Baillie Gifford European Growth Trust details portfolio changes after recent underperformance

(Sharecast News) - Half-year results from Baillie Gifford European Growth Trust received a muted reaction from investors on Friday after the fund significantly underperformed its benchmark during the six months to 31 March, though the company expressed confidence in recent portfolio changes amid ongoing market volatility.

The net asset value per share total return was -9.2% during the period, compared to a total return of 4.4% for the FTSE Europe ex UK Index. The share price fell 8.8%, though the discount to NAV narrowed slightly from 8.6% to 8.2%.

Baillie Gifford blamed the sell-off in certain tech stocks, particularly software names, during the period on the back of concerns about AI disrupting business models, while sentiment was hit further by the conflict in the Middle East.

The trust appointed a new portfolio manager at the start of April, with Joe Faraday succeeding Stephen Paice and Chris Davies, "at a time when performance has fallen short of both our expectations and those of shareholders", said chair David Barron.

However, Barron expressed confidence in the future outlook following the changes, given the company's diversified portfolio and the recent "deliberate repositioning" of investments.

The company said the portfolio now includes a far broader range of growth types and earnings drivers, such as "structural rearmament in defence, infrastructure-like compounding in telecoms, capital strength and rate sensitivity in financials, and cash generation in energy".

"The company has a distinctive mandate, with its focus on growth and ability to access private companies. The changes made at the end of the period were aimed at staying true to the mandate, whilst improving its delivery. We believe the changes made are a positive step towards better execution, and ultimately stronger performance," he said

BGEU shares were down 0.4% at 99.4p by 1239 BST.

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