I hold the Baillie Gifford Pacific Fund in my portfolio. I don’t think generating great returns should be limited to just a few markets. In my opinion, geographical diversification is key, especially during periods of uncertainty like the coronavirus pandemic.
Here are four reasons why I hold the fund and would still buy it today.
#1 – Investment proposition
As a long-term investor, I like the Baillie Gifford Pacific Fund’s investment proposition. It invests in companies listed in the Asia (ex Japan) region that could grow over a five-year or longer time frame.
Since the fund invests for the long term, I don’t expect the managers to chop and change their portfolio very often. This means that the fund turnover should be low. This means I’m paying low transaction charges associated with buying and selling stocks in the portfolio.
#2 – Diversified portfolio
This fund invests in the Asia-Pacific region but excludes Japan (in my opinion, there are some other great funds available that just focus on Japanese companies).
I like that the fund is not limited to a single country or sector. This means that the fund managers have flexibility to invest in companies where they see fit within the Asia-Pacific region. For instance, as of the end of January, the portfolio had a 46% weighting to China and a 12% allocation to South Korea.
I also hold the fund within my portfolio due to the diversified number of holdings in the portfolio. It invests in typically 50-100 stocks. This means that any concentration on a single company is likely to be low, thereby reducing risk within the overall portfolio.
#3 – Experienced management
I should highlight that when I’m buying a fund, I’m really paying for the investment experience of the fund manager(s). The same applies for the Baillie Gifford Pacific Fund.
The portfolio is run by investment duo Ewan Markson-Brown and Roderick Snell. Both have been with Baillie Gifford, the asset manager behind the fund, for several years. In fact, both fund managers are the brains behind the high-performing Pacific Horizon Investment Trust. Baillie Gifford also runs the strong performing FTSE 100 investment trust, Scottish Mortgage.
#4 – Long-term track record
One thing I look out for in potential and ongoing investments is consistent performance over the long term. With the Baillie Gifford Pacific Fund, I get exactly that.
Over a five-year time period, the fund has outperformed its benchmark, the MSCI AC Asia ex Japan Index. It has also performed well in its sector. This shows me that the fund managers are adaptable and can deliver strong returns during various market conditions.
The risks
The Baillie Gifford Pacific Fund isn’t without risk. The portfolio’s past performance isn’t a guarantee of future performance. As an investor, I could get less back than I originally invested.
Just under half the fund is invested in China. This economy has somewhat recovered from the pandemic and delivered some great returns last year. But Covid-19 still remains a threat and could derail China’s growth. This could impact the fund’s performance.
The fund managers expect Asian companies to benefit from tailwinds such as urbanisation, the rise of the middle class and the impact of new technologies. There’s no guarantee these trends will continue, especially after Covid-19.