alpha however with a fund fee of 0.710% which is higher than most mainstream platforms, not willing to take the plunge. Instead I am using BMO Global Equity (renamed CT Global Equity) for the active portion of my pension which is a more palatable 0.510%..not cheap but not extortionate either, just hope it delivers over the next 10 odd years.

Prism

Nobody should really be surprised when a highly volatile group of growth funds that have the scope to fall heavily do that very thing. If you believe in long term growth investing then I can't see anything that has happened over the last year that should change that belief. Growth stocks tend to rerate down during times of rising interest rates and this was always going to happen at some point. 

Its probably a better time to invest in these types of stocks now than it was a year ago but overall the situation is exactly the same as it was, so unless you have changed your mind after seeing the volatility first hand, then generally stick with it. Oh, and they are not 'on sale' as some others seem to mention - they are priced appropriately based on the situation as we know it.