Scottish Mortgage chief calls for patience following ‘painful’ year

Scottish Mortgage chief calls for patience following a ‘painful’ year for shareholders

The manager of Scottish Mortgage Investment Trust has defended the fund’s strategy following what he admitted was a ‘painful’ year for shareholders.

Tom Slater, who co-manages the £11.5billion trust, encouraged investors to ‘remain disciplined and patient’ after the value of the firm’s portfolio tumbled by nearly 18 per cent in the year to the end of March.

Scottish Mortgage, which is hugely popular among UK investors, has surged in value over the last decade following a series of well-placed bets in the tech sector.

Its largest holdings include Elon Musk’s electric car firm Tesla as well as Dutch microchip maker ASML and computer graphics group Nvidia.

Don’t panic: Scottish Mortgage Investment Trust manager Tom Slater encouraged investors to ‘remain disciplined and patient’ after the value of the firm’s portfolio tumbled 

Shares in the 114-year-old trust soared during the pandemic as demand for tech shares boomed, with the stock hitting a record high of around 1569p in November 2021. 

But the outbreak of the war in Ukraine, alongside rising interest rates and surging inflation, has hit its portfolio hard as market sentiment soured on the tech industry.

The shares are currently changing hands at around 622p, down 60.4 per cent on the record high reached nearly two years ago.

In the company’s annual results, Slater acknowledged that the ‘accelerating pace of change throughout the economy’ has ‘not translated’ into results for the fund but said such periods were ‘inevitable’.

He added: ‘We need to remain disciplined and patient. Our approach will never be consistently in favour, and we should not deviate from it to avoid short-term headwinds.’ 

But Slater’s co-manager Lawrence Burns warned that some of the fund’s private companies in which it invests could find themselves in trouble as higher interest rates make it harder to raise funding.

‘It is likely that a few of our smaller private company holdings may find themselves casualties of this new environment,’ he said, although he stressed this was only expected to represent ‘a small percentage of the portfolio’s assets’.

Some of Scottish Mortgage’s largest holdings are in private firms, with rocket group SpaceX its fifth largest investment, accounting for 3.7 per cent of the portfolio.

The trust also acknowledged a sharp shift in the stock price, which during the year fell to a 19.6 per cent discount to the value of its assets from just 0.5 per cent previously, and admitted this had been ‘discomfiting for shareholders’.

Scottish Mortgage was also rocked by an extraordinary boardroom bust-up in March that sent shockwaves through the usually sleepy world of investment trusts.

It came after one of the firm’s non-executive directors Amar Bhide launched an attack on its corporate governance. 

He accused the Scottish Mortgage board of ‘a long series of procedural violations’ going back months and said his concerns had been ‘brushed aside’ by management.

He also directly targeted chairman Fiona McBain, alleging her role had been ‘to protect managers from criticism and questioning’. 

It culminated in McBain announcing she would step down from the board after the group’s annual general meeting in June.