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Fund Profile

Baillie Gifford European Growth 04 December 2023


This is a non-independent marketing communication commissioned by Baillie Gifford. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

BGEU looks exceptionally cheap given the growth potential in the portfolio…

Baillie Gifford European Growth Trust (BGEU) owns a highly differentiated portfolio of high-growth companies based in Europe, managed by Stephen Paice and Chris Davies. The portfolio has almost no crossover with European indices and the typical European equity fund, Stephen and Chris purely looking for companies they have a high conviction can at least double in value over five years, and ideally for those that can be the biggest index weights in the future, rather than the present.

Growth equities have been under pressure this year, as rising interest rates and fears of a recession have led to high levels of risk aversion in markets. Stephen and Chris report that their portfolio has largely performed well operationally, with the long-term growth prospects unchanged or improved. Nevertheless, market sentiment means that valuations have fallen markedly (see Portfolio), arguably increasing the attractions for long-term investors. They have been adding to a number of stocks in their portfolio at lower valuations and have also picked up a handful of new companies where they believe there are exceptional growth prospects being discounted by consensus. Where there have been problems with portfolio companies, the managers are looking through what they see as temporary issues, focusing relentlessly on the long term.

While the growth bias is important, the trust also stands out for the highest allocation to mid-caps in the AIC Europe sector, and the 10.9% allocation to unlisted stocks. The trust has structural Gearing which contributes to volatility in the shares and amounts to c. 15% of NAV.

With its style out of favour, BGEU’s shares have moved onto one of the widest discounts in the AIC Europe sector, and at the time of writing, this Discount is 14.1%.

Kepler View

The last two years have been disappointing for shareholders, but the question now for current or potential holders is what the future holds or what is priced in to the shares, both of BGEU and of the underlying holdings. The managers point to some stark statistics which highlight that the exceptional growth outlook for their companies is not reflected in their rating. Certainly it seems that all environmental factors have been working against the trust: high interest rates have led to investors favouring value stocks, risk aversion has led investors away from mid-caps and increasingly into cash, while the valuations of unlisted companies have been called into question in the absence of many deals. With BGEU’s own shares treading on a wide discount versus history and versus peers, we think there is potential for strong performance once sentiment shifts, and the managers argue it is time to “lean into growth” rather than chase the defensive large caps that have performed better this year.

We acknowledge it may take time for sentiment to shift, and with a highly active portfolio like BGEU’s, good results or operational developments for individual companies are likely to be as important to a re-rating. Promisingly, there are rumours that Northvolt, the portfolio’s largest position and Europe’s leading EV battery manufacturer, is seeking to IPO next year. This could not only see a valuation uplift in the portfolio if the pricing is good, but also dispel some of the negativity around private company valuations, which may be affecting BGEU’s discount.


  • High-conviction approach brings outperformance potential
  • Managers’ compensation package is designed to align long-term interests with shareholders
  • Wide discount could close over time


  • Gearing can enhance losses on the downside
  • Active approach also increases chance of underperformance
  • Likely to continue to be volatile thanks to portfolio makeup and gearing
Continue to Portfolio

Fund History

26 Jan 2024 Baillie Gifford European Growth Trust: manager insights
Investment manager Chris Davies discusses performance, portfolio positioning and why the Trust continues to seek fast-growing companies that prioritise long-term growth over near-term profits. He also explains why the allocation to private companies is an important point of differentiation for the Trust...
04 Dec 2023 Fund Analysis
BGEU looks exceptionally cheap given the growth potential in the portfolio…
03 Nov 2023 European Growth Investing: time to go bargain hunting?
In this webinar recording Stephen Paice, co-manager of the Baillie Gifford European Growth Trust, shares where opportunities lie and what trends he sees driving value creation over the next five years and beyond...
16 Jun 2023 Baillie Gifford: what investors get wrong about Europe
Chris Davies, joint manager of the Baillie Gifford European Growth Trust, gives three examples of European companies that show there is no shortage of ambition and disruption in Europe...
17 Feb 2023 Baillie Gifford European Growth Trust - Manager Insights
Investment manager Stephen Paice explains the European Growth Trust’s objectives, with an update on the portfolio as well as reflections on recent events and reasons for optimism...
15 Dec 2022 Fund Analysis
BGEU is a high-risk, high-potential return strategy looking cheap on a portfolio and share price level…
28 Sep 2022 Mind the gap
While chaos reigns in the short-term for markets, some investors see a growing disconnect between prices and reality...
28 Sep 2022 Slides and Audio: Baillie Gifford European Growth
Download the presentation and listen to the audio from our 'Growth at an unreasonable price' event from 20 September...
22 Jul 2022 Baillie Gifford: Which European country is driving innovation?
In the latest episode of Short Briefings on Long Term Thinking, Baillie Gifford’s Stephen Paice explains how Sweden tops the charts for original thinking and innovation...
18 May 2022 Riding out the storm
We look at trusts with tightly governed discounts which may appeal to investors in volatile markets…
14 Apr 2022 Baillie Gifford European Growth Trust - Growth Investing in Europe
In this recent webinar, co-manager Stephen Paice discusses why the case for owning growing, innovative companies is getting stronger for BGEU despite a rough period for growth investors the world over. Stephen also outlines growth investor opportunities in Europe and answers viewer questions...
18 Feb 2022 Baillie Gifford European Growth Trust - Manager Insights
Moritz Sitte, co-manager of the Baillie Gifford European Growth Trust, gives an update on investment philosophy, portfolio activity and positioning, and outlook...
19 Jan 2022 Fund Analysis
BGEU offers investors an attractive option for European growth investing, combining listed and unlisted opportunities…
20 Oct 2021 Board games
Investment trust boards talk a good game about championing shareholders interests - but do they really deliver?
09 Sep 2021 What next for European equities?
After a strong period for European equity markets, we ask whether this trend can continue…
26 May 2021 Stand and deliver
Is a high OCF daylight robbery or should investors keep calm and carry on? Our analysts debate the perennial question…
21 May 2021 Europe’s digital ambitions
European companies have quietly built up some of the world’s largest digital platforms for ecommerce. The next stage will be anything but quiet say Stephen Paice and Moritz Sitte, joint managers of Baillie Gifford European Growth Trust.
01 Mar 2021 Baillie Gifford European Growth Trust - Manager Update
Stephen Paice, investment manager of the Baillie Gifford European Growth Trust plc, gives an update on investment philosophy, performance, portfolio positioning and outlook. Capital at Risk.
25 Jan 2021 How Covid is changing the way we shop
With the high street either shut down or harder to get to during the pandemic, consumer habits had to change. Baillie Gifford investment manager Moritz Sitte explores what this means for the future of shopping.
25 Jan 2021 Podcast: How Covid is changing the way we shop
With the high street either shut down or harder to get to during the pandemic, consumer habits had to change. In our Short Briefings on Long Term Thinking podcast, Moritz Sitte explores what this means for the future of shopping.
24 Jun 2020 Fund Analysis
BGEU has seen a turnaround in performance under its new managers…
18 Jun 2020 Gimme shelter
As income investors brace for impact we ask which regions and trusts are less likely to cut their dividends in 2020…
18 Dec 2019 Continental blend - the case for European companies
17 Dec 2019 Baillie Gifford European Growth
Baillie Gifford are now managers of the re-named Baillie Gifford European Growth Trust plc. In this film, co-managers Stephen Paice and Moritz Sitte outline why they have repositioned the portfolio to focus on the 40 or so companies that they believe are most likely to deliver outstanding growth over the next five to ten years...
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