BAILLIE GIFFORD International All Cap Quarterly Update 31 March 2022
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BAILLIE GIFFORD International All Cap Quarterly Update 31 March 2022
Contents
02 Executive Summary Through passporting it has established Baillie Gifford
03 Commentary Investment Management (Europe) Limited (Frankfurt Branch)
to market its investment management and advisory services
06 Performance and distribute Baillie Gifford Worldwide Funds plc in
12 Portfolio Overview Germany. Similarly, it has established Baillie Gifford
Investment Management (Europe) Limited (Amsterdam
13 Governance Summary Branch) to market its investment management and advisory
15 Governance Engagement services and distribute Baillie Gifford Worldwide Funds plc in
The Netherlands.
17 Voting Baillie Gifford Investment Management (Europe) Limited
18 Transaction Notes also has a representative office in Zurich, Switzerland pursuant
to Art. 58 of the Federal Act on Financial Institutions
19 Legal Notices ("FinIA"). It does not constitute a branch and therefore does
not have authority to commit Baillie Gifford Investment
Management (Europe) Limited. The firm is currently awaiting
This document is solely for the use of professional authorisation by the Swiss Financial Market Supervisory
investors and should not be relied upon by any other Authority (FINMA) to maintain this representative office of a
person. It is not intended for use by retail clients. foreign asset manager of collective assets in Switzerland
pursuant to the applicable transitional provisions of FinIA.
Important Information and Risk Factors Baillie Gifford Investment Management (Europe) Limited
is a wholly owned subsidiary of Baillie Gifford Overseas
Baillie Gifford & Co and Baillie Gifford & Co Limited are Limited, which is wholly owned by Baillie Gifford & Co.
authorised and regulated by the Financial Conduct Authority Baillie Gifford Overseas Limited and Baillie Gifford & Co are
(FCA). Baillie Gifford & Co Limited is an Authorised authorised and regulated in the UK by the Financial Conduct
Corporate Director of OEICs. Authority.
Baillie Gifford Overseas Limited provides investment Persons resident or domiciled outwith the UK should
management and advisory services to non-UK consult with their professional advisers as to whether they
Professional/Institutional clients only. Baillie Gifford Overseas require any governmental or other consents in order to enable
Limited is wholly owned by Baillie Gifford & Co. Baillie them to invest, and with their tax advisers for advice relevant to
Gifford Overseas Limited is authorised and regulated by the their own particular circumstances.
Financial Conduct Authority. This document contains information on investments which
Baillie Gifford Asia (Hong Kong) Limited does not constitute independent research. Accordingly, it is not
柏基亞洲(香港)有限公司 is wholly owned by Baillie Gifford subject to the protections afforded to independent research and
Overseas Limited and holds a Type 1 and Type 2 licence from Baillie Gifford and its staff may have dealt in the investments
the Securities & Futures Commission of Hong Kong to market concerned.
and distribute Baillie Gifford’s range of collective investment All information is based on a representative portfolio, new
schemes to professional investors in Hong Kong. Baillie client portfolios may not mirror the representative portfolio
Gifford Asia (Hong Kong) Limited 柏基亞洲(香港)有限公司 exactly. As at March 31, 2022, in US dollars and sourced from
can be contacted at Suites 2713-2715, Two International Baillie Gifford & Co unless otherwise stated.
Finance Centre, 8 Finance Street, Central, Hong Kong,
Telephone +852 3756 5700. South Africa
Baillie Gifford Investment Management (Europe) Limited
provides investment management and advisory services to Baillie Gifford Overseas Limited is registered as a Foreign
Financial Services Provider with the Financial Sector Conduct
European (excluding UK) clients. It was incorporated in
Ireland in May 2018. Baillie Gifford Investment Management Authority in South Africa.
(Europe) Limited is authorised by the Central Bank of Ireland North America
as an AIFM under the AIFM Regulations and as a UCITS
management company under the UCITS Regulation. Baillie Baillie Gifford International LLC is wholly owned by Baillie
Gifford Investment Management (Europe) Limited is also Gifford Overseas Limited; it was formed in Delaware in 2005
authorised in accordance with Regulation 7 of the AIFM and is registered with the SEC. It is the legal entity through
Regulations, to provide management of portfolios of which Baillie Gifford Overseas Limited provides client service
investments, including Individual Portfolio Management
and marketing functions in North America. Baillie Gifford
(‘IPM’) and Non-Core Services. Baillie Gifford Investment
Management (Europe) Limited has been appointed as UCITS Overseas Limited is registered with the SEC in the United
management company to the following UCITS umbrella States of America.
company; Baillie Gifford Worldwide Funds plc. The Manager is not resident in Canada, its head office and
principal place of business is in Edinburgh, Scotland. Baillie
Gifford Overseas Limited is regulated in Canada as a portfolio
manager and exempt market dealer with the Ontario Securities
Calton Square, 1 Greenside Row, Edinburgh EH1 3AN
Telephone +44 (0)131 275 2000 bailliegifford.com
Copyright © Baillie Gifford & Co 2009. Ref: 20327 10009702
Commission ('OSC'). Its portfolio manager licence is currently Capital Market Authority. No authorization, licence or
passported into Alberta, Quebec, Saskatchewan, Manitoba and approval has been received from the Capital Market Authority
Newfoundland & Labrador whereas the exempt market dealer of Oman or any other regulatory authority in Oman, to provide
licence is passported across all Canadian provinces and such advice or service within Oman. BGO does not solicit
territories. Baillie Gifford International LLC is regulated by the business in Oman and does not market, offer, sell or distribute
OSC as an exempt market and its licence is passported across
any financial or investment products or services in Oman and
all Canadian provinces and territories. Baillie Gifford
Investment Management (Europe) Limited (‘BGE’) relies on no subscription to any securities, products or financial services
the International Investment Fund Manager Exemption in the may or will be consummated within Oman. The recipient of
provinces of Ontario and Quebec. this document represents that it is a financial institution or a
sophisticated investor (as described in Article 139 of the
Japan Executive Regulations of the Capital Market Law) and that its
officers/employees have such experience in business and
Mitsubishi UFJ Baillie Gifford Asset Management Limited
financial matters that they are capable of evaluating the merits
(‘MUBGAM’) is a joint venture company between Mitsubishi
and risks of investments.
UFJ Trust & Banking Corporation and Baillie Gifford
Overseas Limited. MUBGAM is authorised and regulated by Israel
the Financial Conduct Authority.
Baillie Gifford Overseas is not licensed under Israel’s
South Korea Regulation of Investment Advising, Investment Marketing and
Portfolio Management Law, 5755-1995 (the Advice Law) and
Baillie Gifford Overseas Limited is licensed with the Financial
does not carry insurance pursuant to the Advice Law. This
Services Commission in South Korea as a cross border
document is only intended for those categories of Israeli
Discretionary Investment Manager and Non-Discretionary
residents who are qualified clients listed on the First
Investment Adviser.
Addendum to the Advice Law.
Australia
Baillie Gifford Overseas Limited (ARBN 118 567 178) is
registered as a foreign company under the Corporations Act
2001 (Cth) and holds Foreign Australian Financial Services
Licence No 528911. This material is provided to you on the
basis that you are a “wholesale client” within the meaning of
section 761G of the Corporations Act 2001 (Cth)
(“Corporations Act”). Please advise Baillie Gifford Overseas
Limited immediately if you are not a wholesale client. In no
circumstances may this document be made available to a “retail
client” within the meaning of section 761G of the Corporations
Act. This material contains general information only. It does
not take into account any person’s objectives, financial
situation or needs.
Qatar
The materials contained herein are not intended to constitute an
offer or provision of investment management, investment and
advisory services or other financial services under the laws of
Qatar. The services have not been and will not be authorised by
the Qatar Financial Markets Authority, the Qatar Financial
Centre Regulatory Authority or the Qatar Central Bank in
accordance with their regulations or any other regulations in
Qatar.
Oman
Baillie Gifford Overseas Limited (“BGO”) neither has a
registered business presence nor a representative office in
Oman and does not undertake banking business or provide
financial services in Oman. Consequently, BGO is not
regulated by either the Central Bank of Oman or Oman’s
Past Performance
Past performance is not a guide to future returns. Changes in
investment strategies, contributions or withdrawals may
materially alter the performance and results of the portfolio.
Material market or economic conditions will have an
impact on investment results. The returns presented in this
document are gross of fees unless otherwise stated and reflect
the reinvestment of dividends and interest.
Historical performance results for investment indexes
and/or categories, generally do not reflect the deduction of
transaction costs and/or custodial charges or the deduction of
an investment management fee, the incurrence of which would
have the effect of decreasing historical performance results.
It should not be assumed that recommendations/
transactions made in the future will be profitable or will equal
performance of the securities mentioned.
Potential for Profit and Loss
All investment strategies have the potential for profit and loss.
Stock Examples
Any stock examples, or images, used in this paper are not
intended to represent recommendations to buy or sell, neither is
it implied that they will prove profitable in the future. It is not
known whether they will feature in any future portfolio
produced by us. Any individual examples will represent only a
small part of the overall portfolio and are inserted purely to
help illustrate our investment style. A full list of portfolio
holdings is available on request.
Financial Intermediaries
This document is suitable for use of financial intermediaries.
Financial intermediaries are solely responsible for any further
distribution and Baillie Gifford takes no responsibility for the
reliance on this document by any other person who did not
receive this document directly from Baillie Gifford.
Executive Summary 01 Product Overview International Alpha is an international equity strategy that invests in quality growth companies over the long term. The strategy employs a bottom-up stock-picking approach based on the fundamental research produced by Baillie Gifford's investment teams. It has a diversified portfolio of 70-110 holdings across several shades of growth, equipped to perform throughout the cycle. This report is based on the ACWI ex US All Cap variant. Risk Analysis Key Statistics Number of Holdings 82 Typical number of holdings 60-90 Active Share 89%* Rolling One Year Turnover 11% *Relative to MSCI ACWI ex US Index. Source: Baillie Gifford & Co, MSCI. We are maintaining our long-standing approach to investment: that of seeking the most attractive growth stocks over the long term Operational performance remains strong, but we continue to monitor financial strength and the investment case for the businesses that we invest in Despite market sentiment, the portfolio shows strong earnings growth, margins, and pricing power. We believe that over the long term, earnings growth translates into share price growth Baillie Gifford Key Facts Assets under management and advice US$365.3bn Number of clients 871 Number of employees 1,684 Number of investment professionals 352
Commentary 02
Consistency in uncertain times robust, and we believe, on aggregate, the holdings have
the potential to compound earnings at a growth rate in
The start of 2022 has been overshadowed by uncertainty. the teens over 5–10 years. We know share prices have
Vladimir Putin’s assault on Ukraine has plunged Europe consistently followed underlying fundamentals and,
into conflict. Our news feeds have been dominated by therefore, though there appears to be a large disconnect,
explosions and speeches and, behind it all, millions of the holdings’ underlying operational performance and,
innocent people face a dark and uncertain future as their in many cases brilliance, will ultimately be reflected.
lives are upended and their freedoms threatened. We believe valuations are particularly compelling at
Meanwhile, markets have faced a significant sell-off these times.
driven by the war, concerns about the potential for The portfolio is, as always, an eclectic mix of
recession in Europe, and fears that rising energy and stocks. Strong thematic tailwinds include favourable
commodity prices will fuel further inflation. Covid-19 demographics, the online revolution, the rise of the
also remains widespread in many countries. Many are middle class and technology in industry. We consider
perplexed as to what comes next, and so certainty around 60 per cent of the portfolio to be truly global,
commands a premium over-growth, hope and optimism. with operations spanning many countries. The next
The International All Cap strategy continues to 20 per cent we view as hyper-local with more than
do what it has done for 30 years. Consistency is key. 80 per cent of revenues from their home market, while
We accept that we cannot predict the next economic the remaining 20 per cent is considered ‘glocal’, or a mix
zig or zag, but we can prepare by building a portfolio of both. A third of the portfolio are rapid growers and
of exceptional quality growth companies. Drawdowns two-thirds are enduring quality compounders. However,
happen. There are inevitably weak performance periods, we dissect the holdings (each has its case), our approach
whether at a stock, portfolio, or broader market level. remains to select the best, not the most, from international
In the long term, what matters most during tough times markets.
is the resilience and operational performance of the Questions remain. What are the implications if excess
businesses we invest in. liquidity is out there for too long? How long will these
The portfolio is built on solid foundations. The supply chain bottlenecks persist? Is there something more
holdings overwhelmingly have strong balance sheets, material or structural behind this? To what extent has
significant pricing power, superior profitability, and high globalisation stalled, and will production be devolved
levels of investment in research and development (R&D), again or localised? How powerful might deflationary
capital expenditure and growth. Earnings growth remains forces be? We remain open-minded.Commentary 03
Performance – key contributors and detractors
The start of 2022 has seen a marked period of
underperformance for the International All Cap portfolio.
The market backdrop is worth noting. We have had a long
period of exceptionally low interest rates following a
40-year bull market for bonds combined with restrained
levels of inflation. Monetary policy has been geared
towards promoting economic activity. More recently
things have started to normalise and, as a result, monetary
policy has tightened, and financial uncertainty has
increased. This should lead to a normalisation of interest
rates, which should be healthy for markets and returns in
the long term.
There has been a notable derating of growth stocks
recently, and what is most striking is that it includes such a © Jerónimo Martins.
wide range of growth types. The sell-off began in the latter
parts of 2021, with stocks such as the internet platforms. In addition to the sell-off, performance has been
Many of these businesses are seeing growth rates of more impacted by commodity producers and financials that
than 30 per cent year-over-year, are deploying capital, we don’t hold doing particularly well.
taking market share and expanding their end markets. On a more positive note, several of the more durable,
We think many have a stronger moat today than a year steady compounders have done well. United Overseas
ago, let alone a few years ago. Bank and Jerónimo Martins are good examples. SMC
Zalando, which specialises in fashion retail ecommerce, (pneumatic equipment) and Cochlear (hearing implants)
was notably weak in share price terms this quarter. While have been performing well operationally and we are
underlying operational progress remains sound, the upbeat about their long-term outlook. Holdings exposed
company has been caught up in market concerns over the to the energy transition and rise of renewable energy have
potential impact of a higher inflationary environment on also done well.
discretionary spending in Europe. The group also faces Singapore’s United Overseas Bank has benefited from
concerns over whether performance levels from the the prevailing macroeconomic environment. Led by the
pandemic can be retained as the world opens up. Over Wee family, now in its third generation, the business is
longer time horizons, however, we think Zalando has an managed in a conservative style that has an eye on future
excellent opportunity to grow its earnings by taking market generations. Encouragingly, the company made an
share in fashion retail throughout Europe. Looking five acquisition in January, its first since 2007. Management
years out, our modelling shows Zalando on a single-digit expects this to accelerate its growth into the broader Asian
price-earnings multiple, and we believe it will be growing market and view it as a sign of confidence in the business.
just as quickly then as it is today.
Jerónimo Martins, the discount food retailer with
Moving into 2022, quality growth companies also operations across Poland, Portugal, and Colombia, was
saw marked deratings, including Sartorius (biologics a further notable contributor. Another family-run business,
equipment), NIBE (ground source heat pumps), Atlas the company has high profit margins, low debt levels, high
Copco (compressors and vacuum equipment), Keyence market share, and a significant opportunity to expand,
(factory automation leader), Nidec (brushless motors) particularly in Colombia. Operational performance has
and Rational (cooking appliances). We think all these been strong and long term we expect them to build from
companies are operationally sound. their enviable position, take market share and expand into
Sartorius has an innovative culture and a very sticky new territories.
customer base, with lots of recurring business. Its shares
have derated on concerns over its growth rate. We remain
very upbeat about the company and expect it to be a
double-digit grower for many years to come. We think
that growth potential, and the fundamental quality of the
business, are not correctly reflected in the share price.Commentary 04
Portfolio activity Johnson Matthey, by contrast, has been a holding
since 2008. Performance has been underwhelming and it
We continue to challenge the existing holdings for space has roughly round-tripped over that period in share price.
in the portfolio. Over the quarter, we decided to take a This has not been a successful investment and the
new holding in Experian, the UK-listed credit services company has disappointed operationally over the long
business. As the conclusion from the Portfolio term. Johnson Matthey’s core auto catalyst business is
Construction Group discussion put it, ‘you can think structurally challenged because of the shift to electric
of it as helping financial businesses do what they need vehicles. We had hoped that other newer business lines
to without messing up.’ Through its services, Experian would offset that and provide an open runway for their
is helping banks and other businesses obtain an accurate expertise in material science and catalysts, but we no
financial picture of their customers. Experian holds data longer think this is likely. We also noted last quarter
on billions of people and millions of businesses. It has an that there have been a series of management changes.
edge through its scale, insights, the analytics it undertakes, We have decided it is important to exit and use the
and the reputation it has garnered. The company has a big proceeds for more compelling growth opportunities.
growth opportunity in the UK, the US, Brazil and beyond.
We debated several existing holdings at our deep-dive Decision making and dealing with uncertainty
stock discussions, including Shiseido, the Japanese listed
cosmetics business. We decided to make an addition based To quote the academic John Allen Paulos, “Uncertainty
on share price weakness. Despite the current drawdown, is the only certainty there is and knowing how to live
we believe very little has changed with the long-term with insecurity is the only security.” We try to embrace
investment case or the growth runway for the business. uncertainty because the more radical the uncertainty, the
A reduction in travel because of Covid-19 has led to a more drastically misunderstood an opportunity may be.
drop in demand and profits over the past couple of years, We also look for management teams we can trust to
but that will ultimately return. Looking five years ahead handle uncertainty themselves. We don’t know exactly
we think Shiseido will be making margins on a par with what the future will bring, we don’t know how the act
industry leaders, or potentially higher given its Asian of investing will change that future, but we think we can
business skew. This, along with strong topline growth, identify people and companies that can handle whatever
provides scope for significant share price appreciation in comes.
the years to come.
We believe that it is acceptable to say that ‘we don’t
We also added to MercadoLibre, Latin America’s understand.’ Being comfortable with not knowing is key
largest ecommerce business. We remain enthused about to managing uncertainty, so we must be honest with
the long-term growth potential of the business and ourselves and with each other. Here at Baillie Gifford,
impressed by its underlying operational performance. we try to foster a culture of psychological safety in which
We think the investments the company has made to help all levels of seniority share vulnerabilities and uncertainty,
it become more integrated into supply chains have and we take this with us in our relationships with
strengthened its moat. companies. We also know that the most forceful person’s
We made complete sales of Inditex and Johnson opinion isn’t always the most valuable, so we seek
Matthey. We are concerned about the long-term growth contributions from all quarters.
rate and competitive environment of Inditex, the global Uncertainty is the summation of complexity and time
apparel business. The company is also going through a pressure. With enough time even the most complex
generational change in management. Sadly, this is one problem can be solved, but there is never enough time.
holding that didn’t make it to 10 years in the portfolio. We think the most important questions are not ‘what
would I like to know, and how long do I need?’, rather
‘what don’t I know, and at what point will I know enough?’
We must always be open about the assumptions in our
decision making, but the key skill is knowing when to
stop and decide.Commentary 05
Conclusion
Our approach remains one of patient investment in a
diversified portfolio of strong franchise businesses run
by sensible management. We believe over the long term
we are more likely to deliver good results to our clients
through this approach than through trying to second
guess how the current geopolitical drama ends.
Twenty years ago, during another difficult time, we
wrote in our client letter: ‘Investing in real, sustainable
growth has been a successful strategy for as long as there
have been stock markets. There is no reason to think that
this will change. Investors’ confidence in companies’
growth prospects rises and falls; this creates opportunities
– and risks... In the long run, growth is very valuable,
often more valuable than the stock market is prepared to
believe. Growth is devalued when investors panic. That is
what is happening now.’ We were proved right then, and
that message is as valid now as it ever was. To borrow the
words of Winston Churchill, “Success is not final, failure
is not fatal: it is the courage to continue that counts.”
Disruption Week investment webinar series, June 21-
24. Details & registration:
bailliegifford.com/DisruptionWeekPerformance - US Dollar 06
Performance Objective
At least 2% p.a. over benchmark over 3-5 rolling periods.
The performance target stated is aspirational and in no way guaranteed, nor is it intended to be precise,
and is not used for the purpose of determining or constraining the composition of the fund’s portfolio. We
believe it to be a reasonable estimate of the amount by which we can outperform the relevant benchmark
in the long term through the consistent application of our investment process, taking into account the
opportunity set and the characteristics of the markets in which the strategy invests. Performance may
vary between segregated accounts and pooled funds in different jurisdictions as each structure will bear a
different set of costs. A single performance target may not be appropriate for all vehicles in all
jurisdictions and for this reason our fund specific materials will often refer to ‘material’ outperformance of
a benchmark. Factors that may lead to Baillie Gifford failing to meet our investment performance
objectives in future include a significant change in market characteristics such that our growth investment
style is unrewarded for a period of time; or misjudgement of the prospects for long-term earnings growth
for a significant number of individual stocks in which we invest.
Periodic Performance
Composite Net (%) Benchmark (%) Difference (%)
3 Months* -18.7 -5.3 -13.4
1 Year* -16.4 -1.0 -15.3
3 Years 9.5 8.0 1.5
5 Years 8.2 7.3 0.9
10 Years 7.3 6.0 1.3
15 Years 5.2 3.6 1.6
Since Inception 7.9 7.1 0.8
Annualised periods ended 31 March 2022. *Not annualised.
Inception date: 30 June 2002
Figures may not sum due to rounding.
Benchmark is MSCI ACWI ex US Index.
Source: StatPro, MSCI.
US dollars
Discrete Performance
31/03/17- 31/03/18- 31/03/19- 31/03/20- 31/03/21-
31/03/18 31/03/19 31/03/20 31/03/21 31/03/22
Composite Net (%) 18.9 -5.2 -5.7 66.6 -16.4
Benchmark (%) 17.0 -3.7 -15.1 50.0 -1.0
Benchmark is MSCI ACWI ex US Index.
Source: StatPro, MSCI.
US dollars
ACWI ex US All Cap composite is more concentrated than MSCI ACWI ex US Index.Performance - Euro 07
Performance Objective
At least 2% p.a. over benchmark over 3-5 rolling periods.
The performance target stated is aspirational and in no way guaranteed, nor is it intended to be precise,
and is not used for the purpose of determining or constraining the composition of the fund’s portfolio. We
believe it to be a reasonable estimate of the amount by which we can outperform the relevant benchmark
in the long term through the consistent application of our investment process, taking into account the
opportunity set and the characteristics of the markets in which the strategy invests. Performance may
vary between segregated accounts and pooled funds in different jurisdictions as each structure will bear a
different set of costs. A single performance target may not be appropriate for all vehicles in all
jurisdictions and for this reason our fund specific materials will often refer to ‘material’ outperformance of
a benchmark. Factors that may lead to Baillie Gifford failing to meet our investment performance
objectives in future include a significant change in market characteristics such that our growth investment
style is unrewarded for a period of time; or misjudgement of the prospects for long-term earnings growth
for a significant number of individual stocks in which we invest.
Periodic Performance
Composite Net (%) Benchmark (%) Difference (%)
3 Months* -16.9 -3.2 -13.7
1 Year* -11.7 4.5 -16.2
3 Years 9.9 8.3 1.5
5 Years 7.3 6.4 0.9
10 Years 9.2 8.0 1.3
15 Years 6.5 4.8 1.6
Since Inception 7.3 6.5 0.8
Annualised periods ended 31 March 2022. *Not annualised.
Inception date: 30 June 2002
Figures may not sum due to rounding.
Benchmark is MSCI ACWI ex US Index.
Source: StatPro, MSCI.
euro
Discrete Performance
31/03/17- 31/03/18- 31/03/19- 31/03/20- 31/03/21-
31/03/18 31/03/19 31/03/20 31/03/21 31/03/22
Composite Net (%) 3.4 3.8 -3.5 55.5 -11.7
Benchmark (%) 1.8 5.4 -13.2 40.1 4.5
Benchmark is MSCI ACWI ex US Index.
Source: StatPro, MSCI.
euroPerformance - Sterling 08
Performance Objective
At least 2% p.a. over benchmark over 3-5 rolling periods.
The performance target stated is aspirational and in no way guaranteed, nor is it intended to be precise,
and is not used for the purpose of determining or constraining the composition of the fund’s portfolio. We
believe it to be a reasonable estimate of the amount by which we can outperform the relevant benchmark
in the long term through the consistent application of our investment process, taking into account the
opportunity set and the characteristics of the markets in which the strategy invests. Performance may
vary between segregated accounts and pooled funds in different jurisdictions as each structure will bear a
different set of costs. A single performance target may not be appropriate for all vehicles in all
jurisdictions and for this reason our fund specific materials will often refer to ‘material’ outperformance of
a benchmark. Factors that may lead to Baillie Gifford failing to meet our investment performance
objectives in future include a significant change in market characteristics such that our growth investment
style is unrewarded for a period of time; or misjudgement of the prospects for long-term earnings growth
for a significant number of individual stocks in which we invest.
Periodic Performance
Composite Net (%) Benchmark (%) Difference (%)
3 Months* -16.4 -2.6 -13.8
1 Year* -12.4 3.7 -16.1
3 Years 9.1 7.6 1.5
5 Years 7.0 6.2 0.9
10 Years 9.4 8.1 1.3
15 Years 8.0 6.4 1.6
Since Inception 8.7 7.9 0.8
Annualised periods ended 31 March 2022. *Not annualised.
Inception date: 30 June 2002
Figures may not sum due to rounding.
Benchmark is MSCI ACWI ex US Index.
Source: StatPro, MSCI.
sterling
Discrete Performance
31/03/17- 31/03/18- 31/03/19- 31/03/20- 31/03/21-
31/03/18 31/03/19 31/03/20 31/03/21 31/03/22
Composite Net (%) 5.9 2.0 -0.9 49.7 -12.4
Benchmark (%) 4.3 3.6 -10.8 34.8 3.7
Benchmark is MSCI ACWI ex US Index.
Source: StatPro, MSCI.
sterlingPerformance- Canadian Dollar 09
Performance Objective
At least 2% p.a. over benchmark over 3-5 rolling periods.
The performance target stated is aspirational and in no way guaranteed, nor is it intended to be precise,
and is not used for the purpose of determining or constraining the composition of the fund’s portfolio. We
believe it to be a reasonable estimate of the amount by which we can outperform the relevant benchmark
in the long term through the consistent application of our investment process, taking into account the
opportunity set and the characteristics of the markets in which the strategy invests. Performance may
vary between segregated accounts and pooled funds in different jurisdictions as each structure will bear a
different set of costs. A single performance target may not be appropriate for all vehicles in all
jurisdictions and for this reason our fund specific materials will often refer to ‘material’ outperformance of
a benchmark. Factors that may lead to Baillie Gifford failing to meet our investment performance
objectives in future include a significant change in market characteristics such that our growth investment
style is unrewarded for a period of time; or misjudgement of the prospects for long-term earnings growth
for a significant number of individual stocks in which we invest.
Periodic Performance
Composite Net (%) Benchmark (%) Difference (%)
3 Months* -19.6 -6.4 -13.2
1 Year* -16.9 -1.7 -15.2
3 Years 7.1 5.6 1.5
5 Years 6.7 5.9 0.9
10 Years 9.7 8.4 1.3
15 Years 5.8 4.2 1.6
Since Inception 6.8 6.1 0.8
Annualised periods ended 31 March 2022. *Not annualised.
Inception date: 30 June 2002
Figures may not sum due to rounding.
Benchmark is MSCI ACWI ex US Index.
Source: StatPro, MSCI.
Canadian dollars
Discrete Performance
31/03/17- 31/03/18- 31/03/19- 31/03/20- 31/03/21-
31/03/18 31/03/19 31/03/20 31/03/21 31/03/22
Composite Net (%) 14.9 -1.8 0.5 47.1 -16.9
Benchmark (%) 13.2 -0.3 -9.6 32.5 -1.7
Benchmark is MSCI ACWI ex US Index.
Source: StatPro, MSCI.
Canadian dollarsPerformance – Australian Dollar 10
Performance Objective
At least 2% p.a. over benchmark over 3-5 rolling periods.
The performance target stated is aspirational and in no way guaranteed, nor is it intended to be precise,
and is not used for the purpose of determining or constraining the composition of the fund’s portfolio. We
believe it to be a reasonable estimate of the amount by which we can outperform the relevant benchmark
in the long term through the consistent application of our investment process, taking into account the
opportunity set and the characteristics of the markets in which the strategy invests. Performance may
vary between segregated accounts and pooled funds in different jurisdictions as each structure will bear a
different set of costs. A single performance target may not be appropriate for all vehicles in all
jurisdictions and for this reason our fund specific materials will often refer to ‘material’ outperformance of
a benchmark. Factors that may lead to Baillie Gifford failing to meet our investment performance
objectives in future include a significant change in market characteristics such that our growth investment
style is unrewarded for a period of time; or misjudgement of the prospects for long-term earnings growth
for a significant number of individual stocks in which we invest.
Periodic Performance
Composite Net (%) Benchmark (%) Difference (%)
3 Months* -21.3 -8.3 -13.0
1 Year* -15.2 0.4 -15.5
3 Years 7.5 6.0 1.5
5 Years 8.5 7.6 0.9
10 Years 10.8 9.5 1.3
15 Years 5.7 4.1 1.6
Since Inception 6.3 5.6 0.8
Annualised periods ended 31 March 2022. *Not annualised.
Inception date: 30 June 2002
Figures may not sum due to rounding.
Benchmark is MSCI ACWI ex US Index.
Source: StatPro, MSCI.
Australian dollars
Discrete Performance
31/03/17- 31/03/18- 31/03/19- 31/03/20- 31/03/21-
31/03/18 31/03/19 31/03/20 31/03/21 31/03/22
Composite Net (%) 18.2 2.3 9.5 33.8 -15.2
Benchmark (%) 16.4 3.9 -1.5 20.6 0.4
Benchmark is MSCI ACWI ex US Index.
Source: StatPro, MSCI.
Australian dollarsPerformance – Attribution 11 Stock Level Attribution Top and Bottom Ten Contributors to Relative Performance Quarter to March 31, 2022 One Year to March 31, 2022 Stock Name Contribution (%) Stock Name Contribution (%) United Overseas Bank 0.3 Nibe Industrier 0.7 Cochlear 0.2 Tencent 0.6 Raia Drogasil 0.2 Li Ning 0.4 Gazprom 0.2 Jeronimo Martins 0.4 Sberbank 0.2 Richemont 0.4 Jeronimo Martins 0.1 CATL 0.3 Tencent 0.1 Mettler-Toledo 0.3 Lukoil 0.1 United Overseas Bank 0.3 Walmex 0.1 ASML 0.3 SAP 0.1 Nemetschek 0.3 Sysmex -0.9 Zalando SE -1.2 Shopify -0.9 Auto1 Group Se -0.9 Sartorius -0.7 Naspers -0.8 Zalando -0.7 Farfetch -0.7 Nibe Industrier -0.6 Meituan -0.7 Farfetch -0.5 Spotify Technology SA -0.6 Nidec -0.5 ASOS -0.6 Spotify Technology SA -0.4 Sysmex Corp -0.6 Rightmove -0.4 Shopify -0.6 Mettler-Toledo -0.4 Nidec -0.6 Source: StatPro, MSCI. ACWI ex US All Cap composite relative to MSCI ACWI ex US Index. The holdings identified do not represent all of the securities purchased, sold or held during the measurement period. Past performance does not guarantee future returns. A full list showing all holdings’ contribution to the portfolio’s performance and a description on how the attribution is calculated is available on request. Some stocks may not have been held for the whole period.
Portfolio Overview 12
Top Ten Largest Holdings
Stock Name Description of Business % of Portfolio
TSMC Semiconductor manufacturer 3.9
ASML Semiconductor equipment manufacturer 3.3
NIBE International heating technology company 2.6
Mettler-Toledo Swiss manufacturer of precision weighing equipment 2.5
Asian Paints Indian paint company 2.2
Sartorius Group Biopharmaceutical and laboratory equipment supplier 2.2
HDFC Indian mortgage provider 2.2
Richemont Luxury goods company 2.1
Atlas Copco Industrial compressors manufacturer 2.1
United Overseas Bank Singaporean commercial bank 2.0
Total 25.2
Sector Weights (%)
7 1 Consumer Discretionary 22.4
1 2 Industrials 18.7
3 Information Technology 17.2
6
4 Health Care 10.4
5 Financials 10.0
6 Communication Services 9.2
5
7 Consumer Staples 9.1
8 Materials 2.2
2
9 Cash 0.7
4
3
Regional Weights (%)
4 1 Europe (ex UK) 33.2
2 Developed Asia Pacific 27.3
1 3 Emerging Markets 26.4
4 UK 11.1
5 Canada 1.4
6 Cash 0.7
3
2
Figures may not sum due to rounding.Governance Summary 13
Voting Activity
Votes Cast in Favour Votes Cast Against Votes Abstained/Withheld
Companies 7 Companies 3 Companies None
Resolutions 68 Resolutions 3 Resolutions None
The paths to economic decarbonisation remain in place
National energy security will accelerate the adoption of non-fossil fuel
sources
Supply chains are evolving from price and speed objectives to deliver
ESG resilience
Company Engagement
Engagement Type Company
Corporate Governance Hargreaves Lansdown plc, HomeServe
plc, Kering SA, The Weir Group PLC
Environmental/Social Alibaba Group Holding Limited,
BeiGene, Ltd.
AGM or EGM Proposals ASML Holding N.V., Kao Corporation,
Kering SA, Ubisoft Entertainment SA,
Wal-Mart de Mexico, S.A.B. de C.V.
Executive Remuneration Trainline Plc, Zalando SE
Notes on company engagements highlighted in blue can be found in this report. Notes on other company
engagements are available on request.Governance Summary 14
© AFP/Getty Images.
Decarbonisation paths encompass multiple stakeholders, from workers and
communities to natural resource management and
In times of political and economic dislocation when environmental footprint.
access to oil, gas and thermal coal is at a premium, and The vulnerability of physical supply chains was
commodity prices reflect demand and supply imbalances, highlighted by the Covid-19 pandemic as production
it is appropriate to retest our assumptions regarding the facilities and transport routes closed. The supply of oil
pathway to decarbonising the global economy. Can we and gas is under sanction across many nations, such as
still look to the Intergovernmental Panel on Climate Iran, Venezuela and Russia. Tragically, we are currently
Change’s (IPCC) deep cut in global oil consumption by drawn back to the analysis of international supply chains
2050 to meet the 1.5-degree temperature goal? in the context of being used as a tool of state sovereignty
We believe the answer is yes. While fully recognising and border management. But as with our work on climate
that energy security and supply are immediate priorities change in times of disruption, we look to the long term
for governments, the long arc of transition from fossil and see the global nature of trade and cooperation between
fuel to renewable energy is necessary if we are to avoid suppliers, manufacturers and customers as broadly
climate-related dislocation of economies and society. We irreversible. We are engaging with companies in the fund
continue to see companies announce plans to decarbonise for evolution in managing ESG risks across the supply chain.
their operations and value chain as the best means to secure The days of speed and cost being the determining
sustainable growth. In the first quarter of 2022, a further measures of effectiveness are giving way to the necessary
450 companies committed to set zero carbon emissions accommodation of impact and opportunity on the
by 2050 across their operations and value chain. Among stakeholders along the chain. For example, we have
these companies are Farfetch, ASML and Tencent. That previously written on the role of the worker and the need
brings the total number of companies with net zero 2050 for companies to pay close attention to their rights and
targets to 2,643, a 17 per cent increase over just a quarter. working conditions. When international companies are
In this time of disruption, it is premature to assess how withdrawing operations from Russia, it is notable that
much energy self-sufficiency will become a long-term several of the holdings in the fund are suspending
political objective for nations. However, the need for operations but will continue to pay employees their salary
accelerated uptake of renewable and non-fossil fuel and benefits, for instance, Kering, LVMH, and Burberry.
alternatives is already a live debate. These companies are doing the right thing by their
workers and dependent customers. We applaud but are
Supply chain paths not surprised by the long-term approach of these
companies and many other holdings in the portfolio. It
The global nature of modern supply chains has been a displays the strong corporate culture we hold as a core
recurring theme of our ESG analysis and engagement. ESG consideration when investing for the long term.
Supply chains are complex, typically multinational andGovernance Engagement 15
Company Engagement Report
Alibaba Objective: We met with Alibaba's director of ESG engagement and IR in order to
encourage improved ESG reporting and to explore how sustainability is managed across
the Group.
Discussion: Alibaba recognises that its ESG reporting has not been comprehensive
enough in the past and has committed to improving it greatly in 2022. The ambition to
target ESG improvements was evident on the call and we commended the ambition in
Alibaba's recently published carbon neutrality action plan, which seeks Scope 1 and 2
emissions neutrality by 2030. We also focused on the Group's social responsibility strategy
and discussed its new Common Prosperity committee which, chaired by the CEO, aims to
establish accountability across the Group for delivering on a number of social initiatives,
including improving the quality of jobs provided and enabled by Alibaba.
Outcome: We followed up our call with further communications illustrating good
sustainability practice and reporting and will continue to meet with the company to
encourage positive social and environmental developments at Alibaba.
BeiGene Objective: To gain further understanding of the company's approach to ESG management
and its sustainability initiatives.
Discussions: We had a call with BeiGene's CFO, ESG Lead, and the CEO's chief of staff
focusing on the key ESG issues of affordable medicine accessibility in China, employee
management, climate strategies and data security. Contributing to the healthcare pillar
industry, BeiGene is striving to put the products on the National Reimbursement Drug List,
expanding its geographic footprint in broader markets, and working on a self-developed
manufacturing plant in Guangzhou. Based on a good disclosure of Scope 1 and 2
emissions, the company plans to conduct assessments on Scope 3 emissions and set
carbon reduction targets. Further details are expected to follow later this year.
Outcome: It was a productive and sincere conversation with BeiGene which helped us
better understand their ESG priorities and we look forward to continuing the dialogue.
Hargreaves Lansdown Objective: To determine the consideration given by the board to the chair's appointment to
an additional chairmanship.
Discussion: We had a call with the general counsel and company secretary to establish
what consideration had been given to the additional time commitment required in her new
role to reduce the risk of over-boarding.
Outcome: It was explained that there is a formal process to assess any new potential
appointments by board members and that this process had been used. We were assured
that she would not be joining any board committees in her new role and will be giving up
several of her private commitments.
HomeServe Objective: Introductory meeting with the Chair who was appointed following a prolonged
search process.
Discussion: This is an important appointment given the long-serving Founder CEO who is
also a significant shareholder. The search process took longer than is generally the case
and we had been monitoring its progress. The chair has worked previously with a Founder
CEO and appears to have established a good relationship based on mutual respect with
the Homeserve CEO. We discussed his thoughts on the board, changes made to the
operational structure of the business and related senior management appointments.
Outcome: We are satisfied with the outcome of the succession management process.Governance Engagement 16
Company Engagement Report
Kering Objective: Our meeting with CEO Francois-Henri Pinault and CFO Jean-Marc Duplaix was
an opportunity to discuss the drivers of growth and the intangible nature of protecting the
brands and Russian operations.
Discussion: The pandemic has accelerated many of the underlying trends that were
becoming visible pre-pandemic, such as the growth in younger consumers and the
emergence of the US as a nationwide luxury market. The former is tied in with the use of
brands to signify belonging among the young fuelled by Balenciaga and Saint-Laurent and
the latter Pinault thinks has stemmed from second and third-tier US cities having better
access to products through standalone stores or online. Previously, they were poorly
served through wholesale channels in average department stores.
In previous discussions with Pinault, he has always stressed the importance of price
discipline, but he is even more focused on it now. He explained that both Gucci and Saint-
Laurent could have grown much faster in recent years by selling more at lower prices, in
an attempt to capture more of the US market, however, this would compromise the notion
of aspiration. This discipline shows a thoughtful long-term approach.
We also discussed the horrific events in Ukraine. As a result of this, Kering has suspended
operations in Russia, which is less than 1 per cent of group sales. Pinault's main priority in
the short term is to do what it can to help in Ukraine and to look after its staff in Russia,
who will continue to be paid during the closures.
Outcome: A positive meeting that is a useful reminder of what a high-quality set of assets
Kering possesses, overseen by a very thoughtful CEO who is making the right decisions
for the long term.
Kering Objective: We engaged with Kering as part of its pre-AGM roadshow
Discussion: Kering plans to introduce an employee share scheme for its wider workforce,
which we viewed positively. The rationale is for this to act as a retention tool in a
competitive market, create a sense of belonging and encourage the spirit of
entrepreneurship. The company is also ratcheting up the target ambition on the ESG
components of the long-term incentive plan for executive management. This includes a
metric on the conversion of land linked to Kering's supply chain to more sustainable
agricultural practices. This addresses the most environmentally impactful area of the value
chain, which is raw material sourcing.
We raised concerns regarding the low board attendance rate of Emma Watson, Chair of
the Sustainability Committee, and Jean Liu. While we were provided with additional
context on the call, we expect to see attendance rates improve next year. We were also
informed that the Lead Independent Director will be stepping down, and the nominations
committee is in the process of finding a successor.
Outcome: We value the opportunity to engage with Kering in advance of the AGM as this
helps to inform our voting analysis. We were encouraged by the improvements to
remuneration and will continue to monitor board attendance going forward.
Ubisoft Entertainment Objective: We engaged with Ubisoft as part of its pre-AGM roadshow.
Discussion: This was a good opportunity to discuss proposed company resolutions in
advance of the July AGM and we primarily focused on those related to executive
remuneration. The targets within the ESG components are evolving and we noted a shift
towards more stretching targets as part of this, which is positive. However, we voiced
concerns about the proposed reduction in the vesting period for the performance share
awards available to the Executive Committee.
Outcome: We provided constructive feedback on key aspects of executive remuneration
and will analyse the finalised resolutions once these are published in advance of the AGM.Voting 17
Votes Cast in Favour
Companies Voting Rationale
Kao, LONGi Green Energy Technology 'A' - Stock We voted in favour of routine proposals at the aforementioned
Connect, NAVER Corp, Pigeon, Shimano, Shiseido, Thai meeting(s).
Beverage PCL (Singapore)
Votes Cast Against
Company Meeting Details Resolution(s) Voting Rationale
LONGi Green Energy EGM 2 We opposed the Provision of Guarantee because
Technology 'A' - Stock 01/10/22 the level of guarantees to be provided to one of the
Connect Company's subsidiaries is disproportionate to the
company's level of ownership, and therefore could
expose the company to inappropriate risk.
Companies Voting Rationale
Shimano We opposed the low dividend payment as we believe the company's
capital strategy is not in the interests of shareholders.
Thai Beverage PCL (Singapore) We opposed the request to authorise Other Business. We do not
believe this is in the best interests of clients who vote by proxy.
Votes Abstained
We did not abstain on any resolutions during the period.
Votes Withheld
We did not withhold on any resolutions during the period.Transaction Notes 18
New Purchases
Stock Name Transaction Rationale
Experian Experian provides credit information, data, software and analytical services to businesses and
consumers. It enables businesses to form an opinion on the creditworthiness of potential
customers and helps consumers to understand and improve their ability to borrow. It also
protects its businesses and individual customers against fraud and identity theft threats. We see
Experian as exceptionally well-placed to benefit from the inexorable trend towards the
digitisation of all aspects of both consumer and corporate life. Over the past five years, the
company has invested significantly in its innovation capabilities and is opening up a myriad of
new growth opportunities as a result. We believe Experian will continue to enjoy a very long
growth runway in its core markets in the US, the UK and Brazil.
Complete Sales
Stock Name Transaction Rationale
Inditex Inditex, the European fast fashion retailer and owner of brands including
Zara/Pull&Bear/Bershka, has secured an impressive share of its market and continues to
execute well. Its genuinely distinct business model and culture have interacted to create a
durable competitive advantage, and we remain impressed by the company's growth
opportunity. However, the structure of the fast fashion supply chain raises worries that the
industry may see its growth shrink in the coming decade as consumers seek out more
sustainable alternatives. Additionally, while Inditex has adapted to online shopping, we worry
that its ecommerce offering is less differentiated relative to competitors, and its ambition to
invest in the growth opportunity may be waning. Given increasing competition for capital in the
portfolio, we have therefore sold the holding to invest in companies where we have higher
conviction.
Johnson Matthey Whilst there are still some attractions to Johnson Matthey's core automotive catalyst franchise
we see increased long-term risks around its future growth prospects given the disruptive
changes within the automotive industry. We are also less convinced by the likelihood of success
and growth of the other business divisions, including its process technologies division (catalysts
for a broad range of industrial processes). As a result, we decided to sell the holding.Legal Notices 19
MSCI Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with
respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other
indexes or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None
of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any
kind of investment decision and may not be relied on as such.You can also read
