194. What do Birkenstock, eBay, recycling and litigation all have in common?

Lucy Isles, co-manager of Baillie Gifford High Yield Bond fund, discusses her investments in the bonds of Birkenstock, the owner of eBay and Gumtree, a French recycler and a litigation business. She explains why bonds have struggled in 2022 and how investors could expect high yield bonds to behave in an inflationary or recessionary environment and reveals why the team has invested in an Indian mobile company.
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Baillie Gifford High Yield Bond fund offers investors access to a portfolio of predominantly UK, US and European high yield bonds. The managers, Robert Baltzer and Lucy Isles, focus almost entirely 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. They are looking for resilient businesses that can survive the full business cycle and can improve their financial health.

What’s covered in this episode:

  • Bond market returns so far this year
  • Why fixed income has struggled in 2022
  • Why the manager thinks it has been an inflationary sell-off, not a recessionary sell-off
  • If capital losses can be offset by income generation
  • How high yield behaves in a high inflation or recessionary environment
  • Lending money to Birkenstock and a French recycler
  • The Asian high yield market
  • Why the manager likes a bond in the Indian mobile market
  • Making money from lending to eBay and Gumtree
  • Investing in litigation
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