Baillie Gifford Pacific

Like most Baillie Gifford funds, this is a high-conviction growth fund which focuses on the long term. However, this fund has historically been a bit more pragmatic than others from the Baillie Gifford stable. The portfolio has the ability to move around as different parts of the market, such as more cyclical sectors, exhibit growth, benefitting performance as a result.

Our opinion

This fund has stood out as a top-performing vehicle for investors seeking exposure to high-growth opportunities in the Asia Pacific region. While the fund can be volatile, its long-term focus on identifying companies with durable growth potential has led to superior performance over time. This is a stylistic fund and it has historically delivered its best performance in growth markets. However, a slightly more liberal interpretation of growth has allowed the fund to pivot into other more cyclical parts of the market at certain points. The net result is the fund has not given up as much performance in value markets as some other growth funds have done.

Fund manager

Roderick Snell joined Baillie Gifford in 2006 after graduating from Edinburgh with a BSC (Hons) in Medical Biology. He has been at Baillie Gifford for his whole career. Roddy has been a manager on this fund since 2010. He has also been a manager on the Pacific Horizon Investment Trust since 2021, having previously been a deputy. He was made a partner in 2023.

Ben Durrant joined Baillie Gifford in 2017 and has spent time with a number of different investment teams. He has managed the Pacific fund since 2021. Ben graduated from the University of Edinburgh with a BSC in Mathematics in 2012. He is a chartered accountant and a CFA charterholder.

Roderick SnellFund manager

Investment process

This fund follows the standard Baillie Gifford philosophy that long-term growth investing delivers the strongest returns over the long run. The fund invests for 5 years and beyond. It is benchmark agnostic and willing to be aggressive in its positioning relative to the index. The team is based in Edinburgh.

The fund seeks outperformance from three different types of growth stocks.

Firstly, growth stocks where the duration of growth is much longer than is expected or priced into the market. This allows the team to arbitrage the difference between the reality of the long-term growth and market expectations of the growth. The second growth opportunity is where the pace of growth is just much higher than the market expects. The third is from those stocks which weren’t expected to grow at all but suddenly grew very quickly.

This fund has a slightly more liberal interpretation of growth compared to some other Baillie Gifford funds, with the managers willing to pivot the portfolio and invest in some areas, such as miners, which some other growth investors might avoid.

Ideas are generated from a very wide variety of sources including local researchers, academic research, private companies, industry experts, other BG teams and independent research. Once an idea is identified, further research focuses on industry background, competitive advantage, management’s ability and financial strength. The team assess the potential of an industry and how strong a company is within it. They then consider the company’s ability to capitalise on the opportunity. Finally they consider valuation and how much the market has already understood the potential.

The fund holds between 50-100 holdings.

ESG

ESG – Limited

Baillie Gifford has a dedicated ESG team of over 40 people. Because Baillie Gifford is often a long-term shareholder, it takes its ESG and engagement responsibilities very seriously. Material ESG considerations are an important part of the investment process. The team believe good corporate governance is critical and enhances shareholder value. In conjunction with the investment teams, the ESG analysts are responsible for ESG research and engagement. One of the eight members in the emerging markets investment team (not including the two managers) is a dedicated senior ESG analyst. ESG analysts make use of a large range of external third-party data providers. They believe that ESG practices need to be assessed on a ‘case-by-case’ basis. Whilst ESG is a very important consideration, they are not seeking to invest in ‘perfect’ companies.

Risk

The Baillie Gifford Pacific fund is among the more volatile options in the IA Asia ex Japan sector. The fund’s high-conviction, growth-oriented approach (despite its ability to pivot into less growthier sectors), combined with its aggressive positioning relative to the benchmark, means it can experience substantial swings in performance.

The team takes a pragmatic attitude to risk. They reject the traditional simple measure of volatility around a benchmark as a definition of risk. Real risk is considered to be the permanent loss of capital. This is controlled through diversification and portfolio construction. The managers are skeptical of portfolio optimisation tools and over-reliance on quantitative models which often involve the use of out-of-date and backward-looking statistics. Stock weightings are determined by a combination of conviction and how a stock compares to the other holdings.

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Read more about this fund

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