How does Scottish Mortgage stack up against its rivals?

Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

If we go back further, the story is similar. Allianz Tech transferred to its current management arrangements on 1 May 2007 so we’ll compare the three trusts from that date to treat them on the same basis. This is the chart we get:

Over the past year Scottish Mortgage is again the laggard with a (still impressive) gain of 40.4% in total return terms – in other words, with dividends reinvested. Allianz Tech has risen by 43.3% and Polar Capital Tech by 49.2%.

We should repeat however that Scottish Mortgage is not an avowed technology trust in the way the other two are and that, while it currently has many tech holdings, in the past it has had more exposure to other sectors. This is likely to have influenced returns given that technology has been such a driver of stock market gains in recent years. The other factor to count against Scottish Mortgage is that it has not fully recovered from the pandemic boom and bust in certain briefly popular stocks, such as Zoom and Peloton, in the way that the other two trusts have.

How do the trusts’ holdings compare?

It’s perhaps not surprising that Allianz Tech and Polar Capital Tech have such similar performance records: there is a lot of overlap in their holdings, at least in the top 10. Both trusts have Nvidia as their largest holding (it accounts for 10.9% and 12.5% of the portfolios respectively) and in both cases Microsoft is the second largest holding (9.8% and 8.5% of the portfolios respectively). Broadcom, the semiconductor firm that is now the world’s seventh most valuable company, Apple, Meta, TSMC and the chipmaker AMD also feature in both trusts’ top 10s.

Scottish Mortgage is less similar. Its top 10 does feature Meta in 3rd place (4.5% of the portfolio), TSMC (4.4%) and Nvidia (3.3%), but it also includes Spotify and a couple of less familiar names such as Roblox, a gaming platform, and PDD Holdings, a Chinese conglomerate, as well as SpaceX, Elon Musk’s space rocket company.

SpaceX is significant because it is unlisted – its shares are not traded on any stock exchange. It represents the largest of a considerable contingent of unlisted holdings in the Scottish Mortgage portfolio. The other two trusts, by contrast, stick to listed companies.

This is a major difference between Scottish Mortgage and the other two. While holding unlisted firms can allow a fund to reap more of the rewards as a company grows, especially as more tech companies are choosing to remain private these days, the disadvantages include the lack of an objective valuation for unlisted companies’ shares and reduced disclosure requirements.

The three trusts’ geographical exposure also varies. Allianz Technology has the greatest concentration of assets in American shares at 95.8% of the portfolio, while Polar Capital Technology has 76.2% and Scottish Mortgage just 54.8% of assets in the US.

The three portfolios also have different ‘shapes’: Scottish Mortgage takes smaller bets – its biggest holding accounts for 5.9% of assets against the double-digit percentages for the other two mentioned above – and consequently its top 10 accounts for less of the overall portfolio, at 37% of the total against 57.2% for Allianz and 48.4% for Polar Capital. However, the latter has by far the largest number of holdings: 94, against 49 for Allianz and 58 for Scottish Mortgage. Consequently Polar Capital Technology has taken a large number of relatively small bets.

Who manages the three trusts?

Polar Capital Tech can claim the longest-serving manager – Ben Rogoff has been at the helm since 2006. At Allianz Tech, Mike Seidenberg took over from Silicon Valley veteran Walter Price in 2022; Price had more than 48 years of service at Allianz and its predecessor companies. Scottish Mortgage’s lead manager, Tom Slater, took over from another veteran, James Anderson, in 2015. Slater had been deputy manager since 2009. All three have support from sizable teams.

Which is trading at the biggest discount?

There’s not a lot in it. Scottish Mortgage has the biggest discount at 10.6%, while both the others are at 9.3%.

How do they compare on annual charges?

Scottish Mortgage is the cheapest of the three funds, with an annual ‘ongoing charge’ of 0.31%. Allianz Technology’s charge is 0.64% a year and Polar Capital Tech’s 0.77%. In fairness to the latter two, Scottish Mortgage is far larger, which brings down the percentage as the charge figure is, broadly speaking, the trust’s annual costs divided by its value.

What do trust experts say about the three funds?

Here are some recent comments from investment trust analysts.

Numis said of Scottish Mortgage on Wednesday that it ‘has a unique focus on transformational growth companies and offers exciting exposure to both listed and private businesses’. The broker added: ‘After a difficult few years [following] the rise of interest rates, NAV [net asset value] performance has been excellent over the last year. It also benefits from being the largest, most liquid [trust], whilst the discount is supported by a substantial [share] buyback programme.’

Analysts at Investec wrote of Polar Capital Tech last month: ‘We are in the midst of a seminal moment for Artificial Intelligence (AI). The disruptive potential of the technology is undeniable – it is difficult to imagine a more significant investment opportunity and risk over the next decade. This underpins our conviction that technology stocks should be a cornerstone of a diversified portfolio, and we firmly believe that PCT represents an attractive core holding in this regard, given its AI centric approach and the deep sector expertise of its managers, who we rate highly.’

Numis said of Allianz Tech on 11 August: ‘ATT takes a bottom-up stock picking approach driven by exposure to key themes, with relatively high turnover in a dynamic, fast-moving sector, and we believe that this approach and the flexibility to invest lower down in the market cap spectrum … should serve it well in this market environment.’

• More on Scottish Mortgage
• More on Polar Capital Technology
• More on Allianz Technology

Past performance is not a reliable indicator of future returns

Source: FE, share price returns from 25.9.20 to 25.9.25. Excludes initial charge.