THE manager of the venerable Scottish Mortgage Investment Trust has defended its investment strategy after a turbulent period in which the company faced economic headwinds and boardroom upheaval.

The Trust, which is managed by Edinburgh-based Baillie Gifford, saw its net asset fall by more than £3 billion in the year to March 31, to £11.5bn, from £14.8bn at the end of the preceding year.

The fall in net asset value was the second in successive years for the trust. The downturn came after an eight-year period in which the trust achieved dramatic growth amid Baillie Gifford’s move to focus investment on firms in sectors such as technology and ecommerce.

Baillie Gifford appeared faster than many rivals to recognise the potential scale of the growth that was in store in those sectors. It also moved relatively early to invest in firms in China, including by backing firms whose shares were not listed on public markets.

The 114-year old Scottish Mortgage Investment Trust has faced challenges recently amid the downturn in the technology sector that followed moves by central banks to raise interest rates to try to cool inflation.  The slowdown in China triggered by strict anti-Covid 19 measures made things worse.

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The trust’s share price total return was -33.5 per cent in the year to March 31. The discount between the share price and the net asset value per share averaged 11.8% in the 12 months to April according to the latest performance report on the trust’s website.

“We recognise that - notwithstanding the macro-economic headwinds - performance in recent years has been disappointing,” said chair Fiona McBain, in yesterday’s annual results announcement.

In March the trust said Ms McBain would step down following the annual general meeting set for June 27.

The company parted company with non-executive director Amar Bhidé the same month.

Ms McBain said yesterday: “Professor Amar Bhidé left the Board in March following a fundamental difference in view on the ongoing suitability of the Company's investment policy as it relates to the Company's ability to invest in companies not listed on a public market …, and on whether the Board should maintain its stance on managing the discount/premium.”

She added: “The Board does not currently intend to change its stance or to recommend to shareholders any proposed changes to the Company's investment policy.”

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The latest results cover a year in which Tom Slater took over from long-term trust manager James Anderson. Mr Anderson left Baillie Gifford in April.

This month it was announced that Mr Anderson will invest in firms with innovation potential for the Lingotto Investment Management business owned ultimately by the Agnelli family, of Fiat motor company fame.

In Scottish Mortgage Investment Trust’s results announcement, Mr Slater noted geopolitical tension had increased and monetary tightening moves by central banks investors had fuelled economic uncertainty.

He insisted: “It is by embracing discomfort that we can entertain the possibility of outsized returns from exceptional companies.”

Highlighting advances in fields such as mRna-based medicines and artificial intelligence, Mr Slater added: “The sharp increase in interest rates and associated collapse in the supply of capital has led to a fearful mood in financial markets. This negative disposition ignores the exciting progress in several key technologies and companies.”

The trust’s biggest holding is in Moderna, which Mr Slater said had shown mRNA technology can be used to create effective personalised cancer vaccines.

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The trust achieved a share price total return of 347% in the 10 years to March 31, against 180.8% for the FTSE All-World index. The trust’s NAV per share fell 17.8% in the year to March 31. It increased by 431.5% in the 10 years to March 31.

Directors are recommending the trust’s full year dividend be increased by 14.2% to 4.10p per share, from 3.59p per share last time.

Management fees fell to £36m in the latest year, from £51.6m.  

Ms McBain is expected to be succeeded as chair by senior independent director Justin Dowley.