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Baillie Gifford to launch US ‘patient capital’ trust

Edinburgh partnership to leverage success of Scottish Mortgage and its American fund with ‘patient capital-style’ investment trust focused on US unlisted ‘unicorns’, its first closed-end fund launch in 32 years.

Baillie Gifford to launch US ‘patient capital’ trust

Baillie Gifford plans to launch a US ‘patient capital-style’ investment trust, its first new closed-end fund launch in 32 years, Citywire understands.

Initially, the trust would be a mirror of the £1 billion Baillie Gifford American fund, which invests in listed large US stocks. Its lead manager is Tom Slater (pictured), joint manager of the group’s flagship Scottish Mortgage Trust (SMT), who also oversees its North American equity team.

It is envisaged that the new trust would gradually shift its focus to some of the unlisted tech companies or ‘unicorns’, such as Dropbox and Airbnb, that have become a prominent part of Scottish Mortgage in recent years.

Citywire understands that up to a maximum of 50% of the new trust’s portfolio could be invested in unquoted companies, double the cap on the £6.2 billion global trust that Slater runs jointly with James Anderson. In practice it is expected to average between 20-25% of its net assets.

The trust would be run by Gary Robinson, who has worked at Baillie Gifford for 15 years and who previously managed the North American team. It will also have input from Peter Singlehurst who runs a team of analysts looking at private companies which Baillie Gifford has found are delaying their debut on stock markets for up to 11 years, compared with four previously.

Baillie Gifford is looking to raise £200 million for the new investment trust’s flotation which it hopes to launch in the middle of next month. A prospectus for the initial public offering (IPO) is being finalised.

It’s also understood Baillie Gifford partners intend to back the trust with around £10 million to 20 million of their own money.

The firm is currently sounding out investors. Although its portfolio would be very different from the early stage healthcare portfolio that Neil Woodford has developed for his undeperforming Patient Capital (WPCT) investment trust, Baillie Gifford believes it will share a similar philosophy of backing growth companies for the long term. 

Industry insiders said they would be surprised if the trust does not get off the ground, given Baillie Gifford’s strong track record in this area.

The American fund delivered a total return of 73.9% in the three years to December, beating its sector average of 47.1% by some distance. Scottish Mortgage, whose top holding is a 9% weighting in Amazon, the US e-commerce giant, has generated a 70% total return in the past three years (to yesterday), but has seen net assets nearly double as demand for its shares has grown.

Nevertheless, the timing of the launch could prove tricky given the recent upheaval in global stock markets and volatility in US tech stocks.

A source close to the company said: ‘There’s obviously a lot of cost involved in doing a trust, getting one off the ground is difficult.

‘But the unquoted element is certainly different. [The trust] would be something very different.

‘Baillie Gifford is pretty keen to do this. It is a big house and I’m sure it will get enough support, but you never know.’

Baillie Gifford declined to comment. It manages seven investment trusts, the last of which it launched was Baillie Gifford Shin Nippon (BGS) in 1985, four years after the launch of its successful Japan (BGFD) trust.

 

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