Baillie Gifford has implemented a dramatic overhaul to the portfolio it inherited from Schroders, less than three months into its running of the Baillie Gifford UK Growth (BGUK) investment trust.
Baillie Gifford took over management of the trust, formerly called Schroder UK Growth, at the end of June.
Milena Mileva, who now manages the fund with Citywire AAA-rated Iain McCombie, had pledged to take the portfolio to 'the other end of the spectrum', moving from previous manager Philip Matthews' 'core value' approach to one targeting growth.
Speaking to a private investor forum yesterday, Mileva (pictured) said 'just a couple' of stocks from the Schroders portfolio now remained in the trust.
Data on the portfolio holdings is only available to the end of July, with Mileva emphasising it had evolved since then, but it underlines the speed of the change.
Of the trust's 50 holdings at the end of April, detailed in the latest annual report, only seven survived Baillie Gifford's first month at the helm: Just Group (JUST), HSBC (HSBA), Legal & General (LGEN), Record (RECL), GVC (GVC), Ten Entertainment (TEG) and Sherborne Investors (SIGC).
Mileva and McCombie made 40 new buys for the trust in just over four weeks, resulting in a transformed top 10:
|Old holdings (30 April)||New holdings (31 July)|
|Shell 9.7%||St James's Place 4.2%|
|BP 5.7%||Hargreaves Lansdown 4.2%|
|Tesco 5.4%||Prudential 4.1%|
|Standard Chartered 5.2%||Abcam 2.9%|
|Balfour Beatty 4.4%||Halma 2.9%|
|British American Tobacco 4.3%||Just Eat 2.8%|
|Lloyds 3.9%||Auto Trader 2.8%|
|Aviva 3.9%||Legal & General 2.8%|
|GlaxoSmithKline 3.4%||Burberry 2.7%|
|Just Group 3.1%||Bunzl 2.7%|
Source: Schroders, Baillie Gifford
Mileva highlighted four of the new stocks in yesterday's private investor forum, as well as facing questioning from one investor over major holding St James's Place (SJP), who took issue with the financial advice group's charges.
'The level of the fees is very high and the level will have to come down over the next 15 years,' she said.
'There is a legitimate question mark over the absolute level of the fees. I do have sympathy with that argument.'
She hailed major holding Hargreaves Lansdown's (HRGV) dominance of the UK DIY investor market and its efforts to build its market by targeting a UK savings and investment pool chief executive Chris Hill has estimated at £2.4 trillion.
Mileva pointed to the online stockbrokers' efforts in recent years to extend its appeal to newcomers to investment, such as through its Portfolio+ ready-made Sipp portfolios launched in 2015, and this year's launch of its Simply Invest passive proposition.
Braving the high street
On the embattled UK high street, Mileva picked out clothing retailer Ted Baker (TED) as a company that was better placed than rivals to deal with the shift towards online shopping.
She said the company had proved better than many other UK retailers in replicating its business overseas and had stayed true to its brand identity, grown through word-of-mouth without the heavy advertising or supermodel sponsorship employed by rival clothing firms.
'Ted Baker has been quite different to most other branded retailers,' she said. 'When you talk about the strong identity and vision of a company, this has it,' she added.
Mileva is also a fan of the company's pace of growth. 'For a retailer, growth can be quite a dangerous thing,' she said.
'It comes with risk: you drop the ball, you stop executing well, you start diluting the brand. Ted Baker has never really fallen into the temptation of growth for its own sake.'
Mileva described another top portfolio pick, Renishaw (RSW), as a 'truly world leading UK engineering business', which despite its cyclicality maintained its long-term focus, developing its offering, keeping staff loyal and securing new entrants through work with schools and universities.
'It always does these things, as much when market conditions are weak as when trading is booming,' she said.
Genus (GNS), the animal genetics company, is focused on a gene editing process that could develop resistance to the porcine reproductive and respiratory syndrome virus among pigs.
'Given the scale of the economic damage the disease brings to farmers it would be a fantastic achievement.'
Questioned over the possible impact on her portfolio of the Brexit negotiations, Milena said the stocks would be 'sensitive to a Brexit outcome without a shadow of a doubt', but that she wouldn't seek to trade around politicians' negotiations.
'We won't really change our approach. We are backing them for the long term,' she said.
'We won't really do any trading on the back of macroeconomic, political outcomes.'
Since the announcement of Schroders' replacement as manager of the trust by Baillie Gifford, the shares' discount to net asset value (NAV) has markedly narrowed, from a 12-month high of 14.2% to just 4.4% as of yesterday's close.