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Baillie Gifford Corporate Bond

Elite Rated by FundCalibre

This fund gives access to a concentrated portfolio (typically 60-80 stocks) of primarily UK fixed income securities, from both investment grade and high yield segments of the market. Unlike other funds in the strategic bond sector, the managers aim to add value almost exclusively through their stock-picking prowess, and do not aggressively manage the interest rate exposure or distribution between different credit quality bonds.

Company Description

Founded in 1908 and employee-owned, Baillie Gifford is based in Edinburgh but has offices in London and New York. Awarded the Elite Provider for Equities Rating in 2016, as well as the Elite Provider for Bonds Rating in 2015, it specialises globally in equities, fixed income and multi-asset portfolios.

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Fund Manager

The fund is managed by Stephen Rodger and Torcail Stewart. Stephen joined Baillie Gifford in 2000, having had stints at UBS and M&G. He was made head of the credit team in 2008. Torcail joined Baillie Gifford in 2008 and was made co-manager in 2010. They are supported by six other investment professionals.

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We back our best ideas, invest with conviction and stay focused. There is little room for passengers in this portfolio.

Stephen Rodger & Torcail Stewart - Fund Managers

The Investment Process

The managers believe that inefficiencies exist at the stock level and that through detailed bottom-up research these can be exploited repeatedly to deliver consistent outperformance. Consequently, the relative proportions of different credit quality bonds is fairly stable but a significant portion of the fund will be clustered around the investment grade/high yield border, as this is where the managers believe the most inefficiencies can be found. They have a high conviction approach, and will take concentrated positions in single issues and hold them for the long term.

Risk

The fund invests in fixed income securities which, being debt instruments, are usually significantly less risky than equities. However, the high conviction approach means the fund can be more volatile than some of its peers. As the managers feel using derivatives to manage interest rate or credit risk does not add value over time, investors in this fund will be fully exposed to the ups and downs of the bond market.

Our Opinion

With this fund the managers stick to what they do best, which is picking stocks. While this may seem simplistic, the in-depth research the managers carry out to find ideas is anything but. Also, trying to second guess central bankers and forecast interest rates has been the undoing of many fixed income managers. This is an effective and philosophically pure investment strategy that has been successfully implemented by a high-quality investment team.

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