The mission of the Baillie Gifford American fund is to invest in some of the most exciting growth companies in the United States and generate exceptional long-term returns. Since its launch in mid-1997, the fund has successfully fulfilled this objective. However, the £3.2 billion fund is not immune to market fluctuations.
While ten-year returns of close to 431% are outstanding, the fund’s performance was challenged in 2022 by rising US interest rates, inflation, and the resulting economic uncertainty. Shares in many growth-focused US companies fell sharply during this period, although they have since bounced back. Consequently, the fund’s five-year returns of 19% lag behind its one- and three-year gains of 29% and 73%, respectively.
Kirsty Gibson, one of four managers overseeing the 50-stock portfolio, acknowledges the fund’s “volatile” performance and emphasizes that it is best held as a long-term investment. She explains:
“When we invest in US businesses, it’s with a five- to ten-year time horizon in mind. Our average holding period for individual stocks is around seven years, and investors should look at the fund with a similar perspective.”
Over the past seven years, the fund has delivered returns of around 130%. Its growth focus points it towards some of the US’s mega tech companies, with Amazon, Meta, and Nvidia among its top-ten holdings. However, there are other key characteristics that define the portfolio.
Gibson highlights that approximately 70% of the companies the fund invests in are either founder-led or still have their founders holding a stake in the business. “What we like is that these individuals have created a distinct culture and a long-term vision for their businesses, which invariably aligns with our interests as long-term investors,” she notes.
Among these founder-led businesses is delivery company DoorDash, one of the fund’s biggest holdings at 4.3%. It is run by co-founder Tony Xu, whom Gibson recently met at an investor conference in San Francisco. She explains:
“It’s imperative we get access to key individuals such as Tony Xu so that we can build strategic relationships and better understand the culture of the businesses we are invested in. In the United States, DoorDash is on a mission to deliver everything—be it food, groceries, or retail essentials—to anyone who lives in a city.”
Another key holding is software company Cloudflare, led by co-founder Matthew Prince. Gibson says Prince has a “clear vision” for the business, with a strong focus on artificial intelligence.
Although the fund’s approach centers on identifying long-term opportunities, the managers remain vigilant about the resilience of their holdings when challenges arise. For example, the decision by former President Donald Trump to impose tariffs on imports prompted concerns over a potential decline in US consumer spending. This led the fund to trim—but not exit—some holdings, such as Tesla and digital marketing specialist The Trade Desk.
While the fund is managed out of Edinburgh, the investment team regularly travels to the US to visit companies. Gibson comments:
“Being based in the city means we have space and time to think and not get too caught up in the excitement that swirls around many of the high-growth companies we invest in.”
It’s worth noting that all the fund’s holdings are listed companies. This contrasts with its sister investment trust, Baillie Gifford US Growth, which has 36% of its assets invested in unquoted companies.
The fund’s total annual charges are competitive at 0.52%, offering investors a compelling option for exposure to some of America’s most dynamic growth companies.
https://www.thisismoney.co.uk/money/markets/article-15139495/BAILLIE-GIFFORD-AMERICAN-FUND-Mega-rebound-US-fund-wants-look-tech-titans-eye.html?ns_mchannel=rss&ns_campaign=1490&ito=1490
