1. Investing in Progress


  2. February 2021

    All investment strategies have the potential for profit and loss, your or your clients' capital may be at risk. Past performance is not a guide to future returns.

  3. Scottish Mortgage was the FTSE 100’s stand-out growth company in 2020, but its managers’ are focused not on short-term performance, but on how best to exploit that added size in future.

    For Scottish Mortgage joint managers James Anderson and Tom Slater, getting bigger means becoming more competitive, while all the time putting exciting new opportunities within reach.

    Anderson and Slater outlined the thinking behind their optimism during Scottish Mortgage’s ‘Investing in Progress’ webinar on 14 January, in which the joint managers described the road ahead for the 111-year-old investment trust. “Our task isn’t primarily about any one year’s performance or about growth versus value,” Anderson said. “It’s about trying to build our underlying competitive advantage and, in that context, scale becomes a virtue rather than a hindrance.”

    As Slater explained, Scottish Mortgage’s resources as well as its long-term outlook, put it top of mind for business leaders looking for partnerships that can be maintained in good times and bad. Scale allows better access to private companies in their early growth phase, plus the ability to offer the portfolio to shareholders for low fees (0.36 per cent)*.

    After a year in which Scottish Mortgage shares more than doubled in value, taking assets to £18 billion, Slater described the managers’ task now as identifying a “pipeline of opportunities which are coming from an ever-broadening pool of industries and potential addressable markets”. Many of these surround Moore’s Law – the principle that computing processing power doubles every two years. Anderson highlighted Dutch-based firm ASML, the leading supplier of machines that make the next generation of microchips, as “critical to the survival of Moore’s law” and having the potential to transform the development of online retail, transport, digital finance, healthcare, enterprise software and much more.

    A reputation for identifying the best growth opportunities in public markets has given the managers access to the most innovative private companies that has surprised even them, Anderson said. One recent success is Affirm, a financial technology company that provides point-of-sale credit. Shares in the company jumped nearly 90 per cent above their initial public offering price when they started trading on the Nasdaq on 13 January 2020.

    Around 40 per cent of Scottish Mortgage is invested in companies first bought when private but the distinction has become somewhat irrelevant. “What we’re trying to do is own the world’s most promising growth companies for long periods of time so that the wealth creation accrues to our shareholder”, Slater said. “That’s irrespective of whether these companies are listed on stock markets or not.”

    Transport is one industry where the managers see the ability to handle huge volumes of data and ubiquitous mobile connectivity as leading to highly scalable and sustainable business models. For Anderson, “the end of carbon is an epochal occasion”. The electrification of vehicles and self-driving capabilities are two obvious opportunities reflected in Scottish Mortgage’s ownership of Tesla and autonomous vehicle pioneer Aurora.


    © Nuro


    A recent addition to the portfolio, in the second half of 2020, is Northvolt, a Swedish battery maker. Founded in 2016, with the aim of developing the world’s greenest battery, Northvolt’s reach goes beyond the automotive sector – to industrial equipment, solar and wind power, mopeds, lawnmowers, bicycles and even screwdrivers. Scottish Mortgage also owns a shareholding in America’s Convoy and China’s Full Truck Alliance, which use machine learning to match freight to trucks; Nuro, which makes autonomous electric robots for kerbside delivery – “a really important enabler of the next leg down in the cost of home delivery,” according to Slater; and Zipline, whose drones deliver medical supplies.

    Slater highlighted two holdings, Moderna and Illumina, as evidencing the impact of Moore’s law on healthcare. “Other interesting healthcare opportunities combine sequencing with artificial intelligence. Tempus, an unquoted holding, has developed a small voice-enabled device that oncologists can use to get real-time access to data and insights – a tumour science model of Amazon’s Alexa, if you will. But it doesn’t end there. “There are 7 billion humans on the planet. They each have 6 million unique genetic variations so there’s a vast dataset,” said Slater. “It remains a phenomenal time to be a growth investor.”

    Anderson concurred, leaving webinar attendees with a key principle of the Scottish Mortgage approach: “If we can help and loyally support great business leaders with huge business opportunities in front of them, the outcomes will tend to look after themselves.”

    To watch the webinar please click here.


    Scottish Mortgage Annual Past Performance (%)
    To 31 December each year

    2016 2017 2018 2019 2020
    16.5 41.1 4.6 24.8 110.5

    Source: Morningstar, share price, total return.
    Past performance is not a guide to future returns.


    *Ongoing charges as at 31/03/2020. Calculated in accordance with AIC recommendations. Details of these costs can be found in the Key Information Document. 

  4. Important Information and Risk Factors

    Investment markets and conditions can change rapidly.

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

    The trust has a significant investment in private companies. The trust’s risk could be increased as these assets may be more difficult to sell, so changes in their pieces may be greater.

    Investments with exposure to overseas securities can be affected by changing stock market conditions and currency exchange rates.

    This article contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research and Baillie Gifford and its staff may have dealt in the investments concerned.

    Baillie Gifford & Co Limited is authorised and regulated by the Financial Conduct Authority (FCA). The investment trusts managed by Baillie Gifford & Co Limited are listed UK companies. Scottish Mortgage Investment Trust PLC (Scottish Mortgage) is listed on the London Stock Exchange and is not authorised or regulated by the FCA.

    For a Key Information Document, please visit our website at www.bailliegifford.com


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