Meet the fund managers: Investing in the American dream

In this new weekly series, investment reporter Elliot Gulliver-Needham sits down with a fund manager for a Q&A. This week, we’re hearing from Gary Robinson, fund manager of Baillie Gifford US Growth Trust

What area does your fund cover and how does it differ from other markets?

We invest in US public and private companies. The US is home to many of the world’s most exceptional businesses. It is filled with new opportunities, with more billion-plus dollar startups than any other country by far.

It owes this success to a culture of innovation, a global talent pool, outstanding universities and a thriving venture capital ecosystem. These companies are already changing predictions for what the world will look like years from now.

What makes your fund unique compared to other funds covering the same market?

The US Growth Trust is unique given its focus on exceptional American growth companies across the public/private divide. We look to invest for long time periods, at least five years. We embrace the uncertainty that comes with investing over such long time horizons while focusing on the upside opportunities available.

Our private company relationships give us a unique perspective on what technologies and business models are coming for public market companies. Some of the world’s best businesses are in this category and we get access to them. These are not garage start-ups, these are world-leading companies like Stripe in online commerce and Zipline in drone delivery.

Which of your holdings are you most excited about?

The great thing about building a concentrated portfolio of the most exceptional businesses in America is that every one of them is exciting.

We hold businesses that we believe have a better-than-average chance of delivering among the market’s highest returns over our holding period. We established a position in Meta, which has responded well to competitive threats with its products, while innovating with AI to strengthen its advertising capabilities like nobody else can. Space X’s new approach to rocketry is collapsing the cost of sending cargo to space. This opens never-before available commercial applications like worldwide low-earth orbit satellite internet and
new cargo missions.

I would also highlight education company Duolingo. While most focus on defending and extending their businesses’ edge, Duolingo has shown how to leap out of this limited way of operating by driving growth in emerging new areas while seeding options for future growth. We think this is an important long-term growth characteristic in a competitive landscape.

Which of your holdings are you most excited about?

We find the biggest mistakes are not holding companies that we discussed and subsequently went on to deliver exceptional returns. The returns on offer to investors are asymmetric, so missing out on companies that can multiply their share prices several times over is far more impactful than holding a company whose share price falls. We underestimated the strength of Microsoft’s core assets, and the capacity for new management to re-invigorate the business.

We’re obviously delighted to have maintained a large position in Nvidia, but it could have had an even bigger impact had we not made a small reduction in 2018.

These cases hold valuable lessons about the importance of optimism for long-term, active growth investing.