ADDITIONAL INVESTMENT: Scottish mortgage offers out of this world returns


In 1909, Louis Bleriot piloted the first flight across the English Channel, making history – and winning a prize of £ 1,000 from this newspaper. In the same year, the Straits Mortgage and Trust was created to finance the Malaysian rubber industry.

Today, this investment trust, now known as Scottish Mortgage, is the largest and one of the most successful.

His remarkable performance amidst the turbulence of pandemic action prompted people to ask: How did this retro-sounding trust, part of the Baillie Gifford group, become an 11.5 billion FTSE 100 member? pounds and how to bet on all types of 21st century Technology?

Scottish Mortgage has a significant stake in Tesla, Elon Musk's electric car company, and Musk's other SpaceX company, which has just successfully launched a manned space flight

Scottish Mortgage has a significant stake in Tesla, Elon Musk’s electric car company, and Musk’s other SpaceX company, which has just successfully launched a manned space flight

Since March, the trust’s shares have gone from 470p to 770p, propelled by the belief that the Covid-19 pandemic will accelerate the domination of Facebook, Google-owned Alphabet, and Amazon – which is the second largest portfolio in the portfolio. .

The largest stake in the trust is a stake in Tesla, Elon Musk’s electric car business. Musk’s other activity – unlisted space exploration technologies (SpaceX) in which Scottish Mortgage also holds shares – has just successfully launched a manned space flight.

Based on the principle that we would all like to move faster closer to home, Scottish Mortgage also supports Joby Aviation and Lilium, which develop flying cars.

China is another major goal of the trust that has stakes in tech giants Alibaba and Tencent – which are publicly traded, as well as in unlisted conglomerates like Ant Financial, and Byte Dance, owner of Tik Tok, the video application for routine dance fans lock.

James Anderson and Tom Slater, the managers of Scottish Mortgage, believe that the digital switchover in almost everything from transport to textile manufacturing is inevitable. But their stock selection is based on the qualities of the humans who run these businesses.

Slater explains: “We like to provide long-term support to ambitious and adaptable businesses, led by founders whose wealth is invested in the business, rather than those managed by leaders whose compensation is based on short-term goals. . “

Anderson and Slater emphasize that companies have “a certain degree of resourcefulness and resilience”. As a result, the duo refused to respond to the dismay of Covid-19.

Slater was surprised to see other managers, without medical training, making decisions based on what they perceived to be the likely course of the pandemic, even when the epidemiologists disagreed.

It is “totally absurd,” he argues, to pretend that earning money depends on taking the maximum risk.

The philosophy is that only a few companies with talent and leadership will reach the top and that those that take into account the interests of all stakeholders – employees, customers and society as a whole as well as investors – have greater potential for success. .

The complacent leaders would run out of Anderson and Slater, and they themselves take care not to feel comfortable.

At the annual meeting next Thursday, they will ask for their consent to raise the limit on unlisted assets in the trust, currently 20%, from 25% to 30%.

This could sound the alarm, given the role of unlisted holdings – which may be more difficult to value and trade – played in the fall of Neil Woodford.

Scottish Mortgage says its unlisted assets are subject to regular independent valuation and that the winners should make a successful jump in the stock market.

This gives individuals – the bulk of the trust’s investors – a chance to share in rewards generally reserved for private equity owners.

The management fee is modest 0.36%, a factor that encouraged me to become a long-term holder of the fund.

Darius McDermott of Fund Caliber, however, says that Anderson and Slater are the people to follow if you want to bet on the disruption.

Anyone who has locked out realizes that the future surely belongs to Amazon and the rest, but is less sure of flying cars, can gain exposure to American technology through funds like Natixis Loomis Sayles US Equity Leaders and Morgan Stanley US Growth.

But flying cars are in the spirit of that earlier innovative era, when trust was founded over a century ago.

Popular Actions – Royal Mail

former boss of Rico Back, Royal Mail was struggling with volumes of letters in free fall and the need to shift its activities more to packages.

This was complicated by his strained relationships with the highly unionized workforce, which strongly opposed the changes the German executive was trying to make.

But after Back was posted last month, there could be a reset of relations under executive chairman Keith Williams.

The former head of British Airways is a labor dispute veteran, credited with defusing a huge row with cabin crew in 2011.

But restoring relationships with the Communications Workers Union will be for Williams at the moment, as overhauling Royal Mail operations in the modern era remains a formidable challenge.

Activity in the UK has lagged recently, not achieving the productivity gains expected by management.

Back often says, to amortize each drop of 1% in letter revenue, a 2% increase in package revenue is necessary.

But before Thursday’s annual results, Credit Suisse analysts said they expect letter revenues to decline more than expected – so Royal Mail could once again take one step but two steps forward. back.

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