Investors should carefully consider the objectives, risks, charges and expenses of the Fund before investing. This information and other information about the Fund can be found in the prospectus and summary prospectus. For a prospectus or summary prospectus please visit our website at https://usmutualfund.bailliegifford.com. Please carefully read the Fund’s prospectus and related documents before investing. Securities are offered through Baillie Gifford Funds Services LLC, an affiliate of Baillie Gifford Overseas Limited and a member of FINRA.
In 1492, Christopher Columbus crossed the Atlantic and medieval Europe woke up to a vast new world of opportunity. Columbus’s ‘discovery’ ushered in a century and more of daring exploration, a golden age of exploration driven by boundless curiosity, ambition and acquisitiveness.
Uncharted adventure on that scale is hard to imagine in our well-mapped world, where few places on the globe aren’t navigable via the smartphone in your pocket.
Yet somehow, we still share the trepidation of those early modern transoceanic explorers. ‘We live in uncharted times’ is a familiar tagline for today’s investors.
Why international? Why now?
International equities investors face a landscape reshaped by seismic global shifts. We’ve had a pandemic, conflict in Europe and the Middle East, up-and-down monetary policies and rising protectionism, all simultaneous with rapid technological breakthroughs. These events have distorted markets, propelling US equities to unprecedented valuations concentrated around a few tech giants.
Despite recent volatility, the US market remains twice as expensive as its international counterpart. Global indexes have rarely skewed so heavily toward North America.
Given these dynamics, scepticism toward international investing is understandable. Europe and Japan lag in productivity and innovation and emerging markets are grappling with a strong dollar. Yet the lesson from history remains: unexplored markets hold treasures worth seeking.
Today’s international markets offer real arbitrage: scale, unparalleled diversification, and compelling valuations.
Take China. Its exchanges list over 5,300 companies – more than double the MSCI Global Index constituents. Globally, the MSCI ACWI ex-US Index spans 46 countries and over 2,000 firms. Investors can gain exposure to diverse industries in economies at different developmental stages: from Brazilian natural resource producers to French luxury goods makers. And if US isolationism intensifies, international markets could benefit from the rerouting of trade and the need for innovation.
International equities provide transformative exposure that’s often overlooked. CRH is a good example. It’s an Irish building materials company that’s undervalued relative to US peers despite its superior growth and profitability. Or MercadoLibre (Meli), the Latin American ecommerce and fintech giant. It has returned nearly $7,500 for every $1 invested at the time of its stock market listing. Passive investors captured only the later stages of this growth, as the company did not enter major indices for over a decade after listing. Active managers can navigate and spot opportunities others overlook until it's too late.
Markets are starting to recognise these opportunities. Could this be the dawn of a new age of discovery in international investing?
New maps of the Old World
Cartography, like investing, turns complex realities into two dimensions. Maps approximate reality, distorting some elements to shed light on others. It’s similar to the ways that investors create their own projections, using mental models to interpret and try to exploit changing markets.
We apply three such ‘lenses’ to international markets. They transcend geography, sector, or style and help us identify opportunities unique to this less familiar landscape. They are persistence, interconnectedness, and serendipity.
Persistence: enduring owners, enduring businesses
Luxury businesses such as Hermès, LVMH and Ferrari persist with what they do for decades. These businesses, with no US counterparts, are often led by families whose desire to preserve and grow wealth for future generations fosters resilience and flexibility that aligns with the interests of non-family shareholders able to take the long view.
Beyond luxury, examples include Atlas Copco, the Swedish engineering business backed by the Wallenberg family. It pivoted from railway equipment in the late 1800s, to industrial compressors and, most recently, to vacuum equipment for semiconductors. It has deftly reinvented itself to stay relevant to the latest wave of technological advancements.
In pharmaceuticals, Novo Nordisk, the Danish producer of Ozempic and Wegovy drugs for diabetes and obesity respectively, is supported by its parent Novo Holdings’ foundation to incubate promising next-generation biotech.
Interconnectedness: the underground plumbing of innovation
While US tech giants dominate the headlines, their achievements hinge on international firms that design, build and maintain the infrastructure that lies beneath. Dismissing them as already commoditised overlooks their technical monopolies, which give them pricing power and structural resilience. The neural networks underpinning ChatGPT and others, as well as the chips provided by NVIDIA that drive these, couldn’t exist without graphics processing units (GPUs) made by Taiwan’s TSMC, which itself relies on Dutch business ASML’s lithography machines. Other key but little-known companies in this area include Italy’s Technoprobe (nanoscale cards to detect defects), France’s Soitec (engineered substrates for chips that increase the efficiency of data centres) and Taiwan’s Silergy, which can regulate voltage across billions of transistors.
Beyond this, examples include Adyen, a Dutch payments processor working across 150 currencies and Shopify, the Canadian software business whose logistics and ecommerce products have enabled countless small and medium-sized companies to bring their business online.
Serendipity: new solutions to old problems
In international markets local idiosyncrasies and problems drive the innovation that creates companies such as music streamer Spotify and the aforementioned ecommerce giant MercadoLibre.
In 2006, Sweden was the music piracy capital of the world, with The Pirate Bay enabling consumers illegally to access songs instantly and for free. Daniel Ek at Spotify saw the opportunity to outperform the pirates instead of fighting them. He devised a business model that married the convenience of the pirate service with an economically sustainable model for record labels, artists and shareholders.
Unanswered needs in emerging markets don’t just breed innovation but encourage wholesale technological leapfrogging. In Latin America low ecommerce penetration, unreliable logistics networks, piecemeal regulation and ‘underbanking’ made digital transactions nearly impossible. Meli saw this as an opportunity and has built its own ecosystem, which includes last-mile delivery, fulfilment centres, a digital payments platform and a credit business. This combination of local knowledge and creative commercial flair has built the firm a defensive moat that even Amazon can’t cross.
Conclusion: a new era for international investing
In the original age of discovery, navigators filled the blank spaces in their maps with fantastic creatures and mythical cities. Today’s passive investors share something of their trepidation: instead of venturing into the vast and uncertain territory, they stick to the well-charted edges, as represented by the indexes. But it’s only active management that makes the big discoveries.
Pronouncements from the Trump White House have shaken long-established norms of global trade. But while the decline of the liberal trade order is alarming, it’s also recalibrating global opportunities. International equities are poised to thrive in a multipolar world, driven by new trade routes, economic centres, and accelerated innovation.
Navigating this landscape means looking beyond short-term signals. The lenses of persistence, interconnectedness, and serendipity guide investors toward companies like Ferrari, resilient amid tariffs; TSMC, essential to global tech; and MercadoLibre, thriving through economic turmoil.
This new age of discovery demands investors venture beyond the familiar maps, setting forth to explore international markets to uncover the gems that are often hiding in plain sight.
Risk factors
The Funds are distributed by Baillie Gifford Funds Services LLC. Baillie Gifford Funds Services LLC is registered as a broker-dealer with the SEC, a member of FINRA and is an affiliate of Baillie Gifford Overseas Limited. All information is sourced from Baillie Gifford & Co unless otherwise stated.
As with all mutual funds, the value of an investment in the Fund could decline, so you could lose money. International investing involves special risks, which include changes in currency rates, foreign taxation and differences in auditing standards and securities regulations, political uncertainty and greater volatility. These risks are even greater when investing in emerging markets. Security prices in emerging markets can be significantly more volatile than in the more developed nations of the world, reflecting the greater uncertainties of investing in less established markets and economies. Currency risk includes the risk that the foreign currencies in which a Fund’s investments are traded, in which a Fund receives income, or in which a Fund has taken a position, will decline in value relative to the U.S. dollar. Hedging against a decline in the value of currency does not eliminate fluctuations in the prices of portfolio securities or prevent losses if the prices of such securities decline. In addition, hedging a foreign currency can have a negative effect on performance if the U.S. dollar declines in value relative to that currency, or if the currency hedging is otherwise ineffective.
For more information about these and other risks of an investment in the Funds, see "Principal Investment Risks" and "Additional Investment Strategies" in the prospectus. There can be no assurance that the Funds will achieve their investment objectives.
This communication was produced and approved in May 2025 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 and Baillie Gifford and its staff may have dealt in the investments concerned.
As at May, 2025, Baillie Gifford held Adyen, ASML, Atlas Copco, Ferrari, Hermès, LVMH, Novo Nordisk, Shopify, Silergy, Soitec, Spotify, Technoprobe and TSMC. A full list of holdings is available on request and is subject to change.
155307 10055481
