Fund Profile

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This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. With this commentary, Kepler Partners LLP does not intend to influence your investment firm's behaviour. 

Overview
SMT has achieved returns of over 20% a year for a decade, and the managers believe the growth potential is still huge…
Overview

Scottish Mortgage (SMT) aims to generate superior returns from global equities with a highly active, long-term approach. The success of that strategy, particularly over the past decade, has led SMT to grow into the largest investment trust on the FTSE and pass on the benefits of scale in exceptionally low fees.

The NAV growth has largely come through performance. As we discuss in the Performance section, over the past decade the trust has generated annualised NAV total returns of c. 20%, one of the very best results in the investment-trust sector. Growth has also come through regular issuance of shares in the long periods the trust has been on a premium. Despite a wobble during the recent crisis, the trust is now back on a 3.6% premium.

The managers James Anderson (appointed in 2000) and Tom Slater (deputy manager from 2009 and joint-manager since 2015) aim to identify companies which can deliver exceptional returns, then invest in them at an early stage of their development and hold them for the long run. In recent years this has led them to invest heavily in companies developing and benefitting from new technologies, often centred around the internet. This includes those companies operating out of Silicon Valley, but increasingly also their Chinese equivalents and competitors.

The managers believe the new technologies being developed in recent years tend to provide opportunities for increasing returns to scale, meaning that many investors have underestimated the long-term potential in companies exploiting them. This has led to a willingness to hold onto companies at apparently high valuations when the managers believe their long-term potential is still being underestimated.

Kepler View

SMT’s success is highly impressive. James and Tom’s ability to maintain conviction in their long-term expectations for companies despite vicious volatility and shrill concerns about valuation from other investors is not often found, and their patience has been well rewarded. The real question for investors is whether this success is sustainable or has been the result of having had the right strategy at the right time.

In our view there is now a realistic path to high inflation and higher interest rates over the next couple of years, thanks to the likelihood of massive public expenditure in the developed world to attempt a recovery from the current crisis. This could provide a mechanical drag on the valuation of high-growth companies through the discount rate. However, the question is whether this would offset the growth potential in the portfolio. We would not bet on this, as we think there is still huge growth potential in trends evident at the top of the portfolio – for example in online services and electric vehicles, both of whose growth may be accelerated due to the crisis.

However, SMT’s ability to replicate the past ten years will depend on the ability to find new opportunities to revivify the portfolio in time. This will be difficult and require getting numerous calls correct. For this reason, although we think there is huge potential in SMT, we would be wary of putting all our eggs in this basket.

bull bear
Highly active approach increases chances of outperformance Higher interest rates and/or inflation could be a headwind to the strategy
Offers rare exposure to unlisted early-stage companies Can be volatile thanks to large single-stock positions and volatility in some 'story stocks'
Fees are extremely low for an active fund Unlisted holdings could present liquidity problems for the trust if demand for the trust turns
Continue to Portfolio
2022 Kepler Growth Rated Fund

This trust has been awarded a rating by Kepler Trust Intelligence for growth... Find out more

Fund History

22 Apr 2022 Buying into private companies
Businesses are staying private for longer, creating more opportunities to invest in the likes of SpaceX, Epic Games and Stripe, which are yet to appear on stock markets. Peter Singlehurst, head of Baillie Gifford’s Private Companies Team, explains why...
08 Apr 2022 Scottish Mortgage - The Power of People
Scottish Mortgage deputy fund manager Lawrence Burns explains how access to the brightest minds in entrepreneurship and academia allows him and his team to invest in the leading companies of the future...
25 Mar 2022 In conversation with the Scottish Mortgage managers
In this recent webinar, Tom Slater and Lawrence Burns discuss the evolution of the Scottish Mortgage management team, the trust’s long-term prospects and take questions from a live audience...
11 Feb 2022 Scottish Mortgage: Long-term investing for transformative change
In this recent Scottish Mortgage Investment Trust webinar, deputy manager Lawrence Burns discussed growth stocks, volatility, and why the progress of Moore’s Law remains a positive for innovative companies...
02 Feb 2022 Getting in on the act: Private markets
Private markets could be the next big opportunity for investors…
05 Jan 2022 Kepler’s top-rated trusts for 2022
We unveil the winners of our ratings for 2022 in the Growth, Income & Growth and Alternative Income categories…
30 Dec 2021 Great expectations
As the last of the mince pies wilts in the fridge, topped with a generous helping of stilton, the Kepler Trust Intelligence team stick a finger in the air and point toward their top picks for the year ahead…
22 Oct 2021 Scottish Mortgage on disrupting disease with artificial intelligence
Tom Slater, joint manager of Scottish Mortgage Investment Trust, examines the game-changing tech that could speed up breakthroughs against cancer, heart failure, and Alzheimer’s...
29 Sep 2021 Slings and arrows
Our analysts argue over whether it’s better to take arms against volatility in a portfolio, or to simply suffer it…
19 Aug 2021 Pandemic immunity
We ask which global equity trusts have outperformed through the different stages of the pandemic…
13 Aug 2021 Embracing the Extraordinary - In conversation with the Scottish Mortgage managers
Join investment specialist Claire Shaw as she speaks to James Anderson, Tom Slater, and Lawrence Burns in the first-ever investor event with all three Scottish Mortgage managers...
14 Jul 2021 Grade inflation
We look at how our discounted opportunities portfolio has done in the first half of the year and update on the performance of our long-term rated funds…
28 May 2021 Charging the green revolution
The rapid rise of electric cars means companies such as Tesla and NIO need batteries. Lots of them. Tom Slater, joint manager of Scottish Mortgage Investment Trust, talks to Peter Carlsson, chief executive of Northvolt, about his determination to meet that demand without creating carbon.
04 May 2021 Scottish Mortgage – The Next Generation of Winners
In this in-depth interview, Tom Slater, joint manager of Scottish Mortgage Investment Trust, stakes his claim with the industries he thinks the big winners of the future will come from. Join Slater as he outlines the long-term investment potential of healthcare, transport, transactions, and food delivery. Capital at risk.
31 Mar 2021 East End boys and West End girls
Our analysts debate whether the US or Asian stock markets will deliver the best returns over the next decade…
24 Feb 2021 Dire Straits or Money for Nothing?
With the sector having seen discounts narrow like never before – our analysts debate whether a premium is a price worth paying…
28 Jan 2021 Big game
Two of our analysts go head-to-head on the question of whether SMT’s stampede can continue…
28 Jan 2021 Flash update: Scottish Mortgage
SMT achieved outstanding performance in 2020, which we detail here along with the trust’s most recent update...
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
06 Jan 2021 This time next year Rodney...
We review the performance of the team’s ‘top picks’ for 2020 – including some proper plonkers – and place our bets for the year ahead…
02 Dec 2020 Payments of the Universe
Tom Slater, Scottish Mortgage Investment Trust joint manager, on how companies that can take the pain out of online payments are reaping big benefits...
19 Nov 2020 Hope springs eternal
The US election has given long-suffering value investors new hope of a 'great rotation' in their favour, but that light at the end of the tunnel could in fact be a train…
10 Nov 2020 Results analysis: Scottish Mortgage
We look at the recently published results of SMT, diving into whether this extraordinary run can continue…
07 Oct 2020 The real reason to invest in India...
India is struggling economically – could there be a value opportunity in the stock market?
29 Jul 2020 To be, or not to be (geared), that is the question
Gearing is part of the toolkit that trusts use to outperform OEICs. But how is it best implemented?...
15 Jul 2020 Why stagflation is likely and how to protect your portfolio from it
Our analysis suggests a combination of cost-push inflation and economic hardship could lead to a short, but unpleasant, period of stagflation...
09 Jul 2020 The next big thing: two mega-trends that everyone should own
Tech has beaten almost everything hands down – but nothing lasts forever. Where else should investors be looking for secular growth themes?
29 Jun 2020 Fund Analysis
SMT has achieved returns of over 20% a year for a decade, and the managers believe the growth potential is still huge…
16 Jun 2020 Factor performance and the COVID-19 effect
Will value continue to move into the black, or fade to red?
20 May 2020 Riding for a fall?
We consider the risks which could derail the multi-year tech boom…
29 Apr 2020 On solid ground
Our analysis of discounts highlights trusts which are likely to offer significantly less discount downside from the current level…
01 Apr 2020 Mind the gap
Discounts have yawned across trusts investing in private companies, but appearances can be deceptive and as COVID-19 unfolds it pays to take care…
21 Nov 2019 The imperatives of growth investing
James Anderson, joint manager of Scottish Mortgage Investment Trust, talks about why we need to embrace risk and volatility to achieve long-term rewards.
23 Oct 2019 Sail away: the best trusts to escape the UK
We look under the hoods of Global sector trusts to see which offer the best diversification prospects for UK investors...
09 Oct 2019 Fund Analysis
Targeting significant growth opportunities across the world, SMT runs a concentrated portfolio of listed and unlisted equities...
19 Sep 2019 Guiding a giant
Fiona McBain, chair of Scottish Mortgage, discusses the unique challenges of steering a FTSE 100-listed fund and the importance of its unusual board…
13 Jun 2019 Real growth in a world of fake news
Presentations and audio from our event at the London Stock Exchange, where six fund managers set out their stall for an exciting future...
13 May 2019 Head in the cloud
Scottish Mortgage's Tom Slater discusses tomorrow's opportunities...
13 May 2019 Streaming the future
Scottish Mortgage's Tom Slater discusses tomorrow's opportunities...
22 Mar 2019 James Anderson: Venturing further
The joint manager of Scottish Mortgage Investment Trust talks about why private companies offer more promising new opportunities than their public counterparts...
27 Feb 2019 A marathon not a sprint
Our research shows that investment trusts' structural advantages give them a significant edge for investors seeking long term capital growth...
06 Nov 2018 Fund Analysis
Scottish Mortgage is a global equity trust run via a highly concentrated, growth-orientated stockpicking approach...
12 Jul 2018 Fund Analysis
Scottish Mortgage is a global equity portfolio run via a highly concentrated, growth-orientated stockpicking approach...
09 Jul 2018 Go big or go home
The overwhelming evidence is that fund managers who are willing to back their convictions with punchy bets are the ones that tend to outperform by the highest margin...
27 Jun 2018 A winning combination
New research from Cass Business school helps explain why closed-ended funds have outperformed their open-ended peers in the major equity sectors since 2000...
11 Jun 2018 James Anderson: The US, the UK and company creation
Baillie Gifford's James Anderson thinks the UK falls a long way short of the standards being set on the US west coast...
21 Feb 2018 Regards from Shanghai
Baillie Gifford's James Anderson meets Alibaba founder Jack Ma and finds him in an ebullient mood...
21 Feb 2018 Fund Analysis
The UK's largest investment trust, and a standout performer, with a very high conviction approach focused on some of the world's biggest growth stories...
21 Feb 2018 Once bitten, twice shy...
Fearful memories of 2008 mean discounts remain wide in the listed private equity sector, despite excellent returns from some of the trusts it contains...
14 Dec 2017 Race to the bottom
Ahead of the new PRIIPS rules we examine the progress investment trust boards are making in reducing costs...
23 Oct 2017 Fund Analysis
A high growth global trust with a very enviable track record...
26 Apr 2017 The greatest
We use technical analysis to identify some of the best stock picking fund managers in the world today...
20 Apr 2017 Fund Analysis
12 Jul 2016 The investment trust advantage
The UK's leading managers tell us how they use investment trusts to maximise returns...
12 Jul 2016 Anarchy in the UK
We collate the reactions of the City's leading investment companies analysts in the wake of the EU referendum...
19 Apr 2016 Fund Analysis
05 Apr 2016 Fighting spirit
Why investment trusts are the ultimate recovery play...
13 Oct 2015 Global funds for income, growth and stormy weather
We compare investment trusts and funds across five global equity sectors, and highlight four of the best...
13 Oct 2015 Fund Analysis
13 Oct 2015 Investing on the bright side
This is an exhilarating time to be a growth investor, says Baillie Gifford's James Budden, who thinks too much focus on the downside leads to missed opportunities...
View all

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