Schiehallion Fund: Manager Insights

As with any investment, your capital is at risk.

Robert Natzler: I'm Robert Natzler, Deputy Manager of the Schiehallion Fund. Despite continued economic and geopolitical uncertainty, 2024 proved to be a strong year in share price terms for the fund. We saw a significant narrowing of the discount to the net asset value. More broadly, private markets were characterised by increased deal activity. A more attractive valuation environment allowed us to step up the pace of deployment during the year, an output of the exciting private growth opportunities that we continue to see. In hindsight, the 2020 to 2022 capital cycle was a painful but necessary reset. We have seen businesses emerge from it in a healthier state, characterised by more disciplined spending and more efficient operations.

Despite muted IPO activity during the year, the fund did see one listing in 2024 in the US. Medical diagnostic solutions provider Tempus AI listed on the NASDAQ in June. Over the course of the year, we also continued with the share buyback program previously announced in November 2023. We have now deployed roughly half of the capital we set aside in November 2023 for that purpose. 

Performance:

Over the course of the year, the fund delivered a strong share price return of 51 per cent. The net asset value return was also encouraging at 12.9 per cent.

Over the period, the biggest contributor to absolute performance was the aerospace and satellite communications company, SpaceX. This continued to showcase remarkable operational progress. During the fourth quarter, SpaceX reached a publicly disclosed valuation of $350 bn, making it the largest private company in the world. Other notable contributors to performance included the Italian digital consumer product acquirer, Bending Spoons, and the listed point-of-sale credit provider, Affirm. The largest attractors to performance over the period were German online real estate platform, MacMakler, and Swedish electric vehicle battery maker, Northvolt. Both holdings saw their valuations close to fully written down during the period. These are obviously not the outcomes we had hoped for when we invested on your behalf. In the case of MacMakler, the company has been facing unrelenting market headwinds in Germany that ultimately severely damaged their originally very attractive unit economics. Northvolt was characterised by poor operational execution, but also by incredibly fierce competition from Chinese electric vehicle manufacturers, the two factors combining to drive the company into filing for bankruptcy last year.

Portfolio update:

Capital-weighted revenue growth remains strong across the portfolio, averaging 34 per cent across the fund as a whole. Among the top 10 holdings, revenue growth is particularly strong, averaging 42 per cent. These figures are accompanied by a healthy gross margin profile, 47 per cent across the fund as a whole and 58 per cent across the top 10. We also remain confident in the overall resilience of holdings. Approximately 40 per cent of the fund weight is EBITDA profitable, with holdings remaining well capitalised. Indeed, more than 80 per cent of the private cohort within the fund have a cash runway of two years or more. This should allow them to navigate and execute within an environment that continues to be characterized by much uncertainty.

Over the course of the year, we continued to balance three capital deployment outcomes. These were initiating new investments, making further investments into the existing portfolio, and conducting share buybacks. In this regard, we made a total of six new investments spanning a range of geographies and industries, New U.S. holdings comprised Tenstorrent, a semiconductor design company, and Runway, a generative AI video laboratory. Other investments comprised European online marketplace Vinted, Portuguese surveillance drone maker Tekever, Singapore-based insurance platform Bolttech, and finally Indian manufacturing outsourcer Zetwerk. During the year, we also made follow-on investments into Bending Spoons and into data intelligence platform Databricks, coupled with a recapitalisation of MacMacLar. Two portfolio realizations were made, comprising of the listed sale of sustainable apparel maker Allbirds, and the acquisition of the UK semiconductor company Graphcore.

Looking forward:

The long-term trend of the most important global companies increasingly residing within private markets continues. The Schiehallion Fund holds a number of these names, including the likes of SpaceX, Databricks, also ByteDance, the Chinese social media giant, and Stripe, the digital payment processor. 

While we are still excited about what these names can achieve in the future, at the same time, we continue to search for the next set of private growth names capable of being the winners of tomorrow. With that in mind, we regard the current outlook for private growth markets as extremely compelling. First, we are seeing exceptional product and business model creation in a broader economy that retains its ability to innovate and surprise, Second, we are seeing a private company ecosystem that has learned the hard lessons of a tighter capital cycle and now operates with greater efficiency and professionalism. And third, most importantly, the valuations of many of these companies have become extremely compelling, making it an attractive time to deploy shareholder capital. Peter Singlehurst, I, and everyone else in the Schiehallion Team would like to thank you for your continued support as shareholders.

Annual Past Performance for the Schiehallion Fund* to 31 March Each Year (Net %)

Source: Morningstar, share price, total return, Sterling. *The Schiehallion Fund was launched on 27 March 2019.

Past performance is not a guide to future returns 

Important information and risk factors

The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.

This communication was produced and approved in May 2025 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking. This communication contains information on investments which does not constitute independent research.

Baillie Gifford & Co Limited is authorised and regulated by the Financial Conduct Authority. Baillie Gifford & Co Limited is the authorised Alternative Investment Fund Manager of the Schiehallion Fund Limited (the ‘Company’). 

The Company’s shares trade on the Specialist Fund Segment of the London Stock Exchange. The Company is not authorised or regulated by the Financial Conduct Authority. The value of its shares, and any income from them, can fall as well as rise and investors may not get back the amount invested.

The specific risks associated with the company include: 

Investments that are subject to low trading volume, lack of a market maker, or regulatory restrictions may not be possible to sell at a particular time or at an acceptable price. Large positions held in securities of particular issues may decrease the liquidity of any investments. 

Risk is increased by holding fewer investments than a typical fund and the effect of this, together with a long-term approach to investment, could result in large movements in the share price. 

Private Company assets may be more difficult to buy or sell, so changes in their prices may be greater. There is no guarantee that private companies will become publicly traded companies in the future.
The price of the Company’s shares may be highly volatile and at a discount to the Company’s net asset value per Share. Shareholdings in the Company are likely to be illiquid. 

The Company may issue new shares when the price is at a premium which will reduce the share price. Shares bought at a premium can therefore quickly lose value. 

For a Key Information Document for the Schiehallion Fund, please visit our website at www.bailliegifford.com

All data is source Baillie Gifford & Co unless otherwise stated.