SCOTLAND’s most successful fund manager of recent years is facing big challenges but is likely to be vindicated for maintaining faith in the potential for firms such as Amazon and Tesla to power huge changes in the global economy.
However, some may fear that its decision to maintain a bold bet on China which paid off in the past may pose complications for the firm.
Blue-blooded Baillie Gifford has shot to prominence in the fund management industry in the last 10 years or so after taking stakes in firms that harnessed advances in technology to drive the development of new industries ranging from ecommerce to electric vehicles.
The growth of firms such as Facebook helped drive an increase in the value of the flagship Scottish Mortgage Investment Trust that Baillie Gifford manages from around £2 billion in March 2012 to £17bn in March 2021.
The trust also benefited from the success of the company’s efforts to gain significant exposure to the rapid growth of China through investment in the likes of the Tencent internet and technology conglomerate.
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The trust has used Baillie Gifford’s global investment network to find opportunities to invest in companies whose shares are not listed on public exchanges.
After enjoying a run of stellar performances, the trust has faced big challenges in the last two financial years amid big changes in market conditions.
The total value of shareholder funds fell to £11.5bn in the year to March 31, from £14.8bn.
The global economic outlook has darkened amid the fallout from Russia’s war on Ukraine and moves by central banks around the world to hike interest rates in response to surging inflation.
There has been a sell-off in technology stocks as the breakneck growth seen in markets such as streaming during the pandemic has slowed since lockdowns ended.
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Value investors such as the team that ran the Scottish Investment Trust before it surrendered its independence in 2022 may have been tempted to say, ‘I told you so’.
However, even after the fall in its net asset value seen in the last two years, Scottish Mortgage Trust is showing huge gains on a 10-year view. The net asset value attributable to each share has increased by 431 per cent over that period. By contrast the benchmark index against which its performance is measured, the FTSE All-World, is up 181%.
With the pace of change in the global economy only set to increase as artificial intelligence powers a new industrial revolution the trust can expect to see the value of firms it has backed in sectors such as healthcare and digital growing again in coming years.
The outlook for China stocks, however, is clouded by uncertainty with geopolitical tensions on the increase.
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