Trustnet Magazine Issue 44 October 2018 | Page 28

SCOTTISH BAILLIE MORTGAGE GIFFORD INVESTMENT UK GROWTH TRUST FUND Your portfolio 26 / 27 Low-hanging fruit However, Gannatti says the main reason why passives have nothing to fear from algorithmic trading attacks is far simpler than anything to do with trading strategies or regulation. “If you think about the amount of resources these market participants have,” he adds, “and how smart they passive funds and ETFs have a are, if it was profitable and easy to mandate to track an index, what is do, the low-hanging fruit would have not written in the prospectus is the been picked up by this point.” way they have to track it. Regardless of how many analysts say there is nothing to fear from passives, Stratified sampling many people will stick with an active “It would be rare they buy every stock manager, perhaps unable to shake in an index, except in the case of say the image of a driverless Uber killing US large caps where all the stocks are a cyclist. While this is your choice, it large and have to be followed,” he says. is worth remembering a single factor “If you are talking about small caps, was blamed for 93 per cent of US car what is much more typical is the accidents last year: human error. portfolio managers weigh up the pros and cons and say ‘what is the most efficient way of tracking an index?’. They won’t buy every stock in the same way as not every stock is equally liquid and their transaction costs would be higher.” Tarver says in most markets, trackers follow indices using a technique called stratified sampling where rather than owning every share they buy representatives of a sector. “So, say you have a small-cap index with some fairly illiquid stocks, you might own a basket of these and put an option against them to take out the risk,” he explains. “Although passive funds and ETFs have a mandate to track an index, what is not written in the prospectus is the way they have to track it” THE BAILLIE GIFFORD UK GROWTH FUND WAS FORMERLY THE SCHRODER UK GROWTH FUND KEEPING WATCH FOR HIGH GROWTH UK COMPANIES. The Baillie Gifford UK Growth Fund PLC is an investment trust which brings our long-term growth philosophy home to the UK. As high conviction active managers we are looking for fi rms with sustainable competitive positions and strong corporate cultures. Companies that we believe can deliver superior earnings growth over many years. This is a best ideas portfolio investing in what we consider to be the most exciting businesses listed on the domestic stock market. Please remember that changing stock market conditions will affect the value of the investment in the fund and any income from it. Investors may not get back the amount invested. If in doubt, please seek fi nancial advice. If you’re looking for growth from a fl agship UK fund, call 0800 917 2112 or visit us at www.bgukgrowthfund.com A Key Information Document is available by contacting us. Long-term investment partners Your call may be recorded for training or monitoring purposes. Issued and approved by Baillie Gifford & Co Limited, whose registered address is at Calton Square, 1 Greenside Row, Edinburgh, EH1 3AN, United Kingdom. Baillie Gifford & Co Limited is the authorised Alternative Investment Fund Manager and Company Secretary of the Company. Baillie Gifford & Co Limited is authorised and regulated by the Financial Conduct Authority (FCA). The investment trusts managed by Baillie Gifford & Co Limited are listed UK companies and are not authorised and regulated by the Financial Conduct Authority. trustnet.com