Baillie Gifford High Yield Bond Class B GBP Income


March 2026
 
  • Opinion
    Square Mile rating
  • Performance
    Yield
    7.22%
    % of time met performance objective over 5 years
    25.4%
  • Risks
    Risk of asset class
    1 2 3 4 5 6 7 8 9 10
    Risk of fund within asset class
    1 2 3 4 5
  • Costs
    Ongoing charges
    0.39%
    Transaction costs
    0.20%
    Total cost of investment
    0.59%
  • Responsible
    What type of investor are you?

Source: Square Mile and LSEG Lipper (all rights reserved), Data as at: 31st January 2026.

Overview

This fund predominantly invests in sub-investment grade corporate bonds, with a focus on providing income, although the level of income is not guaranteed and will vary depending on the market cycle and conditions. Through the process of identifying and investing in undervalued bonds, there is potential for some capital appreciation over the longer term, although this is a secondary consideration.

 

Square Mile’s Expected Outcome

We believe delivering returns similar to the 50% Bloomberg Pan-European High Yield index GBP Hedged / 50% Bloomberg US Corporate High Yield index GBP Hedged, on a rolling five year basis, is a reasonable expectation for this fund.

Square Mile’s Opinion

This fund provides exposure to sub-investment grade corporate bonds through a robust investment process centering on the resilience of the bonds held in the portfolio. Whilst the managers have only been a partnership on this fund since early 2018, they have worked together as part of the wider Baillie Gifford team for a number of years. Mr Baltzer has been named on the fund since 2010 and is an experienced and proven investor, and we believe that he is ably supported by Ms Isles and the rest of the team. We have confidence that the managers will continue to follow the team's process and generate a good level of income for investors.

High Yield indices have historically proved difficult for active funds to outperform (and passive ETFs to track) due to both the high costs of trading in this market, as well as the index assuming perfect allocation to all bonds regardless of how difficult they are to get hold of in reality. The fund's relatively modest performance success rate score does not therefore concern us.

Whilst the managers look to primarily invest in resilient companies, they will also identify and invest in undervalued securities meaning that performance could be more volatile than other funds, a feature that can lead to the fund underperforming in a falling market and outperforming in a rising market. This fund would be most suitable for investors who are looking for a relatively high level of income, with the potential for some capital growth, and who are prepared to hold the fund over longer time periods (at least one full market cycle).

The TCI (total cost of investment) of this fund is at the bottom of the range for the IA sterling high yield sector. Given the calibre of the Baillie Gifford team and process, as well as the solid longer term performance track record, we consider this fund to offer good value for money.

Fund Manager’s Formal Objective

The fund aims to produce a combination of income and capital growth.

Income UK
Active 50% Bloomberg Pan-European High Yield index GBP Hedged and 50% Bloomberg US Corporate High Yield index GBP Hedged
Fixed Income IA Sterling High Yield
7.22% £240M
Arthur Milson, Faisal Islam February, May, August, November
1.2 Pounds Quarterly
GBP 28/02/2002
1.2 Pounds 30/09/2025
0.00% -
- -

Source: Square Mile and LSEG Lipper (all rights reserved), Data as at: 31st January 2026
 
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Baillie Gifford High Yield Bond Class B GBP Income
 
 

Asset Manager Overview

The fund is managed by Robert Baltzer and Lucy Isles. Mr Baltzer started his career at Baillie Gifford in 2001, and has since progressed from being an analyst to heading up credit research at Baillie Gifford. Ms Isles joined the company as a graduate from the University of St Andrews in 2012 and became an investment manager in the high yield team in 2015. She was named as co-manager on this fund in January 2018. In reality the fund is managed using a collegiate approach, and the managers can also draw upon the expertise of the wider credit and equity teams at Baillie Gifford. Baillie Gifford was founded in 1908 and is one of the largest independent active investment managers in the UK, investing across fixed income and equities globally.

Baillie Gifford believe that the corporate bond markets are inefficient and often fail to reflect all relevant information. This, combined with the segmented nature of the markets, frequently causes bonds to move away from their fair valuations, creating opportunities for investors who can analyse the relevant information and take advantage of such mis-pricings. As active managers, the corporate bond team at Baillie Gifford seek to benefit from opportunities in the market, which they identify through closely analysing the underlying company's creditworthiness and the characteristics of individual securities. The team seek to invest in a diverse range of bonds with attractive potential returns issued by high quality companies and are prepared to go against market consensus in order to follow their investment philosophy.

In essence the team look to identify resilient companies within high yield markets. A resilient company is deemed to have a durable competitive position, a good approach to governance and sustainability and an appropriate capital structure. Through their analysis the team will also look to identify bonds which are trading below their fair fundamental valuations, and which have an identifiable catalyst that will trigger a market revaluation. The result of this careful, bottom up, investment process is a relatively concentrated portfolio of around 60 to 90 stocks. Position sizes usually vary from 1% to 3.5%, but in exceptional circumstances can be up to 5%, depending on the relative risk of the bond, the size of the mis-valuation, the team's conviction and the correlation of the position to other positions in the portfolio. The turnover of the portfolio is low, as they have long term conviction in their holdings and it generally takes some time for identified catalysts to occur.

The fund invests mainly in sub-investment grade corporate bonds, but can hold investment grade issues where these have risk and return characteristics more akin to the sub-investment grade market (for example, certain financial bonds). Allocations across the ratings spectrum are a result of bottom-up positioning and are not specifically targeted. The fund can hold up to 5% in cash for liquidity purposes. Holdings can be issued across the developed markets and are hedged back to sterling.

 
 
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ESG Integration

Fund ESG Integration

The team use an analysis of environmental, social and governance (ESG) factors to help control risk and identify opportunities. The materiality of ESG factors will vary depending on a company's sector, region and the maturity profile of its bonds. If the team identify potential ESG risks in their evaluation, they will usually receive additional support from the two 'Governance and Sustainability' specialists within their immediate investment team.

ESG has become an increasingly important part of the process for the high yield team. Every credit is given an ESG score and these contribute to buy and sell decisions, and may override other factors if deemed material or not fully reflected in the price. Indeed ESG factors account for one third of the overall credit analysis. All things being equal, the fund is less likely to hold bonds of companies with poor ESG credentials. However, such bonds may be held if there are valid reasons to expect improvement in ESG factors, the risks do not override other positive factors, or the company valuation reflects an excessive discount for the risks.

 
 
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Risk Summary

This fund invests in lower quality (sub-investment grade) fixed income instruments. The overriding risk present in the fund is therefore likely to be credit risk. If default rates increase it is likely to have an adverse impact on the fund. The impact of elevated default rates should however be softened by the extensive credit research which the team at Baillie Gifford undertake, however there is always a possibility that a bond in the fund could default on its obligations. The fund is relatively well diversified and the impact of any individual bond defaulting should thus be small. The managers can also invest in undervalued bonds which tend to be more volatile in their performance profile which can lead to the fund exhibiting more volatility than its peer group. Ultimately we believe that the managers are capable of balancing risk with return in a manner so as to deliver the best outcome for investors.

 

Additional Information

8.65%
4.10%
-4.81%
8.16%
-4.81%
1.87
1.75

(3 years data to last month end unless otherwise stated)

Qualitative Risk Assessment

Significant Potentially Significant Not Significant

For the full summary of the risks, click here
 
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Baillie Gifford High Yield Bond Class B GBP Income
 
 
 

Calendar Year Performance To Quarter End

Period Fund (%) Sector (%)
2025 7.6 7.5
2024 10.9 8.8
2023 11.3 11.1
2022 -13.3 -10.8
2021 2.5 4.5

Source: Square Mile and LSEG Lipper (all rights reserved), Data as at: 30th March 2026

Value for Money

The ongoing charge figure (OCF) for this fund is at the bottom end of the range for the peer group and the fund's transaction costs have also been modest. That results in a very low TCI (total cost of investment) for the fund which, in our opinion, represents good value for money. Sub-investment grade bonds require a considerable amount of analysis, and the fact that this fund offers access to experienced managers and a team of analysts with a well-defined investment process at such a low price should be appealing to many investors.

Following the introduction of MiFID II regulations, Baillie Gifford absorbed the costs associated with their research, which slightly reduced the overall fee paid by investors. This step is at the discretion of each fund group, but it is one that a number of firms have followed.

OCF v Peer Group

0.39%
Transaction Costs v Peer Group

0.20%
TCI v Peer Group

0.59%

Source: Square Mile and LSEG Lipper (all rights reserved), Data as at: 31st January 2026.
 
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Baillie Gifford High Yield Bond Class B GBP Income
 
 

Rating Changes

The Square Mile ratings are reviewed every 6 months. For full details on the methodologies, click here.
For a full list of all Square Mile rated funds, click here.

Rating Changes over last 12 months Time & Date rating changed
 

Disclaimer

This document is issued by Square Mile Investment Consulting and Research Limited which is registered in England and Wales (08791142) and is a wholly owned subsidiary of Titan Wealth Holdings Limited (Registered Address: 101 Wigmore Street, London, W1U 1QU).

Unless otherwise agreed by Square Mile, this factsheet is only for internal use by the permitted recipients and shall not be published or be provided to any third parties. This factsheet is for the use of professional advisers and other regulated firms only and should not be relied upon by any other persons. It is published by, and remains the copyright of, Square Mile Investment Consulting and Research Ltd (“SM”). SM makes no warranties or representations regarding the accuracy or completeness of the information contained herein. This information represents the views and forecasts of SM at the date of issue but may be subject to change without reference or notification to you. SM does not offer investment advice or make recommendations regarding investments and nothing in this factsheet shall be deemed to constitute financial or investment advice in any way and shall not constitute a regulated activity for the purposes of the Financial Services and Markets Act 2000. This factsheet shall not constitute or be deemed to constitute an invitation or inducement to any person to engage in investment activity. Should you undertake any investment activity based on information contained herein, you do so entirely at your own risk and SM shall have no liability whatsoever for any loss, damage, costs or expenses incurred or suffered by you as a result. SM does not accept any responsibility for errors, inaccuracies, omissions, or any inconsistencies herein. Unless indicated, all figures are sourced by LSEG Lipper (all rights reserved). Past performance is not a guide to future returns.

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