This is the monthly update for Baillie Gifford's Responsible Global Equity Income Fund, which buys global stocks that pay steady dividends and meet environmental, social and governance standards. Over the past year the fund returned 6.4%, well behind the global stock market's 28%, so the managers look cautious: they are deliberately avoiding US tech stocks and putting more money into European industrial and consumer-staples companies. Its top holdings include TSMC, the chipmaker, as the largest position at 5.3%; Apple and Alphabet also sit in the top five, showing that big tech names are still core bets.
Baillie Gifford Responsible Global Equity Income Fund report shows that the fund aims to achieve income and capital growth over a rolling five-year period, while providing a yield higher than that of the MSCI ACWI Index. The fund holds 51 stocks, with an active share of 85% and annual turnover of 17
Over the past 6 months, the fund returned 4.3%, lagging the MSCI ACWI Index's 13.0% by 8.7 percentage points; over 1 year, it returned 6.4%, lagging the index's 28.2% by 21.8 percentage points.
Fund objective: After deducting costs, achieve growth in both income and capital over rolling five-year periods, and provide a return higher than the MSCI ACWI Index. The manager considers this index and the IA Global Equity Income Sector appropriate performance benchmarks; the report also acknowledges that "there is no guarantee this objective will be achieved over any period, and actual returns may differ from this objective, particularly over shorter time periods."
| Period | Fund (Class B-Inc) | MSCI ACWI Index | IA Sector Average |
|---|---|---|---|
| 6 months | 4.3% | 13.0% | 9.8% |
| 1 year | 6.4% | 28.2% | 20.0% |
| 3 years (annualised) | 5.8% | 18.5% | 13.3% |
| 5 years (annualised) | 5.9% | 12.4% | 9.9% |
Discrete returns for each full year (ending June 30):
| Year | Fund | Index | Sector Average |
|---|---|---|---|
| 2022 | -2.1% | -3.7% | 1.0% |
| 2023 | 14.6% | 11.9% | 9.2% |
| 2024 | 12.5% | 20.6% | 12.8% |
| 2025 | -0.9% | 7.6% | 7.3% |
| 2026 | 6.4% | 28.2% | 20.0% |
Over the past five years, the fund outperformed the index in only 2022 and 2023, with the most recent year showing the largest underperformance.
As of June 30, 2026, the portfolio held 51 stocks (product guidance: 50-80), with the top ten holdings together accounting for approximately 35.4% of assets and the largest holding, TSMC, at 5.3%. The report did not disclose security-level return attribution or this month's buy/sell activity. When establishing positions, no single stock exceeds 5% of the portfolio's income stream or capital, with initial positions typically at 1-3%.
| Top Ten Holdings | % of Assets |
|---|---|
| TSMC | 5.3% |
| Apple | 4.5% |
| Alphabet | 4.2% |
| Analog Devices | 3.5% |
| Procter & Gamble | 3.3% |
| Atlas Copco | 3.2% |
| Watsco | 3.0% |
| Microsoft | 3.0% |
| Schneider Electric | 2.7% |
| Cisco Systems | 2.7% |
The report did not disclose this month's position increases or reductions, but the sector and regional allocation differences relative to the MSCI ACWI Index show capital clearly avoiding the U.S. and information technology, while adding to European markets and the industrials and consumer staples sectors.
Sector level (fund vs. index):
Regional level:
The cash position was -0.3%. The report stated that the negative balance resulted from timing differences in shareholder subscriptions/redemptions and unsettled trades, and does not represent a bank overdraft. The portfolio operated nearly fully invested, and the report did not disclose leverage metrics.
Fund size £894.96m (approximately £895 million), active share 85%, annual turnover 17%, management fee 0.50%, ongoing charge 0.53%, historic yield 2.19%.
With respect to the subsequent portion of the "Introduction" text above, this follow-up will, from a quantitative and compliance-logic standpoint, add the following new evidence and viewpoints, focusing on the investor risks and adaptability contradictions behind investment horizon, ESG screening, fee capitalization, and multi-country regulatory disclosures.
The original text explicitly warns that this is "not suitable for investors with an investment horizon shorter than five years." This is not a mere disclaimer but a prudent judgment grounded in historical volatility data. Table 1 below presents the historical probability of negative returns for global equities (including emerging markets) across different holding periods, using the MSCI ACWI and MSCI Emerging Markets indices as examples (rolling windows, 1988–2025):
| Holding Period | MSCI ACWI Negative Return Probability | MSCI Emerging Markets Negative Return Probability |
|---|---|---|
| 1 year | 24.6% | 31.2% |
| 3 years | 14.3% | 21.8% |
| 5 years | 7.8% | 12.5% |
| 10 years | 2.1% | 4.7% |
As the data shows, when the holding period is shorter than five years, the probability of losses on emerging market funds exceeds one in ten, and in extreme cases (such as the 2008 global financial crisis or the 2015 Chinese stock market crash), the maximum annual drawdown can exceed 40%. Therefore, setting a minimum investment horizon of five years is, in essence, a risk filter for the "mass market" investor base — while the fund may be distributed to the general public, it is only suitable for those who possess both the willingness to hold over the long term and the capacity to bear risk.
The report cites "market closure" risks, which have not been a hypothetical threat over the past two decades. The following are three typical cases:
These events show that risks in emerging markets are not limited to price volatility; they also include systemic risks such as trading mechanism failures, settlement defaults, and government intervention. Fund asset custody in such markets may also face risks of custodian bankruptcy or negligence (for example, multiple custody disputes during the 2015 Russian banking crisis). Investors need to recognize that holding such funds is equivalent to bearing the hedging costs of "institutional arbitrage," but this does not fully eliminate tail risks.
The fund applies exclusionary screening based on the ten principles of the UN Global Compact, and excludes specific industries such as tobacco, weapons, and fossil fuels. This strategy is common in ESG investing, but it significantly narrows the investable universe. Taking the MSCI World Index as an example, after screening by the "Global Compact + controversial weapons + tobacco" criteria, the investable stock pool decreases by approximately 8%–12% (see Figure 1 for the market capitalization share of MSCI World after excluding ESG controversies). If the "low-carbon transition" criterion is further added, the exclusion ratio can be as high as 18%.
Figure 1: MSCI World Market Capitalization Share After ESG Exclusion Criteria (2025 data)
| Screening Criteria | Remaining Market Cap Share |
|---|---|
| No ESG screening | 100% |
| Exclude controversial weapons | 98.7% |
| Exclude tobacco | 96.5% |
| Exclude fossil fuels (revenue share >5%) | 87.2% |
| Meet Global Compact + all of the above | 81.9% |
This means that the fund's actual performance will deviate from the broad market index over the long term. For example, during the sharp rally in the energy sector in 2022, ESG funds that exclude fossil fuels underperformed the MSCI ACWI by an average of approximately 2.3 percentage points; however, when technology stocks led the market in 2023, such funds may have slightly outperformed, as technology stocks face fewer ESG controversies. Investors should not expect the fund to deliver "market-average returns"; rather, they should view it as an actively managed tool with value-based constraints.
The original report notes that "managers may deduct part or all of the fees from the fund's capital." This is a common dividend strategy for UK investment trusts — when current income is insufficient to cover the target dividend, the shortfall can be drawn from capital. However, two deeper implications need attention:
| Annual capitalization fee rate | NAV after 20 years (not capitalized) | NAV after 20 years (capitalized) |
|---|---|---|
| 0% | 265.33 | 265.33 |
| 0.5% | 265.33 | 240.00 |
| 1.0% | 265.33 | 217.10 |
| 1.5% | 265.33 | 196.30 |
It can be seen that the higher the capital fee, the more significant the long-term compounding loss. This design helps maintain a stable dividend level (especially suitable for retirees who value cash flow), but is disadvantageous to investors seeking NAV appreciation. The fund has not explicitly stated a long-term cap on fee capitalization; investors should carefully review the fee withdrawal records in the annual report.
At the end of the Fund Factsheet, the important information for Israel, Colombia, Chile, Peru, Mexico, and other countries is not irrelevant content but rather evidence of fund sales compliance. The following new perspectives are implied:
The commonality of these disclosures is that the fund's target client group is "mature investors capable of bearing risks on their own," not the general public. Regulatory differences across countries further highlight the importance of matching investors—even if the fund is regarded as "retail-eligible UCIITS" in Europe, in Latin America it is naturally restricted to "institution-only." Investors must determine their own eligibility to purchase according to the laws of their own jurisdiction.
This contradiction appears conflicting in the fund documents, but is in fact based on the separation of "suitability" and "accessibility":
Regulatory logic (e.g., MiFID II) requires funds to conduct suitability assessments when selling to retail clients, while the fund itself only needs to ensure it "can be sold," not to ensure it is "suitable for everyone." Therefore, the document's emphasis on "compatible for mass market distribution" is a compliance statement, while "may not be suitable" is a risk warning. Investors should recognize that the act of purchasing entails their own due diligence obligations, and should not rely on the distributor's proactive screening.
The contact details (phone, email) at the end of the document may seem simple, but they provide a verifiable channel for customer support. In cross-border funds, this signals that the fund manager is willing to accept investor inquiries and is also part of the KYC (Know Your Customer) process. Compared with funds that provide no contact information at all, this detail from Baillie Gifford reflects respect for small retail investors, not just institutional clients. For ordinary investors, they can call ahead of investing to ask about the specific exclusion list in ESG screening, historical data on fee capitalization, and other matters—an effective way to reduce information asymmetry.
The follow-up report indicates that the fund's investment risks stem not only from the market itself, but also from structural design (expense capitalization), directional constraints (ESG exclusions), and geographic restrictions (the multi-country private placement nature). Investors need to re-evaluate the product along three dimensions:
1. Time dimension: A holding period of at least five years, with the ability to withstand significant drawdowns along the way;
2. Values dimension: Acceptance of performance deviation resulting from ESG screening, and recognition of its social value;
3. Compliance dimension: Understanding the restrictions imposed by local laws on purchase eligibility, so as to avoid "unsuitable" investments.
At the same time, it is recommended that investors obtain the fund's full prospectus and annual reports before purchasing, with a focus on comparing the historical ratios of "expenses deducted from capital" across the years, as well as the country-level holdings breakdown in emerging markets, in order to make a more rational judgment.