Baillie Gifford adds gearing to boost returns

The Baillie Gifford-run £59.5m Pacific Horizon investment trust has added short-term gearing of 13.3% to boost returns in the Far East market.
The gearing was introduced in August and helped the trust outperform its benchmark by 16.5 percentage points, it said in its interim results to 31 January.
Pacific Horizon’s net asset value rose by 29.6% compared to the MSCI All Country Far East ex-Japan index’s 13.1% rise, in sterling terms.
Gerald Smith, the trust’s manager at Baillie Gifford, says the gearing was put in place because of the “increasing evidence that economic growth was exceeding initial expectations”.
This money was invested in economically sensitive areas, and from January the portfolio has been swung more towards companies benefiting from the strength of consumption, rather than investment, in China.
Cheung Kong – a Hong Kong-based property developer – is the trust’s largest holding, at 4.2%, while Unilever Indonesia, a consumer products manufacturer, is second at 3.5%.
The trust has increased its weighting in Korea and Taiwan, to 20.2% and 12.4% from 15.9% and 8.2%.
In its interim report Pacific Horizon says some of the larger markets in the region, notably Korea, Taiwan and Singapore, produced the smallest gains. This was partly a reflection of the poor performance of regional technology shares.
Hong Kong was the best-performing market, with Chinese and China-related shares listed there benefiting from the continuing strength of the Chinese economy.