Opening the event, James Budden. director of marketing and distribution, highlighted how it has been an extremely volatile few years. "First when the funds did very well back in 2020, when the firm backed all the winners such as Netflix, Amazon, Zoom and Moderna during the pandemic. And then when they did very badly, when the Covid winners were being punished, and when they were also up against rising inflation and geopolitical issues,” he said.

His views were echoed at the event by Lawrence Burns deputy manager of Scottish Mortgage Investment Trust. “The last two years have been challenging. Interest rates have been high, suppressing the valuation of growth firms. Also some of our firms that benefited from Covid-19 suffered from the post-Covid-19 hangover which they are now coming out of. The Trust was also 25 per cent invested in Chinese firms which came under pressure,” he said.

Based in Edinburgh, Baillie Gifford manages about £230 billion ($292 billion), compared with about £352 billion in 2021. It has suffered from a decline in its growth stocks, such as technology, which soared in the years prior to 2022. It also compares with about £220 billion in 2022.

However, Budden emphasised how stock markets and the firm’s funds have been performing well in 2024, outperforming the index. “Valuations are attractive for growth firms and there will be some good returns. We live in exciting times,” he said.

Together with the firm’s investment managers, Budden pinpointed some long-term opportunities for growth investors in 2024, and top stock picks.

Scottish Mortgage Investment Trust
“The Trust, which supports growth companies over the long-term, has performed well in the past 12 months, driven by winners like Nvidea,” Burns said. “Nvidia fell by about 60 per cent in 2022 but went up again. It’s important to be patient and invest for the long-term.” He emphasised the importance of technology-led change and the powerful force of artificial intelligence. “We own firms that are technology-driven. Nvidia, for instance, makes the chips that makes AI possible. AI won’t be straightforward but the long-term opportunities are good,” he added.

Scottish Mortgage’s largest holdings, Nvidia and ASML, are in the semiconductor industry. Demand for Nvidia's chips has exceeded expectations, which has been a driver of the Trust’s returns. ASML, the Dutch manufacturer of the lithography equipment needed to produce semiconductors, has also performed well. 

Top 10 holdings include pharmaceutical company Moderna. Amazon was added recently, and it has regained its position as one of the Trust’s top 10 holdings. It is reaping the benefits of capacity increases made during Covid-19, showing the type of businesses that seem likely to benefit from AI developments. The Trust also invests in Spotify, a platform business that benefits from the breadth and scale of content on its platform.

Burns has added five new companies to the portfolio, including the re-introduction of Meta; Insulet, which designs and manufactures tubeless pumps that integrate with glucose monitors for type-1 diabetics; and Sea, a digital entertainment, e-commerce and financial services business.

The Trust also provided follow-on funding to eight private companies, totalling £109.4 million. Holdings included Stripe, Redwood Materials, and Tempus. The top 10 private holdings represent about two thirds of the Trust’s private exposure, Burns said. The largest private position, SpaceX, now a bigger holding than Tesla, launched 96 rockets last year. “We also reduced our exposure to Chinese firms to about 10 per cent. And we are optimistic about the outlook,” Burns added.

The trust was launched in 1909 and has been a constituent of the FTSE 100 since March 2017, with total assets of £14.1 billion. In 2024, its annual results delivered a share price return of 32.5 per cent in the year, up 46 per cent from a mid-year low.

Baillie Gifford China Growth Trust
Despite concerns over China’s slowing economy and geopolitical conflicts, portfolio manager Linda Lin of the China Growth Trust believes that the domestic market is big enough to find some good stocks. The Trust is designed to produce long-term capital growth by investing in 40 to 60 Chinese companies.  

Lin said that Chinese consumers are getting richer and becoming more focused on buying locally. “Local electric vehicle firms are proving popular amongst the young. The Chinese understand local demand better so that’s where European firms will suffer,” she added. But she noted that the Chinese are still not there yet when it comes to luxury goods, and the wealthy Chinese will still opt for brands like Hermes.

Top 10 holdings include Chinese tech multinationals Tencent, Alibaba, ByteDance. Lin mentioned that Alibaba has a rich data set which is important for AI. “Energy is also cheap in China to run data centres, and the Chinese are leading the green transition” she added. Most of the firms are also listed on the Chinese stock exchange, making them less vulnerable to geopolitical conflicts, like China and the US and, more recently, between the EU and China. Although Lin is watching China/US trade tensions closely, she said that China is trading more now with other Asian countries and the Middle East than the US. See more commentary here about China and rising trade tensions.

Baillie Gifford European Growth Trust
Portfolio manager Chris Davies said that the Trust, which aims to achieve capital growth over the long term from a diversified portfolio of European securities, had a few years of under-performance but he is now excited about the outlook.

The portfolio concentrates on between 30 and 60 listed and private companies. Davies looks for companies which have a >30 per cent probability of doubling over five years. “The tide is turning with cyclical and secular tailwinds aligning, and headwinds since 2022 starting to reverse. Valuations for European growth investors are also compelling, and Europe still looks quite cheap” he said.

Davies, who believes that secular growth will drive long-term returns, sees opportunities in healthcare innovation, with biological drugs forecast to grow at 10 per cent through to 2028. He favours businesses such as biotech firm Genmab, which specialises in antibody therapeutics for the treatment of cancer. He also sees opportunities in airlines and in the semi-conductor space, including firms such as ASML the Dutch manufacturer of the lithography equipment needed to produce semiconductors, and Swedish multinational Atlas Copco.

Top 10 holdings include Dutch internet group Prosus, Dutch provider of vertical market software Topicus, ASML, Irish-listed Ryanair, Atlas Copco and Swedish battery developer Northvolt. The Trust is heavily exposed to the Netherlands and Sweden, followed by France, Germany, Switzerland and Ireland.

Baillie Gifford Positive Change Fund
Thaiha Nguyen co-manages the fund, which aims to contribute to a sustainable world for future generations by investing in companies that want to make a positive change through social inclusion and education, the environment, healthcare and equality.

The fund aims to outperform the global stock market index (by 2 per cent annually versus the MSCI ACWI) over five-year rolling periods. Its portfolio is relatively concentrated, as it is made up of between 25 to 50 stocks.

With the world population set to hit 10 billion by 2050 and the food system accounting for 30 per cent of emissions, Nguyen invests in Deere & Company, a US agriculture machinery manufacturer, which focuses on precision agriculture to optimise inputs and productivity using sensors. John Deere recently announced two new technologies, ExacShot and an electric excavator. ExactShot uses a sensor to register when each individual seed is in the process of going into the soil, allowing farmers to reduce the amount of starter fertiliser needed during planting by more than 60 per cent. The electric excavator, powered by a Kreisel battery, reduces jobsite noise, enhances machine reliability, and produces zero emissions. 

She also invests in biotech firm Alnylam in the healthcare sector. Top 10 holdings include Taiwan Semiconductor Manufacturing Company (TSMC), ASML the Dutch manufacturer of the lithography equipment needed to produce semiconductors, Indian private bank HDFC Bank, pharmaceutical firm Moderna, Deere & Co, and Tesla, a specialist in electric vehicles and renewable energy solutions. The fund is heavily exposed to the US, followed by Brazil, Taiwan, the Netherlands, Canada and India.