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Scottish Mortgage Investment Trust: May 2021 update

Investment Analyst Henry Ince shares our analysis on the manager, process, culture, cost and performance of the 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.

  • The managers hunt for private and public companies with high growth potential
  • Veteran manager James Anderson will be stepping down in April 2022
  • Long-term performance has been strong and returns over the past year have also been impressive although there are no guarantees this will continue

How it fits in a portfolio

Scottish Mortgage Investment Trust aims to deliver long-term capital 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.


James Anderson is a partner at Baillie Gifford and has been managing the trust since 2000. After graduating from the University of Oxford, he obtained his master’s degree before joining Baillie Gifford in 1983. He has since built up an illustrious career spanning nearly four decades.

Like Anderson, Tom Slater is also a partner at the firm and has been joint manager of the trust since 2015 after spending five years as deputy manager. He joined Baillie Gifford in 2000 and has spent time analysing both Asian and UK equities. His other responsibilities include Head of US Equities and managing other global and US portfolios. Given there is regional overlap and a shared investment philosophy across these strategies, we believe Slater can devote a sufficient amount of time to each.

Earlier this year Anderson announced his intention to step down from the trust at the end of April 2022, at which point he will retire as a partner from Baillie Gifford. Slater will continue to manage the trust alongside newly-appointed deputy manager Lawrence Burns. 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.

Investors in the trust should be aware that closed-ended funds can trade at a discount or premium to the net asset value (NAV).


The managers believe that markets are driven by extreme events and extreme 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.

New ideas are generated from a wide range of sources such as industry specialists, roadshows and the expertise of their colleagues at Baillie Gifford. To identify potential candidates, the team conduct detailed fundamental research and invest differently to the benchmark index. They spend lots 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 within. Typically, these will be financially robust companies that have hard-to-replicate advantages over competitors. Like the companies in which they invest, the managers are optimists and focus on what could go right, and if successful, how big could the opportunity really be?

The managers are true long-term investors since they believe it’s the best way to capture the potential growth of their companies. Currently the trust invests in around 95 companies, eight of which have been held for over ten years, including technology firms Amazon and Tencent, and French luxury goods company Kering.

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 than those traded on established stock exchanges. At the end of March, unlisted investments made up 20.3% of the trust’s assets.

Around half of the trust is invested in North America, with the remainder split evenly across Europe and higher-risk emerging markets like China, a region where the managers have continued to find opportunities. Sector-wise, the managers divide the portfolio up slightly differently to most 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, notably the ability to cause dramatic change and disrupt the status quo.

New investments include Northvolt, a company providing batteries for electric vehicles. It was co-founded by a former Tesla employee and is well placed to benefit from growing demand for green transportation. Playing into the same theme, ChargePoint was also added to the portfolio and is one of the largest players in vehicle charging infrastructure. Other new purchases include food delivery company Ocado and Epic Games, the US gaming platform responsible for Fortnite.

Investments in Facebook and Alphabet have been sold. The managers believe that at their current scale both these companies have less growth potential than other firms in the trust. The managers also reduced their investment in electric car maker Telsa following a period of exceptional performance, although they remain enthusiastic about the firm’s long-term prospects

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 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.

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 that 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 March was 0.34%. 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.


Scottish Mortgage Investment Trust has delivered strong returns since Anderson took charge in April 2000. Over this period the trust’s share price has grown 1682.8%* vs 308.7% for the FTSE All-World Index. Slater has also contributed ideas to the trust for the past decade, meaning he has also made a contribution to performance. Past performance is not a guide to the future though and exceptional returns are unlikely to be consistently repeated. Investments fall as well as rise in value and you could get back less than you invest.

Over the past 12 months the trust’s delivered strong returns. The net asset value (NAV) grew 97.9% compared with 33.4% for the benchmark. The share price rose 90.3% and currently trades at a 5.3% discount to NAV. Whilst the primary objective of the trust is capital growth rather than income, the trust did increase the dividend per share by 5.2% to 3.42p over the latest financial year. Remember yields are variable and not a reliable indicator of future income.

The trust’s top holdings – Tencent, Illumina, ASML, Amazon and Tesla – all delivered strong returns over the trust’s financial year (end of March 2021). Electric car maker Tesla was one of the biggest contributors as it continues to lead the charge in vehicle electrification and ability to manufacture at scale. NIO Inc which is also involved in the production of electric and autonomous vehicles, saw its share price increase over 1,100%. Online furniture retailer, Wayfair was another notable performer, benefitting from increased customer demand and a strong online presence.

In contrast, one of the trust’s more recent additions, Moderna, widely known for its successful Covid-19 vaccine, detracted from returns. The managers believe Moderna’s vaccine success has transformed the company’s prospects and will allow them to fund numerous other vaccine projects. They took the opportunity to add to their investment at a lower price.

The managers’ growth-focused investment style has led to strong returns for several years. But since the start of this year the trust hasn’t performed as well. Several of their holdings saw sharp declines in their share price as concerns about the potential for higher inflation and rising interest rates heightened. A new wave of optimism has also coursed through markets with value-focused trusts seeking lowly-valued businesses seeing a revival. It’s tough to tell whether this is a flash in the pan, or the start of a longer period in the sun for value investing. As always though, 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
April 16 -
April 17
April 17 -
April 18
April 18 -
April 19
April 19 -
April 20
April 20 -
April 21
Scottish Mortgage Investment Trust 47.4% 27.4% 11.5% 27.0% 90.3%
FTSE All World 31.2% 7.8% 11.3% -1.3% 33.4%

Past performance is not a guide to the future. Source: *Lipper IM to 30/04/2021.

Find out more about more about Scottish Mortgage Investment Trust including charges

Scottish Mortgage Investment Trust Key Investor Information

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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