View transcript
<p><strong>Your capital is at risk. Past performance is not a guide to future returns. </strong></p>
<p> </p>
<p><strong>Ben Drury:</strong> </p>
<p>The recovery in market sentiment from the jitters of last quarter has been remarkable. At the time of recording, a double-digit return for Global Alpha since the start of April reflects a sharp recovery after the software selloff and geopolitical nervousness that dominated the first quarter. </p>
<p>And yet, Global Alpha still lags the index by around three percentage points. </p>
<p>The reason for this is straightforward. Global equity markets have become exceptionally narrow – dominated by a single theme: the extraordinary boom in AI-related hardware, particularly the logic and memory chips needed for the build-out of AI. </p>
<p>So how do we continue to benefit from the AI revolution without becoming hostage to a single market narrative? </p>
<p>We are doing this in three ways. </p>
<p>The first is by understanding the market we are investing in. </p>
<p>Stock markets are not machines. They are living systems, shaped by the behaviour of the people and institutions trading in them. And that ecology has changed. </p>
<p>More money now moves through passive index-trackers, thematic baskets and short-term strategies, so prices can be pushed around by flows and narratives rather than long-term fundamentals. </p>
<p>That can be uncomfortable. But it also creates opportunity: the more capital moves without asking what a company is really worth, the greater the opening for patient stock-pickers prepared to do that work. </p>
<p>To protect the patience needed for long-term compounding, we have become more deliberate about where our growth drivers come from, where our unintended exposures sit, and which parts of the portfolio are likely to zig when others zag. </p>
<p>This does not change our core philosophy - ambitious long-term growth investing, grounded in deep company research, and the patience to let exceptional businesses compound. In fact, this work gives us the freedom to swing harder for stock-specific opportunities. </p>
<p>The second thing we are doing is owning the enduring bottlenecks as the foundations of the AI revolution are laid. </p>
<p>TSMC remains the pre-eminent foundry in the manufacture of advanced semiconductors. Samsung provides exposure to memory chips, where we believe disciplined investment in expanding supply and rising demand could create a much more durable opportunity than has been the case historically. Kokusai’s deposition technology is essential for manufacturing high-density 3D-structured memory and logic chips that power AI workloads. </p>
<p>These are not speculative ideas on the edge of the AI story; they are critical to it. These three companies were all among the largest contributors to performance over the quarter. Reflecting the dominance of the AI hardware theme in markets, other semiconductor companies not held in the portfolio, such as Micron, AMD or Intel, all acted as a drag on relative performance. </p>
<p>We have also added new holdings in areas where we think bottlenecks are underappreciated. BE Semiconductor Industries, or BESI, has expertise in hybrid bonding, which is becoming increasingly important as chip architectures become more complex. Lasertec occupies a highly specialised role in inspecting the templates used to print the most advanced chips. </p>
<p>The common thread is scarcity. We are not interested in owning everything with an AI label. We are interested in companies with the right to earn sustainably high returns because they control something difficult to replicate. </p>
<p>The third thing we are doing is preserving breadth. </p>
<p>For the last few years, breadth has felt like a cost. Markets have rewarded a very small number of companies and a very narrow set of themes. But we believe the opportunity set for growth investors is now wider than it has been for some time. </p>
<p>Emerging markets exposure is now around 20% of the Global Alpha portfolio. These opportunities are not just in semiconductors such as TSMC and Samsung, but businesses in financial technology, ecommerce and manufacturing. Nubank, MercadoLibre and CATL are not simply “emerging market exposure”. They are world-class businesses that happen to be listed in emerging markets. </p>
<p>There are also growth opportunities in industries that do not appear obviously glamorous. Linde, an industrial gas business, has consistently outgrown its competition through excellent execution, while Axon is building an operating layer for public safety. Both are new holdings over the quarter. These examples illustrate that growth can come from many sources: specialist expertise, embedded workflows, intellectual property, coordination and trust.</p>
<p>The result is a portfolio that has delivered robust absolute returns, with meaningful exposure to the AI build-out, but also a much broader range of growth drivers than the market is currently rewarding. </p>
<p>It continues to grow much faster than the broader index, supported by exceptional quality metrics, and yet has continued to derate, to a valuation barely above the market. </p>
<p>We believe this combination of growth, quality and valuation is unlikely to persist for long and sets the Global Alpha portfolio up well for a sustained recovery in relative performance. </p>
<p> </p>
<p> </p>
<h3 class="TABLEHEADER1212pt">Global Alpha</h3>
<p><strong>Annual past performance to 30 June each year (%)</strong></p>
<table border="1" style="border-collapse: collapse; width: 100%; border-width: 0px; height: 74.6668px;">
<tbody>
<tr style="height: 18.6667px;">
<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: 18.6667px;"> </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: 18.6667px; text-align: right;"><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: 18.6667px; text-align: right;"><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: 18.6667px; text-align: right;"><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: 18.6667px; text-align: right;"><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: 18.6667px; text-align: right;"><strong>2026</strong></td>
</tr>
<tr style="height: 18.6667px;">
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px;">Global Alpha Composite (gross)</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">-32.4</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">17.9</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">13.7</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">15.7</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">8.5</td>
</tr>
<tr style="height: 18.6667px;">
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px;">Global Alpha Composite (net)</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">-32.8</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">17.1</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">13.0</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">15.0</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">7.8</td>
</tr>
<tr style="height: 18.6667px;">
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px;">MSCI ACWI Index</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">-15.4</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">17.1</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">19.9</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; text-align: right;">16.7</td>
<td style="border: 1px solid rgb(204, 204, 204); padding-top: 10px; padding-right: 10px; padding-bottom: 10px; height: 18.6667px; text-align: right;">24.2</td>
</tr>
</tbody>
</table>
<p> </p>
<p><strong>Annualised returns to 30 June 2026 (%)</strong></p>
<table border="1" style="border-collapse: collapse; width: 100%; border-width: 0px; height: 93.0001px;">
<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: 61.3076%;"> </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: 13.1466%; text-align: right;"><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: 12.7561%; text-align: right;"><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: 12.7561%; text-align: right;"><strong>10 years</strong></td>
</tr>
<tr style="height: 18.6667px;">
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; width: 61.3076%;">Global Alpha Composite (gross)</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; width: 13.1466%; text-align: right;">8.5</td>
<td style="border: 1px solid rgb(204, 204, 204); padding-top: 10px; padding-right: 10px; padding-bottom: 10px; height: 18.6667px; width: 12.7561%; text-align: right;">2.6</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; width: 12.7561%; text-align: right;">11.9</td>
</tr>
<tr style="height: 18.6667px;">
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; width: 61.3076%;">Global Alpha Composite (net)</td>
<td style="border: 1px solid rgb(204, 204, 204); padding-top: 10px; padding-right: 10px; padding-bottom: 10px; height: 18.6667px; width: 13.1466%; text-align: right;">7.8</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; width: 12.7561%; text-align: right;">2.0</td>
<td style="border: 1px solid rgb(204, 204, 204); padding-top: 10px; padding-right: 10px; padding-bottom: 10px; height: 18.6667px; width: 12.7561%; text-align: right;">11.2</td>
</tr>
<tr style="height: 18.6667px;">
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; width: 61.3076%;">MSCI ACWI Index</td>
<td style="border: 1px solid rgb(204, 204, 204); padding-top: 10px; padding-right: 10px; padding-bottom: 10px; height: 18.6667px; width: 13.1466%; text-align: right;">24.2</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; width: 12.7561%; text-align: right;">11.5</td>
<td style="border: 1px solid rgb(204, 204, 204); padding: 10px; height: 18.6667px; width: 12.7561%; text-align: right;">13.3</td>
</tr>
</tbody>
</table>
<p><strong><span class="source-text">Source:</span></strong><span class="source-text"> Revolution, MSCI. 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.</span><br><br></p>
<p><strong>Past performance is not a guide to future returns.</strong></p>
<p><span class="source-text">Legal notice: MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.</span></p>
<p> </p>
<h3>Risk factors </h3>
<p>This communication was produced and approved in July 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> </p>
<p><strong>Important information<br></strong>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>
