However, what was particularly eye-catching at a time when the investment trust sector has been rocked by bids to oust boards and other dramatic action from US hedge fund manager Boaz Weinstein’s Saba Capital Management was what Scottish Mortgage’s managers had to say about the value of these vehicles.
Saba ousted the entire board of the Baillie Gifford-run Edinburgh Worldwide Investment Trust on April 30, replacing it with three US-based individuals it had nominated. This was the US hedge fund’s third attempt to oust Edinburgh Worldwide’s board, after Saba was overwhelmingly opposed by other shareholders in the trust and defeated in crunch votes on Valentine’s Day 2025 and January 20 this year. Saba had a stake of about 30% in Edinburgh Worldwide at the time of its third attempt.
The targeting by Saba of a raft of investment trusts has understandably caused concern among players in the sector and more broadly, given the value of investment trusts as long-term savings vehicles.
Amid the Edinburgh Worldwide saga, in the run-up to the second vote on January 20 forced by Saba, former UK pensions minister Ros Altmann said: “Allowing a determined hedge fund to keep returning to the register until fatigue or low turnout hands it victory is not healthy shareholder democracy.”
She flagged the long-term nature of investment trusts, declaring they were “ideal investments for pension funds”.
Baroness Altmann declared: “UK investment trusts are one of the strengths of our financial system, channelling patient capital into innovative, long-term assets which open-ended funds often struggle to hold. But this model depends on boards acting for all shareholders, not just an aggressive minority with a short time horizon.”
Baillie Gifford partner Tom Slater, manager of Scottish Mortgage, highlighted the value of the investment trust structure in giving individual investors access to private companies in a low-cost way.
This is a very important point, at a time when many huge companies such as SpaceX remain private as opposed to being listed on stock markets.
SpaceX has been in the spotlight ahead of an expected flotation.
Mr Slater said of Scottish Mortgage: “The company’s ongoing charges remain very low at approximately 0.33% [of average net asset value], and there are no performance fees. This is particularly important given the breadth of access Scottish Mortgage offers. Few vehicles provide shareholders with exposure to both listed and private growth companies in a single, liquid portfolio.
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“Private market exposure is often associated with high fees and limited access, however Scottish Mortgage provides access to many exceptional private companies through the investment trust structure, many of which are now large, established businesses rather than early-stage ventures.”
The investment landscape is very different from that of a few decades ago, in terms of many of the highest-profile, fastest-growing companies not being listed on stock markets.
Scottish Mortgage in April obtained permission for “limited additional flexibility” to invest in private companies when the portfolio is above the 30% of total assets limit for such holdings, through an additional capacity of up to £250m, subject to annual shareholder approval.
So the scale of the total private company holdings within Scottish Mortgage is plain.
Scottish Mortgage last week observed it has been investing in such private companies since 2012, declaring it has deployed £4.9bn of capital in this area to “give shareholders low-cost access to the most exciting, transformational growth businesses that are staying private for longer”.
And the comments last week from its managers highlighted their excitement about many of these private holdings.
These comments were made as Scottish Mortgage highlighted its outperformance of global stock markets over one year and 10 years.
Scottish Mortgage reported a total return on net asset value of 27.4% for the year to March 31. It observed this was ahead of a total return of 18% on the FTSE All-World Index.
The trust declared that, over the last decade, the managers have “delivered outperformance for shareholders”, with a total return on net asset value of 435% comparing with one of 234% on the FTSE All-World Index.
Scottish Mortgage said: “The company holds several of the world’s most valuable private companies, and a number of them, including SpaceX, Anthropic, Databricks, ByteDance and Stripe, are now realistic candidates for public listings in the coming years.”
It noted that, in the year to March 31, it deployed £254m of new capital in private companies, compared with £132m in the prior 12 months.
Scottish Mortgage observed that new buys included Anthropic, Loyal Animal Health, and RedNote, while follow-on funding was provided to several holdings including Enveda, Redwood Materials and Zipline.
Mr Slater declared: “SpaceX should no longer be thought of as an aerospace contractor but as a dual monopoly – the world’s dominant launch provider and a global connectivity utility with the potential for software-like margins.
“Though the launch vehicles generate the media attention, the valuation has been driven primarily by its satellite communications subsidiary, Starlink, which is building the kind of predictable, highly profitable revenue that the best software businesses aspire to. The difference is that its assets are in orbit and extraordinarily difficult to replicate. The acquisition of xAI brings a further dimension that the market is only beginning to price.”
Lawrence Burns, deputy manager of Scottish Mortgage, meanwhile highlighted the growth rate of Anthropic, which has developed next-generation AI assistant Claude.
He said: “In January 2025, the artificial intelligence company Anthropic had an annualised revenue run rate of $1 billion. Fifteen months later, it had surpassed $30 billion. No company in recorded history has grown organic revenue at this scale and pace.”
Mr Burns added: “As one of Scottish Mortgage’s private holdings, Anthropic has helped usher in a third era of generative artificial intelligence. The implications of the rise of agents reach across our portfolio into the structure of the software industry, the value of consumer businesses, the rise of a parallel Chinese AI ecosystem, and the physical supply chain that must be built to meet insatiable computational demands.”
Mr Slater meanwhile declared: “It is difficult to recall a 12-month period in which more of the assumptions underpinning the post-war international order were deliberately dismantled. But we think the development that will matter most when this period is viewed in retrospect is not the fracturing of the old order. It is the construction of the new one.
“Beneath the geopolitical turbulence, a transformation of a fundamentally different kind is underway. The acceleration of artificial intelligence into a global infrastructure buildout is, in our judgment, the most important structural change in the global economy since the emergence of the internet, and we are still in its early stages. The dismantling of old arrangements and the construction of new capability defined the portfolio’s year.”
It was certainly fascinating to hear these insights.
However, even amid all this excitement, Mr Slater’s comments about the value of the investment trust structure really grabbed the attention.
