Baillie Gifford is known for many things, but fixed income isn’t one of them.
Those folks do run fixed income money - £2 bn of it for UK clients in fact - but the Edinburgh-based firm tends to be synonymous for its tech plays in general and Scottish Mortgage in particular.
In fact despite Scottish Mortgage's recent travails (it lost 31 per cent in 2022) it alone is five times larger than the amount of money Baillie Gifford manages in its fixed income funds for UK clients.
This was obviously a concern for Baillie Gifford which launched a review of its fixed income strategies.
Two bond fund managers have now left the firm - Lucy Isles, co-manager of the High Yield Bond fund and European High Yield Bond fund, and Stuart Kelly, co-manager of the Sterling Aggregate Bond fund - while Faisal Islam, who currently works on the Strategic Bond fund, will move across to the high yield fund.
Meanwhile Robert Beltzer, the firm’s head of credit research, will join the Strategic Bond fund in a bid to turn it around alongside the incumbents, Torcail Stewart and Lesley Dunn.
The current manager of the Investment Grade Bond fund, Paul Dilworth, will be joined by Nektarios Chatzilefteris.
Our database shows Baillie Gifford was right to take action, with a declining interest in its fixed income range. The Strategic Bond fund, which was once among the most owned in its sector, saw the last two DFMs we monitor head for the exit in 2023, meaning none are now holding it, after a spate of sales in 2022.
All of that adds up to the fund having shrunk by around 75 per cent in three years, having been £1.2bn in size in February 2021.
It was among the worst performers in its sector in 2022, 2021 and 2020 - though there has been modest outperformance more recently.
The fund has material exposure to financials, and also uses futures to take positions on markets.
Baillie Gifford Investment Grade is the largest of the funds affected, with more than £900mn of assets. None of that lucre belongs to the clients of the DFMs we monitor, with none having ever owned it.
It has lost 5 per cent over the past five years.
Beltzer also works on Baillie Gifford’s High Yield Bond fund, which has seen a large number of sales from the allocators we monitor. Since mid-2022 it has been sold by four and now isn't held by a single one.
Once again, this is reflected in the overall size of the fund which has fallen from £950mn in mid-2021 to £400mn now.
AJ Bell is one of the allocators which sold the fund and Ryan Hughes, the company's investment director, said: "We sold out of Baillie Gifford High Yield in November 2022 as we had some concerns that the team looked light on experience when it came to credit analysis. In addition, there was concern that the structure of the team was uncertain given they had previously separated from the investment grade team and had then concluded that it was sensible to come back together again.
"Add in concerns over some aspects of credit selection and it was clear that our conviction had reduced sufficiently to justify exiting the position. As a result, we moved to the Invesco High Yield fund managed by Thomas Moore."
One person who’s going to need a bigger in-tray as a result of the changes is Sally Greig, head of global fixed income, who will now run the government bond chunk of the firm’s £5bn Managed fund.
The total fixed income allocation within that fund, which allocates solely to other Baillie Gifford funds, is around £1bn.
In fixed income there are many areas where the allocators we cover prefer a passive approach to an active approach but the recent successes of Man GLG Sterling Corporate Bond shows there can be active winners in this market.
