After SpaceX exploded onto the public markets earlier this year, it paved the way for other blockbuster IPOs. Anthropic looks likely to be next, coming to market with a valuation of over $1 trillion. Stripe, Databricks, OpenAI and others are all waiting in the wings. For the investment trusts that have backed them, it is a vindication of their shift to this part of the market.
The trusts that have exposure to these companies include a number of the Baillie Gifford trusts – Scottish Mortgage, the US Growth Trust, and Schiehallion – plus RIT Capital Partners and specialist trust Shaires. Most say it has been an organic decision, driven by the evolution of the market.
Vick Seth, CEO at Shaires, says: “Sometimes necessity is the mother of invention. In the early 1990s, companies went public in order to raise capital. While companies could get some modest capital as a private company, if they really wanted to grow, they had to be public. Anything over £250m market cap could be a viable public entity.”
He says two factors have changed. “What is required to be a public entity has increased. Now, companies need to be closer to $2bn to be considered a truly viable public entity. Private capital has also become pretty efficient at pricing itself. Companies can avail themselves of very large pools of private capital that are match-funding their growth trajectories.”
Regulation has been a factor. In 2002, Sarbannes Oxley brought in strict new rules for public companies on compliance and reporting. Areas such as climate reporting have been layered on top. As a result, being public comes with a lot of bells and whistles, whereas remaining private allows companies to operate with more freedom.
This is why it has real appeal for fast-growth companies, and is why, increasingly, more of a company’s growth is taking place in private markets. Whereas Tesla came to market at just seven years old and valued at $1.7bn, SpaceX came to market when it was 24 years old, and valued at over $1 trillion.
Ben James, investment specialist on the Baillie Gifford US Growth Trust, says the median age of a US company at IPO has moved from five years in 1999 to 12 years in 2025. The number of US public companies has more than halved since 1996 – from 8,090 to 4,010 listed domestic US companies. At the same time, he says, the number of VC-backed private companies has increased around 25-fold over the past 25 years. He adds: “Companies are raising more money now and able to enjoy that accelerated hockey stick curve of growth before coming to market.”
Baillie Gifford started to invest in private companies for Scottish Mortgage in 2012. James says: “We realised that in order to access the same universe of high growth companies, we would have to invest in private companies. Alibaba was the first investment.” The US trust launched in 2018 for investors to access the best growth companies irrespective of whether they were public or private.
Access to private companies is more important in higher growth sectors. For example, Seth argues that today, it is the only way to get nuanced access to parts of the AI supercycle: “In the public markets today, you can buy the large companies that give you broad exposure, but there aren’t that many specialists that are public today. If you want to invest in the next 20-year supercycle, the time to invest is now, but the companies are largely private.”
Analysing performance is inevitably more complex for private companies. Investors are reliant on independent valuers employed by the trusts to provide valuations. Nevertheless, for those that have shifted to hold more private companies, it has been a worthwhile endeavour. Baillie Gifford prefers not to release the relative performance of its public and private holdings, believing it’s a false distinction. Nevertheless, it is possible to make a comparison between the US Growth Trust, which does invest in private equity, and the Baillie Gifford American fund, which does not. Baillie Gifford American is up 41.3% over three years[1], while the Baillie Gifford US Growth Trust is up 83.7% in NAV terms (123.6% in share price terms)[2].
The flexibility provided by private ownership also brings considerations for investment trust managers. James says: “Private companies get to choose who goes on their shareholder register. Access and reputation is absolutely vital.” He says that while the fundamental analysis of the companies doesn’t change, they needed to tap into the right networks, building links with venture capital firms and founders. Scottish Mortgage manager Tom Slater moved to the West Coast to build up a network in the ecosystem there. From there, they built a reputation as large, patient shareholders, which led to more opportunities.
Private ownership means the management team and governance of the companies becomes more important. Anthropic and OpenAI have ‘nation state-type influence’, says James, and they have to rely on the leaders doing the right thing. They frame themselves as long term supportive shareholders, which includes regular conversations about the best interests of shareholders and the company.
There are fairly regular liquidity events and an active secondary market, says Seth. Investors are not ‘stuck’ in private companies as they might have been previously. This is important for the ‘flywheel’ of private company investment, with companies growing and becoming a source of liquidity, which allows investors to cash out and reinvest elsewhere. “That flywheel is a pretty big part of the exercise,” he says.
Nevertheless, both Shaires and the US Growth Trust maintain a diverse portfolio to manage the risks. Alongside big names such as Anthropic and Bytedance, Shaires holds Sandbox AQ, a quantum software company spun out of Google, and Colossal Biosciences. Seth characterises these companies as AI beneficiaries, companies that can take the technology and do something transformational with it. The trust also holds Figure AI, which invests in humanoid robotics and Moonshot, the parent of open source AI model Kimi.
The US growth Trust can be up to 50% in private companies but currently sits at 30%. Alongside its high-profile names, it holds Zipline, which specialises in drone delivery. “It started in Africa in Rwanda delivering medicine, blood and vaccines because it was quicker to deliver by air than road. It grew to become the largest autonomous drone delivery in the world and is now moving into groceries,” says James. Psi Quantum is another holding “the most commercially progressed quantum computing company in the world,” he adds. Private company holdings are a reflection of the evolution of the investment ecosystem. It has become a necessity to access certain types of high growth company and has required a shift from investment managers. It brings governance and valuation complexities that trust managers need to manage effectively, but for the most part, the returns have vindicated private company inclusion.
[1] https://www.trustnet.com/factsheets/O/BQ69/baillie-gifford-american-b-acc
[2] https://www.trustnet.com/factsheets/T/OR5H/baillie-gifford-us-growth-trust-plc-ord-gbp001
