‘We know this has been painful’: Scottish Mortgage board defends strategy after bruising year
Bosses at Bailie Gifford’s Scottish Mortgage Board Investment Trust admitted the last year had been “painful” today after it suffered a 33 per cent plunge in its share price over the 12 months to March.
In its full year report today, the co-managers of the £11.5bn high-growth fund urged its investors to be “disciplined and patient” as it mounted a defence of its strategy, including its holding of private unlisted firms.
The £11.5bn fund had built a reputation for bumper returns prior to last year by punting on high-growth tech companies and “agents of change”, including the likes of Tesla and Amazon. However, it was caught up in the sharp sell-off of tech stocks last year triggered by soaring inflation and rising interest rates.
The fund’s managers today defended its strategy and told shareholders to sit tight.
“Despite recent stock market declines, significant operational progress continues, reflecting the accelerating pace of change throughout the economy. While this progress has not translated into our investment results lately, we need to remain disciplined and patient,” said co-manager Tom Slater.
“We know this has been painful for shareholders, but history shows that periods of poor performance are inevitable.”
The update comes after a boardroom bust-up at the 114 year-old trust in which director Amar Bhide stepped down and fired a series of attacks at its management, claiming it lacked the expertise to be backing unlisted companies.
That row ended with the chairman Fiona McBain also stepping away.
Bhide also criticised the scale of cash allocation to private firms amid fears that the plunge in valuations on public markets is yet to be felt by private firms..
Co-manager Laurence Burns defended the strategy today however, saying that the trust had a “robust valuation process” for private companies in its portfolio and 532 revaluations occurred last year, with 84 per cent of firms revalued five times or more.
“The companies that make up the bulk of our private company exposure are consequently neither small nor early-stage,” he added.