Half-year results from Scottish Mortgage Trust (SMT) show the £12.5bn Baillie Gifford flagship has recorded its best period of recovery since the 2022 growth crash humbled its shares.
In the six months to 30 September, the net asset value (NAV) of SMT’s investments rose 22.9%, beating the 15.4% gain in the FTSE All-World index with the half year neatly coinciding with a global relief rally that US tariffs would not be quite as bad as first feared.
SMT shareholders received a slightly smaller 20.9% total return as the shares failed to keep up with the portfolio and their discount – or gap to NAV – widened from 9% to 10.5%. The board said it would continue its programme of share buybacks, which has seen it purchase £2.6bn of stock since March 2024, well above the £1bn it initially promised over two years.
Marketing efforts would be expanded to increase understanding of the company’s investments and stimulate demand for the shares in the UK and internationally, it said.
Chris Samuels, who succeeded Justin Dowley as chair in January, said the strong performance, which included an unchanged interim dividend of 1.6p per share, “reflected a growing market recognition that the companies driving fundamental technological and economic transformation have emerged from recent volatility with strengthened competitive positions”.
Gearing, or borrowing, which increased the trust’s investments by 11%, also helped performance, though China’s listed food delivery company Meituan fell 36% and the unlisted Brandtech Group was marked down, detracting 0.6% from returns.
Returns from the portfolio had been broad-based, Samuels said, encompassing not just cutting-edge providers of artificial intelligence (AI), but also consumer digital platforms and companies engaged in the clean energy transition, in the US, Asia and Europe.
US online gaming platform Roblox was the biggest contributor, its shares leaping 128%, ending the period at 1.8% of the portfolio after fund managers Tom Slater and Lawrence Burns made a “significant reduction” and took profits.
TSMC, the leading Taiwanese chip foundry maker; Nvidia, the $5tn AI chip manufacturer; MercadoLibre, the Latin American Amazon; and Cloudflare, a cybersecurity specialist, were the next four biggest performers.
Private, or unquoted, investments, which made up nearly 27% of net assets, dragged on performance by not keeping up with the listed companies in the portfolio. SMT said its largest 10 private equity holdings, accounting for 76% of off-market exposure, gained 9.2%, well behind the listed segment. A further £196m was invested in two new private companies, Anthropic, the $183bn AI developer, and RedNote, a Chinese lifestyle and commerce platform.
Scottish Mortgage currently leads the pack of global investment trusts over one year with a total shareholder return of 24%. Over five years, however, it ranks ninth out of 10 in the listed peer group with a total return of just 4%. This reflects the fact that at £11, up 3.5p today, the shares are still 28% below their £15.28 peak four years ago.
The company acknowledged that six months was too short a time frame to judge its performance, requesting that shareholders align themselves to its long investment horizon and recognise that “returns are not delivered in a straight line”.
Over 10 years Scottish Mortgage is the top performer in the AIC Global sector, returning 331% to shareholders on the back of the bull market in technology shares during the 2020 pandemic that sharply reversed when interest rates and inflation started to rise.
This month the trust’s share price discount has widened again to 12% as markets worry about a correction in highly-valued AI and tech stocks. Among those worried about a speculative bubble are James Anderson, SMT’s former fund manager.
