Valeria Martinez, Investment Week, 9 February 2023:
Scottish Mortgage is sitting in an uncomfortable position with its private equity exposure at full capacity, but analysts have pointed out several ways the managers of the £14.5bn investment trust giant could relieve some of the pressure.
As a result of public equity market falls, particularly among the growth stocks that the trust focuses on, the unlisted portion of Scottish Mortgage’s portfolio has risen above its self-imposed limit of 30% for the second time in nine months.
While going over the 30% limit does not represent a breach of the investment policy, as it applies at the time of purchase, it means that there is little scope for the managers to make any follow-on investments or invest in new opportunities.
Emma Bird, head of investment companies research at Winterflood, views this as the biggest concern for the trust, particularly as the Baillie Gifford team “prides itself on being a long-term, supportive shareholder”, something it considers it a key advantage in gaining access to private deals.
However, according to QuotedData’s head of investment companies James Carthew, the biggest potential problem would be if Scottish Mortgage was unable to participate in a funding round for one or more of its unlisted holdings, and found itself diluted as a consequence.
“From a perception point of view, it looks bad that the managers allowed the problem to arise in the first place,” he said.
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