Scottish Mortgage (SMT) is a London-listed investment trust founded in 1909 and managed by Baillie Gifford almost from inception.
Its large tech exposure resulted in heavy losses in the 2022 shakeout, but it has since bounced back strongly.
The 2022 crash was notably both an equity and bond bear market, and nearly unique in that it was one of the few times a traditional 60/40 balanced portfolio failed as utterly as either/or portfolios.
One of the mathematical features of long-term growth stocks is their high sensitivity to a collapse in bond prices (that is, a surge in yields), much like a long-dated bond does. As bond yields are rebased higher than zero interest levels after the 2022 crash, I feel the risk of demolition from central bank action and/or inflation has significantly subsided. Anyone would feel woozy from that punch, but this is a fund house with a proven long-term process.
Deutsche Numis research notes on results and the recent news of a revaluation of SpaceX (to a $400bn market cap!) provided a chance to review the fund. To recap, managers Tom Slater and Lawrence Burns focus on identifying outliers with high upside optionality.
They highlight common outlier traits: unconventional, long-term focused, adaptable, and addressing large, scalable market opportunities. Almost inevitably, this means that a company such as SMT will have big exposures to infotech and biotech, given the orientation towards long secular themes.
There was also a focus on “resilience”, which means more than just having a strong balance sheet. They emphasise companies with the leadership, culture and flexibility to adapt to change — be it from interest rates, AI adoption or global geopolitics.
The managers stress asymmetric payoffs, illustrated by their significant Nvidia sales. Nvidia is still a big holding, but they believe margins may erode as AI becomes more ubiquitous.
The fund benchmarks itself against the FTSE all-world index, which I have beef with. The fund NAV is significantly more volatile than the index — but in fairness, their active share of a huge 88% deviates significantly from the index — showing this is a genuinely actively managed fund.
Other bragging rights are that not only did they make money from Tesla, but they also remembered to bank a lot of profit from it
Other bragging rights are that not only did they make money from Tesla, but they also remembered to bank a lot of profit from it.
Deutsche Numis notes that the 10% discount is an attractive entry point, with downside protection supported by a commitment to buybacks — about £2bn has been repurchased since March 2024. I’m largely a traditional value investor, but if I’m going to allow someone else to go in to bat for me on the foxy stuff, then I’d rather it was someone who has persistently shown that they’ve got their act together.
Quite apart from the supercool listed counters, the unlisted stocks include SpaceX, ByteDance and Stripe.
I also feel it’s time to revisit Vietnamese funds, especially given how much things have changed since I first covered them. US President Donald Trump announced on July 2 that the US had reached an agreement with Vietnam on tariffs. On paper, it looked more like a drive-by shooting than a trade agreement, but maybe that’s just me.
Anyway, what was telling was that the US stocks most exposed to Vietnamese manufacturing capacity (such as Nike) made some nice bounces after the announcements. The moral of the story: even if we haven’t got a handle on what the clown-in-chief is doing, US fund managers seem to. So that’s all right then ...
Previously, I highlighted VinaCapital Vietnam Opportunity and Vietnam Enterprise (VEIL), which have now analysed the deal’s implications for Vietnam’s economy. The managers maintain the view that Vietnam’s growth in 2025 will be driven by internal factors: increased public infrastructure spend, a recovery of the real estate market and significant government reforms (dubbed Doi Moi 2.0).
VEIL manager Dragon Capital believes that the potential GDP hit from the tariffs is “far less severe” than the initial 1.4%-2% contraction estimated after “liberation day”. Southeast Asian shares remain skewed to financials and real estate, but offer good value.
Lucas is a portfolio manager at Vunani. These views are personal.
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