Scottish Mortgage Investment Trust

Scottish Mortgage Investment Trust is a publicly traded UK investment trust whose portfolio is built around global businesses expected to generate strong, above-average returns over the long term. The trust is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index. It is managed by Baillie Gifford & Co Limited, the Edinburgh-based investment management partnership that originated the trust. The trust began in 1909 during the aftermath of the Panic of 1907. Credit was difficult to obtain, while the expanding motorcar industry was increasing demand for rubber and tyres. Baillie and Gifford identified an opportunity to lend against rubber estates in Southeast Asia and established The Straits Mortgage and Trust Company Limited for that purpose. The anticipated specialist lending market developed differently from expectations. As the credit crisis eased, rubber planters required less financing, and the trust's original business model became less compelling. In 1913, the board broadened the remit to include bonds and equities from markets around the world and changed the name to The Scottish Mortgage and Trust Company Limited. The change transformed the organisation from a specialist lender into a conventional international investment trust. Early holdings included oil and railway companies as well as government loans connected with Argentina, India, China and the Ottoman Empire. From its earliest decades, overseas investing was central to the trust's identity, with North America becoming particularly important. The portfolio changed in response to economic and political conditions. During the 1930s, European holdings were reduced as political tensions worsened and proceeds were directed toward North American securities. By 1940, about 22 percent of the portfolio was invested in US companies, although wartime British controls subsequently required the sale and repatriation of American securities owned by British citizens. The US allocation fell to 6.6 percent by 1942 and was rebuilt during the post-war period. By 1957, investments in the United States and Canada represented more than 44 percent of assets. Scottish Mortgage also participated early in the opening of Japan's investment market to foreign investors during the 1960s. In the 1970s, the trust reduced its relative exposure to UK equities and bonds, reflecting both the poor performance of the UK market and a deliberate preference for overseas opportunities. This international orientation remains a defining characteristic. In the modern era, the trust describes its philosophy as investing in progress. It seeks companies and entrepreneurs that are building or benefiting from long-term changes in the economy, rather than limiting the portfolio to a particular country or industry. Its holdings have included listed technology, consumer, healthcare and industrial businesses, together with selected private companies. The trust can allocate up to 30 percent of its value, measured at the time of investment, to private companies. Examples cited in reference material include SpaceX and ByteDance. Scottish Mortgage reached its centenary in 2009. Its investment interests continued to extend across developed and emerging markets, including China and Brazil. Reference material reported total net assets of approximately £14.6 billion as of 20 August 2020 and approximately £19.5 billion as of 30 September 2021. These figures are historical and should not be treated as current assets under management. Dividend continuity is another notable feature of the trust's history. It has reduced its dividend only once, in 1933, after the Depression severely affected its portfolio. In other years it maintained or increased the dividend, including during the two World Wars. The trust's long history therefore combines a global mandate, a willingness to invest through major economic disruptions and a growth-oriented approach managed by Baillie Gifford.

Scottish Mortgage Investment Trust originated in Edinburgh in 1909, when Colonel Augustus Baillie and Carlyle Gifford established The Straits Mortgage and Trust Company Limited. The enterprise was created during a period when credit markets remained constrained after the Panic of 1907. At the same time, the growing popularity of motorcars, including the Ford Model T, was stimulating demand for rubber. The founders intended to provide secured loans to rubber planters in Southeast Asia, using rubber estates as collateral. The original lending opportunity did not develop as expected. Credit conditions improved, and the planters no longer needed financing on the scale anticipated. Within several years, the trust therefore moved away from its specialist mortgage purpose. In 1913, its investment remit was expanded to encompass worldwide bond and equity markets, and its name became The Scottish Mortgage and Trust Company Limited. This was the decisive transition from a rubber-finance vehicle to an international investment trust. The early portfolio reflected the industrial and imperial economy of the period. It included oil and railway companies and loans to governments associated with Argentina, India, China and the Imperial Ottoman state. North American investments were present from the beginning and became increasingly significant. During the 1930s, the trust sold European investments as political conditions deteriorated and redirected capital toward North America. By 1940, US securities accounted for approximately 22 percent of the portfolio. The Second World War interrupted that development. The British government required British owners to sell and repatriate American securities, and Scottish Mortgage's US exposure declined to approximately 6.6 percent by 1942. The allocation was rebuilt after the war as international equity markets recovered. By 1957, more than 44 percent of the trust's assets were invested in the United States and Canada, demonstrating the board's long-standing willingness to place substantial capital outside the United Kingdom. During the 1960s, Scottish Mortgage was among the investors to take advantage of the relaxation of restrictions on foreign investment in Japan. The decision was financially successful according to the reference history, although it occurred while memories of the war remained politically and socially sensitive. In the early 1970s, UK equities and bonds represented about 63 percent of the trust in 1972 but roughly 45 percent two years later. The reduction reflected both the relative fall in UK markets and a deliberate strategic preference for overseas opportunities. The trust celebrated its hundredth anniversary in 2009. Its later portfolio continued to span the world, including rapidly developing economies such as China and Brazil. The modern investment philosophy is expressed as investing in progress: identifying companies and entrepreneurs that may shape future economic activity and can deliver strong returns over extended periods. The portfolio may contain both publicly traded companies and private businesses, with private-company exposure capped at 30 percent of the trust's value at the time of investment. The trust's dividend record is unusually persistent. It cut its dividend once, in 1933, following the damage caused by the Great Depression. Outside that year, the dividend was maintained or increased, including through both World Wars. Historical reference material reported total net assets of approximately £14.6 billion on 20 August 2020 and approximately £19.5 billion on 30 September 2021. Scottish Mortgage is managed by Baillie Gifford & Co Limited, remains listed on the London Stock Exchange and is included in the FTSE 100 Index.

• 2009

  Centenary year

  [1]Scottish Mortgage Investment Trusten.wikipedia.org

  Scottish Mortgage marks 100 years since its establishment.

• 1960

  The trust invests in Japan after market restrictions ease

  [1]Scottish Mortgage Investment Trusten.wikipedia.org

  Scottish Mortgage is among the early investors taking advantage of the opening of Japan's market to foreign capital.

• 1957

  North American exposure exceeds 44 percent

  [1]Scottish Mortgage Investment Trusten.wikipedia.org

  The post-war equity boom helps rebuild the trust's US and Canadian holdings to more than 44 percent of assets.

• 1942

  Wartime controls reduce American exposure

  [1]Scottish Mortgage Investment Trusten.wikipedia.org

  British requirements to sell and repatriate American securities reduce the US allocation to approximately 6.6 percent.

• 1940

  US holdings reach approximately 22 percent

  [1]Scottish Mortgage Investment Trusten.wikipedia.org

  North American investments become a major part of the portfolio after European assets are reduced amid worsening political conditions.

• 1913

  The remit becomes a global investment mandate

  [1]Scottish Mortgage Investment Trusten.wikipedia.org

  The trust expands into worldwide bonds and equities and changes its name to The Scottish Mortgage and Trust Company Limited.

• 1909

  The Straits Mortgage and Trust Company is established

  [1]Scottish Mortgage Investment Trusten.wikipedia.org

  Colonel Augustus Baillie and Carlyle Gifford establish a trust intended to finance Southeast Asian rubber planters against their estates.

A concentrated, global, long-term growth investment trust combining listed-company investments with a permitted allocation to private businesses. Its identity is associated with investing in progress, entrepreneurial companies and structural changes in the world economy.

• Listed investment trust · 1909

  Scottish Mortgage Investment Trust shares

  The trust's publicly traded shares provide investors with exposure to a globally managed portfolio of companies. The portfolio is oriented toward long-term growth and may include both listed securities and private-company investments. The shares trade on the London Stock Exchange under the ticker SMT.L.

• Private-market portfolio allocation

  Private-company investment allocation

  Scottish Mortgage can invest in private businesses alongside its public-market holdings. The stated limit is up to 30 percent of the trust's value, measured at the time of investment. Reference material cites SpaceX and ByteDance as examples of private companies included in the portfolio.

• 2023

  Maintain a material private-company allocationStrategy

  Background

  The trust's progress-oriented philosophy extends beyond listed markets to privately held companies with potentially significant long-term growth.

  Action taken

  The trust continued to use its authority to invest up to 30 percent of value at the time of investment in private companies, with SpaceX and ByteDance cited as holdings.

  Aftermath

  The portfolio retained a hybrid public- and private-market structure.

  Source

• 1974

  Reduce relative UK exposureStrategy

  Background

  UK markets had performed poorly, and the board expressed greater confidence in overseas investment prospects.

  Action taken

  The trust reduced the proportion allocated to UK equities and bonds from approximately 63 percent in 1972 to about 45 percent two years later.

  Aftermath

  The change reinforced the trust's long-standing international orientation.

  Source

• 1960

  Enter Japan as foreign-investment restrictions are relaxedStrategy

  Background

  Japan's emerging market became more accessible to overseas investors during the 1960s.

  Action taken

  Scottish Mortgage invested at an early stage in Japanese companies.

  Aftermath

  The reference history describes the decision as financially sound, although it was controversial because wartime memories remained recent.

  Source

• 1930

  Increase North American exposure during European political deteriorationStrategy

  Background

  The political situation in Europe worsened during the 1930s, affecting the trust's assessment of European investments.

  Action taken

  European holdings were sold and proceeds were redirected substantially toward North American securities.

  Aftermath

  US investments represented approximately 22 percent of the portfolio by 1940, before wartime restrictions forced a later reduction.

  Source

• 1913

  Move from specialist rubber finance to international investmentStrategy

  Background

  The credit crisis had eased and rubber planters no longer required the level of secured financing originally expected.

  Action taken

  The board broadened the remit to global bonds and equities and renamed the trust The Scottish Mortgage and Trust Company Limited.

  Aftermath

  The organisation developed into a conventional overseas-oriented investment trust rather than remaining a specialist lender.

  Source

1. 1Scottish Mortgage Investment Trusten.wikipedia.org