Schiehallion Fund: finding opportunity amid uncertainty

As with any investment, your capital is at risk. Past performance is not a guide to future returns. 

For professional audiences only. This is not intended for use by retail clients. 

Gustav Venter (GV):  Good day and welcome to this annual update for the Schiehallion Fund. I'm Gustav Venter, an investment specialist within Baillie Gifford's private companies Team, and will be facilitating today's proceedings. Now, I'm delighted to be joined today by the chair of the board, Dr. Linda Yueh, as well as the managers of the fund, Peter Singlehurst and Robert Natzler. Now, over the first 20 minutes or so, they'll be looking back at fund-related developments over the past year. This will include performance and activity within the fund, operational progress among holdings, as well as sharing their views on the broader market and highlighting the pipeline of exciting opportunities which they are currently seeing. 

Now, during the latter portion of today's webinar, there will also be an opportunity for them to address any questions that you might have. So please do use this functionality by submitting such questions via the Zoom Q&A function on your screen. And so with that, I'd now first like to hand over to the chair of the board, Dr. Linda Yueh, to make a few opening remarks to be followed by Peter and Rob thereafter. Over to you, Linda.

Linda Yueh (LY): Thank you very much, Gustav. I just want to add my welcome to that of Gustav’s, to this annual webinar and to thank you as shareholders for sharing our long-term perspective on investing in transformative companies. So thank you. And I'm now just going to hand over to Peter Singlehurst.

Peter Singlehurst (PS): Thank you, Linda. And let me just extend my thanks as well to everybody for joining today and also for your ongoing ownership of Schiehallion and support. I'm going to touch on two topics before handing over to Rob. I'm going to talk about the performance over the course of the past reporting year for Schiehallion, and our activity over the course of that year. And then I'll hand over to Rob to talk about the pipeline of opportunities that we're currently seeing, what we're seeing in the overall market.

So starting on performance. For the 12 months that ended on the 31st of January 2025, the Schiehallion Fund delivered a net asset value return of 12.9 per cent and a share price return of 51 per cent. Playing into that share price return was a fairly significant narrowing of the discount at which the shares traded from 39.6 per cent at the start of the year to 19.2 per cent at the end of the reporting year.

NAV contribution came from both public and private holdings. Private companies that drove the underlying NAV growth were businesses such as Bending Spoons, where they successfully continued to pursue their acquisition strategy of businesses such as Brightcove, WeTransfer, Steamyard, Meetup, and successful integration of these companies and profit generation from them. SpaceX was also a strong contributor to net asset value performance with continued growth in Starlink and the launch business. And ByteDance was also a contributor to the net asset value growth of the fund with revenue and profit growth from that business being driven largely by the domestic Chinese operations of ByteDance. Amongst the public holdings, Affirm and Tempus were also strong contributors. Over the course of 2025, Affirm delivered revenue growth of 47 per cent and 27 per cent adjusted operating income. And Tempus successfully completed a listing of the business in the US and delivered growth of around 75 per cent over the course of the year.

Of course, there were also detractors from net asset value. Northvolt was a major detractor which filed for bankruptcy after failing to successfully ramp production of batteries. McMakler was also a negative contributor, operating in a difficult residential retail housing environment and also going through a recapitalisation of the business over the course of 2024. Brex was also a negative contributor with slower growth than we had anticipated, but with subsequent signs over the course or after the reporting period of a return to good growth.

Overall, the aggregate portfolio, we feel very comfortable with both in terms of the growth drivers within the fund, but also the resiliency of the underlying holdings. Average growth within the fund is 34 per cent, with the top 10 holdings having average growth of 42 per cent over the course of the year. 40 per cent of the portfolio is invested in EBITDA-profitable companies and 80 per cent of the private companies have two years or more of cash runway.

In terms of activity, we stepped up investments over the course of 2024, really for two reasons. The first was valuation driven. We just found more companies at prices that we thought would enable us to deliver the targeted five times return for investments. But also business quality. Companies that have been through the difficult years of 2022 and 2023 have largely restructured their cost bases, and we are finding more companies with better profitability dynamics than we had done over previous years. In aggregate, as a team, we met over 1,000 companies last year. We looked at over 600 private financing rounds. We did 65 first cuts of our diligence process. We did 30 deep dives where we went through our full deep 10 questions framework, and we made six new investments for the Schiehallion Fund. So approximately a 1 per cent conversion rate of the opportunities that we looked at to those we ultimately invested shareholders' capital in.

Of those six companies, interestingly, only two were to be found in the US. Those were Tenstorrent and Runway, both actually operating in the AI space. Vinted in Lithuania, Tekever in Portugal, Bolttech in Singapore, Zetwerk in India. And after the end of the reporting period, we also closed an investment in Revolut in the UK. In terms of follow-on investments, we put additional capital to work in Bending Spoons and Databricks, and we also took part in the recapitalisation of McMakler last year. We made two complete sales over the course of 2024. We exited Allbirds, which had not been a successful investment for us. We sold our shares in Graphcore as that company was acquired. And after the end of the reporting period, we also sold our shares in Airbnb, which was a good investment for us. With that, I will hand over to Rob to talk about pipeline and market background.

Robert Natzler (RN): Thanks, Peter. And thank you to everyone for your continued support. As Peter covers, last year was a much more promising environment for deployment than the previous years. And we saw private markets broadly return to a higher level of activity following the long quiet of 2022 to 2023. Survivors of that capital cycle being in a healthier state was good, but so too was the fact that their valuation expectations had become moderated by the tough experiences of no rounds or down rounds during the years of high interest rates. Whilst it's tempting to talk about macroeconomic turbulence then or now, we remain very focused on fundamental technology change as laying the groundwork for new business creation, new economic growth, and new investment opportunities.

In that regard, generative AI has remained one of the main drivers of surprise and new business formation over the last 12 months period, and we expect it to continue to surprise us and delight us over the next 12 months. We've seen some remarkable traction and surprise from the leading generative AI models with the speed of user adoption and monetisation at many AI companies that are frankly unparalleled in history. At the same time, we still have very real questions about the durability of some of these revenue streams and about the long-term profitability and defensibility of their business models. Against that, we've seen venture capitalists burned a bit by the risk experiences of the last few years, crowding into the most fashionable names in this space, bidding up some valuations to levels that we don't think can be justified by the fundamentals of those companies. With that in mind, whilst continuing to learn a lot about the space, we've broadly been cautious in the area of AI, preferring to make a couple of small investments on opposite ends of the AI stack, focusing more either on the hardware that makes it all possible, or on the business models that are being built on top of the new capabilities being generated, and mostly staying away from simple pure play AI laboratories.

In terms of other areas where we've spent time, we've continued to pay a lot of attention to the thematic of defence, as well as finding really interesting opportunities in global financial services, a space where investors in VC funds drifted away from over the last couple of years, preferring instead to focus on AI. We've done work on manufacturing supply chains, both with an eye on robotics, but also with an eye on actually orchestrating the outsourcing that is going to be required by the reshaping of supply chains we see around us. And we've done a bit of work as well in entertainment, corporate benefits and parts of the consumer stack, although there our biases have led us more towards counter-cyclical businesses rather than premium platforms.

Our perspective remains global. Not only have we found roughly half of the investments over the last 12 months coming from outside of America, but we continue to see that bias when it comes to the ideas that are coming up to us at the one-pager initial cut stage of our diligence. The team has spent time this year in Singapore, in India, in the Middle East, in Latin America, and there are plans for more trips up ahead as we continue to go out and work in parts of the world where the Americans are withdrawing and pulling their capital out. With that in mind, we think the next 12 months should be a fantastic time for continuing to deploy capital for you, and we hope that we're laying the foundations for many years of constructive NAV growth to come.

GV: Great, thanks Rob and Peter for your initial thoughts. We can now transition over to our Q&A portion of the webinar. We see the questions coming in, so I'll just encourage the attendees again, so please do fire them just using the Q&A functionality on your screen. To lead off, Peter, perhaps we can come to you, and this is obviously something that's been in the news a great deal in recent months, and the question of tariffs. This is one of the pre-received questions. To what degree, you know, will the prospect of tariffs impact the Schiehallion portfolio?

PS: I think it's a very important question. I think there's a few different strands to this. I think the first thing to point out is that the Schiehallion Fund skews very heavily towards service businesses – 18 of the top 20 positions are services companies, which as things stand are not subject to any tariffs. In terms of the impact, we think about it through first order impact and second order impacts. There are companies in the portfolio that will be impacted in terms of having to pay the tariffs on imported goods. A business like Oddity, for instance, imports ingredients and packaging from Europe and Asia, respectively. However, we think Oddity is very well positioned to weather these tariffs in whatever form they eventually materialise. Firstly, because they are first and foremost a brand company, they have very strong branding in the Il Makiage and Spoiled Child brands, and with branding comes pricing power. And secondly, because it is already a very high gross margin business. Gross margins in Oddity are already north of 70 per cent, and we think that they are going to be able to maintain those through passing on whatever tariffs come through.

There are also businesses like Insightec [editor’s note: this business is held elsewhere across the Baillie Gifford private companies stable, but not within the Schiehallion Fund specifically], for instance, which is a medical technology business which imports from Israel. There we actually see the company getting really ahead of these tariffs with stockpiling inventory in the US, but also qualifying additional suppliers. So we think first order impacts on the fund will be relatively limited. It's predominantly on the second order impacts that we're looking at. There are quite a number of companies in the portfolio that are consumer discretionary businesses. These are not companies that are going to have any first order impact, but they are discretionary spend. [A] business like Epic Games, where V-Bucks are a very discretionary purchase for a household, or Stripe, where a lot of online payments, consumer good payments, are for consumer discretionary items, or indeed a business like Faire, which is a wholesale marketplace. In the event of a macroeconomic downturn, it would be naive to think these companies won't be impacted. But again, what gives us conviction in the underlying opportunities for these companies is that they are structural growth stories. And so those structural drivers will persist, and at the margin, better or worse economic conditions will impact growth for sure. But it is the underlying structural drivers and taking of market share of these companies that is really the underlying investment case. So second order impacts we think will be there, but we are ready to be sanguine on how severe they will be.

The final point I just want to make is that there are actually a number of companies in this portfolio that are very well positioned for a world of greater tariffs in the US. And I'll just name three. Solugen, which is a chemicals manufacturing business. Now they make chemicals using biological enzymes in a very interesting way, but they have the ability to make chemicals which currently are only sourced through imports. They are very well positioned for an onshoring of chemical supply chains. Zetwerk, their whole business model is around helping companies build in resiliency and agility to their supply chains, and they had, even before this trade war, been helping companies offshore manufacturing from China. And then finally Vinted, which is a second hand clothes marketplace. And this is a company where you would expect those benefits to be more second order effects. If you do see consumer pullback, they are a company where you would likely see consumer shift spending away from new apparel towards second hand apparel. So those are some of the lenses that we look through it. You know, as I said, largely a services driven portfolio. We think first order consequences of tariffs can largely be mitigated by the underlying companies. There probably will be some second order implications. But actually, we think there are some companies that are very well positioned in this brave new world in which we find ourselves.

GV: Great, thanks for that, Peter. The next one, Rob, this one can probably go out to you. It's in reference to this balanced activity that we saw in the fund over the last year. And so this question specifically speaks to the new activity outside the US. And the question is whether this is driven mostly by elevated US valuations, or an effort to diversify the portfolio more geographically, or something else. So Rob, maybe if you want to unpack that a bit for us.

RN: Yeah, so I think it's a very fair question. It really comes down to valuation levels in the US as reflected in the bottom-up opportunities that make it through our process. So for context, when we look at our part of the asset class in general, about 65 per cent of the deals that happen, happen in the US. And so 50 per cent in the context of the fund isn't wildly off from what we typically expect to see in the asset class broadly. However, there was definitely a situation last year where you had American names, particularly in the AI space, really see their valuation levels in multiple terms as well as in absolute terms skyrocket, whereas valuation levels in the rest of the world were more reasonable. And so we found ourselves being more selective in the US and finding more attractive opportunities elsewhere. I don't know whether that'll continue to be true over the next 12 months. It is very much driven by bottom-up idea discovery, and there are a number of American names which we think are attractively valued that are currently having work done on them. So it's very much organic. It doesn't come from a top-down view from myself or Peter. It's just an output of the work that we do. I know I mentioned that the places the team have gone and visited in the last wee while. I should flag that that's not unusual. We've always been a global firm. We always believe that it's important to go out and see what's happening in the world outside of Silicon Valley. And I think that'll continue to be true in the future.

GV: Great. Thanks for that, Rob. Peter, maybe next one we can move on to, you know, one of the disappointments within the fund, and that is Northvolt, which you alluded to a bit earlier. And so I was wondering if you could maybe elaborate on any potential lessons that we can take from what unfolded with this one.

PS: Yeah, of course. Northvolt was a very bad investment that we made. I think it's important to say that this will happen within the fund. We will make investments that go wrong. And as I think you're alluding to, Gustav, the important point when that happens is to make sure that we learn from those mistakes. I think in the specifics of Northvolt there are three things that I would draw out. The first, I think we were too enamoured by the theme that sat behind Northvolt. Or to put it another way, I think there was a feeling that a business like Northvolt should invest, should exist and should flourish, rather than Northvolt itself being a company of the sufficient calibre that we would seek to invest in. Now, many of you will have heard us in the past saying, look, we don't do thematic investing, we're bottom-up stock pickers. I think the mistake here was that really Northvolt was where we strayed away from that. And we became too interested in the theme itself, not only of EV growth and penetration, but of the need for a European domestic supplier of batteries. I think the second lesson really comes down to team. We thought that this was the right team to build this business. And it wasn't. Ultimately, so much about what we do and the success or failure of the investments we make comes down to the people that we back. And where we make good investments, it's often because we have backed the right people to build and scale these companies. And where we make bad investments, often it is a question of execution, which comes down to the people leading these businesses. And then the third lesson I think is a little more esoteric, and that relates to the capital structure and the fundraising strategy pursued by Northvolt. The company ended up with a very complicated capital structure with various layers of equity, but then convertible instruments, and then debt on top of that, and ultimately that led to major difficulties in recapitalising the business and tied their hands in a way that perhaps wouldn't have been the case had they had a simpler and cleaner capital structure. So I think there will be continued lessons that we will draw from Northvolt, but in this fairly early post-mortem analysis, if anything, it kind of re…this sort of doubling down on conviction of things which we already knew and believed, which is one, we're bottom-up stock pickers, not thematic investors. Two, it is all about the team. And three, simplicity of capital structure really matters.

GV: Great, thanks for clarifying, Peter. Next up, we mentioned tariffs a lot in the news. Let's talk about something else that's also in the news a lot, and that's artificial intelligence. And so Rob, I was wondering if you could maybe take a stab at just articulating our views on what we are seeing within this area. As I said, a lot of news flow, a lot of attention. How do we make sense of the noise and the signal within this whole AI frenzy, so to speak?

RN: Yeah. I mean, there's an old joke that artificial intelligence is simply what we call the latest clever thing computers turn out to be able to do. And so there's a chance that it will just be forever a moving target. I think right now we're still very much in a posture with our minds open. We're still learning. And the best way of learning right now is sitting down and spending time with the leading companies in the field. And you only get to do that if there's a chance that you put a bit of capital to work. And so we've tried to get that balance right, and we're drawing on some of the lessons we learned from, for example, the way we engaged with the crypto craze of a number of years ago, of getting that balance between engaging, learning, listening, but also not going in all the way.

Our sense is that there are still some fundamentally unanswered, in a sense, unanswerable questions at the heart of the AI technology debate, which even the leading figures and the leading companies don't honestly know an answer to. And one of those questions is what we think of as the question of scale, and the other one is the question of data. Quickly, give a sense of both. The first question being a question of scale. We still don't know whether we will continue to see increasing returns to scale in the performance of these models as they get bigger. So far, we've seen increasing or constant returns. We don't know if that will carry on in the future. Depending on whether you believe it will or it won't, you either end up in a world where you have a cutting edge model that is wildly ahead of the next best option, and that may well be proprietary to a cloud provider, or you end up with a large number of good enough open source models. Nobody really knows the answer to that, but it's going to have a massive impact on where value accrues long term inside the AI ecosystem.

The other axis that we like to think about is the data axis. It's the question of whether, once you have a big enough general purpose model, it will be able to operate in areas that it didn't have exact training data on. In other words, if I have a clever enough general model, does it matter that I haven't trained it on all of the latest commercial law contracts? Will it be able to beat every law AI at the game? And again, that's a question which we're still discovering the answer to in the field. While those questions are unanswered, it's very, very hard to make a high conviction bet one way or another. And so what we've been doing is instead just thinking about the different scenarios that will emerge and where you might want exposure. We've looked at everything from the hardware designers at the one end, to the model labs in the middle, to the data providers, the model training outsources, the distributors, and even the end applications. But yeah, it's all happening still in this vein of curiosity, this vein of learning. We're a long way yet from being able to sit down and say, as a team, we've got one really clear, high conviction thesis on who's going to be the winner of AI. And to be honest, at some of the prices that we see in the space, unless you have that level of high conviction bet, it is very, very hard to, in good faith, make an investment today.

GV: Great, thanks, Rob. Very interesting. I think next up, we can talk a little bit, Peter, earlier you talked about some fund activity during the course of the reporting year. Since then, there's also been some more activity and maybe we can elaborate a little bit on this. There was, of course, the listed sale of Airbnb. So Peter, I'm going to ask you to first come in on that one. And then Rob, after that, maybe you can elaborate on the recent new investment in Revolut. The fund obviously holds a number of the largest companies in the world and Revolut is the latest example of that. But firstly, Peter, maybe just on Airbnb and what the thinking was there.

PS: Yeah, sure. So Airbnb was a company that we invested in for Schiehallion and relatively early on in the fund's life. We actually bought the shares through a secondary transaction, which was very unusual at the time for Airbnb. The company didn't really facilitate secondary transactions, but because we'd owned the shares in Scottish Mortgage historically and knew the company well, they actually facilitated a secondary purchase for us. It's quite an interesting one because of how the returns sort of split across public and private markets. So overall, the investment in Airbnb returned about 135 per cent over the course of the investment. Interestingly, about 15 per cent of that came before the company went public, or the return was about 15 per cent. before IPO and it was about 105 per cent post IPO. So actually most of the returns that we saw from Airbnb came through the ownership of the company after it went public. Airbnb remains a good business, but the question for us was really one of upside from here and position size. We didn't feel that the probability of a continued five times return from here warranted a continued holding in the business. And it was a subscale position of roughly around 1 per cent of the fund. And so we decided that we would use it as a source of funds, and we sold the position to recycle into new businesses. So not a critique of Airbnb in any way, shape or form, really just a question of upside from here and the opportunity cost of continuing to own the shares versus recycling those funds into the new opportunities that we are seeing.

GV: Thanks, Peter. And then I'll bring Rob in there on the new investment in Revolut.

RN: Yes. Gosh, what to say about Revolut? There's a bunch of things. I'll try and be brief. So Revolut was a business that we met a few times over the course of its growth. And we finally made the decision to invest at the end of last year. Why did it take us so long? I think is one fair question. And it actually says a lot about the rate at which Revolut has iterated its product, has scaled its business, and has matured as an operation. When we sat down with them three years ago, this was a business that was still very heavily driven by crypto. It did not have the regulatory licenses that you'd want to see it have to scale, and had not yet proven out that it could deliver meaningfully better economics than legacy banks achieve. And so in that world, we felt that it was quite a tall order to invest. When we sat down with them last year, we found the business had achieved licenses in the markets where it needed to achieve them. We did deep diligence around the way that it was engaging with stakeholders in its different ecosystems and found a company that had learned some of the hard lessons of trying to blitz scale in financial services. And we also found an economic model that was unlike anything we've seen outside potentially Nubank coming out of Latin America. The thesis here is that having gone through a decade plus of financial services being unbundled from classic legacy banks into individual point solutions, we're now seeing in Revolut, Nubank, and there may be a third globally, a small number of these fintechs emerge as full stack banks able to offer competitive financial service offerings across the board. We're not convinced that is what's happening, but there's a reasonable chance that it is. And if that is what's happening, then we think Revolut could make many times over the initial starting valuation of our investment last year.

I think there's probably a recurring trend there, Gustav, when you look across the portfolio broadly. I'd include ByteDance, I'd include SpaceX, I'd include Stripe, I'd include Databricks. We think it's perfectly possible to invest in high growth, exceptional private companies that are the winners in their fields at enterprise values that are nominally large and still hope to achieve many multiples of capital return over the course of the investment period. Relative valuation matters, but the total enterprise value, if the opportunity is large enough, need not be an obstacle.

GV: Great, thanks for that, Rob. Another question that's come in here is regarding the interest rate environment. So this has shifted materially since the fund was launched. And so the question is, Peter, maybe this can go to you. Do you feel your emphasis on quality and resilience should give the fund an edge? Or should this higher rate for longer environment be concerning for the broader private equity landscape?

PS: I mean, I think as the question highlights, there's kind of two ways to look at this – like one is the sort of what this means for investment returns across the private equity industry, and then the second is actually very specifically how it affects the underlying companies. Maybe taking the first one first. I think it's important to point out very few of our companies have debt. And we don't use leverage in our investment approach. And so that means that a higher interest rate environment doesn't impact the interest burdens on companies in general, nor does it affect the investment returns that we can potentially make because we are not using leverage at the fund level or at the individual investment level. Of course, in leverage buyout, that is not the case where companies are using or investors are using leverage where everything else being equal, the more expensive your gearing, the lower returns you will experience. But I think the way in which we approach it is a little bit more resilient to, or is more resilient to a higher interest rate environment.

There's then the question of the impact on the underlying companies. Now, as I said, most of our companies don't have debt. So there isn't really an impact there. But there is a broader cost of capital question. The way that we think about this is that, and I think this is particularly a lesson from the years of 2020 and 2021, the zero interest rates environment world, is that a capital environment or an interest rate environment that is too low can be as damaging as an interest rate environment that is too high. Really what you want is a sort of an Aristotelian, a kind of Golden Mean in terms of cost of capital. Why is that? Well, if capital is too expensive, the detriment of that is fairly obvious – raising capital and investing becomes prohibitively expensive. But why is too cheap a capital a problem? Well, I think it's because it leads companies to lose focus on capital efficiency. It leads companies to lose focus on returns on capital and returns on equity. And it leads to a profligacy in cost base, which is ultimately detrimental for companies. As we've seen interest rates go up and as we've seen the cost of capital go up, we've actually seen many of our portfolio companies and many of the companies we look at in our pipeline become better businesses because they've had a greater focus on the returns of investments because there is a higher cost of capital and everything else being equal, we think is actually leading to a generation of better companies that will over the long term deliver higher returns on equity.

GV: Great, thanks, Peter. Next up, Rob, this can also go to you. And this is the question of China. Often on the minds of shareholders in the news, we are all well aware of the elevated sort of geopolitical tension that we're seeing there. So maybe the question is, just what are you seeing in China at the moment? And how do you think about the exposure to China within the fund itself?

RN: I think both Peter and I feel quite torn on the question of the level of exposure to China within the fund itself. When we go out to China, when we talk to colleagues there, when we talk to friends on the ground there, we always come away with the sense that it's an economy with an incredible amount of innovation, of disruption, of new wealth creation. It's a space where as global growth investors, we feel we'd be letting our shareholders down by not considering deploying capital into. And in every quarter, there's another couple of Chinese names that are getting discussed by the team and looked into by the team for that reason. On the flip side, we have always believed that exposure to any country is a function of a whole range of variables, but risk is very much one of them. And when we look at China, we see expropriation risk as a non-negligible risk – the chance that all of our holdings there might go to zero on a correlated basis. And for that reason, we need to balance that downside risk across a China exposure at the fund level against the incredible quality of the businesses we see on a bottom-up nature there. Today, we have a little over 11 per cent of the fund's assets by fair value invested in China. The majority of that is our ByteDance holding.

It's worth noting that due to China's outperformance, despite the news headlines, that compares to only about 6.5 per cent of the fund's current fair value in terms of initial invested capital into the region. So it's done well for our shareholders so far. At the moment, we feel fairly happy with that level, but this is something that we revisit constantly in discussion with each other, in discussion with Linda and the other members of the board. It's one of the things that we're probably most torn up about, because nowhere else in the world, I think, do we see on the one hand such attractive valuations and such innovative companies, and at the same time, such a clear and stark risk of loss of capital for our shareholders by having too large an exposure to it.

GV: Thanks, Rob. Our time is drawing to a close, but I think there's time for one more. And so Peter, I'd like you to end off and maybe just clarify to us in terms of the broader market environment, are there any specific aspects that make you particularly optimistic on a forward-looking basis from here?

PS: Yeah, I mean, so, I think it's difficult doing our job, and meeting the companies we meet, not to feel inherently optimistic about the opportunity for growth equity, investing. As I mentioned earlier, we looked at 600 private financing rounds last year. And whilst our conversion rate was very low, only about 1 per cent of those are companies we ultimately choose to invest in, often we're finding companies that we think are amazing businesses, but maybe the valuation doesn't quite stack up for us. But there is no shortage of high-quality companies out there, and increasingly we're finding these businesses at really good valuations. And the breadth in terms of industry and geography of where we find these companies I think is really exciting for growth investing. And I say growth investing and not technology investing. I think people sometimes think of us as technology investors, which we're not. We are growth equity investors, and we find these exceptional companies in such a wide range of industries. So that's one comment I would make.

But the second comment I would make, I think, relates back to the comments I was making a few minutes ago on cost of capital. I think that companies growing up today in a slightly more capital-constrained environment are going to be better businesses than the businesses that grew up in a zero interest rate environment, because they will have grown up with slightly greater constraint on what they're able to do, a greater focus on return on invested capital, and that will in aggregate lead to companies that are able to deliver higher returns on equity. We sometimes talk internally about this as through the lens of sort of Darwinian evolution, when in Darwinism you have two things that happen: you have variance in gene pools and then you have the application of selective pressure, and it's that which gives rise to new species. And over the course of the zero-interest rate environment, we saw a lot of variants created. We saw a lot of businesses started within the venture capital ecosystem, which is the sort of the pool that we will then fish in to try to find companies that are able to scale out of that. I think this period we're in now is this period of selective pressure, where businesses that don't have a right to exist fail, but where this slightly higher cost of capital environment is leading to I think a very healthy selective pressure, which is exactly what you want as a growth equity investor. So while some might look at the interest rate and slightly higher interest rate environment as a negative for growth equity investing, I actually view it as a long-term positive because I think you get better businesses on the other side of it.

GV: Thanks, Peter. So certainly a lot to be enthusiastic about going forward. I think that's all we have time for today. I don't see any other questions in the queue. So with that, I'd just like to thank all today's participants for dialling into the webinar. If you have any other subsequent questions that might emerge after the fact, then please do reach out to your relevant Schiehallion client contact, and we'll be happy to address those through that channel. So thank you again for tuning in, and we hope to see you again next time.

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.

Australia 

Baillie Gifford Overseas Limited (ARBN 118 567 178) is registered as a foreign company under the Corporations Act 2001 (Cth) and holds Foreign Australian Financial Services Licence No 528911. This material is provided to you on the basis that you are a “wholesale client” within the meaning of section 761G of the Corporations Act 2001 (Cth) (“Corporations Act”). Please advise Baillie Gifford Overseas Limited immediately if you are not a wholesale client. In no circumstances may this material be made available to a “retail client” within the meaning of section 761G of the Corporations Act. 

This material contains general information only. It does not take into account any person’s objectives, financial situation or needs.