View transcript
<p><strong>Your capital is at risk. Past performance is not a guide to future returns. The following update is based on a representative portfolio. As such, stock examples may not be held in every client portfolio, and performance may differ.</strong></p>
<p data-start="33" data-end="580"><strong>Kathleen Hunter: </strong>Periods of significant relative underperformance are deeply uncomfortable. For those of you who have trusted us with your capital and feel disappointed by recent outcomes, we absolutely recognise that. While being at odds with the market is an inevitable part of long-term investing, the past five years have been unusually extreme. A challenging macroeconomic backdrop — marked by sharp rate rises, higher energy prices and geopolitical tension — has driven strong returns in large parts of the index, particularly Oil & Gas, Banking and Defence.</p>
<p data-start="582" data-end="1027">By contrast, the long-duration growth companies we invest in have firmly been out of favour, with sustained operational progress largely unrewarded by the market. Periods like this do test conviction, but they also create opportunity. While share prices have been weak, the earnings power of the companies we invest in has remained robust. As a result, valuations across many companies in the UK Core strategy are now at historically low levels.</p>
<p data-start="1029" data-end="1530">This growing disconnect increasingly resembles a coiled spring — where short-term pressure is building, not eroding, the potential for future returns. The most recent quarter illustrates this clearly. While the FTSE All-Share Index finished ahead, there was a range of highly polarised share price moves beneath the surface. Oil & Gas shares rose sharply, driven by the conflict in the Middle East, while a pronounced AI-related sell-off weighed heavily on software and technology businesses.</p>
<p data-start="1532" data-end="2005">Against this backdrop, the UK Core strategy underperformed. Our lack of exposure to the oil majors, Shell and BP, detracted from performance. At the same time, shares in Bellway and Auto Trader struggled. In terms of the housebuilder, Bellway, its shares fell following a cautious update from their management team due to uncertainty driven by the conflict in the Middle East. For example, they flagged an increased risk of cost inflation and potential headwinds to demand.</p>
<p data-start="2007" data-end="2342">That said, recent operational progress has been encouraging, and it remains on track to meet full-year expectations. Looking ahead, we believe Bellway is well-positioned for a recovery. It has a high-quality land bank, a strong balance sheet, and the shares trade at a significant discount to book value, which we find very compelling.</p>
<p data-start="2344" data-end="2809">In terms of Auto Trader, there is a concern that AI could disintermediate its role in the car-buying journey. But Auto Trader sits at the centre of the UK automotive ecosystem, with the largest audience of buyers and the broadest network of dealers. The value it provides to both sides of this network is underpinned by a rich dataset spanning pricing, inventory and consumer behaviour — this is an asset that we believe should be strengthened, not weakened, by AI.</p>
<p data-start="2811" data-end="3113">Finally, in terms of positive contributors, Rio Tinto performed well, supported by record production and favourable commodity dynamics. In terms of trading, activity picked up during the quarter as we took new holdings in HSBC and Softcat, while selling out of Ashtead, Just Group, Ocado and Trainline.</p>
<p data-start="3115" data-end="3428">You will probably be familiar with HSBC. This is a well-established banking franchise with a strong balance sheet and leading positions in key Asian markets. Its exposure to structural growth in wealth and deposit gathering provides a clear pathway to sustained earnings growth and attractive shareholder returns.</p>
<p data-start="3430" data-end="3696">Softcat is less well known. It provides IT infrastructure services and benefits from ongoing digital investment across its customer base. This is a company we have been monitoring for some time and took advantage of recent share price weakness to take a new holding.</p>
<p data-start="3698" data-end="4140">To summarise: while recent performance has been challenging, we believe the current environment is reinforcing — not undermining — our approach. Markets today are increasingly driven by short-term narratives and narrow leadership. That is creating mispricing in businesses with strong long-term prospects. We are seeing this across the strategy and are leaning into it — deploying capital into high-quality companies at compelling valuations.</p>
<p data-start="4142" data-end="4403">As I said at the start, when conviction is tested, opportunities are created. While this has been a difficult period, we would struggle to identify a time when the opportunity to generate long-term returns from UK growth companies has ever been more compelling.</p>
<p data-start="4142" data-end="4403"> </p>
<h3 class="TABLEHEADER1212pt">UK Core</h3>
<p><strong>Annual past performance to 31 March each year (%)</strong></p>
<table border="1" style="border-collapse: collapse; width: 100%; border-width: 0px; height: 74px;">
<tbody>
<tr style="height: 18.5px;">
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.5px;"> </td>
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.5px;"><strong>2022</strong></td>
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.5px;"><strong>2023</strong></td>
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.5px;"><strong>2024</strong></td>
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.5px;"><strong>2025</strong></td>
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 18.5px;"><strong>2026</strong></td>
</tr>
<tr style="height: 18.5px;">
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">UK Core Composite (gross)</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">-4.2</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">-7.4</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">8.7</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">9.6</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">10.1</td>
</tr>
<tr style="height: 18.5px;">
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">UK Core Composite (net)</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">-4.7</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">-7.9</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">8.2</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">9.1</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">9.5</td>
</tr>
<tr style="height: 18.5px;">
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">FTSE All Share index*</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">7.9</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">-3.3</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">10.8</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">12.9</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px;">24.2</td>
</tr>
</tbody>
</table>
<p> </p>
<p><strong>Annualised returns to 31 March 2026 (%)</strong></p>
<table border="1" style="border-collapse: collapse; width: 100%; border-width: 0px; height: 92.5px;">
<tbody>
<tr style="height: 37px;">
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 37px; width: 61.3387%;"> </td>
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 37px; width: 13.1043%;"><strong>1 year</strong></td>
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 37px; width: 12.713%;"><strong>5 years</strong></td>
<td style="border-width: 1px 1px 2px; border-style: solid; border-color: rgb(204, 204, 204) rgb(204, 204, 204) rgb(0, 0, 0); border-image: initial; padding: 10px; height: 37px; width: 12.844%;"><strong>10 years</strong></td>
</tr>
<tr style="height: 18.5px;">
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 61.3387%;">UK Core Composite (gross)</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 13.1043%;">10.1</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 12.713%;">3.1</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 12.844%;">5.7</td>
</tr>
<tr style="height: 18.5px;">
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 61.3387%;">UK Core Composite (net)</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 13.1043%;">9.5</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 12.713%;">2.6</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 12.844%;">5.1</td>
</tr>
<tr style="height: 18.5px;">
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 61.3387%;">FTSE All Share index*</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 13.1043%;">24.2</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 12.713%;">10.1</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.5px; width: 12.844%;">7.7</td>
</tr>
</tbody>
</table>
<p><strong> </strong></p>
<div>Source: Revolution, FTSE. US dollars. Net returns have been calculated by reducing the gross return by the highest annual management fee for the composite. 1 year figures are not annualised.</div>
<div></div>
<div></div>
<div><strong>Past performance is not a guide to future returns.</strong></div>
<div></div>
<div></div>
<div>Legal notice: FTSE International Limited (“FTSE”) © FTSE 2025. “FTSE ®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data and no party may rely on any FTSE indices, ratings and/or data underlying data contained in this communication. No further distribution of FTSE Data is permitted without FTSE’s express written consent. FTSE does not promote, sponsor or endorse the content of this communication.</div>
<div></div>
<p><strong>Risk factors </strong> <br>This communication was produced and approved in April 2026 and has not been updated subsequently. It represents views held at the time and may not reflect current thinking.</p>
<p>The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.</p>
<p>This communication contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research, but is classified as advertising under Art 68 of the Financial Services Act (‘FinSA’) and Baillie Gifford and its staff may have dealt in the investments concerned.</p>
<p>All information is sourced from Baillie Gifford & Co and is current unless otherwise stated. </p>
<p>The images used in this communication are for illustrative purposes only.</p>
<p> <br><strong>Important information</strong><br>Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). Baillie Gifford & Co Limited is an Authorised Corporate Director of OEICs.</p>
<p>Baillie Gifford Overseas Limited provides investment management and advisory services to non-UK Professional/Institutional clients only. Baillie Gifford Overseas Limited is wholly owned by Baillie Gifford & Co. Baillie Gifford & Co and Baillie Gifford Overseas Limited are authorised and regulated by the FCA in the UK. </p>
<p>Persons resident or domiciled outside the UK should consult with their professional advisers as to whether they require any governmental or other consents in order to enable them to invest, and with their tax advisers for advice relevant to their own particular circumstances.</p>
<p><strong>Financial intermediaries</strong><br>This communication is suitable for use of financial intermediaries. Financial intermediaries are solely responsible for any further distribution and Baillie Gifford takes no responsibility for the reliance on this document by any other person who did not receive this document directly from Baillie Gifford.</p>
<p><strong> </strong></p>
