Baillie Gifford Monthly Income Fund
Baillie Gifford Monthly Income Fund: retirement income for the long term
Investment manager Steven Hay discusses the latest trends and opportunities in income investing, offering insights into achieving long-term financial goals
Watch the interview
A well-defined purpose and broad investment universe offer an income solution for investors looking for a resilient long-term income stream.
The Baillie Gifford Monthly Income Fund has a simple and clear solution to multi-asset investing that provides stable and resilient income sources and inflation protection. The solution is natural income: the income derived from dividends, interest, or rent from a diversified portfolio of assets.
Investment managers Steven and Nicoleta emphasise that by prioritising income stability over short-term capital volatility and chasing the highest current yield, which comes with greater risk, the fund aims to provide investors with a more stable and predictable monthly income stream.
The Monthly Income Fund has about a third invested in equities, a third in bonds and a third in real assets with a focus on property and infrastructure; and through the recent market volatility, these diversification benefits are now shining through.
In this content portal, we explore the team’s approach to diversifying across asset classes, look at resilience through the lens of retirement, and offer exclusive access to manager insight on risks and opportunities and more.
Resilient income for long-term protection
Steven Hay,
Investment manager
As the long period of stock market dominance recedes, multi-assets show there is life beyond equities. Watch the video for more on how the Monthly Income Fund team is allocating across fixed income, real assets, and quality equities.
Perspectives on a difficult quarter
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Beyond the headlines and short-term trends, the Baillie Gifford Managed Fund focuses on fundamental analysis to find companies with enduring growth potential. Investment managers Iain McCombie and Steven Hay discuss the firm's bottom-up approach, highlighting key investments and how they are positioned for the future, including the evolving landscape of AI.
Growth that endures: Investing beyond the headlines
Read this article
Sequencing risk threatens retirement income when asset sales are forced during market downturns. With resilient income sources and inflation protection, the Baillie Gifford Monthly Income Fund aims to give retirees financial security throughout retirement.
Navigating retirement: combating sequencing risk
Read this article
The Baillie Gifford Monthly Income Fund is designed to be a ‘one-stop’ solution for clients who need an attractive regular income from their investments. It was launched in 2018 with the fast-growing UK decumulation market in mind, as growing numbers of investors face the challenge of turning their pension pots into a dependable income stream.
Baillie Gifford Monthly Income Fund: an introduction
Read this article
For long-term investors, its not about reacting to tricky environments, but to maintaining a steady long-term outlook. Watch the video for more on how the Managed Fund investment managers navigate uncertain terrain.
Perspectives on a difficult quarter
Watch the video
Following a very difficult 2022 and a choppy 2023-24 global bond markets have seen a resurgence in 2025. Yields on government bonds, BBB corporate debt, and emerging market local currency bonds, while still elevated, offer compelling opportunities compared to much of the past two decades. The question now: What will shape the outlook for bonds over the next three to five years, and beyond?
What could drive bond markets after the recent rally?
Read this article
Nicoleta Dumitru,
Investment manager
Steven Hay,
Investment manager
Learn more about the Baillie Gifford Monthly Income Fund
A well-defined purpose and broad investment universe offer an income solution for investors looking for a resilient long-term income stream.
The Monthly Income Fund has a simple and clear solution to multiasset investing that provides stable and resilient income sources and inflation protection. The solution is natural income: The income derived from dividends, interest, or rent from a diversified portfolio of assets.
Investment managers Steven and Nicoleta emphasise that by prioritising income stability over short-term capital volatility and chasing the highest current yield, which comes with greater risk, the fund aims to provide investors with a more stable and predictable monthly income stream.
The Monthly Income Fund has about a third invested in equities, a third in bonds and a third in real assets with a focus on property and infrastructure; and through the recent market volatility, these diversification benefits are now shining through.
In this content portal, we explore the team’s approach to diversifying across asset classes, we look at resilience through the lens of retirement, and offer exclusive access to manager insight on risks and opportunities and more.
As the long period of stock market dominance recedes, multi-assets show there is life beyond equities. Watch the video for more on how the Monthly Income Fund team is allocating across fixed income, real assets, and quality equities.
Perspectives on a difficult quarter
Watch the video
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As with any investment strategy, your capital is at risk and any income
isn’t guaranteed
We recognise that retirement should be a period of enjoyment and security, not financial anxiety. To provide that peace of mind, our strategy aims to deliver consistent monthly income designed explicitly to keep pace with inflation. To achieve this goal we carefully select investments that consistently pay dividends or bond interest, aiming for a dependable and predictable monthly payout.
The Baillie Gifford Monthly Income Fund is designed with practical and clearly defined objectives to meet the need of retirees filling the gap where their salary once was – currently yielding approximately 4.5 per cent, with income distributions projected to grow at over 5 per cent next year – comfortably ahead of the anticipated UK inflation rate.
Monthly Income brings together the best of Baillie Gifford’s income ideas. The Fund directly invests in 250-300 income-generating assets across three broad classes: equities, bonds and real assets. It currently has approximately one-third in each, along with a (typically small) cash balance. The real assets exposure is entirely through listed property and infrastructure companies, so the underlying investments are all highly liquid.
Baillie Gifford Monthly Income Fund: an introduction
The Baillie Gifford Monthly Income Fund is designed to be a ‘one-stop’ solution for clients who need an attractive regular income from their investments. It was launched in 2018 with the fast-growing UK decumulation market in mind, as growing numbers of investors face the challenge of turning their pension pots into a dependable income stream.
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Stability and Simplicity
Iain McCombie,
Investment manager
Annual Discrete Performance to 31 December each year (%)
Past performance is not a guide to future returns.
Sector data based on B-Acc share class performance. Source: FE, Revolution. Total return net of charges,
in sterling. Share class returns calculated using 10am prices, while the Index is calculated close-to-close. *IA Mixed Investment 40-85% Shares Sector. The manager believes an appropriate comparison for this Fund is the Investment Association Mixed Investment 40 – 85% Shares sector median given the investment policy of the Fund and the approach taken by the manager when investing.
Class B-Acc
Sector Median*
2020
33.9
5.1
2021
4.3
11.1
2022
-24.3
-9.5
2023
10.7
8.1
2024
8.9
9.1
Important information
You or your clients' capital is at risk. This article does not constitute, and is not subject to the protections afforded to, independent research. Baillie Gifford and its staff may have dealt in the investments concerned. The views expressed are not statements of fact and should not be considered as advice or a recommendation to buy, sell or hold a particular investment. Bonds issued by companies and governments may be adversely affected by changes in interest rates, expectations of inflation and a decline in the creditworthiness of the bond issuer. The issuers of bonds in which the Fund invests, particularly in emerging markets, may not be able to pay the bond income as promised or could fail to repay the capital amount. The Fund's share price can be volatile due to movements in the prices of the underlying holdings and the basis on which the Fund is priced. Baillie Gifford & Co Limited is authorised and regulated by the Financial Conduct Authority. Baillie Gifford & Co Limited is an Authorised Corporate Director of OEICs. All data is sourced from Baillie Gifford & Co unless otherwise stated.
That’s how we manage currency risk. Now consider the impact of ‘Sequencing risk’ (Read the full article here) – one of retirement’s greatest hidden dangers, along with longevity risk and inflation risk.
Take two hypothetical retirees, Jane and Sarah, who each retire with identical pension pots but just one year apart. Jane retired in 1974, an uncommon year when both equity and bond markets simultaneously faced sharp downturns (similar to 2022). This early loss significantly depleted her savings, which unfortunately ran out after 25 years. Sarah retired in 1975, during a market rebound, and experienced substantial growth in her pension pot. We believe retirees shouldn’t have to rely on chance or perfect timing to ensure financial security. We believe the best way to avoid this is to prioritise income volatility over capital volatility. This approach means our retiree doesn’t have to make up for an income shortfall by selling their investments at inopportune moments.
The left chart demonstrates the consistent and reassuring growth of the Fund’s income per share since its inception, consistently outpacing inflation rates. The Fund sits in the IA Mixed Investment 40-85% Shares sector. The chart on the right shows returns since inception are ahead of the peer group average.
Additionally, transparency of direct holdings and cost-efficiency are essential aspects of our approach. Our fees are competitive - Ongoing Charges Figure (OCF) of just 0.56 per cent. Significantly, these fees are deducted from capital, ensuring that monthly income distributions remain fully protected.
In conclusion, we believe the Baillie Gifford Monthly Income Fund specifically addresses
the needs of retirees, offering financial stability, resilience to inflation and mitigation of some
of the risks around volatility. Our carefully managed approach enables retirees to spend their retirement years focused on enjoying life rather than worrying about finances.
© Markus Mainka/Shutterstock.
Iain McCombie, Investment manager
Our beliefs on investing in retirement
Source: Bloomberg. April 2025.
Income volatility can be more important than capital volatility
Income distribution history and forecast (B Inc)
Monthly Income Fund distributions shown in pence per share.
December 2025 figure is estimated. Monthly Income March 2025.
Past performance is not a guide to future returns.
Total return since inception* versus peer group
5
4
3
2
1
0
Rolling 12m periods end of quarter
Dec 20
Dec 21
Dec 22
Dec 23
Dec 24
Dec 25
Dec 24
3.8
3.9
4.1
4.2
4.4
4.6
“Retirees shouldn’t have to rely on chance or perfect timing to ensure financial security. We believe the best way to avoid this is to prioritise income volatility over capital volatility”
Reliability and transparency are the cornerstone of our strategy. Our rigorous approach to risk management aims to ensure that monthly income distributions will not decrease by more than 10 per cent in any given year, even amid challenging market conditions.
Our direct investment model and in-house forecasting tool provides clear visibility on future income streams, allowing us to set the distribution levels as high as possible for the first 10 months of the financial year (without distributing more than is available), and then typically making higher distribution payments in May and June.
We deeply understand the emotional strain financial uncertainty can impose on retirees. This understanding shapes our approach to delivering income stability and predictable growth. Additionally, we actively aim to mitigate currency risk specifically for UK-based investors. By hedging our international investments back into sterling as far as practically possible,
we protect purchasing power from fluctuations in foreign exchange rates.
Baillie Gifford Monthly Income Fund
Annual past performance to 31 March each year (net%)
Important information and past performance
Past performance is not a guide to future returns.
Source: FE, Revolution. Net of fees, total return in sterling. *Investment Association Mixed Investment 40-85% Shares Sector
Baillie Gifford Monthly Income Fund
Sector Average*
2021
21.2
26.4
2022
7.4
5.2
2023
-3.9
-4.5
2024
6.4
10.2
2025
2.3
3.4
The Fund has no target. However you may wish to assess the performance of both income and capital against inflation (UK CPI) over a five-year period. In addition, the manager believes an appropriate performance comparison for this Fund is the Investment Association Mixed Investment 40-85% Shares Sector.
The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.
This communication contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research, and Baillie Gifford and its staff may have dealt in the investments concerned.
Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). Baillie Gifford & Co Limited is an Authorised Corporate Director of OEICs.
Investment markets can go down as well as up and market conditions can change rapidly. The value of an investment in the Fund, and any income from it, can fall as well as rise and investors may not get back the amount invested.
The Fund’s share price can be volatile due to movements in the prices of the underlying holdings and the basis on which the Fund is priced.
Further details of the risks associated with investing in the Fund can be found in the Key Investor Information Document or the Prospectus, copies of which are available at bailliegifford.com.
Source: FE. Monthly Income Fund B Inc share class. Rebased to 100. Sterling.
*Data from 31 August 2018 to 31 March 2025.
Monthly Income Fund
IA Mixed Investment 40-85% Shares
Resilient income for long-term protection
Steven Hay,
Investment manager
Important information and past performance
Baillie Gifford Monthly Income Fund
Monthly Income Fund
IA Mixed Investment 40-85% Shares
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We believe our Monthly Income Fund offers a comprehensive solution to mitigate sequencing risk. That solution is natural income: the income derived from dividends, interest, or rent from a diversified portfolio of assets, which allows investors to receive regular distributions without needing to sell the underlying capital.
By doing so, the fund allows retirees to maintain their spending needs without being forced to liquidate investments at inopportune times. This can help preserve capital during market declines, leaving more assets in place to benefit from eventual recoveries.
By prioritising income stability over short-term capital volatility and chasing the highest current yield, which often come with greater risks to capital, the fund aims to provide retirees with a more stable and predictable monthly income stream, reliably filling the void of their previous employment salary.
Both John and Sandra start with an investment sum of £500,000 and achieve an average rate of return of 5 per cent per annum over an eight-year period. The pattern of returns varies, but neither is drawing down on their savings.
Retirement, or the prospect of retirement, can be daunting for a whole host of reasons. Adding to this sometimes difficult transition is an investment phenomenon whereby two retirees with identical portfolios and average returns can end up with vastly different financial outcomes. This is due to the order of their investment returns.
Sequencing risk, in essence, is the danger lurking in the timing of these returns. It occurs when markets fall early in a person’s retirement while they are taking a regular income from their pension.
Navigating retirement: combating sequencing risk
Sequencing risk threatens retirement income when asset sales are forced during market downturns. With resilient income sources and inflation protection, the Baillie Gifford Monthly Income Fund aims to give retirees financial security throughout retirement.
Important information and risk factors
This recording was produced and approved in May 2025 and has not been updated subsequently. It represents views held at the time and may not reflect current thinking.
The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.
This communication contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research, and Baillie Gifford and its staff may have dealt in the investments concerned.
Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). Baillie Gifford & Co Limited is an Authorised Corporate Director of OEICs.
Investment markets can go down as well as up and market conditions can change rapidly. The value of an investment in the Fund, and any income from it, can fall as well as rise and investors may not get back the amount invested.
Market values for illiquid securities which are difficult to trade, or value less frequently than the Fund, such as holdings in weekly or monthly dealt funds, may not be readily available. There can be no assurance that any value assigned to them will reflect the price the Fund might receive upon their sale. In certain circumstances it can be difficult to buy or sell the Fund’s holdings and even small purchases or sales can cause their prices to move significantly, affecting the value of the Fund and the price of shares in the Fund.
Derivatives may be used to obtain, increase or reduce exposure to assets and may result in the Fund being leveraged. This may result in greater movements (down or up) in the price of shares in the Fund. It is not our intention that the use of derivatives will significantly alter the overall risk profile of the Fund.
The Fund’s share price can be volatile due to movements in the prices of the underlying holdings and the basis on which the Fund is priced.
Further details of the risks associated with investing in the Fund can be found in the Key Investor Information Document or the Prospectus, copies of which are available at bailliegifford.com
Baillie Gifford Monthly Income Fund
Past performance is not a guide to future returns.
Source: FE, Revolution. Net of fees, total return in sterling. *Investment Association Mixed Investment 40-85% Shares Sector
Baillie Gifford Monthly Income Fund B Inc
Sector Average*
21.2
26.4
2021
7.4
2022
5.2
-3.9
2023
-4.5
6.4
2024
10.2
2.3
2025
3.4
Scenario one: no withdrawals
Mitigating sequencing risk through natural income
David Rolland,
Investment specialist
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Iain McCombie,
Investment manager
Annual Discrete Performance to 31 December each year (%)
Past performance is not a guide to future returns.
Sector data based on B-Acc share class performance. Source: FE, Revolution. Total return net of charges,
in sterling. Share class returns calculated using 10am prices, while the Index is calculated close-to-close. *IA Mixed Investment 40-85% Shares Sector. The manager believes an appropriate comparison for this Fund is the Investment Association Mixed Investment 40 – 85% Shares sector median given the investment policy of the Fund and the approach taken by the manager when investing.
Class B-Acc
Sector Median*
2020
33.9
5.1
2021
4.3
11.1
2022
-24.3
-9.5
2023
10.7
8.1
2024
8.9
9.1
“Volatility becomes an enemy because if you are taking regular withdrawals during times when the market is down, it will lead to ‘pound cost ravaging”
When retirees begin withdrawing from their investment portfolios, the sequence of returns becomes crucial. If a retiree encounters a market downturn early on, they may be forced to sell assets (encash units) at depressed prices to meet their income needs.
This can permanently impair the portfolio’s value, leaving less capital to recover and draw subsequent income from when markets rebound. In contrast, a retiree who experiences strong returns early in retirement may find themselves in a much more favourable financial position, having more capital to draw income from.
Understanding sequencing risk
Volatility is your friend in the accumulation phase as you build up your retirement pot. That’s because it facilitates the beneficial effects of ‘pound cost averaging,’ where the regular drip-feeding of payments into the fund helps mitigate the impact of market volatility and reduce the risk of making large investments at inopportune times.
However, once you draw on your investments, it becomes an enemy because if you are taking regular withdrawals during times when the market is down, it will lead to ‘pound cost ravaging’. The greater the strategy’s volatility of the strategy, potentially, the greater the negative impact.
Consider two retirees, John and Sandra, who both achieve the same average return over a decade. However, John faces a string of poor returns early in retirement, while Sandra enjoys strong returns from the start.
Despite having the same average return, John may find himself in a significantly worse position. He may struggle to meet expenses, be worried about potential longer-term care costs and have less to pass on to his heirs.
The extent of that difference is evident in the following two scenarios.
The impact of sequencing risk
Figures may not sum due to rounding.
John's portfolio returns
Year
£450,000 (-10%)£427,500 (-5%)£470,250 (10%)£456,143 (-3%)£524,564 (15%)£561,283 (7%)£673,540 (20%)£713,952 (6%)
1
2
3
4
5
6
7
8
Sandra’s portfolio returns
£530,000 (6%)£636,000 (20%)£680,520 (7%)£782,598 (15%)£759,120 (-3%)£835,032 (10%)£793,280 (-5%)£713,952 (-10%)
Difference
£80,000
£208,500
£210,270
£326,456
£234,556
£273,749
£119,740
£0
Scenario two: with withdrawals
In this scenario, both John and Sandra withdraw £25,000 annually via a pension/retirement investment income stream. They start with the same balance and average return as in Scenario 1.
John’s almost £100,000 shortfall after eight years underscores the importance of managing sequencing risk to help provide a secure and comfortable retirement.
John's portfolio returns
Sandra’s portfolio returns
Difference
Year
£425,000 (-10%)£378,750 (-5%)£391,625 (10%)£354,876 (-3%)£383,108 (15%)£384,925 (7%)£436,910 (20%)£438,125 (6%)
£505,000 (6%)£581,000 (20%)£596,670 (7%)£661,171 (15%)£616,335 (-3%)£652,969 (10%)£595,320 (-5%)£533,288 (-10%)
£80,000
£202,250
£205,045
£306,294
£233,228
£268,044
£158,410
£95,164
1
2
3
4
5
6
7
8
Withdrawals
£25,000
£25,000
£25,000
£25,000
£25,000
£25,000
£25,000
£25,000
Figures may not sum due to rounding.
We focus on identifying companies and assets with resilient, growing income streams. That is why the fund’s holdings undergo rigorous analysis to assess their ability to maintain and grow income payments over the long term. This can help reduce the risk of dividend cuts or defaults that could exacerbate sequencing risk.
As a stark reminder of how volatile income streams can be, FTSE UK companies slashed dividends by almost 50 per cent in 2020 during the Covid-19 pandemic. In 2020, although our income fell, it showed its resilient qualities and remained within our risk guideline that the fund's income production should not decline by more than 10 per cent in any given year.
The Monthly Income Fund invests directly in around 250 holdings, enabling our Income Forecasting tool to provide an accurate monthly income forecast covering every month of the Fund’s current financial year and the following two years.
This income line of sight is simply unattainable through the automated approach taken by a model portfolio service (MPS) or the lack of transparency inherent in a fund-of-fund approach to portfolio construction.
Focus on resilient income sources
While inflation may not seem directly related to sequencing risk, it plays an important role in long-term retirement income sustainability.
The Monthly Income Fund seeks to grow both income and capital in line with inflation over time. While the bonds do much of the heavy lifting on income-generation, the fund's holdings in infrastructure and property assets often have rental agreements or service contracts linked to inflation, which also assist.
These assets provide a natural hedge against rising prices, as their income tends to increase with inflation. When combined with the long-term growth potential of equities, they are an additional lever the fund deploys in its quest to maintain retirees' purchasing power throughout retirement, regardless of the economic environment.
Inflation protection for long-term income sustainability
“While inflation may not seem directly related to sequencing risk, it plays an important role in long-term retirement income sustainability”
This is all the more relevant in the current macro environment. At one point on Monday 7 April 2025, the S&P 500 surged 8.5 per cent in just 30 minutes after media commentary suggesting that President Trump might pause tariffs was misinterpreted. Within 15 minutes, as the initial statements were retracted, the index dropped 5.5 per cent from that intraday peak.
In practical terms, what typically would represent annual movement unfolded in less than an hour. We believe higher short-term volatility is an inherent feature of markets, not a bug.
Minimising the volatility on retirement income requires innovative solutions. Presently, retirees have several strategies at their disposal. Some approaches divide savings into segmented pots, others rely on encashing capital, some shift assets to lower-risk investments over time, and others provide a guaranteed income, albeit with limited flexibility.
Each approach carries its own risks. These include the opportunity costs of having too much allocated to cash (and cash-like investments) for extended periods, reliance on market timing for withdrawals, or focusing on delivering a fixed as opposed to a growing income that also retains capital flexibility.
The natural income approach does not completely eliminate sequencing risk. However, as we navigate these extraordinary times, the approach’s focus on delivering a resilient, growing income with some built-in protection against rising costs can help significantly reduce its impact.
Every retiree’s goals will be different. For those looking for more stability and peace of mind, the Monthly Income Fund is designed as a one-stop solution to preserve capital and deliver a reliable monthly income. Ultimately, it seeks to help those entering the drawdown phase of their lives feel more secure about their financial future.
The road ahead
The Fund has no target. However you may wish to assess the performance of both income and capital against inflation (UK CPI) over a five-year period. In addition, the manager believes an appropriate performance comparison for this Fund is the Investment Association Mixed Investment 40-85% Shares Sector.
Past performance
Annual past performance to 31 March each year (net%)
“What we're trying to do as bottom-up growth investors is to find great companies with underappreciated long-term prospects”
“Volatility becomes an enemy because if you are taking regular withdrawals during times when the market is down, it will lead to ‘pound cost ravaging”
Past performance is not a guide to future returns.
Source: FE, Revolution. Net of fees, total return in sterling. *Investment Association Mixed Investment 40-85% Shares Sector
Figures may not sum due to rounding.
Resilient income for long-term protection
Resilient income for long-term protection
