This week I am looking at the Scottish Mortgage investment trust, which aims to achieve long-term capital growth through investing in global equities, focussing on the speed of technological advancements and how they can disrupt established business practices.
The trust recently published strong results for the 12 months to 31 March 2017, during which it returned an impressive 40.9% vs the FTSE World benchmark return of 33.1%, placing it in the top 10% for Global funds during that period. The main driver of these positive results was a strong US market and, in particular, outperformance of the technology sector.
The lead manager, James Anderson, has been in charge of the trust since 2000 and has seen his successful strategy lead it into the FTSE100 and become the largest investment trust in the UK. Over this time Mr Anderson has created a concentrated portfolio of around 40-80 holdings, with high weightings in US tech stocks including Amazon and Tesla. In recent years he has also looked to exploit the emergence of China by holding tech stocks such as Tencent and Alibaba.
This trust has been a consistently strong performer, gaining 219% over 5 years against the FTSE World benchmark return of 116%. This has gained it much attention from investors and the fund’s size (now at c£5.6bn) has allowed it to lead the way in reducing fees within the investment trust sector. The trust is clearly an attractive vehicle for investors looking to have diversified exposure to disruptive technologies. The fact that it is trading at a modest premium to the underlying value of its assets makes it less attractive from a value perspective, but reflects the returns generated by the manager.