- MLC has enhanced its multi-manager UK share strategy by adding another active manager, Baillie Gifford & Co ("Baillie Gifford")
- With the appointment of Baillie Gifford, the number of managers within the MLC UK equity strategy has increased from five to six
- Key benefits of this change are:
- the strategy remains fully exposed to active management
- broader diversification of insight across more managers
- The return objectives of the strategy are unchanged
Appointment of Baillie Gifford
An integral part of MLC’s process is the ongoing review and assessment of the manager arrangements for each asset class. The review process is not restricted to incumbent managers, which are subjected to frequent monitoring and analysis. It also includes an assessment of the potential role that other high-interest managers could play in achieving strategy and client objectives.
Baillie Gifford is a manager that MLC has been researching for many years. Our first review meeting occurred in 2000 and our respect for the firm and its UK equity management credentials grew from subsequent reviews. However, access to Baillie Gifford’s UK equities capabilities has (until recently) been restricted due to an earlier decision by the firm to close to new segregated accounts. The recent decision to selectively re-open to new UK equity mandates has enabled MLC to appoint Baillie Gifford.
The inclusion of BG in the MLC strategy has been facilitated by small reductions in the allocations to three incumbent managers – Capital International, Bernstein and Alliance. The following table shows the adjustments that have been made to facilitate the appointment of Baillie Gifford.
| Manager | Previous | Current | Change |
|---|---|---|---|
| Capital International | 25% | 20% | -5.0% |
| UBS | 20% | 20% | N/A |
| Bernstein | 20% | 15% | -5.0% |
| Alliance | 25% | 20% | -5.0% |
| Dimensional Fund Advisors | 10% | 10% | N/A |
| Baillie Gifford | N/A | 15% | +15% |
The enhancements to the strategy were carefully implemented by MLC’s dedicated implementation team during December 2007. Implementation strategies were employed to help minimise costs such as stamp duty, brokerage and market impact costs.
Profile of Baillie Gifford & Co
Baillie Gifford is an independent investment management firm that is based in Edinburgh, Scotland. Founded in 1908, the Baillie Gifford group has approximately £52bn in funds under management.
Baillie Gifford is an independent partnership, wholly owned by 33 senior and full-time employees. This ownership structure has meant the firm has a history of attracting and retaining skilled individuals for the entirety of their investment careers.
Baillie Gifford offers investors a range of UK equity portfolio strategies spanning the risk return spectrum. The MLC portfolio is invested in the UK High Alpha strategy which is a concentrated portfolio comprising 25-35 companies that is benchmarked against the FTSE All Share Index. This high conviction portfolio is consistent with the MLC strategy’s investment objectives.
Baillie Gifford’s UK equities department is large and well resourced, comprising fifteen investment professionals. Large and mid caps are covered by the main UK team, ensuring there is breadth and depth of coverage of the market’s top 95% and the stocks in Baillie Gifford’s portfolios. UK small caps are covered by a separate team who feed their best ideas from the small cap universe to the manager of the UK High Alpha portfolio.
Baillie Gifford’s disciplined investment approach is based on the belief that share prices ultimately follow earnings. As a result, portfolios comprise the highest quality companies with sustainable competitive advantages in their industries and earnings growth that is expected to exceed the market average over the long term. There is a preference for companies with attractive long-term earnings growth prospects, rather than those with cyclical or transitory growth characteristics.