By Jean-Baptiste Andrieux, Reporter, Trustnet, 05 February 2024:
Investors who bet on Scottish Mortgage Investment Trust 10 years ago have been richly rewarded, quadrupling their cash since 2014.
This phenomenal return has made it the best performing portfolio of the past decade in the IT Global sector – a feat it achieved thanks to a focus on long-term global structural growth across both public and private markets.
Yet, Scottish Mortgage’s outperformance has not been without its bumpy moments. Indeed, newer investors may wonder what all the fuss is about, after performance in recent years has underwhelmed..
In short, higher interest rates are a headwind for Scottish Mortgage, while low interest rates are a tailwind. Therefore, there is a possibility that the trust thrives again if central banks are done with their hiking cycle and start cutting rates..
A strength of this investment trust is that if offers exposure to what managers Tom Slater and Lawrence Burns perceive to be the world’s most exceptional growth companies at a relatively low cost (0.35%).
Matthew Read, senior analyst at QuotedData, said: “The managers achieve this by first looking to identify key drivers of change, and then look to invest in a small number of names that they believe are the best placed to benefit from these structural changes.
“The managers have to be unconstrained to build it, but the result is a portfolio of long-term investments (a 5% turnover per annum implies an average holding period of 20 years) that looks very different to the index (active share of 92%), so you are getting true active management and quite idiosyncratic NAV returns.”
Read more here