Edinburgh Worldwide to ring changes in bid to boost performance

The global smaller companies trust has lost nearly 50% of its value over the past three years, writes Sam Benstead.

20th November 2024 11:29

by Sam Benstead from interactive investor

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Edinburgh Worldwide, the global smaller companies investment trust from Baillie Gifford, hopes to make changes to its investment approach in a bid to boost performance.

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The board of the £635 million market cap trust, which trades on a -2% discount to its net asset value, is asking shareholders to approve the following changes.

First, the board will commit to share buybacks and other capital-return programmes of up to £130 million.

Second, the investment process will change slightly, with a restructuring of the portfolio to focus on a reduced number of holdings, which it hopes will enable more regular and deeper engagement with those companies.

This means 60 to 100 positions instead of 75 to 125 currently. The trust also hopes to be able to invest in larger companies, raising the upper limit of positions from a $5 billion (£4 billion) market cap to the largest constituent of the trust’s comparative index, the S&P Global Small Cap Index. This is currently MicroStrategy Inc Class A (NASDAQ:MSTR), an $87 billion company as a result of its bet on Bitcoin.

In addition, Luke Ward and Svetlana Viteva will now be co-managers on the trust alongside Douglas Brodie. Both Ward and Viteva are existing Baillie Gifford portfolio managers and have been involved in Edinburgh Worldwide and its open-ended sister fund Baillie Gifford Global Discovery since 2017.

Edinburgh Worldwide invests in innovative smaller companies from around the world, many of which are currently unprofitable. Its largest positions include Zillow, PsiQuantum and Ocado. It also has an 11.9% position in Elon Musk’s private SpaceX firm.

Performance has been disappointing since rising interest rates in late 2021 curtailed demand for riskier investments.

Over the past three years, the trust’s shares have dropped -48%. They are down -10% over five years but up 120% over 10 years.

To implement the “action plan” shareholders will need to approve the changes at its 18 December Annual General Meeting.

Jonathan Simpson-Dent, chair of Edinburgh Worldwide, said: “Our vision, to identify and manage a carefully selected portfolio of transformative businesses, has the potential to deliver outsized returns for shareholders.

“We have developed a comprehensive action plan to improve execution and, in addition, are committing to return up to £130 million to shareholders following a share buyback programme that has recently reduced our discount and been value accretive for shareholders.

“We believe that this wide-ranging package of changes will put the trust back on a path for growth.”

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