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Baillie Gifford High Yield Bond

Elite Rated by FundCalibre

Offers investors access to a portfolio of predominantly UK, US and European high yield bonds. As with all other Baillie Gifford funds, the emphasis of the managers is on stock picking, so the portfolio is likely to be concentrated and turnover low, as they back their ideas with conviction and give them time to come to fruition. This is a plain vanilla product which means derivatives don’t feature and interest rate exposure is managed in accordance with the benchmark.

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

Managed by Robert Baltzer and Donald Philips since June 2006. In this time they have built an impressive track record and are supported by six others. Baillie Gifford may not have the biggest fixed income team, but it is stable, populated with high calibre individuals and well suited to the way they run money.

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We are looking for resilient businesses that can survive the full business cycle, with a focus on companies that have the ability to improve their financial health.

Robert Baltzer & Donald Phillips - Fund Managers

The Investment Process

The investable universe is screened for stocks with desirable characteristics. Stocks that pass the screen are then analysed by the relevant sector specialist. Stocks that make it into the portfolio will fall into 1 of 4 buckets; steady, compounders, accelerated or event-driven. The managers will flex these buckets according to where they find ideas. However, as bonds become expensive, the weightings in the riskier buckets are likely to decrease. The managers will look across their investable universe for ideas but are unlikely to make big bets in regard to the relative weightings of different credit quality bonds.

Risk

This fund invests in the riskier end of the fixed income spectrum. The managers’ high-conviction approach, which translates into large position sizes, can make the fund more volatile than some of its peers. The managers don’t use derivatives to manage credit or interest rate risk as they feel this approach doesn’t add value over time.

Our Opinion

The managers believe that the most consistent way to deliver outperformance in this segment of the fixed income market is to pick the right stocks using a straightforward investment process. We think this is well justified, as the fund has delivered excellent relative performance for a number of years.

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