Baillie Gifford & Co (Baillie Gifford), an Edinburgh based investment management partnership, is to launch a new investment trust, the Baillie Gifford US Growth Trust, which will target an issue of GBP250 million by means of a placing and offer for subscription of ordinary shares.
The Company’s investment objective is to produce long-term capital growth by investing predominantly in equities of companies which are incorporated or domiciled, or which conduct a significant portion of their business, in the US. It is expected that the Company’s initial investments will be predominantly in listed securities, but that exposure to unlisted securities will be increased over time. The Company will usually invest in listed securities with a market capitalisation of at least USD1.5 billion; and in unlisted securities with pre-raise valuations of at least USD500 million.
The portfolio will consist of listed securities and unlisted securities up to a combined maximum of 90 holdings, typically with 30 to 50 listed security holdings. The maximum investment in any one holding will be limited to 10 per cent of the Company’s total assets, and the maximum amount invested in unlisted securities will not exceed 50 per cent of total assets (in each case measured at the time of investment).
The Company’s portfolio will be managed by Gary Robinson (pictured), and deputy managers, Helen Xiong and Andrei Kiselev, members of Baillie Gifford’s US Equities Team and managers of the GBP924 million Baillie Gifford American Fund which has returned 165 per cent over five years.
The Company will have an ongoing annual management charge of 0.70 per cent on the first GBP100 million of the net asset value of the Company and 0.55 per cent thereafter. Once launched, the Company will bear other ongoing operational expenses that will be included in its ongoing expenses and charges.
The Baillie Gifford US Equities Team believes that exceptional growth companies are the major drivers of wealth creation. In their view these are companies that, over the long term: (a) are able to distinguish themselves from their competition and create conditions that make it difficult for competitors to replicate or impinge upon their success; and (b) have the potential to generate high profits and returns for their shareholders and to grow substantially faster, compared to the average US company.
It is the Team’s view that the US is one of the most attractive countries for starting innovative businesses that may develop into exceptional growth companies.
The US is home to some very active and diverse entrepreneurial hubs, whose conditions and collective wisdom for creating innovative companies is, in the Team’s view, unrivalled. For example, Silicon Valley has become a nexus for some of the world’s most exciting technology companies, while Boston and San Francisco play hosts to deep concentrations of bio-technology companies operating at what the Team believes to be the vanguard of scientific advancement in their respective fields.
It is the Team’s view that although investing through the public equity market remains a very important source of exceptional growth company ideas, increasingly these companies are choosing to remain private for longer. The Team believes this represents a structural shift in the nature of capital markets which is likely to persist in the long term. The necessity to list on a stock exchange as a means of entering the next stage of growth is not as acute as it was before. As a result, there are many attractive businesses to be found in the private market. The Company will seek to differentiate itself by investing across the spectrum of listed and unlisted companies.
Gary Robinson, investment manager at Baillie Gifford, says: “This is an exciting opportunity for investors to gain exposure to the truly innovative growth companies in the US. For over two decades, our American Fund has successfully invested in these companies in the public markets. This new investment trust will allow the team to take the same distinctive philosophy and process that has served our American Fund so well and apply it to a broader opportunity set which includes both public and unquoted companies.”