Baillie Gifford UK Growth Trust: Underperformance, Fee Cut, and New Co-Manager Amid Growth Style Headwinds

Baillie Gifford UK Growth Trust results 2026: the big picture for investors

Baillie Gifford UK Growth Trust has delivered a decent year in absolute terms, but a disappointing one against its benchmark. Net asset value, or NAV, total return was 15.6% for the year to 30 April 2026, while the FTSE All-Share Index returned 25.2%. The share price total return was 18.2%.

That gap matters because this is an actively managed investment trust. Investors are paying for stock picking, not index hugging, so falling nearly 10 percentage points behind the benchmark is not a small miss. The Board plainly knows that too, and to be fair, the tone of this RNS is more honest than polished.

Baillie Gifford UK Growth Trust key numbers from the 2026 annual results

Metric	2026	2025
NAV total return	15.6%	7.1%
Share price total return	18.2%	13.6%
FTSE All-Share Index total return	25.2%	Not disclosed in the table for 2025
NAV per share	226.7p	201.2p
Closing share price	207.0p	180.0p
Discount to NAV	8.7%	10.5%
Revenue return per share	6.23p	5.32p
Final dividend	6.20p	5.70p
Ongoing charges	0.76%	0.71%
Net gearing	9%	9%

Why Baillie Gifford UK Growth Trust underperformed the FTSE All-Share Index

The main issue was style. The trust is built as a growth portfolio, meaning it backs companies expected to grow profits strongly over time, rather than cheap cyclical shares. That was the wrong place to be in a market led by banks, oil and gas, and mining.

The Chairman says the trust’s lack of exposure to oil, gas and coal, industrial metals and mining, and banks explained most of the underperformance. The figures behind that are pretty stark: the FTSE All Share Banks Index returned 58% and the FTSE Resources Index returned 52% over the year.

Stock selection also let them down. Among the largest detractors were Auto Trader, Experian and Rightmove, while Renishaw and Just Group were notable positive contributors. The managers also point to an AI-driven sell-off in platform, software and data-related names, which hit valuations hard in the second half.

My read is simple: some of this was market fashion, but not all of it. When the Board admits that poor stock selection accounted for around three-quarters of the underperformance over the last five years, that is not just bad luck. It is an admission that discipline on entry price and selling has not been good enough.

New co-manager James Smith and higher turnover: a real change or light touch reset?

This is one of the most important parts of the announcement. James Smith is joining Iain McCombie and Milena Mileva as co-portfolio manager, and the Board clearly pushed for it.

Just as important, the trust expects portfolio turnover to rise from less than 5% per annum towards 20% per annum. Turnover simply means how much of the portfolio is bought and sold in a year. That suggests a much stronger sell discipline and a willingness to act faster when an investment case changes.

For shareholders, that is probably a positive. Baillie Gifford’s long-term patience can be a strength, but in this case it looks like patience drifted into stubbornness. A modest increase in the number of holdings and a more active portfolio construction process could make the trust more adaptable without abandoning its growth identity.

Baillie Gifford fee cut to 0.40%: good news, but also a sign of pressure

Baillie Gifford has agreed to cut the management fee from 0.50% to 0.40% of NAV from 1 July 2026 until 30 April 2029. That is a welcome move and should help a bit on costs.

Still, investors should see it for what it is: a concession made under pressure. The Board is staring at a 2027 continuation vote and a 2029 performance-triggered tender offer, so the manager has had to give ground.

The trust’s ongoing charges were 0.76% at 30 April 2026, up from 0.71% a year earlier. So the fee cut helps, but it does not magically solve the main problem, which is performance.

Baillie Gifford UK Growth Trust buybacks, discount control and treasury share cancellation

There is more good news on capital management. The trust bought back 20,949,202 shares during the year, equal to 16.2% of the issued share capital at 30 April 2025, and a further 1,450,997 shares since the year end to 23 June 2026.

Those buybacks helped narrow the discount to NAV from 10.5% to 8.7%. For an investment trust, the discount is the gap between the share price and the value of the underlying assets per share. A narrower discount is helpful because it means shareholders keep more of the asset value when buying or selling shares.

The Board also plans to cancel the majority of shares held in treasury, reducing the treasury balance to about 5% of total ordinary share capital. That makes sense. Holding 54,042,573 shares in treasury as at 23 June 2026, or 33.6% of total ordinary share capital, is a chunky overhang.

Dividend, income and balance sheet: steady enough, but this is still a growth trust

The final dividend rises to 6.20p per share from 5.70p, with payment due on 11 September 2026 if approved. Revenue return per share increased to 6.23p from 5.32p.

That said, the Board is very clear that this is a capital growth vehicle, not an income trust. If you want a steadily rising dividend stream, this is probably not the right home.

On the balance sheet, shareholders’ funds fell to £245.6 million from £260.1 million, largely because £42.2 million was spent on buybacks. Borrowings stayed at £24.35 million, and net gearing was 9%. Gearing means borrowed money used to increase market exposure, which can boost returns in good markets and worsen them in bad ones.

Portfolio moves: Greggs added as managers back domestic UK growth names

The managers added a new holding in Greggs and increased positions in Softcat and Spirax Group. They sold Just Group following its takeover and exited FDM.

That tells you they are not giving up on the core playbook. This is still a trust focused on quality growth businesses, many of them mid-cap names that have been badly out of favour compared with large caps.

What the 2027 continuation vote and 2029 tender offer mean for shareholders

This is the real countdown clock. Shareholders will vote in 2027 on whether the trust should continue, and there is already a performance conditional tender offer in place for 2029.

If NAV total return over the five years to 30 April 2029 does not beat the FTSE All-Share Index, shareholders will be able to sell their entire holding at NAV less 2%. After the first two years of that period, the trust is behind: NAV total return is 24%, versus 35% for the index.

That is why this RNS matters. It is not just an annual results statement – it is part progress report, part warning shot. The Board is effectively saying: we still believe in the strategy, but time is running short.

My verdict on Baillie Gifford UK Growth Trust after the 2026 results

There are some genuine positives here. The fee cut is sensible, buybacks have narrowed the discount, the dividend has increased, and the appointment of James Smith looks like a serious attempt to improve decision-making.

But the negatives are still heavier. Performance remains weak versus the benchmark, the trust is already behind on its 2029 target, and management is asking investors for more patience after a five-year period where patience has not been well rewarded.

For existing shareholders, this feels like a recovery case rather than a victory lap. The ingredients for a better period may be falling into place, especially if UK growth and mid-cap stocks come back into favour, but the trust now needs evidence, not just theory. In short: better aligned, better priced, but still very much on probation.