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The power of people.

How access to leading entrepreneurs and academics powers Scottish Mortgage.

The value of shares in Scottish Mortgage, and any income from them, can fall as well as rise and investors may not get back the amount invested.

Access to entrepreneurs, visionary founders and academics powers the thinking of the managers of the Scottish Mortgage Investment Trust as they seek to unearth exceptional growth companies.

Their success is rooted in identifying and investing in the outliers of tomorrow – those companies capable of returning five, 10, 15 or 20 times the initial investment over a five- to 10-year period. 

It’s a strategy that has made the trust one of the most successful of the past decade and catapulted its assets to more than £18bn, making it by far the largest investment trust in the UK.

Much of that success is down to the team’s network of connections within business and academia, which it has forged and strengthened over many years. This has put it in a privileged position to spot these breakthrough companies before they get on the radar of other investors. 

One recent example is an investment trip to Berlin, when the managers spent five hours of face time, including dinner, with the founders of online fashion retailer Zalando.

“That is quite anomalous in terms of the level of access,” said deputy manager Lawrence Burns. “It’s not just quantity of time, but also the nature of that time. When you build relationships with people that are more like partnerships, you get more open conversations. They’re more willing to talk about ideas, ambitions, aspirations earlier.”

The reputation that Scottish Mortgage has established as a supportive and steadfast shareholder over the long term – sticking with transformative growth companies through the good times and the bad – gives company directors trust and reassurance. 

There’s also a virtuous circle where one founder will vouch for the trust’s reputation to other founders. 

Such an exclusive level of access to entrepreneurs matters more when it comes to private companies: unlike public ones, they can choose their investors.

Private companies have become an increasingly fertile hunting ground for the managers as businesses opt to stay private for longer. The trust had 21.3 per cent of its assets in private companies at the end of 2021, out of a maximum of 30 per cent. TikTok owner ByteDance and aerospace developer SpaceX are among its 49 private holdings.

“In the private space, the access and the advantage we have is not just about talking and understanding, but it’s also access to the opportunity in the first place,” Burns said.

Best minds

It is from these company networks combined with academic networks that the management team of Burns, James Anderson and Tom Slater glean their insights. Such insights drive their thinking, shape their ideas and inform where they do their research.

“If we want to do the best possible job for Scottish Mortgage shareholders, only a fraction of the insight is naturally going to be embedded within the three of us or within Baillie Gifford,” he said.

“We need to make sure that we’re getting genuine, broad insight from the very best minds that we can globally. Academia is particularly fruitful because academics don’t think on a one- to two-year horizon. They think on a 10-year horizon, they think on a multidecade horizon and that aligns very well for us.”

One academic who the managers talk to regularly is Brian Arthur, a foremost thinker in the field of complexity science. “In my view, he’s one of the world’s leading academics,” said Burns. “He was one of the first people to spot the nature of the digital economy.”

Arthur has shared with the team his belief that artificial intelligence will prove to be the most important technological development since Gutenberg’s printing press. The printing press made information more widely available; AI is making intelligence more widely available.

That chimes with the importance Robin Li, co-founder of China tech company Baidu, assigned to AI many years ago.

“That [kind of insight] helps focus us on where we want to spend our time,” said Burns. “What do we think is interesting, what do we think are the areas where outliers are likely to emerge?”

Meaningful opportunities

These themes of interest may change over time. Recent ones have included ecommerce and electric vehicles (EVs) with Scottish Mortgage an early backer of both Amazon and Tesla. Today, exciting themes include decarbonisation and the intersection of technology and biology.

EV adoption is one of the many opportunities presented by the transition to a zero-carbon world. Tesla remains a large holding and the trust also invests in Chinese EV maker NIO. Further along the supply chain, it invests in Swedish battery developer Northvolt. In the US, it owns ChargePoint, the world’s largest network of EV charging stations, and Redwood Materials, which hopes to build recycling infrastructure for batteries.

The most exciting theme for Burns, however, is the application of computing power to the field of biology. The opportunity set is large and varied, he said, but perhaps more importantly, the potential impact on people is profound.

“[It’s] Moderna’s ability to address HIV, Zika, even cancer. It’s Ginkgo Bioworks’ ability to potentially give us biodegradable plastic,” he said.

“Grail has a blood test that detects about 50 types of cancer very early on. That cancer test could save my life or that of someone close to me in the future, and that, to me, makes it very meaningful.”

From EVs to biology – and to whatever comes next – the aim of the Scottish Mortgage fund managers is to remain ahead of the curve with their investments. And while the themes will shift again and again, that strategy will remain unchanged.

Annual past performance to 31 December each year (net %)

Important information and risk factors

The value of shares in Scottish Mortgage, and any income from them, can fall as well as rise and investors may not get back the amount invested. Investment markets and conditions can change rapidly.

The views expressed in this article are those of the Scottish Mortgage Team 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.

This communication was produced and approved in March 2022 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.

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.

The Trust invests in overseas securities. Changes in the rates of exchange may also cause the value of your investment (and any income it may pay) to go down or up. The Trust invests in emerging markets where difficulties in dealing, settlement and custody could arise, resulting in a negative impact on the value of your investment. 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 prices may be greater.

Stock examples

Any stock examples and images used in this communication are not intended to represent recommendations to buy or sell, neither is it implied that they will prove profitable in the future. It is not known whether they will feature in any future portfolio produced by us. Any individual examples will represent only a small part of the overall portfolio and are inserted purely to help illustrate our investment style.

A key information document is available here.


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