Baillie Gifford says shareholders can ditch China trust if underperformance persists

Baillie Gifford has pledged to allow investors to refund their money from its £133m China-focused growth trust if it continues to underperform the wider market over the next four years.

The trust’s share price has dropped by more than 33 per cent in the last five years, compared to a drop of just nine per cent in its index.

The 117-year-old trust would allow shareholders a full redemption of shares if it can’t match its performance of its benchmark, the MSCI China All Shares index between 29 November 2024 and 30 November 2028.

In a stock exchange notice today, the Baillie Gifford trust said that 2028 would give the trust and its manager “appropriate time to outperform against its benchmark”, and shareholders would be able to be refunded 100 per cent of their cash in the trust if they fail to do so.

Created in 1907, the trust originally began as the General Investors and Trustees, investing in the US, UK and Europe before shifting its focus towards Asia in the 1980s. Baillie Gifford took control of the trust in September 2020.

The trust’s share price currently trades on a 14 per cent discount to the value of its underlying assets, having sat comfortably below it for more than two years, meaning investors would bring in more cash from a redemption over selling the shares.

“For investors in China equities, the board believes the company offers a differentiated growth strategy,” Baillie Gifford China Growth trust chair Nick Pink said.

As an asset manager, Baillie Gifford has constantly battled with problems of underperformance over recent years as its growth style of investing has been persistently out of fashion.

In August, its US growth trust was put on notice by analysts over its poor performance, with one warning that investor patience would “wear thin” if performance didn’t pick up.