Successful year for Scottish Mortgage

It has been a volatile few years for shareholders in the Scottish Mortgage investment trust, but the recently released annual accounts reveal a more comfortable period of outperformance. Baillie Gifford’s £12bn flagship fund is a real bellwether for growth investors, with the managers scouring the markets for outliers with asymmetric upside potential.

The asymmetry of returns offered by successful companies is supported by recent data measured over the 10-years from 2014. This suggests that 20% of businesses create half of the market return, with 5% of global stocks increasing by a factor of 4.5 times in a 5-year period.¹

Objective and approach

Scottish Mortgage aims to identify, own and support the world’s most exceptional growth companies. The portfolio includes both listed and unlisted businesses, with the goal being to provide long-term funding for the entrepreneurs who are shaping the future of the global economy.²

Managers Tom Slater and Lawrence Burns take a thematic approach to stock selection with the holdings focused on key trends such as: the rise of Artificial Intelligence (AI); the future of advertising and entertainment; the digitalisation of commerce and finance; and the evolution of transport.

The underlying portfolio

This has led them to put together an unusual and highly concentrated portfolio that bears very little resemblance to the benchmark. At the end of April it consisted of 44 publicly listed stocks that accounted for 73.8% of the assets, with a further 51 private companies making up the balance.³

The ten largest holdings include the likes of: the space exploration company, SpaceX; online marketplace MercadoLibre; the well-known tech giants Amazon and Meta; music streamer Spotify; TikTok owner and social media platform ByteDance; as well as the Taiwan Semiconductor Manufacturing Company.⁴

Scottish Mortgage top 10 holdings 

1. Space Exploration Technologies
2. MercadoLibre
3. Amazon
4. Meta Platforms
5. Spotify
6. ByteDance
7. TSMC
8. PDD Holdings
9. Ferrari
10. ASML

Source: Scottish Mortgage Investment Trust factsheet, 30 April 2025.

What are the managers’ latest views?

Slater and Burns attempt to identify outliers, which are stocks with asymmetric upside potential. In the latest accounts they explain that the most notable traits common to these sorts of businesses are that: they are adaptable, unconventional, long-term focused, and address large opportunities.⁵

However, the chastening experience of the last few years has meant that there is also now a significant focus on resilience, which means more than just having a strong balance sheet. It is essential that the companies under consideration must be able to adapt to a changing environment: such as more difficult funding requirements, the adoption of AI or the structural shifts in geopolitics and global trade.

Performance

According to the annual accounts to the end of March, Scottish Mortgage produced an NAV total return of 11.2%, which was comfortably ahead of the 5.5% gain by the FTSE All-World benchmark as measured in Sterling. The outperformance was largely due to the holdings in AI-driven companies and semiconductor demand, as well as operational improvements in the various underlying businesses.

Investors have experienced a volatile few years, but the long-term record remains impressive. Over the decade to the end of April, the NAV total return of 318.1% was well in excess of the 176.5% produced by the benchmark.⁶ 

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Before investing, please read the relevant key information document which contains important information about each investment trust. The shares in Scottish Mortgage investment trust are listed on the London Stock Exchange and their price is affected by supply and demand. Investment trusts can gain additional exposure to the market, known as gearing, potentially increasing volatility. 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. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. 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.