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Scottish Mortgage Investment Trust: June 2022 update

Lead Investment Analyst Kate Marshall shares our analysis on the manager, process, culture, ESG integration, cost and performance of Scottish Mortgage Investment Trust.

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 for private and public companies with high-growth potential
  • Veteran manager James Anderson stepped down from the trust in April 2022, Tom Slater and deputy manager Lawrence Burns continue to manage the trust
  • Long-term performance has been strong, but 2022 has been a tough year so far

How it fits in a portfolio

Scottish Mortgage Investment Trust is managed by Baillie Gifford. It aims for long-term growth by investing in some of the stock market’s most exciting companies. From healthcare to transportation, the trust provides exposure to some of the most disruptive businesses around the world. This includes both public and higher-risk private companies. With a focus on growth, the trust could work well alongside others investing in out-of-favour ‘value’ companies to form part of an adventurous portfolio. Investors in closed-ended funds should be aware the trust can trade at a discount or premium to Net Asset Value (NAV).


James Anderson, the long-standing manager of this trust since 2000, stepped down and retired at the end of April 2022. Baillie Gifford takes succession planning seriously, especially as Anderson has been integral to the trust’s development and performance over the past two decades.

Tom Slater is a partner at Baillie Gifford and is now lead manager of the trust. He was joint manager alongside Anderson from 2015 after spending five years as deputy manager. He joined Baillie Gifford in 2000 and has spent time analysing both Asian and UK companies. He’s also Head of US Equities and manages other global and US portfolios, including the Baillie Gifford American Fund. Given there is regional overlap and a shared investment philosophy across these strategies, we believe Slater can devote enough time to each.

Lawrence Burns was appointed deputy manager in March 2021 and continues to support Slater following Anderson’s retirement. He joined the firm in 2009 and has experience covering the UK, emerging markets, and managing global growth portfolios. He’s also a partner at Baillie Gifford.

The team also benefit from the wider resource available at Baillie Gifford, which consists of over 100 investment professionals.


The managers believe that markets are driven by extreme events and success, which propels society forward. Their research suggests that only a handful of companies generate wealth over the longer-term and these are the ones they seek to invest in. The trust is invested in a way that means it looks very different from the index and peers.

New ideas are generated from a wide range of sources such as industry specialists, roadshows and the expertise of colleagues at Baillie Gifford. The team then conduct detailed research into each potential company – they spend a lot of time building a deep understanding of a company’s business model, its quality of management and the growth potential of the industry they operate in. Typically, these are financially robust companies that have hard-to-replicate advantages over competitors. The managers are optimists and focus on what could go right and, if successful, how big could the opportunity be?

The managers are true long-term investors as they believe it’s the best way to capture the potential growth of the companies they invest in. The trust currently invests in 102 companies, eight of which have been held for over ten years, including technology firms Amazon and Spotify, and Indian bank HDFC.

This patient approach is well suited to investing in private companies (those not listed on the stock market). The trust can invest up to 30% of its assets in these (measured at the time of investment). Investors should be aware that investment in unquoted companies is higher risk and they can be considerably less liquid (more difficult to buy and sell) than those traded on established stock exchanges. At the end of May 2022, there were 52 unlisted investments, making up 28.7% of the trust’s assets.

Around 60% of the trust is invested in North America, with the remainder split across Europe and higher-risk emerging markets like China. The managers view the trust’s sector allocation differently to most others, and in a way that expresses their view of the world. ‘Transformational Healthcare’ is the largest theme and is home to the likes of drug discovery firm Moderna and one of their longest held holdings, biotechnology equipment manufacturer Illumina. Other notable themes include, ‘Changing Media Habits’ and ‘Online Retail’. All have qualities in common, including the ability to cause dramatic change and disrupt the status quo.

New investments this year include Solugen, a biology company seeking to produce chemicals through low-carbon processes, Redwood Materials, a battery recycling company, and Capsule, an online pharmacist. More broadly, the managers have been adding to investments in healthcare, where they see lots of opportunities and expect meaningful progress over the coming decade.

To pay for new investments, the managers have sold companies they believe could still be successful but have not fulfilled as much of their opportunity as expected. This includes used car dealer AUTO1 and Workday, which provides cloud applications for areas such as finance and HR.

The managers can use gearing (borrowing to invest), which can boost gains but also increases losses, so is a higher-risk approach. They can invest in derivatives too, which if used also adds risk.


Scottish Mortgage was established in 1909 and is a member of the FTSE 100 index, home to the biggest companies in the UK stock market. The trust is managed by Baillie Gifford, an independent private partnership founded in 1908. It's owned by its 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 fund managers are incentivised in a way that aligns their interests with those of long-term investors and should retain talented managers.

ESG integration

All of Baillie Gifford’s funds are run with a long-term investment horizon in mind – they see themselves as long-term owners of a business, not short-term renters. So, assessing whether society will support, or at the very least, tolerate, the business model over the long term, and whether management will act as good stewards of shareholders’ capital is an important part of the investment process. All fund managers have access to a dedicated Governance and Sustainability team that’s responsible for developing and coordinating the firm’s ESG (Environmental, Social and Governance) research. Investment in controversial weapons is prohibited across the firm.

Similarly, Slater and Burns consider whether they believe a company can make a real difference to society before investing. While they don’t invest in businesses that require wholesale change, they regularly engage with companies with the view to improve their chance of success.


The ongoing annual charge over the trust’s financial year to 31 March 2022 was 0.32%. 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 per annum 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 trust has grown 240.90%* in share price terms since Slater was appointed co-manager in 2015. This compares with 131.18% for the broader global market, as measured by the FTSE All World Index. Past performance is not a guide to the future though and investments fall as well as rise so you could get back less than you invest.

While the managers’ growth-focused investment style led to strong returns for several years, the trust has struggled and fallen in value since November last year. Higher inflation and rising interest rates have put pressure on growth investing, as this erodes the value of cashflows expected to be generated further out in the future.

On the other hand, value-focused trusts, which invest in lowly-valued or recovering businesses, have performed better. Some economically sensitive areas of the market, such as oil & gas and commodity related businesses, which the trust tends to avoid, have also been strong.

Investments in Chinese companies, including internet-related businesses Alibaba, Tencent and Meituan Dianping, have also detracted from performance. China’s market has been one of the weakest over the year, hindered by regulatory crackdowns by China’s authorities and the economic impact of the zero-Covid policy and ongoing lockdowns.

We believe the trust has long-term performance potential, but periods of volatility should be expected. As always, we suggest investors build diversified portfolios with exposure to a variety of investment styles, sectors, countries, and asset classes. Plus, you should regularly review your investments to make sure they continue to meet your needs and objectives.

Annual percentage growth

May 17 – May 18 May 18 – May 19 May 19 – May 20 May 20 – May 21 May 21 – May 22
Scottish Mortgage Investment Trust PLC 29.33% -0.68% 45.48% 64.79% -32.32%
FTSE All World 8.97% 4.58% 8.01% 23.91% 5.60%

Past performance is not a guide to the future. Source: *Lipper IM to 31/05/2022.



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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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