Scottish Mortgage loses crown, but ‘will still reward’

Baillie Gifford's current Edinburgh HQ

Baillie Gifford’s Scottish Mortgage Investment Trust has lost its position as the largest UK investment trust by stock market value amid the brutal sell-off in tech stocks — but the fund “is still well positioned to grow and reward patient investors over the longer term.”

That’s according to Abrdn-owned investment platform Interactive Investor, which announced it has taken a “look” at how investors should be approaching the widely-held Scottish Mortgage.

Interactive Investor said Scottish Mortgage “provides global exposure to disruptive growth companies, public and private, selected by highly experienced managers.”

It said the strength of the Baillie Gifford fund managers’ stock-picking skills, combined with strong risk-adjusted performance and competitive fees, make the fund “a good choice for adventurous long-term investors.”

Scottish Mortgage’s share price almost tripled during 2020 and 2021 from around £5.80 to over £15, but it has since dropped nearly 50% to £7.75.

The market capitalisation of Scottish Mortgage has fallen to £11.2 billion — below the £12 billion of private equity investor 3i Group, which has now become the UK’s largest investment trust in market cap terms.

However, Scottish Mortgage’s total assets are worth £14 billion compared with £13 billion for 3i Group, according to the latest data from financial data firm Morningstar.

“Investor nervousness about the prospect of spiralling inflation and the inevitable interest rate hikes that follow has hit technology stocks hard, and popular investment trust Scottish Mortgage Investment Trust has also suffered as a result,” said Interactive Investor.

“This crash comes as a stark contrast to the consistent growth delivered by the trust over many years, which will understandably be making many holders of the trust concerned about next steps.

“Today, interactive investor, the UK’s second largest platform for private investors, takes a look at how investors should be approaching this.”

Interactive Investor Head of Fund Research Dzmitry Lipski said: “Scottish Mortgage Investment Trust provides global exposure to disruptive growth companies, public and private, selected by highly experienced managers.

“The strength of their stock-picking skills combined with strong risk-adjusted performance and competitive fees make this a good choice for adventurous long-term investors.

“Investors should note, however, that it is higher-risk investment due to its high portfolio concentration, exposure to unquoted companies and tech stocks.

“The risks of all this is enhanced further by gearing (borrowing), so it works better as a satellite holding in a well-diversified portfolio.

“The style bias of the trust is toward growth, with less attention paid to valuation, meaning it can complement other funds with a core or value style orientation …

“Despite the recent sell off, or as long-term investors would say, ‘short term volatility’, it is still well positioned to grow and reward patient investors over the longer term.

“The size of assets should continue to provide easier access to more opportunities in both public and private markets and the managers expertise and their commitment to work with academia should allow them to find modern portfolio ideas and maintain a competitive edge against other players.

“Support and access to wider resources from Baillie Gifford are also important, especially in such challenging times.” 

Scottish Mortgage is a member of interactive investor’s Super 60 list of recommended funds.

 

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.