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Scottish American Investment Company: March 2022 Update

In this investment trust update, Investment Analyst Henry Ince shares our analysis on the manager, process, culture, cost and performance of the Scottish American Investment Company.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

  • The managers hunt around the globe for companies with sustainable growth prospects and resilient dividends
  • The managers are supported by a well-resourced and diverse team at Baillie Gifford
  • The trust has a proven track record of year-on-year dividend growth, having increased its pay-out for 48 consecutive years

How it fits in a portfolio

Founded in 1873, The Scottish American Investment Company (SAINTS) is one of the oldest investment trusts around. The managers search globally for companies with the potential for sustainable growth and a reliable dividend. The aim is to grow income and capital over the long term by primarily investing in company shares, but they also invest in other assets such as property, infrastructure, and bonds. Given its growth bias it could work well alongside ‘value’ funds or investment trusts investing in unloved companies to form part of an income focused portfolio.


James Dow and Toby Ross have been joint lead managers of the trust since August 2017, having served as deputy managers since July 2016. Both have spent their entire investment careers at Baillie Gifford after joining its graduate scheme. Prior to their current positions, Dow spent time covering US companies while Ross focused on the UK.

Together they lead the Global Income Growth Team and manage the Baillie Gifford Global Income Growth fund, an open-ended fund that invests in a similar way to this trust but doesn’t have the ability to invest in unquoted companies or borrow to invest, known as ‘gearing’. Dow is also co-manager of the Baillie Gifford Multi-Asset Income fund and Ross forms part of the International Alpha Portfolio Construction Group. Given the overlap in their process and approach, we think they can comfortably handle these responsibilities.

The duo work very closely with Ross Mathison who was named co-manager on their near identical open-ended fund at the start of 2022. Mathison joined Baillie Gifford in 2019 having previously worked at Aviva and Standard Life covering European and global equities.

The managers are supported by a team of four analysts alongside dedicated ESG (Environmental, Social and Governance) and China specialists. They also benefit from the wider resource available at Baillie Gifford which consists of over 100 investment professionals.


SAINTS has all the hallmarks of a Baillie Gifford portfolio, unconstrained with a focus on growth over the longer term. Dow and Ross require companies to demonstrate two key traits: a dependable income stream and the potential for above inflation profit growth. These companies need to demonstrate resilience through the economic cycle. This leads them to be very selective and only those companies they consider to be ‘exceptional’ make the cut.

To identify opportunities, they focus on bottom-up analysis (looking at individual company prospects) using a combination of quantitative and qualitative factors. Each company must pass their nine-question framework which focuses on understanding the drivers of growth and the reliability of the dividend. Meeting with company management is a crucial part of this process and it allows them to gauge the attitude towards paying a dividend to shareholders. If a company cuts its dividend, the managers review the investment, but this doesn’t necessarily mean it will be sold. Each company is assessed on a case-by-case basis and the managers acknowledge that dividend cuts can be prudent for long-term growth, for example to fund the acquisition of another business.

This analysis whittles a universe of around 4,500 into a portfolio of between 50-80 companies. The trust is split into four areas looking for different drivers of free cash flow - cash available to the business after expenses have been paid.

‘Compounding machines’ form the bedrock of the trust and consists of quality companies with strong balance sheets, barriers to entry from competition and experienced management teams. Companies like Nestle, Microsoft and McDonald’s fit in this bucket. The managers like companies with an ‘exceptional revenue opportunity’, these tend to be market leaders with pricing power (the ability to raise prices without affecting demand) offering the potential for quicker growth. The remaining areas focus on longer-term free cash flow growth, looking for companies with a catalyst for positive change. Companies that possess these qualities can be hard to find, but by investing globally the managers give themselves the best opportunity to seek them out.

The managers keep the trust diversified by investing across different regions. The largest investments are in developed markets like the US and Europe but exposure to Asia also accounts for 14% of the trust. The managers also invest in emerging markets which adds risk.

Recent additions to the trust include Starbucks, a company they’ve had on their radar for several years. The team believe the long-term growth opportunity for the company looks attractive, especially with the potential to add further value with their ‘drive-thru’ stores. They also invested in their first Shanghai-listed company, Midea group, a dominant player in the Chinese air conditioning and home appliance market. Other notable additions include Spanish motor insurer Linea Directa and Valmet, a manufacturer of pulp and paper machinery.

In contrast, they sold British American Tobacco, doubting its long-term prospects and ability to sustainably grow its dividend which is already quite high. China Mobile and financial services company, Sumitomo Mitsui Trust holdings were sold to make way for their best new ideas.

The trust also invests in a portfolio of UK commercial property managed by OLIM Property Limited and some global bonds, which includes riskier high yield and emerging market bonds. More recently they have also set up a small infrastructure equities portfolio to help diversify the income stream and deliver growth in excess of inflation. These investments are made with borrowed money with the intention of increasing returns (known as gearing), but this could magnify losses in a falling market and increases risk.

The managers can also use derivatives, which if used adds risk. The investment trust structure gives them the flexibility to also invest in higher-risk unlisted companies, but they do not anticipate doing so for the foreseeable future.


This trust is managed by Baillie Gifford, an independent private partnership founded in 1908. It’s owned by partners who work full time at the firm. This ownership structure means senior managers have a vested interest in the company, and its funds and investment trusts, performing well. We think this has helped cultivate a culture with a long-term focus, where investors' interests are at the centre of decision making. We also like that managers are incentivised in a way that aligns their interests with those of long-term investors and should retain talented managers.

Baillie Gifford recognises the risks posed by Environmental, Social and Governance (ESG) issues and uses its position to encourage companies to act in a sustainable way. The company has a dedicated Governance and Sustainability team which is responsible for producing ESG research and challenges and contributes to the investment decision-making process. They also monitor companies' progress, engaging with them on ESG matters where appropriate.


The ongoing annual charge over the trust’s financial year to 31 December 2021 was 0.62%. Investors should refer to the latest annual reports and accounts, and Key Information Document for details of the risks and charging structure. If held in a SIPP or ISA the HL platform charge of 0.45% (capped at £200 for a SIPP and £45 for an ISA) per annum also applies. The platform charge doesn’t apply if the trust is held in a Fund and Share Account.


The managers have done a good job of outperforming their benchmark over the past five years (to end of February 2022). Over this period the trust’s net asset value (NAV) has increased by 74.01%* vs 62.70% for the FTSE All-World. The share price has increased by 63.63% over the same period, exceeding the AIC Global Equity Income peer group return of 26.97%. Remember that past performance is not a guide to the future.

This was also the case over the trust’s past financial year. To the end of December 2021, the trust’s NAV increased by 21.38% vs 19.98% for the FTSE All-World benchmark, whilst the share price rose 19.54%. In contrast, the AIC sector returned 16.70%. One of the trust’s top performers was Novo Nordisk, the pharmaceutical company who saw success in developing treatments to help tackle obesity. The company continues to see strong demand with their target sales for the drug doubling by 2025. Other notable performers included Semiconductor company, Silicon Motion Technology and Anta Sports, the Chinese sports and equipment company.

It was a great period for their property portfolio which returned 25.7% over the past financial year. This was helped by the sale of their largest investment at a significant premium to its valuation. Rising levels of inflation were a headwind for their bond portfolio though which returned 0.8%, with income offsetting a capital loss.

More recently since the start of the 2022, the trust has lagged its benchmark with the market favouring more value orientated businesses. As always, we suggest investors build and maintain diversified portfolios with exposure to a variety of investment styles, sectors, countries, and asset classes.

The total dividend per share for the year to 31 December 2021 was 12.675p, which is a 5.6% increase on the previous 12-month period. This means the trust has increased its dividend for the 48th year in a row. At the time of writing the trust trades at a 0.43 % premium to NAV and has a dividend yield of 2.55%, although remember yields are variable and aren’t a reliable indicator of future income.

Annual percentage growth

Feb 17 – Feb 18 Feb 18 – Feb 19 Feb 19 – Feb 20 Feb 20 – Feb 21 Feb 21 – Feb 22
Scottish American Investment Company 12.66% 3.28% 6.81% 20.80% 9.00%
FTSE All-World Index 7.84% 2.93% 8.81% 19.40% 12.81%
AIC Global Equity Income 9.91% -1.11% 4.34% 9.93% 1.85%

Past performance is not a guide to the future. Source: *Lipper IM to 28/02/2022.



This trust has a holding in Hargreaves Lansdown PLC

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    Our investment trust research is for investors who understand the risks of investing and that investing in investment trusts isn't right for everyone. Investors should only invest if the trust's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of an investment trust before they invest, and make sure any new investment forms part of a diversified portfolio.

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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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