Scottish Mortgage doubles health, biology investment

Baillie Gifford's current Edinburgh HQ

Baillie Gifford’s high-flying flagship fund, the £21 billion Scottish Mortgage Investment Trust plc, said on Monday it has increased its investment in healthcare and biology companies from 11.6% of its portfolio a year ago to 21.4% today.

Announcing results for the six months to September 30, 2021, Scottish Mortgage said: “We are finding and supporting a growing number of businesses that we believe are benefiting from the intersection of biology and information technology.

“Our largest holding, Moderna has been the greatest contributor to this change, writing what is effectively code in the form of RNA to program human cells.

“Moderna has helped the world to start escaping the tragedies and confinement of the last 18 months.

“However, it is the breadth and scalability of its mRNA technology platform rather than its Covid vaccine that holds the greatest promise.

“Its pipeline of programs is both large and growing, targeting diseases such as flu, Zika, HIV, cancer and many more.”

Scottish Mortgage said its net asset value (NAV) rose by 16% in the six months compared to a 9% increase in the benchmark FTSE All-World index.

Over 10 years Scottish Mortgage’s net asset value per share with debt at fair value has increased by 1,072% versus a 275% increase in the FTSE All-World. Over five years it has increased by 341% against 83%.

The fund’s board is recommending an interim dividend of 1.52p, an increase of 5% over last year’s payment of 1.45p.

Scottish Mortgage’s 10 biggest investments are Moderna, Illumina, ASML, Tesla, Tencent, Ginkgo BioWorks, MeituanDianping, NIO Inc, Delivery Hero and Amazon.

FTSE 100 constituent Scottish Mortgage is the UK’s biggest conventional investment trust and is currently the biggest listed plc run from Scotland when measured by stock market value with a market capitalization of around £21.5 billion.

Perth-based SSE has a stock market value of £17.5 billion, while NatWest-RBS has a market capitalization of around £25 billion but has been run from London for several years.

On its other investments, Scottish Mortgage said: “Recursion Pharmaceuticals and Tempus are successfully leveraging growing quantities of big data combined with machine learning to powerful effect in drug discovery and cancer treatment.

“We took a new holding in 10x Genomics whose products enable the analysis of single cells complementing Illumina’s next generation sequencing and enabling a more granular understanding of biology.

“We continue to see opportunities for technology platforms to improve resource allocation in the economy across a growing range of areas such as freight, food and finance.

“At the same time the question of how to regulate big tech platforms continues to challenge law-makers across the globe.

“China has taken to this task with particular vigour. It has demonstrated far greater speed and forcefulness in approach than elsewhere.

“This sharp adjustment has naturally presented challenges both in market sentiment and for technology businesses that are having to adapt to a rapidly altering regulatory environment.

“At the same time there has been a push for the rewards of China’s growing prosperity to be more evenly distributed.

“Together these shifts have negatively impacted the share prices of many of our Chinese holdings.

“The underlying progress of the companies however remains surprisingly strong.

“Alibaba and Tencent both continue to grow revenue in excess of 20% whilst Meituan and Pinduoduo are both growing considerably faster.

“The companies themselves are keenly aware of their need to contribute not just to shareholder returns but to society to ensure true sustainability.

“We will continue to assess the long-term implications of the new regulatory approach as they apply to each of our holdings.”

In its outlook, the fund said: “As we anticipate the next decade we are both optimistic and enthused.

“It strikes us that there are multiple drivers of change and thus opportunity.

“These include the continuing digitisation of our economy, the intersection of information technology and biology and the much-needed energy transition.

“Together they provide an opportunity set that is profound and diverse.

“We look forward to continuing to back the companies and visionaries that drive and take advantage of these powerful long-term trends.”

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.