The markets tell us what investors are doing. But what, exactly, are they thinking? Edison’s Inside the mind of investors aims to find out. In this edition, we outline the key topics of Baillie Gifford’s Investment Trust Conference.
Baillie Gifford’s Investment Trust Conference offered investors a valuable overview of how to control risks in uncertain and volatile times. The conference, entitled The Next Chapter, showcased the asset manager’s enhanced commitment to long-term, high-conviction investing despite current macroeconomic uncertainties. The event brought together portfolio managers from across Baillie Gifford’s 12 listed investment trusts, revealing a consistent theme of quiet confidence underpinned by patience and a focus on growth companies.
The main themes
Six key themes emerged: the importance of identifying a small number of transformational winners; the role of organisational culture in sustainable business success; the expanding opportunity in private markets; the structural transition across Asian markets; the importance of a diversified growth framework; and the role of resilient dividend strategies for income-oriented portfolios.
The overarching message was clear: Baillie Gifford views current market volatility not as a risk to be avoided but as an environment where differentiated thinking and long-term structural alignment can deliver superior returns.
1) Skew to big winners
Tom Slater, portfolio manager of Scottish Mortgage Investment Trust (SMT), shared analysis showing that a small number of companies are responsible for most market gains. This conclusion was supported by an analysis of both S&P 500 and global stock performance. In the case of the S&P 500, 5% of stocks increased fivefold over five years. Similarly, 5% of global stocks increased four-and-a-half times over the same period. This is why SMT backs selected companies that it believes will generate long-term success. This strategy has been exemplified by its holding in Nvidia, whose share price has increased 80x in the last decade to March 2024. However, Slater emphasised the importance of holding stocks over the long term. SMT has held shares in Nvidia since 2016, reinforcing its average holding period of 9.7 years.
2) Organisational culture for resilience
Baillie Gifford US Growth Trust’s (USA’s) portfolio manager Kirsty Gibson highlighted organisational culture as a critical but often overlooked investment factor. She identified two distinct cultural components that support long-term business success: foundational culture, which refers to the core beliefs instilled by company founders and embedded in decision-making; and created culture, which is specific to a point in time and evolves as companies scale and adapt. Sustainable success comes from alignment between the two.
This framework is particularly valuable for USA, which can allocate up to 50% of its portfolio to private companies that are still developing their corporate identity. Fundamentally USA is not just buying businesses, it is backing cultures that can scale. Companies that manage both cultural elements effectively tend to show resilience through uncertainty, restructuring or scaling phases. For a trust with holding periods measured in years, backing culturally aligned companies is essential.
3) Capturing value creation in private markets
Schiehallion Fund’s (MNTN’s) portfolio manager Robert Natzler addressed the structural shift towards private markets, noting that c 87% of US companies with revenue of more than $100m remain private. As private secondary transactions now exceed IPO volumes, much of the value creation occurs outside public markets.
MNTN provides exposure to late-stage private companies scaling in sectors such as biotechnology, fintech, software and AI. These businesses typically feature strong gross margins, clear unit economics and healthy cash positions. Nearly 70% of the fund’s portfolio companies have more than four years of cash runway, offering resilience in uncertain markets. The fund’s strategy recognises that companies are staying private longer while scaling faster, creating opportunities for investors willing to enter ahead of public listings.
Exhibit 1: Number of US firms with revenue >$100m
Source: Baillie Gifford Schiehallion Fund presentation at the 2025 Baillie Gifford’s Investment Trust Conference
Pacific Horizon Investment Trust’s (PHI’s) manager Roderick Snell highlighted Asia as the engine of global middle-class expansion, with more than 80% of the world’s new middle-class consumers expected to emerge from the region. Markets like Vietnam and China show domestic strength supported by favourable policies.
Baillie Gifford China Growth Trust’s (BGCG’s) managers made a strong case for contrarian optimism, noting that Chinese companies trade at a 50% discount to US peers despite comparable or better earnings growth. They also emphasised that AI development in China is being achieved at around one-third of the cost of equivalent US development, suggesting significant value opportunities for investors.
Additionally, after three decades of economic stagnation, Japan is undergoing fundamental change. Baillie Gifford Japan Trust’s (BGFD’s) manager Matthew Brett identified key catalysts such as rising pricing power and improved financial strength which can potentially shrink valuation discounts. These are supported by real wage growth, renewed infrastructure spending and low inflation, creating an attractive environment for selective growth investing. BGFD focuses on growth companies benefiting from domestic change, while expanding globally, while Baillie Gifford Shin Nippon (BGS) concentrates on Japanese small caps, a market of 3,000–4,000 listed companies with limited analyst coverage. Many are founder-led and operate in niche sectors, offering unique opportunities.
5) Diversified growth portfolio
Monks Investment Trust (MNKS) employs a sophisticated portfolio structure based on three growth categories: stalwarts (long-term compounders), rapid growth and cyclical growth companies. This diversified approach allows the trust to benefit from different market behaviour patterns, providing resilience across various economic cycles.
However, Baillie Gifford European Growth Trust (BGEU) points out that it is important to ensure that company fundamentals and valuations are aligned with market expectations. Hence, its differentiated, structural growth portfolio seeks situations where companies are growing faster than consensus expectations.
6) Income and dividend resilience
Scottish American Investment Company (SAIN) demonstrates how careful portfolio construction can deliver resilient dividend growth. Portfolio manager James Dow noted that during the COVID-19 market shock in 2020, nine of the trust’s top 10 holdings increased their dividends, reflecting rigorous company selection rather than fortunate timing. SAIN uses a comprehensive resilience checklist to filter out companies with excessive debt, fragile margins or unsustainable payout ratios. The result is a portfolio yielding c 3%, which includes growth companies that can compound 10% of earnings per year and provide resilient dividends.
Investment implications
Baillie Gifford’s strategic positioning reflects several key principles relevant to current market conditions.
- Long-term perspective creates advantages. In a market focused on short-term performance, patience can facilitate access to opportunities unavailable to quarterly focused investors. Nvidia’s multi-year trajectory illustrates how long holding periods can capture transformational value creation.
- Cultural analysis strengthens research. Understanding a company’s culture provides insights into resilience and adaptability, which is particularly valuable when investing in private companies or during periods of market stress.
- Structural shifts create asymmetric opportunities. Private market expansion, Asian middle-class growth and Japan’s economic reawakening represent structural changes that may not be fully reflected in current valuations.
- Diversification requires sophistication. Effective portfolio construction goes beyond traditional sector or geographic diversification to include growth-style diversification and cultural resilience factors.
- Quality income requires active curation. Sustainable dividend growth is achieved through careful company selection and ongoing monitoring rather than passive high-yield strategies.
Conclusion
Baillie Gifford’s Investment Trust Conference revealed an organisation confident in its long-term investment philosophy despite near-term market uncertainties. The consistency of approach across different strategies, combined with the underlying conviction of portfolio managers, suggests that Baillie Gifford views current market conditions as an opportunity rather than a constraint. Its investment trusts are positioned to benefit from long-term value creation, while managing near-term volatility through diversified, resilient portfolios.
| Investment Trusts featured at the Baillie Gifford Conference: |
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Baillie Gifford European Growth Trust
Baillie Gifford Japan Trust
Baillie Gifford Shin Nippon
Baillie Gifford UK Growth Trust
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Pacific Horizon Investment Trust
Scottish Mortgage Investment Trust
The Monks Investment Trust
The Scottish American Investment Company
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