Baillie Gifford European Growth (BGEU)

Baillie Gifford European Growth (BGEU) owns a portfolio of companies that managers Stephen Paice and Chris Davies consider to be growth outliers in Europe. Stephen and Chris look for companies they think can at least double their money over five years and aim to outperform by taking a longer-term view than the market. The trust has cheap structural Gearing which contributes to the growth potential as well as the volatility in the shares and amounts to c. 14% of NAV.

BGEU’s portfolio has a strong growth bias and a heavy tilt to the mid-caps. This, along with some stock-specific issues with private companies, has led to some disappointing Performance since 2022. However, the listed portfolio outperformed the FTSE Europe ex-UK Index over the latest financial year, which is one promising sign, buoyed by some strong performances from companies like Spotify. Stephen and Chris argue that growth is still being undervalued by the market, and they have made a number of new additions to the Portfolio. In their view, the secular growth drivers behind their portfolio are as strong as ever, and some cyclical headwinds are abating which is promising for 2025.

In response to the troubled performance, the board has decided to implement a tender offer for 100% of the shares if the trust doesn’t outperform the index over the four years to 30/09/2028. At the time of writing, the shares trade on a 15% Discount to NAV, the widest in the peer group. The managers have retained their same core strategy, but have made some minor adjustments, determining they should be quicker to take some profits in their winners if they become expensive.