Monks’ musings: the fruits of resilience and diversity

As with any investment, your capital is at risk.

Consider the banana: in supermarkets we mostly see the yellow Cavendish, yet the world holds a thousand-plus varieties in every hue. When growers bet everything on one strain in the mid-20th century, a single fungus – Panama disease – wiped it out.

Monocultures are brittle. Resilience comes from diversity. That is the spirit we aim for in your Monks portfolio: sturdy finances, adaptable cultures and a range of growth engines so one ‘fungus’ cannot fell the whole orchard.

We’ve long highlighted the portfolio’s superior financial resilience: higher returns on capital, stronger margins and far lower debt than the broader index. Those traits fund progress when others retrench – growth funded from cash the businesses generate themselves, opportunistic mergers and acquisitions, or capacity expansion. But balance sheets don’t build enduring franchises by themselves. Culture does.

That is why we were encouraged by Nu Holdings, the firm behind Latin America’s Nubank. Concerned that the company might drift towards big-bank bureaucracy, founder-chief executive, David Vélez, triggered a self-described cultural reset to avoid becoming “slow, bureaucratic and risk-averse”.

He has refreshed the firm’s senior leadership team and sharpened its entrepreneurial edge. With a superbly profitable model and an innovation mindset, Nu remains well placed to keep winning share across Latin America.

Shopify offers another angle on cultural agility. Founder Tobi Lütke has “leaned back in”, putting the ecommerce platform squarely into founder mode. The decisive 2023 exit from logistics refocused Shopify on its “main quest”: making commerce easier.

Execution speed is up, and despite its scale, the company has posted 12 straight quarters of 20 per cent-plus year-on-year sales growth. In a fast-evolving AI era for ecommerce, that clarity and pace matter.

Disruptors and consolidators

Not every culture is top-down. The Ensign Group – the skilled nursing and assisted living operator we bought this quarter – runs a deliberately decentralised model. Local leaders own decisions, share best practices and hold meaningful equity. The result is unusually low staff turnover – a major edge in this industry – and a durable ability to run sites more efficiently than rivals.

Nu and Shopify are digital native disruptors: ambitious, product-centric and customer-delighting. Ensign is different. It is the largest player in a highly fragmented industry but still under 5 per cent market share.

The investment case is disciplined, repeatable consolidation: identify struggling facilities, acquire, fix and compound. With labour shortages and financial pressures across the sector, the pipeline of future targets is strong.

We also bought Medpace, a clinical research organisation focused on small and mid-cap biotechs. Funding constraints in recent years slowed trial starts and Medpace’s growth.

Yet innovation in drug discovery has continued apace, creating pent-up demand. Early signs of recovery pushed the shares up during the quarter, and we believe we are at the start of a multi-year upswing.

We have exited Genmab. Its success is concentrated: Darzalex is more than 70 per cent of revenue today but will fade by 2031 after its partner decided not to license a next-gen version.

Management is pivoting from royalty streams to in-house commercialisation for late-stage assets. We respect the science but view the execution risk, plus the looming revenue hole, as too high relative to alternatives.

Riding the next S-curves

Coinbase, another new holding, is widely pigeonholed as a cyclical crypto exchange. We think it is becoming a broader financial infrastructure platform thanks to:

• stablecoin payments rails – the infrastructure and software tools that allow Coinbase’s clients to move digital assets pegged to a traditional currency or other financial instrument
• institutional custody – secure, compliant services for safeguarding and managing digital assets on behalf of large organisations
• subscription services such as Coinbase One – a membership scheme offering no-fee trading and enhanced customer support

With scale, regulatory alignment and credibility, Coinbase can capture value as institutional adoption deepens and stablecoin usage grows.

More broadly, industries first transformed by the internet – including commerce, ads and payments – are climbing a fresh S-curve as artificial intelligence restarts the cycle. In other words, the gains they make from artificial intelligence may be slow to start, but promise to accelerate into rapid, transformative growth.

Yesterday’s disruptors are today’s incumbents, but the opportunity set may be re-steepening rather than mean-reverting.

That supports owning a mix of beneficiaries: platform incumbents adapting quickly and new challengers exploiting the seams.

Strength in diversity

The Monks portfolio spans multiple growth archetypes – from Shopify’s explosive reinvestment efforts to Ensign’s steady expansion through acquisitions to Medpace’s potential to turn a recovery into long-term growth – spanning Latin America, Europe and the US.

This thematic and regional breadth reduces reliance on any single trend and widens the field for idiosyncratic winners.

Absolute and relative returns in both the share price and net asset value (NAV) for Monks have been strong in the 12 months to the end of September 2025. Our:

• share price rose 25.1 per cent
• net asset value (NAV) gained 19.1 per cent
• comparative index (FTSE World Index) increased 17.8 per cent

We believe the combination of financial strength, cultural adaptability and diversified growth engines creates fertile ground for long-term compounding. Not a single-variety plantation, however tasty, but a rainbow of resilient opportunities, built to withstand the next ‘fungus’ and flourish in its aftermath.

Performance source: Morningstar, FTSE, total return in sterling

Past performance is not a guide to future returns.

Important information    

This communication was produced and approved in October 2025 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.  

The Trust invests in overseas securities. Changes in the rates of exchange may also cause the value of your investment (and any income it may pay) to go down or up. 

This article does not constitute, and is not subject to the protections afforded to, independent research. Baillie Gifford and its staff may have dealt in the investments concerned. The views expressed are not statements of fact and should not be considered as advice or a recommendation to buy, sell or hold a particular investment.

Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). The investment trusts managed by Baillie Gifford & Co Limited are listed on the London Stock Exchange and are not authorised or regulated by the FCA. 

A Key Information Document is available at bailliegifford.com.

FTSE index data 

Source: London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2023. FTSE Russell is a trading name of certain of the LSE Group companies. “FTSE®” “Russell®”, “FTSE Russell ®, is/are a trade mark(s) of the relevant LSE Group companies and is/are used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

162623 10056491