(To update) Scottish Mortgage Trust (SMT) is up to a market valuation of £ 10 billion after its stocks rose 23% since late March.
Annual results for the global mutual fund, managed by Baillie Gifford, show today that it hit the milestone Tuesday after its portfolio of internet disruptors and growth stocks saw an impressive stock market rebound from its lows in the coronavirus crash.
The Trust slipped to a valuation of £ 9.8 billion by Thursday’s close according to Morningstar data, but a 2.7% rise in shares to 693.5 pence this morning pushed it back above £ 10 billion, with an estimated discount of 0.7% on the net asset value (NAV).
Scottish Mortgage’s dramatic gain underscores its dominance, making it the UK’s largest mutual fund, significantly larger than the private equity giant 3i (III), formerly the largest fund in the FTSE 100, which has fallen by almost a third in the past three months to £ 7.7 billion.
Part of Scottish Mortgage’s success comes from helping high-growth tech and internet companies before they go public. A little more than 20% of its assets are held in private equity positions, near a 25% limit that should be increased to 30%, it said today.
The results show that the trust’s stocks were up 12.7% for the year ended March 31, slightly less than the underlying NAV growth of 13.7%, although both of them fared much better than the FTSE All-World Index, which fell 6.2%.
The increase increased the total return for shareholders to 435% in the 10 years to the end of March, nearly double the average global mutual fund return of 238% and more than three times the 128% growth in the FTSE benchmark.
Performance was a relatively quiet year for the portfolio, with the sale of Baidu, the Chinese search engine, and Grubhub, the US food company, and the downsizing on Facebook and Alphabet being the main changes made by fund managers James Anderson and Tom. roofers were reported.
Amazon, the US e-tailer and web service giant, has regained its position in the trust’s largest share at 9.3% after briefly exiting Telsa the electric car pioneer in second place with 8.6%.
New investments in the second half of the year include a stake of GBP 56.2 million or 0.6% Free market, a Latin American e-commerce platform; £ 29.5m or 0.3% on the online payment platform Stripes; £ 22.4m or 0.2% in convoy, a marketplace for truckers and freight forwarders; £ 10.7m or 0.1% in Joby Aero, a manufacturer of electric aircraft; and £ 8.5m or 0.1% in Snowflake, a computer data warehousing platform.
American online homeware retailer Wayfair was the only new investment in public markets. SMT had £ 45 million, or 0.5% of the New York listed shares.
Zooming, the now ubiquitous operator of video conferencing, also added 0.9% or GBP 82.4 million to the portfolio of GBP 9.1 billion at the time at the end of March.
Fiona McBain, chairwoman of the trust, said the managers hadn’t made any material changes in response to the Covid-19 pandemic, adding, “They continue to focus on the long-term prospects for the companies they hold but are changing also realizing that these companies must ‘also be able to reach that point.’
Miracle and revolution
Anderson, who took over the portfolio 20 years ago, said it was too early to predict the consequences of Covid-19. In his comment on the annual report, he referred to the recommendation of the forecaster Hans Rosling not to be unduly influenced by unusual and negative events, and said that at some point we would have to return to the “secret, silent miracle of human progress”.
Such a miracle could already have happened, he suggested, when the plummeting price of crude oil signaled the end of the carbon age before the pandemic broke out.
Anderson, who previously predicted the extinction of many longtime FTSE supporters and, with Slater, positioned confidence in what he believes to be long-term winners of energy, communications and health revolutions, said, “We did not predict the current pandemic, even though the The possibility of such a disaster has always existed, as health care and fragility experts have repeatedly observed.
“So we did not suspect that the cause of the collapse of business and stock prices for so many important index constituents would lie in Covid-19. But they were indeed prone to major setbacks, even if we expected it to unfold in over a decade instead of a year. ‘
Investors in the trust have been encouraged to vote ahead of next month’s general meeting on the proposed increase in the cap on unlisted holdings, which, as with all general meetings currently, does not allow personal attendance by shareholders due to social distancing restrictions.
Private equity voting
Catharine Flood, SMT’s corporate strategy director, said it was important to raise the limit to 30%. While the fund managers had never gone beyond 25%, the extra capacity was needed to give them the flexibility to invest when the time was right.
The company also announced a change of board of directors, with non-executive director Professor John Kay retiring after 12 years. The economist and FT columnist is perhaps best remembered when he asked shareholders two years ago to “burn” the new key information documents that Scottish Mortgage was required to release by its regulator, claiming they were misleading.
Kay will be replaced by Professor Amar Bhidé, an expert in economic innovation and entrepreneurship at Tufts University, Massachusetts.
The board recommends increasing the trust’s dividend by 4% to 3.25p, half paid from capital gains and half from capital reserves.