A Guide To Investing In The Baillie Gifford American Fund

Baillie Gifford is an investment management company that offers a range of funds, including equity, fixed-income, and multi-asset portfolios, to individual and institutional investors. The company's American Fund aims to outperform the S&P 500 Index by at least 1.5% per annum over rolling five-year periods. The fund focuses on investing in innovative and disruptive businesses with strong growth prospects in the US market, adopting a long-term investment horizon of at least five years. While there is no guarantee that the fund will achieve its objective, Baillie Gifford's creative approach to research and investment insights aim to deliver outstanding returns to shareholders. The fund can be accessed directly through Baillie Gifford's Client Relations Team or via fund platforms, such as Stocks and Shares ISA, Lifetime ISA, SIPP, or Fund and Share Account.

The fund's performance and portfolio

The Baillie Gifford American Fund aims to outperform the S&P 500 Index, as stated in Sterling, by at least 1.5% per annum over rolling five-year periods. However, it is important to note that there is no guarantee that this objective will be achieved over any time period, and actual investment returns may differ, especially over shorter time periods. The fund's performance should be compared to the Investment Association North America Sector.

The fund invests with a five to ten-year view, and its share price can change significantly based on the valuations of a few companies. Therefore, it may not suit investors looking for shorter-term gains. Baillie Gifford's creative approach to research and long-term investment horizon help them identify value where others don't. However, they cannot guarantee the success of their strategy.

The fund's top ten holdings as of 30/09/2024 include investments in overseas securities, which may be subject to changes in exchange rates, impacting the value of investments. The fund is actively managed and concentrated, investing in US companies across various sectors and sizes.

The Baillie Gifford American Fund is available as Class B - Accumulation (GBP) and Class B - Income (GBP) units. The accumulation units retain income within the fund, increasing the unit price, while the income units pay out income as cash. The fund can be held in a Stocks and Shares ISA, Lifetime ISA, SIPP, or Fund and Share Account.

The fund's charges and costs

The Baillie Gifford American Fund has a minimum investment amount of £100,000. The ongoing charge figure is currently 0.53%, though this figure is subject to change. The ongoing charge is taken from the fund's revenue, and if there is insufficient revenue, the remainder will be taken from capital, which will reduce the capital value of the investment.

The fund's aim is to outperform the S&P 500 Index, as stated in Sterling, by at least 1.5% per annum over rolling five-year periods. However, there is no guarantee that this objective will be achieved, and actual investment returns may differ, especially over shorter time periods.

The fund's price could change materially based on the valuations of a few companies, and there is a risk that the amount originally invested may not be recovered. The fund's share price can be volatile due to movements in the prices of the underlying holdings and the basis on which the fund is priced.

A dilution adjustment may be applied when buying or selling shares in the fund, which could reduce the return on the investment. Additionally, tax rates and the tax treatment of OEICs can change at any time, impacting the overall costs of the investment.

It is important to carefully consider the potential charges and costs associated with investing in the Baillie Gifford American Fund before making any investment decisions.

The fund's risks

The Baillie Gifford American Fund carries a variety of risks that potential investors should be aware of. Here is a detailed overview of the key risks associated with investing in this fund:

Investment Risk

The value of investments in the fund and any income generated from them can decrease as well as increase. This means that investors may not get back the full amount they originally invested. The fund's share price is subject to volatility due to fluctuations in the prices of its underlying holdings. Additionally, past performance is not a reliable indicator of future results, and actual investment returns may differ from the fund's objectives.

Market Risk

Investment markets can be highly volatile, and market conditions can change rapidly. As a result, the value of an investment in the fund, as well as any income derived from it, may decrease. The fund's exposure to a single market and currency (the US market and dollar) may amplify share price movements.

Concentration Risk

The Baillie Gifford American Fund has a concentrated portfolio compared to similar funds, which means that it may experience larger movements in its share price in the short term. The fund's performance is heavily influenced by the valuations of a small number of companies, primarily in the US market.

Currency Risk

As the fund invests in overseas securities, changes in foreign exchange rates can cause the value of an investment and any associated income to decrease or increase. The fund's focus on the US market and the US dollar increases its exposure to currency risk.

Dilution Risk

When buying or selling shares in the fund, a dilution adjustment may be applied to the share price, which could reduce the return on the investment.

Tax Risk

Tax rates and the tax treatment of OEICs (Open-ended Investment Companies) are subject to change at any time, which could impact the fund's performance and the returns for investors.

Custody Risk

Custody of assets carries a risk of loss if the custodian becomes insolvent or fails to uphold their duties of care.

Other Risks

The fund's key investor information and prospectus documents outline additional risks, including conflicts of interest risk, equity securities risk, environmental and governance risk, focused investment risk, government and regulatory risk, information technology risk, initial public offering risk, and liquidity risk.

Baillie Gifford's investment strategy

The company takes a long-term approach to investing, often supporting companies for years or even decades. This strategy allows them to invest in innovative and disruptive businesses with strong growth prospects and reap the rewards over time. Baillie Gifford's investment horizon of at least five years, combined with its creative approach to research, helps it identify value where others might not.

The company's American Fund, for example, aims to outperform the S&P 500 Index by at least 1.5% per annum over rolling five-year periods. The fund focuses on investing in exceptional growth businesses in the world's largest stock market and holding them for the long term. Baillie Gifford's US Equities Team, led by Tom Slater, makes investment decisions for this fund.

Baillie Gifford's history and values

Baillie Gifford & Co is an investment management firm wholly owned by partners who work within the firm. Founded in 1908 in Edinburgh, Scotland, by Lieutenant Colonel Augustus Baillie and Carlyle Gifford, it was initially a law firm called Baillie & Gifford WS. However, in 1908, the business shifted its focus to investment.

In 1909, Baillie and Gifford created the Straits Mortgage and Trust Company Limited to lend money to rubber planters in Malaya and Ceylon, taking advantage of the burgeoning automobile industry's demand for rubber. The Straits Mortgage and Trust Company Limited was then renamed The Scottish Mortgage and Trust Limited in 1913, and this was followed by the introduction of several other investment trusts.

The firm continued to grow, and by 1927, the transition from a firm of solicitors to a partnership managing investment trusts was complete with the creation of Baillie Gifford & Co. In 1931, they took over the management of Monks Investment Trust and two other related companies.

Augustus Baillie passed away in 1939, and the following year, World War II began. Carlyle Gifford, now in his late 50s, was requested by the Governor of the Bank of England to advise HM Treasury on building a war chest. Gifford successfully negotiated with the US, and upon his return to Edinburgh, the firm survived the challenging post-war investment climate.

The firm continued to grow and expand its business, especially in the 1980s and 1990s, with offices in New York, London, and later Hong Kong. By its centenary in 2008, Baillie Gifford managed over £50 billion and counted five of the seven largest pension funds in the US as clients.

Today, Baillie Gifford continues to seek out game-changing companies and assets that can sustain long-term growth and remain resilient. They believe in contributing to society and supporting management in pursuing long-term goals. With a focus on fairness, equality, and openness, they strive to deliver strong returns for their clients.

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