Standout 2026 Results: 34% NAV Total Return and a Narrowing Discount
Baillie Gifford China Growth Trust has delivered a thumping year. For the 12 months to 31 January 2026, the net asset value total return (NAV TR) was 34.0% and the share price total return was 38.8%, comfortably ahead of the MSCI China All Shares at 22.2%. NAV total return is the change in net assets plus dividends, while share price total return tracks what investors actually got from the market price, dividends reinvested.
The discount – the gap between the share price and the NAV – tightened to 7.4% at year end (from 10.4%), helped by stronger performance, buybacks and a performance-linked discount control tool. For growth-focused China exposure, this is one of the stronger sets of numbers we’ve seen in the sector in recent years.
| Key metric (year to 31 Jan 2026) | Outcome |
|---|---|
| NAV total return | 34.0% |
| Share price total return | 38.8% |
| Benchmark (MSCI China All Shares, £) | 22.2% |
| Closing discount to NAV | 7.4% |
| Ongoing Charges Ratio (OCR) | 1.06% (down from 1.12%) |
| Total assets | £205.3 million |
| Shareholders’ funds | £197.6 million |
| Net gearing | 3.1% |
| Buybacks | 1.7m shares (2.9% of share capital) |
| Proposed final dividend | 2.50p (ex-div 18 June; pay 22 July 2026) |
| Unlisted exposure | 12.2% of total assets (ByteDance 10.4%) |
Why the Trust Outperformed: Stock Picking, AI Leverage and Private Exposure
Management attributes most of the outperformance to stock selection rather than sector bets – exactly what you want from an active fund. AI and platform exposure were key tailwinds as investors re-engaged with China’s private-sector champions at more sensible valuations.
Top contributors and detractors that moved the dial
- Positive: ByteDance, Zijin Mining Group, Pop Mart, Zhongji Innolight.
- Negative: Meituan, DPC Dash, Sunny Optical Technology.
ByteDance was the standout, helped by stronger monetisation and the completion of the TikTok US transaction, which meaningfully reduced regulatory tail risk. Zhongji Innolight surged on demand for high-speed optical kit in AI data centres; the manager trimmed after a steep run. On the other side, Meituan faced fiercer competition in local services.
AI and advanced manufacturing: the portfolio’s growth engine
The managers lean into China’s diffusion of AI across platforms, devices and factories rather than hunting a single model “winner”. That’s evident in holdings like Tencent, Alibaba and ByteDance, plus selective names such as MiniMax and Horizon Robotics. Hardware and energy enablers matter too: CATL (batteries), Zhongji Innolight (optics) and Zijin (copper/gold) all connect to the AI and energy-transition build-out.
Private Companies: Big Bet on ByteDance, Plus RedNote
Unlisted investments were 12.2% of total assets, with ByteDance at 10.4% – the primary driver of long-run outperformance since acquisition. Valuations are set by Baillie Gifford with independent input from S&P Global and overseen by the Board. The trust added RedNote (Little Red Book), a consumer platform fusing social discovery with ecommerce. The unlisted cap is 20% (at time of investment), so there’s room to manoeuvre, but private valuation risk is always a consideration.
Opinion: the private tilt is a genuine differentiator. It’s helped on the way up, but concentration cuts both ways. With ByteDance a double-digit position and IPO timing not disclosed, investors should watch ongoing valuation marks and liquidity assumptions.
Discount Control: Buybacks and a Conditional Tender Offer
The Board bought back 1.7 million shares at an average 10.4% discount, adding an estimated 0.3% to NAV per share. More interesting is the performance-linked Conditional Tender Offer (CTO) running to November 2028. Since the measurement period began (29 November 2024), NAV TR has outpaced the benchmark by 12.4%. Specific CTO terms are not disclosed here, but the principle is clear: sustained outperformance can trigger shareholder-friendly actions. Combined with ongoing buybacks, that underpins discount discipline.
Costs, Income and Gearing: Quietly Improving
The ongoing charges ratio fell to 1.06%, helped by a higher average NAV. Revenue earnings per share rose 17.8% to 2.98p, and the Board proposes a 2.50p final dividend, in line with the policy to pay the minimum needed to maintain investment trust status. Translation: capital growth remains the focus; income is a modest bonus.
Net gearing was 3.1%. The US$25 million loan facility matures on 11 April 2026 and the Board “does not currently anticipate any issues” with renewal. Modest gearing helped in a rising market and remains a sensible lever given expected equity returns versus borrowing costs.
Portfolio Shape: Concentrated, High-Conviction China Growth
The trust holds a focused book (typically 40–80 holdings), with active share of 62% and 19.1% one-year turnover. The top 10 as at 31 January 2026 were Tencent, ByteDance, Alibaba, Ping An, CATL, Zijin Mining, Kweichow Moutai, China Merchants Bank, China Construction Bank and Weichai Power – a blend of platform AI leaders, consumer franchises and energy-transition enablers.
Opinion: this is not a closet indexer. The underweight to broad financials but selective ownership of Ping An, CMB and CCB shows valuation discipline, while the AI and manufacturing stack drives the growth skew.
Context: Two Strong Years Don’t Erase the Past, But Momentum Helps
Since the mandate change on 16 September 2020, the trust still trails its benchmark on a cumulative basis (NAV TR underperformance of 6.3%; share price underperformance of 9.3%). That said, the last two years have been notably strong and have narrowed the gap. If the managers keep compounding stock-specific wins and AI diffusion remains a tailwind, the CTO carrot could keep discount volatility in check.
What to Watch Next
- Loan facility renewal by 11 April 2026 – the Board expects no issues.
- ByteDance valuation updates – still the biggest swing factor; IPO not imminent.
- Discount trend – buybacks and CTO support are in place to November 2028.
- Execution in AI-exposed names – especially Tencent, Alibaba, MiniMax and Horizon Robotics.
- Geopolitics and China macro – managers note persistent rather than paralysing risks.
My Take: A Credible China Growth Vehicle with Real Edge
This readout ticks the right boxes: superior returns versus benchmark, tighter discount, lower OCR and clear attribution to stock selection. The private sleeve – headlined by ByteDance – is a genuine source of alpha and makes this trust stand out. The caveat is concentration risk and the inherent uncertainty around private valuations and geopolitics. For investors seeking high-conviction China growth with measured gearing and active discount control, this remains one of the more compelling options on the UK market.
As ever, returns will be lumpy. But if China’s innovation cycle keeps turning – across AI, advanced manufacturing and energy – this portfolio looks well placed to capture it.
