Following the retirement of Baillie Gifford’s veteran manager Spencer Adair at the end of March, the firm has made a big change at the top of its investment trust Monks.
Michael Taylor is a new arrival to the management team, but he stresses continuity at the global diversified growth fund, which manages £2.6 billion in assets. He has the help of Helen Xiong and Malcolm McColl in running the portfolio of 100-plus equities.
They are clear that there is method and a firm hand behind their stock selection.
Taylor may be new to the Monks team but he is no stranger to Baillie Gifford’s independent-minded culture and dogged adherence to long-term growth investing.
He spent five years at the Edinburgh-based asset manager earlier in his career and returned to the fold in 2022.
Monks seeks out firms that it expects to hold for five years on average, so unsurprisingly it takes its time assessing them.
When it comes to ferreting out promising buys, the team looks for where there is demand for products or services that are specialised and not easily replicable. Taylor says: ‘We then invest in the companies we think can best exploit the resulting profitability from these specialised areas that we call ‘bottlenecks’. We want to invest in those where we see a long-lasting opportunity.’
Almost a third of Monks’ investments are concentrated in the technology sector, with industrials and financials in a distant second and third place.
Health is another major theme that Taylor believes cannot fail to pay off over decades to come – and Monks has staked nearly a tenth of the trust’s holdings in this sector.
But Taylor explains healthcare is so broad that the trust can achieve diversity within the sector itself.
For example, it has a holding in Medpace, which operates in clinical research and is headquartered in Cincinnati, Ohio.
But it is also invested in Ensign Group, based in California and offering assisted living, rehabilitation and nursing services. Taylor says: ‘With these two you are getting exposure to healthcare but in different ways.’
Monks places its current and potential future holdings in four growth buckets – stalwart, rapid growth, cyclical and idiosyncratic.
Microsoft, one of its top ten holdings, makes up 2.7 per cent of the portfolio and it is easy to identify as a ‘stalwart’ as it is a large tech stock with great longevity.
Royalty Pharma, which makes up a chunky 2.5 per cent of the fund, is a ‘cyclical’ player because it operates in the biotech sector, which typically comes in and out of favour with investors. For ‘rapid growth’, Monks looks to innovators such as AppLovin, an advertising specialist for the tech industry.
Games Workshop, the British manufacturer of miniature figurines for fantasy wargames, is an ‘idiosyncratic’ holding as it bears little similarity to any of the other holdings in the trust’s tech and industrials dominated portfolio.
Baillie Gifford’s investment mission for Monks stresses it should not be viewed as a proxy for any index. But as a global fund, its benchmark is the FTSE All World, against which its returns are comparable over one, three or ten years but dismal over five years.
As long-term growth investors, Monks’ management look through this – though investors might take a dimmer view. However, when the Association of Investment Companies compiled a list this year of which investment trusts would have made you an Isa millionaire by now, Monks was on it.
Monks’ ongoing charge is 0.43 per cent, Sedol is 3051726, ISIN is GB0030517261 with ticker MNKS.
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