Baillie Gifford investment trust to merge with sister fund

Investors can opt to receive cash or take units in the open-ended vehicle, writes Sam Benstead.

2nd October 2024 09:10

Baillie Gifford investment trust Keystone Positive Change is being rolled into its open-ended sister fund, the £1.8 billion Baillie Gifford Positive Change strategy.

Shareholders can opt to receive units in the open-ended fund, which is run by the same team and has the same investment approach, or take cash at close to the net asset value (NAV) of the trust.

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Baillie Gifford took over the mandate of Keystone in early 2021 from Invesco, during a boom period for the growth shares that the Scottish fund manager specialises in.

But since then, returns have been disappointing and the shares have traded at a discount.

This is because interest rates have risen, which has made “jam tomorrow” companies less attractive. In addition, there have been stock-specific issues at the likes of Beyond Meat and Teladoc.

The trust invests in growth companies that also have a positive impact on the planet. It has large positions in chip companies ASML and TSMC, as well as Latin American shopping platform MercadoLibre.

The board of the trust said in mid-September that it was reviewing options for the underperforming trust that would be in the interest of shareholders, with a wind-up and merger one of the proposals.

It also said that over the past 12 months it had taken steps to enhance value for shareholders, such as commencing a share buyback programme, introducing a continuation vote and increasing marketing activity.

But now it has taken a decision. Karen Brade, chair of Keystone Positive Change, said: “We recognise that the company has not received sufficient support from shareholders to allow the strategy the time needed to play out over the period to the February 2027 continuation vote that we recently introduced.

“The board has therefore reluctantly agreed to propose the scheme, which will provide shareholders with an opportunity to continue their investment through the rollover option.”

It is expected that the scheme will take effect during the first quarter of 2025, but a further announcement will be made by the board about timelines.

The trust owns five private companies, including Swedish battery group Northvolt, which account for 4.3% of the portfolio.

The board said that it was unlikely that it would be able to sell these investments before cash is returned to shareholders, and any proceeds from these sales would come at a later date.

Baillie Gifford Positive Change has returned 217% since launch in 2017, ahead of the 110% gain for the MSCI All Country World index.

It delivered excellent returns during the pandemic in 2020 and 2021, before collapsing as interest rates rose to combat higher inflation.

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