1. The future is now, and it works

    Living and loving in the
    fourth industrial revolution

    Torcail Stewart
  2. July 2021

    The value of any investment can fall as well as rise and investors may not get back the amount invested.

  3. The received wisdom that bond investors must lend to dividend-focused behemoths whose days of growth are long numbered is an outdated textbook simplification, but one that is surprisingly still prevalent beyond our doors. Global corporate bond markets have grown rapidly in the past decade, almost doubling to over 20,000 plus bonds, giving us extensive freedom to lend to businesses which are investing in their futures.

    At Baillie Gifford, we like lending to businesses with solid growth prospects and we stay invested for the long term. As the company scales in size and diversifies its revenue streams, it will have a much more robust ability to keep paying the income we’re buying today. In addition, as that income becomes more dependable, its value rises and so does the price of the bond. Most bond market participants are fixated on short-term results and current credit ratings so can often easily miss these longer-term opportunities. Yet identifying companies of the future early presents great investment opportunities for bond investors.

    Let’s step into the world of what is possible with bond investing and get a flavour of some of the novel growth companies that the Credit Team has recently identified.


    It's a match!

    The era we live in today will in time be recognised as the beginning of the fourth industrial revolution. A time that has revolutionised the way we buy groceries, book our holidays and order takeaway food. Such rapid growth in interconnectivity has created opportunities for innovative companies able to embrace the change. We can debate whether it is harder to find a good plumber or a life partner, however we are convinced that companies that can make those searches easier offer excellent long-term opportunities to a bond investor.

    ANGI Homeservices is an online marketplace for home remodelling and maintenance. The business was founded in 1995 and has since evolved from a publication with reviews of local home and lawn care services to the leading online home services marketplace in the US. It connects consumers with more than 200,000 service professionals and receives over 30 million service requests annually: triple the level five years ago. Pleasingly, the dollar bonds of this promising business yield 4 per cent and, should the business continue to scale in size as we expect, the resulting reduction in risk premium offers the additional possibility of bond price upside.

    Even when it comes to romance it is surprising to learn that, by some estimates, one-third of relationships globally originate from an online dating site. Match Group, the fast-growing global leader in online dating, offers its platforms in 42 languages and 190 countries. There are estimated to be over 600 million single people in the world at any one time, so the long-term potential for Match to scale in size from its present 11 million paid subscribers is significant. With a yield of 3 per cent at the moment, what’s not to love?



    More than the sum of the parts

    Part and parcel of our approach to bond investing is lending to companies that innovate. Businesses producing the solutions of tomorrow don’t stand still. A classic example would be ASML, a Dutch company that has established itself as an irreplaceable asset to global electronics. As this business progressively demonstrated its leadership in micro-chip shrink technology, it gained market-share, pricing power and scale. Its credit ratings responded accordingly: rising three notches from BBB- to A- over a period of 10 years.

    A new example on our radar is the recent merger of the Austrian sensor designer, ams AG, and the German lighting specialist OSRAM, an exciting combination of two blue-chip companies with the potential to create novel products. The major opportunity for the firm is in microLEDs. Smartphones typically rely on energy intensive organic light-Emitting diode (OLED) displays, materially reducing battery life. OSRAM’s expertise in microLED with ams AG sensors, boosted by spending $1bn per annum on research and development, has the potential to create a game-changing integrated solution.

    With the ams AG euro convertible presently offered on a 4 per cent yield, it is a partnership that bond markets appear to be underestimating.

    Thanks to our longer time horizon, we can provide patient debt capital to companies investing in new innovative technologies that will shape our future. The reward is resilient income and the potential for price upside, should such technologies succeed. That is Actual Income.


    ANGI, AMS and Match Group are issuers we hold in various Baillie Gifford Income strategies. ANGI, AMS and Match Group are all held in the Strategic Bond and High Yield Bond portfolios. ANGI and Match are held in the Multi Asset Income portfolio.

  4. Actual Investors
    see people’s aspirations.

    Not assets under


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    Stock Examples

    Any stock examples and images used are not intended to represent recommendations to buy or sell, neither is it implied that they will prove profitable in the future. It is not known whether they will feature in any future portfolio produced by us. Any individual examples will represent only a small part of the overall portfolio and are inserted purely to help illustrate our investment style.

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