Baillie Gifford suffers fresh blow after shake-up at flagship Scottish Mortgage fund

Baillie Gifford has reported a weak performance from another of its funds just a day after a boardroom reshuffle at its flagship Scottish Mortgage Investment Trust, which has suffered amid the tech downturn.

Results for the year to the end of January revealed that the Edinburgh investment firm’s Japan-focused Shin Nippon saw its net asset value per share fall by 1.2 per cent and its share price by 8.9 per cent.

The firm said that the fund managers’ “unwavering focus on high-growth smaller companies is currently out of sync with investor sentiment”, meaning that the recent performance in absolute and relative terms “is not unexpected”. It added: “Growth stocks are now priced at levels that assume barely any future increase in revenues or profits, which is in stark contrast to their underlying fundamentals. The board and managers continue to believe that being patient and seeing through market noise increases the chances of picking exceptional companies that will deliver attractive long-term returns.”

Shin Nippon aims to achieve long-term capital growth through investment mainly in small Japanese companies which are believed to have “above average prospects for growth”. As of the end of January, the fund had total assets of £633.5 million.

News of the underperformance comes after it emerged that Fiona McBain had resigned as chairwoman of the 114-year-old Scottish Mortgage Investment Trust as the board was reshuffled in the wake of a bust-up over corporate governance. Justin Dowley, the trust’s current senior independent director, will succeed McBain - a former boss of Scottish Friendly - as chair of the board with effect from the conclusion of the 2023 annual general meeting. SMIT confirmed that Amar Bhide, who recently issued a rare public criticism of corporate governance at the trust, is no longer a director of the company. In response to that criticism McBain had said last week: “The board is convinced that the managers are taking the right long-term investment approach.”

Scottish Mortgage, managed by Baillie Gifford, has been one the UK’s most successful trusts over the past decade as holdings in big tech outfits such as Tesla and Alibaba have paid off. However, the slump in tech stocks has hit its performance with the trust’s share price sliding more than 30 per cent over the past year.