- FTSE All World Index up 4.3% in six months
- Interim dividend remains at 1.60p per share
- Net asset value falls by 2.7%
Scottish Mortgage Trust (SMT) has underperformed its benchmark - the FTSE All-World Index - reporting a 2.7% fall in NAV (net asset value) for the six months to 30 September 2023 compared with a 4.3% gain.
The fall in NAV could be attributable to the investment managers' stock selection and allocation to private companies.
According to analysts at Stifel private companies represent 35% of the Scottish Mortgage Trust’s NAV, and these companies have seen ‘valuation declines.’
Tom Slater investment manager defended the trust’s exposure to private companies: ‘The operational performance of our major private businesses has been strong despite the difficult prevailing conditions.
‘The average revenue growth rate of the top ten private holdings was 38% in 2022. Market scepticism around the performance and valuation of our private assets is misplaced, and we believe they will be a significant source of value creation for the trust in the coming years.’
Slater went on to say that the trust ‘deployed approximately £74 million into six private companies in the half year, and one of our private holdings, the beauty company Oddity (ODD:NASDAQ), went public.’
In a further disappointment to shareholders, the company’s board said there would be no further increase in the dividend of 1.60p per share.
Investors seemed to have ‘fallen out of love’ with the Baillie Gifford-run trust, and in September it was one of the most sold investment trusts over the AJ Bell platform.
In contrast City of London Investment Trust (CTY) was one of the most bought investment trusts in September over the AJ Bell platform, perhaps due to its high paying dividend of over 5%.
Most bought and sold investment trusts in September - Scottish Mortgage haemorrhages more investors
Scottish Mortgage Trust’s shares were little changed on the news at 688p in morning trading.
Year-to-date the shares are down just under 4%.
LONG TERM PLAY?
In contrast, Scottish Mortgage Trust’s long-term performance has been much better than its short-term performance.
Over five years its NAV has gained 59.6% versus 49.6%, and over 10 years its has increased by 358.1% against 189.5% (both against the index).
Investment manager Tom Slater was quick to build on the trust’s ‘long-term successes’ like buying chipmaker Nvidia (NVDA:NASDAQ) in 2016, he commented ‘the acceleration in its business has been breathtaking’ with revenue guidance for the third quarter at $16 billion, compared to $6 billion a year ago.
The trust also holds other large cap ‘luminaries’ Amazon (AMZN:NASDAQ) (4.22%), Tesla (TSLA:NASDAQ) (5.28%) and pharmaceutical and biotechnology company Moderna (MRNA:NASDAQ)(6.21%) in its top ten holdings.
