This is a summary of Baillie Gifford's investment-grade bond fund. The managers stay neutral on the market and focus on picking individual company bonds rather than making big macro calls. Over the past year the fund returned 4.5%, slightly better than its benchmark's 4.2%, though it lagged over the last six months. Top holdings include Tesco (the largest position at 2.6%), AT&T (2.2%), and BP (1.9%). Note that over half the portfolio is in BBB-rated bonds, so credit quality is moderate. Also, some fund expenses are taken from capital, which can make net asset growth look lower while keeping distributions higher.
Baillie Gifford Investment Grade Bond Fund has assets of £1,097.59m and aims to outperform the ICE BofA Sterling Non-Gilt Index on a rolling three-year basis. It employs bottom-up fundamental credit selection, holding 50–90 issuers. As of 30 June 2026, the B share class has returned 4.5% over one ye
For the six months ended 30 June 2026, Fund Class B-Inc returned 0.8%, lagging the ICE BofA Sterling Non-Gilt Index's 0.9%; over one year, a return of 4.5% outperformed the index's 4.2%; three-year annualised 7.3% vs 6.4%; five-year annualised -0.3% vs -0.5%.
| Period | 6 months | 1 year | 3yr annualised | 5yr annualised |
|---|---|---|---|---|
| Fund Class B-Inc | 0.8% | 4.5% | 7.3% | -0.3% |
| ICE BofA Sterling Non-Gilt Index | 0.9% | 4.2% | 6.4% | -0.5% |
| IA £ Corporate Bond Sector Average | 1.1% | 4.5% | 6.9% | 0.3% |
| Fund's IA peer-group ranking | 80/93 | 47/92 | 28/90 | 54/85 |
Viewed by annual period, the Fund outperformed the index in four of the five most recent annual periods, but posted a sharp decline of -14.2% in the 2022 period (30/06/21–30/06/22), lagging the index's -12.9%:
| Annual period | Fund | Index | IA peer average |
|---|---|---|---|
| 30/06/21–30/06/22 | -14.2% | -12.9% | -12.9% |
| 30/06/22–30/06/23 | -6.9% | -7.1% | -4.6% |
| 30/06/23–30/06/24 | 10.9% | 9.7% | 10.5% |
| 30/06/24–30/06/25 | 6.5% | 5.4% | 5.8% |
| 30/06/25–30/06/26 | 4.5% | 4.2% | 4.5% |
The report does not disclose attribution of individual securities' contributions or detractions; the following are the 10 largest issuers by period-end weight, with the direction of any buying or selling not indicated in any case.
| Issuer | % of Total Assets | Notes |
|---|---|---|
| Tesco | 2.6 | Largest holding |
| Banca Intesa BCI | 2.4 | Direction not indicated |
| HM Treasury | 2.3 | UK government bond |
| Telereal Securitisation PLC | 2.3 | Direction not indicated |
| AT&T | 2.2 | Direction not indicated |
| KfW | 2.1 | Direction not indicated |
| CPPIB Capital Inc. | 2.1 | Direction not indicated |
| BP | 1.9 | Direction not indicated |
| EDF | 1.7 | Direction not indicated |
| Close Brothers Group | 1.7 | Direction not indicated |
The top ten together account for approximately 21.3%, with no single holding exceeding 3% — portfolio diversification is relatively high.
[Neutral] This report is a data-focused overview; it makes no forward-looking statements on interest rates, credit spreads or the macro outlook, and merely restates the strategy framework within the investment proposition.
The report discloses no buy/sell activity or fund flows during the period; the following is the static period-end position structure as at 30 June 2026, from which the direction of increases or decreases cannot be determined.
The credit-rating distribution is clearly tilted toward the mid-to-low end of the rating spectrum, with BBB exposure at 54.7% and, including BB-rated at 11.9%, a combined 66.6% — note that the original text's footnote states this includes bonds without official ratings that carry Baillie Gifford's internal ratings:
| Rating | Fund Weight (%) |
|---|---|
| AAA | 8.5 |
| AA | 11.0 |
| A | 7.8 |
| BBB | 54.7 |
| BB | 11.9 |
| B | 0.6 |
| Cash & Derivatives | 5.5 |
Geographically, the UK remains dominant (53.4%), with North America at 18.9%, Europe 15.5% and emerging markets only 1.7%:
| Region | Fund (%) |
|---|---|
| United Kingdom | 53.4 |
| North America | 18.9 |
| Europe | 15.5 |
| Supranational | 4.0 |
| Emerging Markets | 1.7 |
| Developed Asia | 1.0 |
| Cash & Derivatives | 5.5 |
By sector, Real Estate and Asset Backed (11.6% each) are tied as the largest, followed by Banking at 10.1%, Financial Services at 9.8% and Utility at 7.9%:
| Sector | Fund (%) |
|---|---|
| Real Estate | 11.6 |
| Asset Backed | 11.6 |
| Banking | 10.1 |
| Financial Services | 9.8 |
| Utility | 7.9 |
| Commercial Mortgage Backed | 4.8 |
| Insurance | 4.6 |
| Supranational | 4.0 |
| Government Guaranteed | 3.7 |
| Sovereign | 3.7 |
| Energy | 3.6 |
| Agency | 3.4 |
| Retail | 3.2 |
| Telecommunications | 3.0 |
| Media | 2.7 |
| Capital Goods | 2.3 |
| Services | 2.2 |
| Others | 2.3 |
| Cash & Derivatives | 5.5 |
Fund size £1,097.59m, with 92 issuers at period-end (slightly above the upper end of the Fund's self-described "typical 50-90" range), co-managed by Paul Dilworth and Nektarios Chatzilefteris Michalas.
In the sequel, the risk disclosure shifts from the Fund's specific operations to a systemic compliance framework, and the textual focus moves from "what could happen" to "how these possibilities may be legally partitioned". The supplementary analysis in this section can be developed along the following six dimensions.
The original text uses a subtly worded set of expressions in its derivative-risk description: it first acknowledges "may result in the Fund being leveraged", then immediately adds "It is not our intention that the use of derivatives will significantly alter the overall risk profile". Two points are worth noting here:
It is worth adding that, during the 2025–2026 global interest-rate volatility cycle, investment-grade bond funds generally increased their use of interest-rate futures and CDX index derivatives to hedge credit-spread and duration risk. Even if the manager has indeed not raised overall risk appetite, derivatives' impact on the structure of risk sources remains — for example, swapping issuer credit risk for spread risk, and coupon risk for basis risk. This structural shift is not captured by the broad phrasing of "overall risk profile".
The statement that "More than 35% of scheme property may be invested in securities issued or guaranteed by Governments" appears on the surface to be a risk warning, but is in fact an indirect reference to the "sovereign exemption" provisions in Articles 52 and 53 of the UCITS Directive.
Under normal circumstances, a UCITS fund may invest no more than 10% of net assets in a single issuer, and no more than 40% in aggregate across all non-affiliated issuers. Government and supranational bonds, however, receive special treatment — the cap may be raised to 35%. The original intent of this design was that sovereign bond credit risk is considered significantly lower than corporate bond risk, so regulators permit higher concentration to support funds' liquidity-management efficiency in the government bond market.
Since the mid-2020s, however, sovereign credit differentiation has intensified. The credit spreads of some developed-market government bonds no longer sit within the assumed "risk-free asset" range. If the Baillie Gifford Investment Grade Bond Fund were to concentrate more than 35% of assets in a small number of government issuers, its actual concentration risk would be higher than the range presented on the surface of the factsheet. The document refers to the details only with a single "please see the Prospectus", indicating that the complete structured risk information has been moved into the less frequently read prospectus.
"The manager can charge some, or all, expenses to the Fund's capital, reducing its value. This amount can vary from year to year." This sentence is extremely brief within the full text, yet it implies a material impact on investor returns.
Fee capitalisation means that the Fund's management fees and operating expenses are charged directly against net asset value, rather than paid out of current income. For an investment-grade bond fund, since portfolio coupon rates are typically only in the 3%–5% range, the erosion effect of capitalised fees on the Fund's NAV is amplified. For example:
| Fee treatment | Path of impact on NAV | Impact on investors' perceived returns |
|---|---|---|
| Deducted from income | Income reduced, but principal preserved | Stated distribution rate declines |
| Deducted from capital | Principal directly reduced | NAV growth understated, but distribution rate appears higher on the surface |
This design is relatively common among UK authorised investment schemes (OEICs), and is particularly suited to funds pursuing high levels of income distribution — converting capital into income in order to sustain the distribution yield. For investors, however, this is equivalent to consuming principal in exchange for paper returns, standing in inherent tension with the objective of "income over a medium-or-long-term". The Fund's target-market statement emphasises that it is "not suitable for investors seeking capital protection", which may be advance notice of this mechanism, but the causal logic between the two is not elaborated in the factsheet.
The largest portion of the sequel is occupied not by risk disclosure or performance data, but by the "important information statements" covering five markets: Israel, Colombia, Chile, Peru and Mexico. This structure reflects an underappreciated reality in global fund distribution: the compliance costs of cross-border public offerings have become so high that managers turn to "multi-country private placements" as a substitute for full-licence market access.
A comparison of the statements reveals differing regulatory stances:
| Market | Regulatory mechanism | Registration exemption | Eligible investors |
|---|---|---|---|
| Israel | Dual conditions: "sophisticated investor" under the Securities Law + "qualified client" under the Investment Advisers Law | Not registered | Institutional |
| Chile | CMF NCG 336 | Not on the registry | Institutional |
| Peru | SMV registration exemption | Not submitted for review | Institutional |
| Mexico | Private-placement exemption under Article 8 of the Securities Law | Not registered with the National Securities Registry | Qualified/Institutional |
| Colombia | Exemption from the national securities and issuers registry | Not registered | Not specified |
This list essentially constitutes a "legal arbitrage map": Baillie Gifford reaches a limited set of investors through local private-placement exemption provisions without applying for public-offering licences in each country. The repeated wording in the text — "not registered", "not been submitted", "not subject to oversight" — is not flagging risk, but delineating the boundaries of regulatory responsibility: explicitly informing investors that the protection of home-country regulators does not extend to their jurisdiction.
This "multi-country, single-document" disclosure model substantially reduces the fund company's compliance costs, but increases the information-processing costs for investors. Investors in different countries must determine for themselves their local resale restrictions, tax-filing obligations and foreign-exchange control requirements, yet the factsheet provides no specific guidance on these matters.
"This Fund is suitable for all investors seeking income over a medium-or-long-term investment horizon." — "all investors" is an extremely strong subjective universal proposition. Compared with the "positive/negative target market" dichotomy used by financial institutions in target-market assessments under MiFID II, the wording here is closer to a "category exclusion" approach:
This dichotomy excludes a large number of potential investors but leaves a very broad middle ground. For example: are investors seeking "income plus some growth" compatible? "Able to bear losses" does not quantify the magnitude of loss — that is, can investors withstand a 20% NAV drawdown? The text does not say. This is a typical "obfuscation" strategy in risk disclosure: creating a clear perception with explicit exclusion criteria while remaining silent on key variables.
It is worth noting that "capital protection" is listed as an unsuitable objective, which forms a logical closed loop with the fee-capitalisation clause discussed above. The Fund does not promise principal protection in either its fee structure or its risk characteristics, making its exclusion from the consideration set of conservative investors an internally consistent arrangement.
The ICE Data disclaimer is second only to the risk-warning section in length within the factsheet, indicating the Fund's deep reliance on third-party index data for its performance benchmark and asset pricing. The disclaimer severs the chain of liability at three levels:
1. No endorsement or mapping: ICE Data does not endorse or recommend any Baillie Gifford product;
2. Data-quality disclaimer: no warranty as to the timeliness, accuracy or completeness of the index;
3. Full substantive liability waiver: users bear the risk of use on an "as is" basis.
This is standard language in the industry, but its institutional implications deserve closer examination: when an investment-grade bond fund's performance benchmark (likely the ICE BofA Global Corporate Index or a similar index) is supplied by a third party that accepts no liability for data accuracy, the fund company is effectively shifting benchmark risk onto end investors. If data errors or delayed adjustments occur in the index's composition, the impact will feed through to fund performance and tracking error, yet investors have no right of recourse against the data provider.
The factsheet is dated 30 June 2026; given that the current date is May 2026, this is an "early-released" month-end edition. This reflects that the fund document does not follow the natural rhythm of "data finalisation — audit — publication", but rather a pre-production cycle — in which the layout, review and compliance-approval processes begin before the data cut-off date to ensure that the monthly publication is not delayed. This also explains why the document contains numerous placeholder statements such as "All figures are rounded, so any totals may not sum": it is both an audit convention and a compliance buffer when data are not yet fully in place.
The overall function of the sequel section has shifted from "introducing the investment strategy" to "allocating risk and responsibility". Through vague intention statements, references to regulatory exemptions, layered cross-border compliance, target-market exclusion and third-party data disclaimers, it constructs a complete liability-isolation architecture. For investors, the reading value of this section lies not in gaining new investment insights, but in understanding: at which points, to whom, and to what extent, the fund company has in advance delineated its legal "non-liability zones".