Scottish Mortgage NAV tumbles 19%

TIM SHARP

Published on 10 Jan 2009

Once top performing Scottish Mortgage Investment Trust has lost almost a fifth of its value in just three months after manager James Anderson's highly-concentrated, leveraged stance left him exposed in the post-Lehman Brothers sell-off.

In an update to the market yesterday the company, which is managed by Edinburgh-based Baillie Gifford, revealed its net asset value, the worth of its underlying investments, fell 18.8% over the three months to December 31 while its shares dropped 19.8%.

In comparison the FTSE All-World index declined by just 3.7% in sterling terms.

Scottish Mortgage's shares have lost further ground since the New Year. Yesterday they closed another 2.2% down at 360p, 49% off the 52-week high of 710p they reached in May last year.

The company, which typically has fewer than 100 investments, was also forced to repay some £235m of debt to reduce the hit that the portfolio was taking from rocky markets and ensure it remained within banking covenants.

The trust, which has a market cap of around £1bn, still retains gearing of some 20% of trust assets.

Baillie Gifford yesterday said the trust took the brunt of the market sell-off after Lehman Brothers' collapse in September because it was positioned in riskier growth-orientated companies.

Robert O'Riordan, investment trust liaison manager at Baillie Gifford, said: "The last quarter of last year saw conditions in markets that were unprecedented for at least two generations and Scottish Mortgage was very much positioned towards a growth bias especially from overseas markets.

"Everything has pretty well fallen in value everywhere but particularly hard hit in the fear and panic have been overseas markets and in our view a lot of good shares have been oversold."

He maintained that the trust would not adjust its investment strategy.