Edinburgh-based Baillie Gifford trimmed its stake to 4.25%, from as much as 7.67% in February.
Following the SEC filing overnight, Tesla’s share price fell from above US$480 to below US$409, before finishing at US$475. It has resume a downward slide in pre-market trading on Thursday.
Baillie Gifford, which among its many funds runs the FTSE 100-listed Scottish Mortgage Investment Trust, where Tesla was recently revealed as the largest holding, said in a statement that it had sold down the stake to prevent clients being over-exposed to the auto manufacturer after its eye-popping gains this year.
Tesla stock has rocketed more than fivefold so far in 2020, giving clients of Baillie Gifford around a US$17bn gain from capital gains or banked profits, according to reports.
The asset manager trimmed its holding in Tesla earlier in the year to avoid breaching UK regulations for funds to avoid holding a position of more than 10% in a single stock.
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“The substantial increase in Tesla’s share price means that we needed to reduce our holding in order to reflect concentration guidelines which restrict the weight of a single stock in clients’ portfolios,” said Baillie Gifford partner and portfolio manager James Anderson.
“However, we intend to remain significant shareholders for many years ahead. We remain very optimistic about the future of the company. Tesla no longer faces any difficulty in raising capital at scale from outside sources but should there be serious setbacks in the share price we would welcome the opportunity to once again increase our shareholding.
“We are privileged to have been Tesla’s largest external shareholder over a critical period for the development of the company.”
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UK investors have been piling into Baillie Gifford funds of late, according to fund platform Interactive Investor, as well part of a big focus on funds investing overseas.
Baillie Gifford American was the second most bought fund on the platform last month, with ethical fund Baillie Gifford Positive Change in third.
In all, funds by the asset manager accounted for five out of the top 10 fund purchases, with Baillie Gifford Global Discovery, Baillie Gifford Long Term Global Growth and Baillie Gifford Managed in fifth, sixth and eighth positions, respectively.