Funds that fit with Scottish Mortgage Investment Trust

ONE of the top performing investment trusts over the last decade is Scottish Mortgage, which aims to identify, own and support the world’s most exceptional growth companies. It has an unconstrained approach that enables the managers to invest in both public and private stocks from around the globe, providing funding for the entrepreneurs who are shaping the future of the economy.

Baillie Gifford’s flagship investment trust is unusual as it targets stocks that can transform society and achieve explosive growth and returns in the process. Examples include: Moderna, which is best known for its mRNA Covid vaccine; tech stock NVIDIA that has benefitted from the surge of interest in AI; electric car maker Tesla; as well as Space Explorations Technologies, better known as the spacecraft manufacturer SpaceX.

Scottish Mortgage top 10 holdings

1. ASML 
2. Moderna  
3. NVIDIA 
4. Tesla 
5. MercadoLibre 
6. Amazon 
7. PDD Holdings 
8. Ferrari 
9. Meituan 
10. The Brandtech Group

Source: Fidelity International, as at 31 August 2023

The sharp increase in interest rates over the last year or so has undermined the value of these types of stocks more than any other part of the market, with Scottish Mortgage down substantially from its peak. However, the broker Numis says that its focus on long-term growth drivers sets it apart from almost all other investment approaches and allows it to deliver an attractive return.¹

If you are one of the many people to have money in Scottish Mortgage and are looking to diversify your portfolio with different investment styles, one option to consider would be the BNY Mellon Long-Term Global Equity Fund, which is managed by Edinburgh-based investment house Walter Scott. It is a member of our Select 50 list of handpicked funds and follows a quality approach rather than the out-and-out growth strategy favoured by Baillie Gifford.

Manager Walter Scott targets companies that have strong management teams and competitive positions in the industries they operate in. It looks for businesses that have attractive characteristics such as: reliable cash flows, strong brands and pricing power within their key markets. These sorts of features should allow them to achieve strong year-on-year growth.

Stocks like this tend to be more expensive than others, but Walter Scott takes a long-term view when investing, to allow for the power of compounding to work over time. It is a style that will not always be in favour, yet it is prepared to stick with its approach in the belief that the characteristics it looks for will be rewarded.

Another constituent of the Select 50 with a different investment style to Scottish Mortgage is the Schroder Global Recovery Fund, which has a deep value approach to stock selection. Its main strength is its proven philosophy that has withstood several tough periods.

Value investing was out of favour for much of the last decade, yet the team has shown that they will persevere with their process and that their stakeholders will support them through challenging conditions. Repeated tests suggest that they implement their approach consistently and they are often most comfortable owning what others are selling, a difficult but essential quality when following this type of strategy.

Find out more about the Select 50

Source:

¹ Numis, 17.5.23

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Select 50 is not a personal recommendation to buy or sell a fund. Shares in the Scottish Mortgage Investment Trust are listed on the London Stock Exchange and their price is affected by supply and demand. The trust can gain additional exposure to the market, known as gearing, potentially increasing volatility. Schroder Global Recovery Fund uses financial derivative instruments for investment purposes, which may expose the fund to a higher degree of risk and can cause investments to experience larger than average price fluctuations. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.