Baillie Gifford's Scottish Mortgage looking long term with 'robust' portfolio after first-half dip

Scottish Mortgage Investment Trust’s underlying investment philosophy has “served us well for many years” and its portfolio is in “robust health”, its lead fund manager has insisted, after a challenging six months.

Scottish Mortgage Investment Trust, known at Smit, has assets totalling almost £13 billion.

The 114-year-old trust, the flagship fund of Edinburgh-based investment firm Baillie Gifford, said its net asset value (NAV) per share, with debt at fair value, had fallen by 2.7 per cent over the half year to the end of September, compared with a rise of 4.3 per cent for the FTSE All-World Index. However, over five years, that NAV has risen by 59.6 per cent versus 49.6 per cent for the benchmark index, and over ten years it has increased by 358.1 per cent, against 189.5 per cent. An interim dividend of 1.6p per share is in line with last year’s payment.

Fund manager Tom Slater said: “We will have periods when we underperform the market, and the six months in question was one. Our objective is to find companies with the potential for exceptional growth and then own them patiently as they deliver. There are times when stock markets reward this approach and times, as now, when they do not.

“We constantly revisit the case for our investments and expect that we will sometimes find our optimism misplaced. However, we do not revisit the underlying investment philosophy that has served us well for many years. The value created by the innovation and dedication of exceptional companies will deliver returns for our fellow shareholders. Our portfolio of growth investments is in robust health,” he added.

Slater said market scepticism around the performance and valuation of the fund’s private assets was “misplaced”. He pointed out that in the region of £74 million had been pumped into six private companies in the half year, with one of the trust’s private holdings, the beauty company Oddity, going public. Scottish Mortgage (known as Smit) has assets totalling almost £13 billion.

“Progress is being made across a broad swathe of technologies,” Slater added. “What makes this so exciting for growth investors is that the number of ways companies can combine these technologies grows exponentially. Accelerated computing drives artificial intelligence, which can be applied to vast datasets in the cloud, enabling breakthroughs in healthcare and so on.”

Baillie Gifford suffers fresh blow after shake-up at flagship Scottish Mortgage fund