Baillie Gifford China Growth (BGCG)

Baillie Gifford China Growth Trust (BGCG) is co-managed by Sophie Earnshaw and Linda Lin, experienced investors who have spent many years analysing and investing in Chinese equities. They aim to build a high-conviction Portfolio of China’s most promising listed and private companies, looking beyond short-term volatility to uncover mispriced businesses with enduring competitive advantages and strong long-term growth potential. Backed by a ten-strong dedicated China equities team—seven based in Shanghai—and Baillie Gifford’s wider global resources, the managers benefit from deep local insight and regular access to company management, particularly founder-led businesses, helping them identify long-term, alpha-rich opportunities.

Their growth-focussed philosophy centres on structural winners: scalable businesses with strong management teams and durable moats, capable of thriving in China’s evolving economic landscape. Over the past year, the managers capitalised on widespread deratings—driven by years of weak sentiment and market turbulence—to initiate and add to high-quality positions at attractive valuations. These include domestic-facing consumer names benefitting from targeted government stimulus and companies aligned with China’s push for technological self-sufficiency.

The portfolio remains firmly growth-oriented, with minimal exposure to slower-growing state-owned enterprises—a stance that supported performance in 2020 as growth stocks surged post-COVID. However, subsequent years of heightened macroeconomic and geopolitical headwinds challenged the managers’ preferred style, contributing heavily to BGCG lagging its benchmark over five years.

However, sentiment began to stabilise in 2024, with targeted stimulus supporting a recovery in domestic consumption, boosting BGCG’s returns, resulting in the trust outperforming its benchmark over the past 12 months (see Performance). The managers remain optimistic about China’s internal growth drivers, particularly around BGCG’s positioning to capture tailwinds from continued policy support, innovation in manufacturing and high-end tech, gradual income growth, and further targeted stimulus.

At the time of writing, BGCG trades at a 7.0% Discount, wider than its five-year average of 5.7%.