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Baillie Gifford Strategic Bond
Baillie Gifford Strategic Bond gives investors access to a concentrated portfolio (typically 40-60 stocks) of primarily UK fixed income securities, from both the investment grade and high yield segments of the market. Unlike other peers in the strategic bond sector, the managers aim to add value almost exclusively through their stock-picking prowess and do not aggressively manage the interest rate exposure.
Our opinion
With this fund the managers stick to what they do best, which is picking stocks. While this may seem simplistic, the in-depth research they carry out to find ideas is anything but. Trying to second guess central bankers and forecast interest rates has been the undoing of many fixed income managers, so we like this philosophically pure strategy that has been successfully implemented by a high-quality investment team.
Company description
Founded in 1908 and employee-owned, Baillie Gifford is based in Edinburgh but has offices in London and New York. Awarded the Elite Provider for Equities Rating each year from 2015 to 2019, it specialises globally in equities, fixed income and multi-asset portfolios. The firm is owned by 44 of its senior executives and operates as a partnership.
Fund manager
Baillie Gifford Strategic Bond is managed by Torcail Stewart and Lesley Dunn. Torcail joined Baillie Gifford in 2008 and was made co-manager in 2010, while Lesley joined the strategic bond management team as co-manager in January 2018, having previously worked with Scottish Widows Investment Partnership for 15 years in the investment grade team and subsequently moving to the high yield team. The co-managers are supported by six other investment professionals.
We back our best ideas, invest with conviction and stay focused. There is little room for passengers in this portfolio.
Torcail StewartFund manager
Investment process
The managers believe that inefficiencies exist at the stock level and that, through detailed research, these can be exploited to deliver consistent outperformance. Consequently, a significant portion of Baillie Gifford Strategic Bond fund will be clustered around the investment grade/high yield border, as this is where the managers believe the most inefficiencies can be found. They will take concentrated positions in single bond issues and hold them for the long term. Ultimately there are two drivers for performance: bond selection and income generation.
Risk
The high conviction approach means Baillie Gifford Strategic Bond can be more volatile than some of its peers; however, the strategy also benefits from the diversification that investing on a global scale across a broad range of sectors can provide. The managers also consider how all the trades are related to each other, potentially scaling back certain positions to avoid concentrations of risk.
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