Baillie Gifford High Yield Bond

This fund offers investors access to a portfolio of predominantly UK, US and European high yield bonds. As with all other Baillie Gifford funds, the managers focus on stock picking, so the portfolio is likely to be concentrated and turnover low, as they back their ideas with conviction and give them time to come to fruition.

Our opinion

The managers believe that the most consistent way to deliver outperformance in this segment of the fixed income market is to pick the right stocks using a straightforward investment process. We think this is well justified, as the Baillie Gifford High Yield Bond fund has delivered excellent relative performance for a number of years.

Fund manager

The Baillie Gifford High Yield Bond fund is managed by Robert Baltzer and Lucy Isles. CFA charterholder Robert joined Baillie Gifford in 2001 as an analyst, the same year he graduated with a degree in mathematics from Durham University, and has managed this fund since July 2006. Lucy joined Baillie Gifford in 2012, having graduated with a masters in International Relations and Modern History from the University of St Andrews. She began co-managing the fund in January 2018.

We are looking for resilient businesses that can survive the full business cycle and have the ability to improve their financial health.

Robert BaltzerFund manager

Investment process

Stocks that make it into the portfolio will fall into one of four buckets: steady, compounders, accelerated or event-driven. The managers will flex these buckets according to where they find ideas. However, as bonds become expensive, the weightings in the riskier buckets are likely to decrease. The managers are more likely to have conviction in individual bonds than in a particular credit quality band of the market.

Risk

This fund invests in the riskier end of the fixed income spectrum. The managers' high-conviction approach, which translates into large position sizes, can make the fund more volatile than some of its peers. The managers don't tend to use derivatives to manage credit or interest rate risk as they feel this approach doesn't add value over time.

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