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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Baillie Gifford -Global Alpha 2026 Q2 Investor Letter | Buyside Digest

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Primary Source Intelligence • Q2 2026 Letter Analysis

Baillie Gifford -Global Alpha Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Baillie Gifford -Global Alpha. This analysis is provided for institutional research purposes only and is not investment advice.

SOURCE UNAVAILABLE

Fund Returns

YTD+7.8%

Annualized+10.2%

Positioning StanceCONSTRUCTIVE

Market CapLarge Cap

GeographyGlobal

Digest Analysis

Quick Take

"Global Alpha's portfolio trades at an unprecedented discount to the market despite delivering strong fundamental growth and higher expected earnings."

Executive Summary

Baillie Gifford's Global Alpha portfolio returned double-digits in Q2 2026 but lagged the MSCI ACWI index, which was driven by AI-related hardware stocks. The portfolio has delivered almost 20% since the start of 2025, underpinned by strong sales, earnings, and returns growth that have gone relatively unrewarded. This mismatch has caused the portfolio's valuation premium versus the market to evaporate, reaching unprecedented territory with the strategy now trading at a discount on some measures. The manager maintains significant AI exposure through core positions in NVIDIA and TSMC (over 10% combined), hyperscalers Amazon and Alphabet, and newly added specialized equipment makers Besi and Lasertec. Beyond AI, the team added positions in copper miners, industrial gas leader Linde, and Axon Enterprise after its sell-off on misplaced AI concerns. The portfolio's higher expected earnings growth, stronger financial positions, and broad set of growth drivers position it for substantial outperformance as market focus expands beyond the single AI theme. The manager remains convinced that breadth, resilience, and growth will deliver long-term returns.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

72%

CautiousHigh

High Conviction (72%)

The portfolio demonstrates high conviction through concentrated positions: NVIDIA and TSMC together exceed 10%, and the four core AI holdings (adding Amazon and Alphabet) represent over half of the AI supply chain exposure. The manager names specific positions, discusses sizing ('c. 3 percent' to memory chipmakers), and explains why they favor durable competitive positions over marginal players. However, the portfolio appears to hold 20+ positions given the breadth discussed across sectors and geographies, and some hedging language appears ('we think,' 'should deliver'). The combination of concentrated core positions with named, sized holdings and clear thesis articulation, balanced against portfolio breadth, places this in the high-moderate to high conviction range.

Growth Outlook

35%

BearishBullish

Bearish (35%)

The manager acknowledges the AI boom driving index returns but frames the current market as mono-thematic and narrowly focused on hardware buildout. They note that growth expectations have leapt for AI hardware while software companies have sold off. The outlook is constructive on AI as a defining decade-long theme but cautious about the market's singular focus, stating 'AI being the defining feature of the next decade of investing does not make it the only one.' The tone is selective optimism rather than broad bullishness.

Risk Appetite

45%

DefensiveAggressive

Balanced (45%)

The portfolio maintains significant risk-on positioning with over 10% in NVIDIA and TSMC combined, plus approximately one-third of the portfolio invested in companies participating directly in AI expansion. However, the manager has been actively building breadth and adding to out-of-favor positions rather than chasing momentum. They added new positions in Besi, Lasertec, Wärtsilä, and Axon while deliberately building up prior areas of underexposure. This reflects selective adding with risk tilted toward conviction positions rather than maximum long exposure.

Capital Deployment

35%

De-riskingDeploying

Net Neutral (35%)

The manager added four new positions during the quarter (SK Hynix, Besi, Lasertec, Wärtsilä) and established a holding in Axon Enterprise, indicating moderate deployment activity. They also added to existing holdings that sold off. The letter states they have 'deliberately built up prior areas of underexposure over the past several months' to broaden growth drivers. However, no specific cash level changes are disclosed, and the activity appears to be selective adding to out-of-favor names rather than aggressive broad deployment. The rotation into new names combined with adding to existing positions suggests moderate net deployment.

Forward Guidance

55%

CautiousExpansionary

Neutral (55%)

The manager explicitly states they will 'remain ambitious and long-term as we adapt the portfolio to the realities of stock markets' and will be 'relentlessly outward-looking as we seek out the best opportunities to own great growth businesses.' They are actively deploying into out-of-favor growth businesses that have been placed 'on sale,' adding positions in software and industrial companies. The language indicates selective deployment bias with clear intent to add to mispriced opportunities, though not aggressive across-the-board deployment.

Language Signal

40%

BearishBullish

Balanced (40%)

The letter balances opportunity language with acknowledgment of challenges. Bullish terms include 'unprecedented territory,' 'on sale,' 'highly attractive,' 'substantial' rewards, 'wonderful growth businesses,' and 'compelling value.' Risk language includes concerns about 'mono-thematic market,' 'poorly defined AI concerns,' cyclicality, and the portfolio being 'well behind' index returns. The net balance tilts slightly positive with more emphasis on mispricing opportunities and long-term growth potential, but the tone is measured rather than overwhelmingly bullish.

Perceived Risk

48%

Low RiskElevated

Moderate Risk (48%)

The manager identifies specific risks including the mono-thematic market driven by passive flows and algorithmic trading, memory chip pricing cyclicality, and the potential fragility of high market expectations. They acknowledge that 'the proliferation of ETFs' and trend-following algorithms 'raises the chance that those investors will be further out of favour, for longer.' However, these risks are discussed in the context of creating opportunities rather than systemic threats. The risk discussion is present and specific but not alarmed, with more emphasis on positioning to benefit from mispricing than on downside protection.

Opportunity Density

68%

ScarceAbundant

Abundant (68%)

The manager sees abundant opportunities across multiple areas: underappreciated niches in the AI supply chain (Besi, Lasertec), copper supply-demand imbalance, emerging market champions, industry consolidators (QXO, Linde), and mispriced software businesses (Axon). They state that 'wonderful growth businesses' have been placed 'on sale' and emphasize finding 'the best growth businesses of tomorrow' beyond the largest market constituents. The language of 'plenty of growth available' in fragmented industries and the variety of new positions added indicate a selective but rich opportunity set across defined areas.

Time Horizon

78%

Short-TermLong-Term

Decade+ (78%)

The manager explicitly emphasizes long-term orientation throughout, stating they will 'remain ambitious and long-term' and that 'the importance of fundamentals in driving long-term share price returns hasn't changed.' They discuss Linde's compounding opportunity persisting 'for over a decade' and frame AI as 'the defining feature of the next decade of investing.' The letter emphasizes patience, with the closing statement that 'Your patience with us as we rebuild the strategy's returns is hugely important.' The focus is on multi-year thesis realization with no urgency around near-term catalysts, though some catalyst dependency exists (memory capacity coming online in 'a year or two'). The emphasis on long-term fundamentals over short-term momentum places this in the multi-year thesis range.