By Dave Baxter, Investors Chronicle, March 22, 2023:
The Scottish Mortgage Investment Trust (SMT) has lurched into further difficulties, with its chair Fiona McBain stepping down in the wake of a boardroom spat over governance and monitoring of the trust’s sizeable exposure to private companies.
The Baillie Gifford trust announced on 21 March that McBain would step back at the conclusion of its 2023 annual general meeting, with director Paola Subacchi also retiring from her role.
While Scottish Mortgage put the changes down to “succession planning”, the announcement follows on from Amar Bhidé, another director, telling the Financial Times he had clashed with McBain over the process to appoint two new board members just a few days earlier.
Bhidé, who has now left the board, also questioned whether the trust had the capabilities and governance to monitor its illiquid investments. “In my opinion they do not have the capabilities and governance clout to be able to monitor the illiquid investments on which there is little audited information in the public sphere,” he said.
Unquoted companies have played an increasingly significant role in the portfolio over time and made up 29.9 per cent of assets at the end of February, with such holdings partly making up a bigger proportion of the fund because of prices tumbling on the listed tech and healthcare stocks Scottish Mortgage is known for backing.
With the trust’s unquoted exposure capped at 30 per cent at the time of investment, James Carthew, QuotedData’s head of investment company research, worries that the trust would be unable to participate in further fundraising from its private holdings.
“We have suggested that this be lifted to 50 per cent but with a stated ambition to keep the exposure to around 30 per cent over the long term,” he said. “This would get around any potential problem with SMT being unable to provide extra finance to these companies over coming months. Without this, Scottish Mortgage could find itself diluted.”
Read more here