Scottish Mortgage enjoys strongest ever returns

Baillie Gifford's current Edinburgh HQ

Baillie Gifford’s high-flying flagship fund, Scottish Mortgage Investment Trust plc, said on Thursday it produced its strongest ever return in the year to March 31, with its share price soaring 99% in the period and net asset value (NAV) total return rising 111% versus the 39.6% return of its benchmark, the FTSE All-World Index.

The Edinburgh-based closed end fund, which manages £18 billion of assets, has benefited from smart investments in global companies including its 12 biggest holdings — Tencent, Illumina, ASML, Amazon, Tesla, Alibaba, Meituan Dianping, Moderna, NIO, Deliver Hero, Netflix and NVIDIA.

FTSE 100 constituent Scottish Mortgage is the UK’s biggest investment trust and is currently the biggest public company run from Scotland when measured by stock market value — with a current market capitalization of around £15.3 billion, just ahead of Perth-based SSE.

Scottish Mortgage’s net asset value total return over five years is 374.9% versus the 98.5% of the the FTSE All-World Index. Over 10 years its net asset value total return is 708% versus 193.7% of the the FTSE All-World Index.

“As one would expect, joint managers James Anderson and Tom Slater remained resolutely focused on patient investment on behalf of shareholders and their time horizons reach far beyond the pandemic and its immediate after effects,” said Scottish Mortgage senior independent director Justin Dowley.

“Despite largely being confined to their own homes, they continued to engage with portfolio companies, as well as exploring new investment opportunities.

“It is worth noting that the portfolio turnover increased over the year in both monetary and number terms as Scottish Mortgage became owners of several new companies which the managers believe can drive returns over the coming years …

“For the financial year to 31 March 2021, shareholders saw the strongest ever return produced by the company, surpassing the returns delivered during the company’s expansion post the Great Depression and, more recently, in the aftermath of the Global Financial Crisis.

“As a result, the company reached new market capitalisation highs during the year, closing at just over £18 billion.”

Scottish Mortgage shares hit a high of around £14.15 in February, but have since slipped to around £11. One year ago, the shares traded around £7.

Baillie Gifford said in March that Scottish Mortgage joint manager James Anderson will leave the firm on April 30, 2022, to join the Swedish investment company Kinnevik AB, whose shareholders include Sweden’s wealthy Stenbeck family.

“Over the last two decades James has led the transformation of the company, from a largely UK-focused trust to one that is now global, long term and index indifferent,” said Dowley.

“He also pioneered Scottish Mortgage’s investments in private companies, one of its most important strategic initiatives to date.

“There is a lot more to say about the huge contribution that James has made, but it would be premature to do so now, as he remains focused on jointly managing the portfolio over the coming year.

“During this year, the investment team increases to three, with the addition of Lawrence Burns as deputy manager.

“Lawrence’s name may be new to many shareholders but he is philosophically aligned with the current managers.

“He has a particular focus on transformative growth companies and has also co-managed some of Baillie Gifford’s largest strategies alongside James and others.

“Lawrence’s arrival marks the next step in a long term succession plan that has been agreed between the board and managers and will ensure that we have a strong team in place to manage the portfolio for the next decade or more.”

About the Author

Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.