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Growth disrupted: Crash in US tech and high-flying global growth stocks takes it toll on Scottish Mortgage as shares sink 50% from their peak
Scottish Mortgage, one of the most popular investment trusts on the London Stock Market, has reported a double-digit annual decline in value triggered by a bloodbath in US tech stocks.
Scottish Mortgage, reported the value of its assets had tumbled by 13 per cent in the year to the end of March, massively underperforming its benchmark, the FTSE All-World Index, which logged gains of 12.8 per cent.
But the market decline since that reporting date has seen shares fall further. Scottish mortgage shares are now down 34.2 per cent over the past year and at 769p have fallen almost 50 per cent from their November 2021 peak.
The Edinburgh-based firm counts major US tech giants such as Tesla, Amazon and Nvidia among the largest holdings in its portfolio.
Tesla is one of Scottish Mortgage’s major holdings and has seen its shares recently slump 40%
The investment trust posted a loss for the year of £2.5billion, swinging from a £9.2billion profit a year ago.
Scottish Mortgage’s value boomed during the pandemic, adding to substantial gains in the years ahead of that, attracting a large following to the global trust among UK retail investors, which are estimated to make up 75 per cent of its shareholder base.
But stock prices for the disruptive growth companies it targets have plummeted in recent months, as fears over inflation, rising interest rates and supply chain disruption dented investor confidence in growth.
Big tech names, which also make up major holdings in other UK growth funds and trusts have been hit, with lacklustre results sending the value of firms including Amazon, Netflix and Facebook owner Meta plunging.
Tesla, in particular, has struggled, down 40 per cent this year, although a rollercoaster ride saw it lose rougly that chunk of value between January and March, rebound to almost its previous level in April and then sink again.
The US electric car maker, led by Elon Musk, is a top ten holding for Scottish Mortgage, alongside, Covid vaccine maker Moderna, biotech star Illumina, and Amazon.
Scottish Mortgage shares have fallen by about 50 per cent from their November 2021 peak
Over the longer term Scottish Mortgage has richly rewarded its share holders with big gains
The losses at Scottish Mortgage come as star fund manager James Anderson left the company. The decline in value cost the 113-year fund its position as the UK’s largest investment trust, being replaced by 3i Group.
Shares fell yesterday 2.4 per cent, or 18.4p, at 760p as investors were also worried about comments made by management, particularly around China, where the company admitted it had become too invested.
Scottish Mortgage also has investments in China e-commerce giant Alibaba and Tencent.
Scottish Mortgage’s lead manager Tom Slater said: ‘Investors in Chinese companies have suffered from president Xi’s regulatory crackdowns in the name of “common prosperity”.’
Nevertheless he also said most firms in the company’s portfolio had delivered ‘exceptional levels of growth over two years’.
Tracy Zhao, at Interactive Investor, said the recent slump in the fund’s share price offered ‘an attractive entry point’ for those willing to go in for the long term.