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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
Buyside Digest is not affiliated with, and does not endorse, Baillie Gifford -International Growth. This analysis is provided for institutional research purposes only and is not investment advice.
"Constructive on durable international growth leaders across AI infrastructure, digital platforms, and specialist healthcare, maintaining high active share while exercising patience through cyclical transport and semiconductor volatility."
During the third quarter of 2026, the Baillie Gifford International Growth Fund posted a net return of -0.90% for both the K Class and Institutional Class, trailing the MSCI ACWI ex US Index benchmark net return of 0.57%. Year-to-date, the fund has generated a net return of 3.38% (K Class) and 3.32% (Institutional Class), compared to 14.66% for the benchmark. Relative performance was weighed down by weak performance in logistics and semiconductor equipment holdings, alongside an intentional structural underweight in banks and traditional energy during a period of elevated interest rates and oil prices. Cash stood at 0.96% of the portfolio, while active share remained high at 82% with an annual portfolio turnover of 22%. The investment team frames the current macroeconomic and technological backdrop as the dawn of a new industrial age driven by artificial intelligence, encompassing data centers, power generation, advanced manufacturing, and robotics. Despite broader market concerns regarding potential capital overinvestment and software disruption, the managers argue that value will disproportionately accrue to bottleneck owners and firms with proprietary customer context. Furthermore, while the fund has experienced volatility over the past five years, the managers emphasize that portfolio valuation multiples have contracted to an attractive level, trading at a 12-month forward price-to-earnings ratio of 18.7x against strong underlying business fundamentals. Portfolio activity was minimal during the quarter, with zero new purchases or complete sales, following significant capital reallocations earlier in the year that trimmed active semiconductor exposure. Key positive individual contributors included Atlassian, Shopify, Wix.com, and Genmab, while notable detractors were freight forwarder DSV due to freight cycle headwinds and Schenker integration costs, and battery manufacturer CATL amid slower electric vehicle demand. Core long positions in TSMC (7.53%), Spotify (4.20%), and MercadoLibre (2.93%) remain central to the fund's strategy as long-term compounders.
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