Baillie Gifford American Class B - Income (GBP)

The fund aims to outperform the S&P500 index by 1.5% per year after costs over any five year period. The share prices of well-known US companies can react very quickly to new information. This makes it difficult to consistently perform better than the broader market over the long term, but we think the Baillie Gifford American team are well equipped to do so.

Investors should note that while growth-style investing has done very well in recent years compared to value investing, a well-diversified and robust portfolio should include a variety of styles, as well as different asset classes and geographies. The manager's long term time horizon means the fund tends to have a relatively low annual turnover of stocks.

When the manager's growth-focused investment style is out of favour, investors are less willing to pay up for companies with high growth potential and so we wouldn't expect the fund to perform as well in this environment. You should consider annual performance in the context of a longer time horizon and not in isolation.

The managers believe few companies are capable of delivering exceptional returns over the long run, so they run a relatively concentrated fund of between 30 and 50 stocks. These are companies they believe have excellent growth potential and each one can contribute significantly to returns, although this approach increases risk. Baillie Gifford also has a dedicated Governance and Sustainability team responsible for producing ESG research which challenges and contributes to the investment decision-making process. The managers also have access to a wider team of 38 analysts who spend time researching US equities at Baillie Gifford. We think the managers are well resourced to focus on the job in hand.

The managers invest in companies with high growth potential that they think could be capable of delivering exceptional returns over the long run. They believe that companies with resilient business models make for good long term investments and that corporate culture can be a key component of company performance and ultimately investor returns although of course there are no guarantees.

Culture is difficult to measure and capture. But the managers believe it's one of the most underappreciated drivers of long-term returns. Companies with a strong culture are often adaptable, durable and willing to invest for the future at the expense of short term profits. And although there's no exact science, they believe that it's these kind of companies that are often the ones to really deliver on their vision and purpose. Founder involvement is another element that the managers view positively. They believe these individuals, who usually still have much of their wealth tied up in the business, often possess the strong vision that's required to continue growing the company.

The managers spend a lot of time thinking about industry dynamics and the powerful trends developing across the economy. Many of these businesses disrupt old ways of doing things and they have grouped these into eight distinct areas. They are; the future of commerce, innovative healthcare, the battle for our Attention, new enterprise, the digitalisation of finance, the evolution of Transport, capital allocators, and changing education.