Holly Mackay digs under the bonnet at Scottish Mortgage Investment Trust

I have been tracking Scottish Mortgage for over a decade and have held it in my portfolio for ages. It’s a popular investment product which – despite one hell of a volatile ride since the end of the pandemic – still regularly appears amongst the best-selling retail funds on investment platforms. It’s also the product I get asked most questions about by our readers.

This question is a very good summary of what most people are wondering. “I – like many others I’m sure – loaded up at the start of the pandemic and now have a fairly languid fund in the red in my portfolios. It’s ticking back up (largely driven by Nvidia) but I’d be interested to hear your thoughts on the fund and sector more in general.”

To put some numbers on this, the trust is up about 40% over the last year, down about 32% over the last 3 years, and up about 70% over the last 5 years. That is Alton Towers finest! So what’s been going on?

What’s the trust trying to achieve?

Their philosophy has been almost boringly unchanged since I can remember. The purpose of Scottish Mortgage is to identify, own and support the world’s most exceptional companies.

As investment briefs go, that’s pretty broad. By definition the trust will be concentrated, driven by a belief that most stock market returns will be driven by a small number of winners. It’s an optimistic ‘blue sky’ approach, which sees that upside is unlimited whilst the downside is capped. This is not about wealth preservation, or finding income, or backing the biggest guys today. This is an unapologetic quest for growth.

From three massive headwinds…