Update from the Fund Manager
The Scottish Mortgage Trust is predominantly an investment in equities. The number of equity holdings will typically range between 50 and 100 and the portfolio can be relatively concentrated. An unconstrained approach is adopted and there are no fixed limits set as to geographical, industry and sector exposure.
Below is a commentary from a recent webcast from Lawrence Burns, who is a partner at Baillie Gifford and deputy manager on the Scottish Mortgage Trust. The question was posed regarding his view of the uncertainty over whether growth companies can continue to deliver and if he can provide any comfort.
“Yes, so I think the first thing to say is that periods of stress, periods of difficulty are sort of par for the course. I mentioned Tesla earlier there, I think we first invested in 2013 and there’s been over ten instances since then of 30% drawdowns. Even for very great companies the path isn’t a straight line. Volatility is something that if you want good long-term returns you have to accept that the road’s going to be bumpy there. And I think for us it’s about continuing to focus on what are the outcomes of these companies in five to ten years’ time. Not what are the outcomes of the gyrations of share prices over six months.
If we look at the interest rates, rising rates do reduce the present value of earnings far out into the future and there’s disproportionate impact to growth companies. And I think if you’re having an investment on a short-term period this starts to matter a lot more. And it starts to matter a lot more in part because people are really buying into the market narrative so they’re going to buy and sell based on those expectations around it.
I think if you’re able to invest on a five-to-ten year time horizon, then your perspective becomes quite different. What we’re trying to do for shareholders is identify and own the next big growth companies of tomorrow. Companies that might be able to deliver five, ten, 15, 20 times return. In the past that’s been companies like Amazon, companies like Tesla, I don’t think their success has ever really been predicated on either of the macroeconomic features that you were talking about there.”
If you would like to discuss your investment in SMT further or are looking to increase your international exposure, please call your adviser at Hamilton Hindin Greene to discuss if the Scottish Mortgage Trust is the right option for you.