The Scottish Mortgage Investment Trust (LSE: SMT) has a fantastic long-term track record, even though the last year has been bumpy.
An investor who put the full annual ISA allowance into this trust every year since the tax-free investment wrapper was launched in 1999 would have a staggering £1,519,568 today.
Long-term winner
This is a superb return on an initial investment of £283,440. Only three other investment trusts have beaten it. Former manager James Anderson, who left in 2022, built a concentrated portfolio of international stocks with massive growth potential.
Yet he also allowed Scottish Mortgage to become heavily skewed towards US tech during the boom. Which explains why it did so poorly last year, when top holdings like electric car maker Tesla crashed.
Scottish Mortgage is down 27.47% over the last 12 months, but as AJ Bell’s figures show, long-term investors are still comfortably ahead.
Today though, the trust has reduced US exposure at just over 50%. Its investments in China (14.5%), Netherlands (8.8%), Sweden (5.4%) Germany (4.7%) and Brazil 3.9%) give it a more international feel.
This is still a concentrated fund with tech and biotechnology to the fore. Top holdings include pharma and biotech specialist Moderna, chip-maker ASML, the aforementioned Tesla, battery maker Northvolt and another Elon Must vehicle SpaceX.
Stock markets have picked up in recent months but Scottish Mortgage hasn’t. It’s down 6.6% over three months and 7% over one month. Investors who jumped in hoping it would make a lightning recovery will be disappointed, so far. It has performed far worse than its investment trust global benchmark in that time.
Last week, Scottish Mortgage manager Tom Slater admitted that 2022 was a “humbling year” for the trust. On top of the inevitable volatility caused by rising interest rates and inflation, the trust had made some “wrong assumptions”, such as failing to recognise the impact of deteriorating Sino-US relationships. It also assumed changes brought forward by Covid would be permanent.
Future may be tougher
Scottish Mortgage is only for investors with a long-term view, which means at least five to 10 years. Given today’s “uncomfortable” situation, growth opportunities in the portfolio will now take time to play out.
Slater said the fund has exposure to areas that enjoyed significant progress over the last year, including electric batteries and nuclear fusion, while SpaceX doubled the number of space rocket launches in 12 months to 60.
I would still like to add Scottish Mortgage to my portfolio, when I have the money, but I wouldn’t invest my entire ISA allowance (to be fair, that’s true of any stock or fund). Nor would I expect it to make me a millionaire.
Its pre-crash performance was driven by rock-bottom interest rates and the US tech boom. We cannot expect a sudden return to that wild and wacky era.
My personal focus today is on buying FTSE 100 dividend stocks for long-term income and growth, but I will keep a close eye on Scottish Mortgage. It’s not done yet.
