Scottish Mortgage Investment Trust: June 2026 update

• The managers hunt for private and public companies with high-growth potential

• Tom Slater is an experienced fund manager and has been involved with the trust since 2009

• Long-term performance has been strong, but also volatile

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 most exciting companies across the world. From healthcare to advertising, the trust provides exposure to some of the most disruptive businesses. This includes both public and higher-risk private companies. Given the trust’s focus on growth, it could work well alongside other funds or trusts investing in out-of-favour ‘value’ companies to form part of an adventurous investment portfolio.

Investors in closed-ended funds should be aware the trust can trade at a discount or premium to Net Asset Value (NAV).

Manager

Tom Slater is a partner at Baillie Gifford and lead manager of the trust. He was previously deputy manager to industry veteran James Anderson, before becoming joint manager in 2015. He became lead manager when Anderson retired in 2022. Slater joined Baillie Gifford in 2000 and spent time analysing both Asian and UK companies before moving to his current role. He’s also Head of North American Equities and manages other global and US portfolios. Given there’s 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 duo benefit from the wider resource available at Baillie Gifford, which consists of over 100 investment professionals.

Process

The managers aim to identify the most exceptional growth companies in the world. Their research suggests that only a handful of companies generate wealth over the long term and these are the ones they seek to invest in. The trust is invested in a way that means it looks very different to both the index and peers.

New investment ideas come from a wide range of sources such as industry specialists, roadshows, and the expertise of colleagues at Baillie Gifford. The team conduct detailed research into each potential company – spending a lot of time building a deep understanding of a company’s business model, its quality of management, and the growth potential of its industry. Typically, these companies are financially robust and have hard-to-replicate advantages over competitors. The managers take a long term view, focusing on what could go right and, if successful, how big the opportunity could be.

At the end of April 2026, the trust is invested in 98 companies, from large multinationals to higher risk smaller companies. Some investments have been held for over ten years, such as US companies Amazon and Netflix, and European luxury brands Ferrari and Kering.

This patient investment approach is well suited to investing in private companies (those not listed on the stock market). The trust can usually invest up to 30% of its assets in these unquoted companies (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 April 2026, the trust invested in 53 private companies, making up 40.5% of the trust’s assets. Nearly half is invested in SpaceX, which saw strong growth in its valuation ahead of the company’s plans to list on the stock market for the first time.

At the end of April 2026, 59.7% of the trust invests in North America, alongside further investments in Europe and Asia. This includes some higher-risk emerging markets. Rather than viewing the trust through traditional sectors, the managers look at growing themes that companies are exposed to. ‘Emerging Industries’ is currently the trust’s largest theme and is home to companies like computing company PsiQuantum and autonomous vehicle developer Nuro. Other notable themes include ‘Digitalisation of Commerce’ and ‘Enablers of AI’. All the themes have the ability to cause dramatic change and disrupt the status quo.

Over the trust’s latest financial year, ending in March 2026, the managers made several changes to the trust. New investments include Minimax, a Chinese artificial intelligence (AI) company. The team believe China is an overlooked hub in the development of AI tools, with companies developing products at lower costs than US competitors. The managers also invested in advertising technology business AppLovin and battery manufacturer CATL.

The managers sold their investment in US e-commerce platform Wayfair. The company wasn’t growing as quickly as the managers had anticipated, so they opted to sell their investment in favour of other opportunities. They also sold their investment in medical technology business HeartFlow.

The managers can use gearing (borrowing to invest). This can boost gains but also increase losses, so is a higher-risk approach. As at the end of March 2026 the gearing stood at 11%, which is lower than the 13% the previous year. They can also use derivatives to help manage the trust, which adds risk.

Culture

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, as well as its funds and investment trusts, performing well. We think this has helped foster a culture with a long-term focus, where investors' interests are at the centre of decision making. We like that fund managers are incentivised in a way that aligns their interests with those of long-term investors and the partnership structure should help retain talented fund managers.

ESG integration

All of Baillie Gifford’s funds are run with a long-term investment horizon in mind. The firm’s fund managers 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.

Dedicated ESG analysts sit with and report into both their respective investment teams and the central ESG function. The firm’s ESG efforts are supported by a dedicated Climate team. Individual investment teams are responsible for voting decisions and engagement for the companies they invest in. Investment in controversial weapons is prohibited across the firm.

The firm reports all its voting decisions and provides rationale in situations where it votes against management or abstains, in a detailed quarterly voting report. There is also a quarterly engagement report which details the companies engaged with, and the topic discussed, and further engagement case studies are available on the website. All this information is brought together in the firm’s annual Investment Stewardship Activities report.

Baillie Gifford withdrew from the Net Zero Asset Managers’ Initiative and Climate Action 100+ in 2024, citing concerns that membership had become contested and risked distracting from its core responsibilities. We viewed this as a disappointing backward step, but the firm stated that this decision did not change its approach to analysing climate-related risks or engaging with investee companies.

Cost

The ongoing charge over the trust’s last financial year, to 31 March 2026, was 0.33%, an increase from 0.31% in the previous year. Investors should refer to the latest annual reports and accounts, and Key Information Document for details of the risks and charging structure.

The annual charge to hold investment trusts in the HL ISA, SIPP, or Fund & Share Account is 0.35% (capped at £150 p.a. in each account) and 0.25% in the HL Lifetime ISA (capped at £45 p.a.). There are no charges from HL to hold investment trusts within the HL Junior ISA. As investment trusts trade like shares, both a buy and sell instruction will be subject to the HL share dealing charges.

Performance

The trust has delivered strong returns since Slater was appointed co-manager in January 2015. Up to the end of May 2026, the trust has delivered share price return of 555.97%*, compared to 210.57% for the average trust in the AIC Global sector. The trust’s NAV has grown 539.71% over the same period. While performance has been strong, it has also been volatile. There have been times when the trust hasn’t performed as well. Remember, past performance isn’t a guide to the future. Investments can fall in value, as well as rise, so you could get back less than you invest.

Over the trust’s last financial year, to the end of March 2026, it delivered a share price return of 26.79%, beating the 8.95% average growth of the peer group. The trust’s NAV rose 27.18% over the year.

The top contributor to performance over the year was SpaceX. The company, which recently listed on a stock market for the first time, saw a significant upgrade in its value as its satellite communication business Starlink experienced strong growth. Other companies that contributed to performance include TSMC, ASML, and Nvidia, which all benefited from increased spending in AI supply chains.

A number of the trust’s investments in China detracted from performance, including food delivery business Meituan and e-commerce platform PDD. Both companies have faced a weaker domestic economy and been under pressure from competitors. Hermès International also detracted due to weaker demand for luxury goods, particularly across Asia.

At the time of writing the trust trades at a 2.71% discount to NAV, compared to an average discount of 6.98% over the past 12 months. The trust’s board regularly buy back shares in an effort to manage the discount. They also issued new shares in 2026 when the trust traded at a premium.