Investing in robots, wristwatches and sausage rolls

July 2023

Key Points

  • Baillie Gifford’s Managed Fund invests across five regional building blocks, resulting in a diverse growth portfolio
  • Companies as diverse as NVIDIA, Richemont and Greggs all find a home within the Fund
  • Every holding is there because we believe it has the potential to produce superior profit growth over the long run

All investment strategies have the potential for profit and loss, your or your clients’ capital may be at risk.


Over recent months, many clients have asked for our thoughts on artificial intelligence (AI). That is no surprise, as there has been an explosion of interest in, not to mention panic about, the technology following the release of OpenAI’s Chat GPT and Alphabet’s Bard. This could be one of those rare topics which has widespread implications across the investment landscape over the next decade. Indeed, it is already having an impact today, as the Managed Fund’s holding in NVIDIA, a California-based designer of graphics processing units, has enjoyed an increase in AI-driven demand for its chips.

However, fascinating though it is to speculate on the future of AI, that is not the purpose of this note. Rather, it is intended as a reminder that although Baillie Gifford is perhaps best known for its investments in innovative technology firms such as NVIDIA, the Managed Fund is a more traditional balanced portfolio. As such, it invests in a wide range of growth companies across its different regional building blocks.


From a Cartier watch to a Greggs steak bake

The equity component of the Managed Fund (typically 75 per cent of the overall fund) consists of a combination of five separate portfolios covering North America, Europe, the UK, Developed Asia1 and the Emerging Markets (EM). The individual teams have a high level of autonomy in what stocks they select from their respective regions, leading to significant diversification due to the different opportunity sets in different parts of the world.

For example, our North American Team has access to some of the world’s leading technology firms, resulting in holdings such as the aforementioned NVIDIA, Shopify in ecommerce and The Trade Desk in online advertising.

The North American part of the Managed Fund is also home to an exciting subset of innovative healthcare firms, pioneering new research and developing new treatments. The poster child for these holdings is Moderna, which became rightly famous for its rapid development and production of an mRNA-based Covid-19 vaccine. The possibility that the company achieves similar success in other areas, such as cancer, is hugely exciting, as is the long-term potential of Denali Therapeutics to address neurodegenerative diseases such as Parkinson’s and Alzheimer’s.

Moreover, the North American team also invest in biotech ‘picks and shovels’ – businesses providing the tools that support the innovation of others. The Managed Fund has a holding in 10x Genomics, which makes gene-sequencing equipment that allows scientists to analyse and understand the genetic causes of illnesses.

But, if we turn our attention to the European slice of the Managed Fund, the themes emerging look quite different.

The European portfolio also has its share of technology firms, such as the music streaming service Spotify and the online fashion platform Zalando. But there is also a healthy weight in more down-to-earth firms such as Atlas Copco, which makes industrial equipment such as compressors, and IMCD, a distributor of speciality chemicals.

While these businesses may gain fewer headlines, they remain fabulous growth stocks. For example, Atlas Copco has grown its earnings by eight per cent a year over a decade, while investing efficiently in its business.

The European holdings also provide a touch of glamour through positions in Kering, owner of Gucci, and Richemont, the parent company of ultra-high-end jeweller and watchmaker Cartier. The investment case is based on the enduring value of near-unique luxury brands, with Cartier founded in 1847 and even the seemingly more modern Gucci’s history stretching back over a century.

© Max Lakner/BFA/REX/Shutterstock

© Bloomberg/Getty images

Moving from big-budget luxury to affordable food on the go, one of the UK team’s recent purchases was the bakery chain Greggs. Greggs is a superb example of an overlooked growth stock, but not by our specialist regional teams.

Although Greggs is unlikely to ever be an AI play for investors, this genuine Northern powerhouse (flour-house?) is innovative in its own way. It has introduced healthy and vegetarian options into its line-up and extended its opening hours to sell food in the evenings. Combining this with a programme of store roll-outs2 has allowed Greggs to set itself the ambitious goal of doubling its sales by 2026.

The UK portfolio also has a healthy exposure to financial firms. Not, however, the large UK-listed banks, but rather the insurance giants Legal & General and Prudential, with the latter now focused on its Asian market and headquartered in Hong Kong. The decline of traditional corporate defined benefit pensions in the UK means many more of us are now responsible for investing for our own retirement, and so the Fund also has holdings in the wealth manager St. James’s Place and savings platform Hargreaves Lansdown.

Further afield, one long-standing theme in our Developed Asia portfolio is exposure to high-quality Japanese engineering firms. In particular, the Fund holds companies providing the technology and know-how for businesses across a host of industries to automate their operations and become more efficient. This includes SMC, a leader in pneumatic controls, FANUC in robotics and Keyence in sensors and machine vision systems. In contrast to AI, this a long-established growth theme, with Keyence held in the Managed Fund for five years and both SMC and FANUC for over a decade.

And, last but not least, one consistent feature of the Managed Fund’s EM portfolio is companies that give shareholders access to the emergence of a new middle class, benefitting from the enormous tailwind of rising wealth over time. This includes the Indian mortgage lender HDFC, Chinese insurance firm Ping An, and Latin American ecommerce and payments platform MercadoLibre.

The above examples only really scratch the surface of the roughly 200 companies held in the Managed Fund, making it tricky to characterise and explain the fund.

However, growth is a consistent feature right across the portfolio. Every holding is there because we believe it has the potential to produce superior profit growth over the long run. This is in keeping with Baillie Gifford’s house style and supported by the analysis of our Risk Team, which shows a high correlation between the fastest-growing companies and the best share price performers.

From that common starting point, each member of the Managed Fund team in their respective regions cheerfully recognises that growth comes in many forms. This results in a portfolio that benefits from not one exciting theme but many: the progress in AI and robotics, the untapped spending power of the EM consumer, the enduring cachet of a luxury watch, and the delicious treat of a humble sausage roll.


1. Japan, Hong Kong, Singapore, Australia and New Zealand.

2. Pun very much intended.

Important Information and Risk factors

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.

This communication was produced and approved in July 2023 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.

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.

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.

All information is sourced from Baillie Gifford & Co and is current unless otherwise stated.

The images used in this communication are for illustrative purposes only.

The specific risks associated with the Fund include:

Custody of assets, particularly in emerging markets, involves a risk of loss if a custodian becomes insolvent or breaches duties of care.

The Fund invests in emerging markets where difficulties in trading could arise, resulting in a negative impact on the value of your investment.

Bonds issued by companies and governments may be adversely affected by changes in interest rates, expectations of inflation and a decline in the creditworthiness of the bond issuer. The issuers of bonds in which the Fund invests, particularly in emerging markets, may not be able to pay the bond income as promised or could fail to repay the capital amount.

The Fund has exposure to foreign currencies and changes in the rates of exchange will cause the value of any investment, and income from it, to fall as well as rise and you may not get back the amount invested.

Derivatives may be used to obtain, increase or reduce exposure to assets and may result in the Fund being leveraged. This may result in greater movements (down or up) in the price of shares in the Fund. It is not our intention that the use of derivatives will significantly alter the overall risk profile of the Fund.

The Fund's share price can be volatile due to movements in the prices of the underlying holdings and the basis on which the Fund is priced.

Further details of the risks associated with investing in the Fund can be found in the Key Investor Information Document or the Prospectus, copies of which are available at


Ref: 48315 10030723

About the authors