Baillie Gifford has moved two giant underperforming funds into a different sector after they both failed to beat their previous sector’s average return for more than three years.
The asset manager announced yesterday (September 26) its £7.2bn Diversified Growth fund and £1.8bn Multi-Asset Growth fund had been switched from the IA Specialist sector to the Targeted Absolute Return sector.
James Budden, director of retail marketing and distribution, said the IA Targeted Return Sector was a “more fitting classification” for the funds and positioned them against “more appropriate peers”.
But both funds had performed below the specialist sector’s average return since July 2016, while the Multi-Asset Growth fund had generated returns significantly less than its peer group since its inception in December 2015, according to FE data.
Last year, the IA Specialist sector produced average returns of 8 per cent while Baillie Gifford’s Diversified Growth and Multi-Asset funds returned 3.8 and 5.6 per cent respectively.
It is worth noting the IA Specialist sector has a large variety of different types of funds, meaning some high performing funds could skew the average return of the sector.
FE data also showed that by comparison, the IA Targeted Absolute Return Sector — which the funds are now part of — produced an average return of 0.91 per cent last year, but Baillie Gifford rebutted one-year return data was not in line with their long-term investment approach.
Baillie Gifford's Multi-Asset Growth fund compared to the average of each sector:
Yellow: IA Specialist sector. Orange: Multi-Asset Growth fund. Blue: IA Targeted Absolute Return sector. Source: Hargreaves Lansdown
Baillie Gifford's Diversified Growth fund compared to the average of each sector:
Yellow: IA Specialist sector. Orange: Multi-Asset Growth fund. Blue: IA Targeted Absolute Return Sector. Source: Hargreaves Lansdown
The asset manager said the decision to shift the £9bn of assets did not mean the mandates would be run in a different way.
Mr Budden said: “Our investment approach remains unchanged and we will continue to target long-term returns at a lower risk than equity markets by investing in a broad range of traditional and alternative asset classes.”
The Diversified Growth fund aims to achieve an average return of at least 3.5 per cent more than the UK base rate over a five-year period, while the Multi-Asset Growth fund aims to deliver 3.5 per cent more than the UK base rate every year, both after the deduction of costs.
Both funds aim to achieve a positive return over three-year periods and annualised volatility of returns below 10 per cent.
imogen.tew@ft.com
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