Scottish Mortgage (LSE: SMT) shares performed well in 2024. After starting the year at 808p, they rose to 955p – a gain of 18% (they also paid a small dividend).
Now, as an investor in Scottish Mortgage, I’m quite happy with that performance. However, several other growth funds I’m invested in generated higher returns for me.
Blue Whale Growth Fund
One was the Blue Whale Growth Fund, which is managed by Stephen Yiu. For the year, it returned a very impressive 28.2%.
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People often compare this fund to the Scottish Mortgage Investment Trust. That’s because both products have a focus on growth stocks.
But there are some key differences. One is in relation to the number of holdings. Whereas Scottish Mortgage has invested in nearly 100 companies, Blue Whale’s invested in less than 30 businesses. So it’s a ‘high conviction’ fund (ie Yiu has a lot of conviction in his holdings).
Another is that Blue Whale has more of a focus on quality. Whereas Scottish Mortgage has invested in lots of up-and-coming unprofitable businesses, Blue Whale tends to invest in industry leaders with strong competitive advantages and high levels of profitability (eg Visa).
Now, as with Scottish Mortgage, the growth focus here can lead to volatility at times. When tech stocks fell in 2022 as interest rates rose, this fund underperformed.
I’m comfortable with the volatility though. Since I invested in this fund in 2019, it’s done really well for me. And Yiu has proven to be a great stock picker. One of the largest holdings right now is Broadcom and it’s flying on the back of the artificial intelligence (AI) boom.
Sanlam Global Artificial Intelligence
Another fund I own that outperformed Scottish Mortgage in 2024 is the Sanlam Global Artificial Intelligence. I don’t have the exact return here as the December factsheet hasn’t been published yet, but Hargreaves Lansdown’s website says it returned 27.45% for the year to 31 December 2024.
This fund’s focused specifically on AI, a hot investment theme in 2024. At the end of November, the top five holdings were Nvidia, Amazon, Microsoft, Alphabet and Tesla. And all of these stocks generated double-digit returns in 2024.
Given its niche focus, I see this fund’a risk level as quite high. If AI stocks lose their appeal, this fund is likely to underperform. I personally believe that the AI story is just getting started though. So I plan to keep this fund in my portfolio for a while.
I’ll stick with Scottish Mortgage
Going back to Scottish Mortgage however, I plan to stick with the trust. That’s because it gives me something different. Not only does it provide exposure to more obscure listed companies such as e-commerce powerhouse Mercadolibre and payments specialist Adyen, but it also gives me exposure to some really exciting unlisted companies such as Elon Musk’s space business SpaceX (about 5% of the portfolio).
I’ll point out that I see this product as the highest risk of the three mentioned. This is due to the fact that it’s invested in a lot of unprofitable and/or unlisted businesses.
So I’ve sized it appropriately. If it does experience some volatility, my portfolio won’t be badly impacted.
