Leading fund managers: ‘The storm is easing’ – but it’s a fool’s game to second guess the market
Fund managers at Baillie Gifford said “the storm was easing” on global markets today as the firm’s London-listed US fund narrowed the heavy discount that has plagued firms across the investment trust sector.
Bosses at the Baillie Gifford US Growth Trust said the underlying value of its investments had climbed 4.1 per cent to £631,428 in the six months to the end of November after a stronger performance of its tech-heavy US portfolio, which includes the likes of Tesla and Facebook owner Meta.
The firm’s share price also rose 12.1 per cent in the same period and helped narrow the chasm between the value of the trust and its underlying assets from 22.4 per cent to 16.2 per cent.
Investment trusts in London have been dogged by sluggish valuations in the past two years as investors sour on the sector amid surging inflation and rapid rate hikes.
The fund’s managers said the sector continued to suffer from levels of discount “last seen during the financial crisis” with the average gap in the sector reaching lows of 16.9 per at the end of October 2023. However, the volatility was beginning to settle, they added.
“It has been a better year. The storm is easing. We know we cannot assume that the sun will always shine, but we take comfort from the fact that the companies held in your portfolio are executing, and executing well,” the firm told investors in its half-year report.
“When fundamentals will be better reflected in share prices is nigh on impossible to predict. Trying to predict the mood of the multitude of market participants is a fool’s game for the long-term stock picker.”
Bosses at Baillie Gifford said they would also roll out a buyback programme worth £319,000 today with the aim of reining in some of the volatility in its share price.
However, they warned investors that the sale of some of its liquid public holdings to fund the programme could in fact widen the discount of the firm by skewing its holding towards private markets.
“Importantly if the exposure to private companies is a key driver behind the discount any such buyback could result in the discount widening rather than tightening,” they said.
The lacklustre valuations of the UK’s investment trusts have made them a target for activist investors in recent months. New York-based hedge fund Saba Capital revealed a series of stakes in undervalued London investment trusts in October including the Baillie Gifford US Growth Trust and a number of Baillie Gifford’s other listed vehicles.