Scottish Mortgage, a distinguished member of the FTSE 100, stands as a testament to the enduring relevance of investment trusts in the UK stock market. Despite its unassuming name, this trust is far from conventional, strategically investing in high-risk, high-reward enterprises. Among its most notable investments is Elon Musk’s SpaceX, which holds the position of its largest stake. It also includes groundbreaking companies like AI leader Anthropic and the innovative payments platform Stripe.
These investments are primarily acquired while the companies are still private, long before their potential stock market debuts. This strategy allows the trust to capitalize on significant gains that are often realized before the broader market takes notice.
However, potential investors should be aware of the inherent risks, as highlighted in the recent SpaceX float prospectus. Investing in Scottish Mortgage, or trusts of a similar nature, requires careful consideration. It is advisable for private investors to have a diverse portfolio with a cash reserve and other stable assets, alongside a commitment to a long-term investment strategy.
For those who are intrigued by the prospect of supporting cutting-edge technologies, investment trusts present a distinctive opportunity. Their ‘closed-end’ structure allows them to maintain a long-term perspective, free from the pressure to sell in response to fluctuating values—an issue that contributed to the downfall of Neil Woodford’s funds. Unlike many passive funds that are limited by the need to follow an index, investment trusts like Scottish Mortgage have the flexibility to pursue innovative ventures.
But if you are the kind of person who relishes the chance to bet on revolutionary technology of the future, investment trusts offer a unique opportunity.
Because of their ‘closed-end’ structure they can take a patient view: they are not forced to sell if values fall, unlike the ill-starred Neil Woodford with his collapsed funds. They are not constrained by the requirement to track an index, unlike many ‘passive’ funds.
technology shift: Scottish Mortgage has said its holding in Space X has brought huge returns for investors
As the managers of Scottish Mortgage put it: a long-term philosophy means they can be willing to look foolish in the short run.
They believe that, as Trump’s tariffs and the closure of the Strait of Hormuz demonstrate, the old order is being dismantled as a new global, and extra-terrestrial, economy is being constructed.
Their contention is that, while there will certainly be losers, the biggest risk as an investor is to sit on the sidelines and miss out on all the potential growth.
For those who find Scottish Mortgage too exciting, there are plenty of other, more pedestrian investment trusts.
Even better, investment trust charges tend to be low. There are very few ways modest investors, anywhere in the world, can gain access to exciting and diversified assets in easily traded funds, at low-cost.
The sector is an undersung part of the London market: it has taken the predatory attentions of an American corporate raider, Boaz Weinstein of Saba, to put it in the spotlight. It’s too late for some of his targets, but not too late to start appreciating investment trusts.
Not so slick
Albert Manifold has been a keen apiarist since childhood – but still got on the wrong side of BP’s Queen Bees, foremost among them new boss Meg O’Neill.
He is hitting back hard against the characterisation as ‘shouty’ and at reports of bullying. There must be a risk of a lawsuit, with the prospect of further unedifying publicity for the oil giant.
Whatever the rights and wrongs, being chairman of BP requires high-level diplomatic skills, to be deployed with the likes of Vladimir Putin, Donald Trump and Middle Eastern potentates. A row with one’s own colleagues is therefore not ideal.
Who might be a good replacement?
Tony Blair, who was on the radio yesterday opining about the Labour leadership, would be a left-field candidate – pun intended.
He has the connections, the suavity and a precedent in his former adviser Anji Hunter, who went on to be a top spin doctor at BP.
Only kidding! But the latest boardroom drama has led some to speculate that BP, like Britain, is becoming ungovernable.
Whoever takes over as chairman will have a less daunting task than that faced by the next Prime Minister, but perhaps not by much.
Doesn’t add up
Speaking of former prime ministers, Rishi Sunak is right to champion financial literacy. Understanding compound returns, inflation and portfolio diversification – the areas he advocates – are a start.
People are now expected to deal with complex personal finances, particularly stock market-linked workplace pensions. Social media abounds with ‘fin-fluencers’ dispensing ‘advice’ – much of it dubious.
But nine out of ten of us do not have a professional financial adviser, partly because it is perceived as expensive.
There is no obvious ideal solution. But anyone wanting to improve their understanding, avoid rip-offs and get richer could start by reading my excellent colleagues on the personal finance and money pages.
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