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Over a decade, the trust’s shareholders have enjoyed a 781% total return, versus the MSCI AC World index’s 191% rise. ‘We do think there is a good case to take some profits and lock in some gains. Starkey identified managers James Anderson and Tom Slater as a ‘best in class team with a well-executed process’. Morningstar has downgraded its rating on Scottish Mortgage (SMT) on cost grounds, claiming low ongoing charges were pushed up by the top-performing global investment trust’s use of borrowing. ‘Scottish Mortgage remains committed to providing shareholders with low fees and is unique in doing so for a portfolio that provides access to established private companies.’. A Baillie Gifford spokesman pointed to Morningstar’s change of methodology.

Gearing stands at 6%, the AIC’s data, which is also the average across the sector.

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We use cookies to give you the best experience on our website. All Rights Reserved. Please sign in or register to comment. According to the latest annual results, 21 of the 59 holdings SMT first invested in when they were unlisted had delivered annualised returns of more than 10%. Scouller pointed to the concentrated portfolio as a risk, with the trust’s 10 largest investments accounting for 58% of net assets at the end of June. Property of Morningstar. © 2020 citywire.co.uk. You've disabled JavaScript in your web browser. SMT had a 13.4% position in Tesla (TSLA.O) and 9.7% in Amazon (AMZN.O), its top pair of holdings, at the end of July, according to the latest factsheet. Scouller pointed out those bets had worked ‘exceptionally well in recent months’ as technology disruptors had thrived during the pandemic and Chinese companies, making up about a fifth of investment, had performed strongly after the country’s comparatively strong recovery from the virus. While the catalyst for this shift was unclear, it could include a rotation away from ‘growth’ stocks to out-of-favour ‘value’ stocks, a shift in US policy on technology companies if there is a change in administration after November’s presidential election or market sentiment weakening on technology and growth stocks. Excluding costs from gearing, ongoing charges in the AIC’s Private Equity sector average 1.66% when including performance fees, which SMT does not have. As you were browsing citywire.co.uk something about your browser made us think you were a bot. He said the managers had gained a reputation as ‘patient and cornerstone investors’, which gave them access to a wide range of opportunities to invest in unquoted companies. Separately, Stifel analyst Iain Scouller said there was a ‘good case’ for investors to take some profits on the trust, which has surged 94% from March lows.

Unlisted companies have become an increasingly important part of the trust’s strategy, with the maximum proportion of the portfolio that can be held in private companies recently raised from 25% to 30%. ‘We are disappointed that cost of debt is now included in their analysis without accounting for the actual returns produced from the borrowing,’ he said.

Registration is free and only takes a minute. This is not as attractive as the management fee alone, although it is still attractive given the access the trust offers to unquoted assets,’ he said. Scottish Mortgage Ord SMT Morningstar Analyst Rating Analyst rating as of Aug 5, 2020.

Investment trust statistics: © Morningstar 2020. Experience suggests to us that trust net asset values and share prices don’t rise in a straight line indefinitely,’ said Scouller. Covid-19 Reality Check: How long will Pfizer vaccine last. ‘The nature of this high-growth, leveraged portfolio means it is likely to be volatile, and while we are reassured by the experience of Anderson and Slater, risk-averse investors need to factor this into their considerations,’ Starkey added. However, faltering sentiment on the unquoted portion of the portfolio could be another catalyst for a derating. Morningstar analyst Robert Starkey cut the £13.4bn Baillie Gifford trust’s rating from ‘gold’ to ‘silver’, under the data provider and research group’s new ratings methodology, which places more of an emphasis on costs. There are a few reasons this might happen: After completing the CAPTCHA below, you will immediately regain access to citywire.co.uk. However, in a different market scenario, or if there were some negative company specific issues, the concentration could be an important risk factor, potentially impacting performance,’ said Scouller. If you would like to, you can find out more about cookies and managing them at any time, We use cookies to improve your experience. ‘Scottish Mortgage will continue to employ strategic gearing, in the belief that low-cost borrowing invested into carefully selected equities will benefit shareholders in the long term. You reached this page when attempting to access https://citywire.co.uk/investment-trust-insider/news/aic-attacks-morningstar-for-penalising-geared-trusts-like-scottish-mortgage/a1396249 from 142.44.165.103 on 2020-11-12 08:30:22 UTC. A third-party browser plugin, such as Ghostery or NoScript, is preventing JavaScript from running. Morningstar has downgraded its rating on Scottish Mortgage ( SMT) on cost grounds, claiming low ongoing charges were pushed up by the top-performing global investment trust’s use of … The performance of the unquoted investments has been strong, Scouller pointed out. Investment Trust Insider - Opening the door to investment trusts, Your independent guide to investment trusts and investment companies.

And investors who thought such a growth strategy would suffer in the recent rout, they were wrong: the trust, which has Morningstar Analyst Rating … ‘An ongoing charge of 0.36% is offset when the cost of debt is considered, pushing the representative cost up to 0.77%. ‘In recent months, this concentration has worked well for shareholders given the very strong price performance of many of the trust’s largest investments. JavaScript needs to be enabled to complete CAPTCHA. Register to get unlimited access to our investor forum and all editorial content, including our e-zine and weekly email. Scottish Mortgage Ord SMT Morningstar Analyst Rating Analyst rating as of Aug 5, 2020. Starkey said SMT’s ongoing charges of 0.36% were low, but said the trust’s use of gearing, or borrowing, to enhance returns meant costs were higher than they first appeared. To change your settings please, Morningstar downgrades Scottish Mortgage over costs, Scottish Mortgage Investment Trust plc (Ordinary Share), The Big Broadcast: China’s compelling growth story has only just begun, Thursday Papers: overhaul of UK capital gains tax urged in review, Pfizer feel-good factor spawns flurry of infrastructure, royalty and UK trust launches, Impax tumbles 10% as biggest backer sells major stake, FTSE extends vaccine rally to take week’s gains to 8%, Wednesday Papers: UK economy ‘to recover by the summer’, Scottish Mortgage slides 6% as ‘value’ switch gathers pace, Hargreaves to fix accounts as users report duplicate trades, Trust Watch Update: the big risers and fallers in yesterday’s Covid cure euphoria. He added that Baillie Gifford’s robust valuation and governance framework for these stocks gave ‘comfort’ to investors, while the closed-end structure was appropriate for illiquid assets. Quote Total Returns ... S&P 500, Nasdaq, and Morningstar Index … By your continued use of this site you accept such use. Scottish Mortgage (SMT), the sector’s £14.1bn flagship which has boosted its impressive long-term performance with a 66% share price surge this … SMT’s ongoing charges are the lowest in the Association of Investment Companies’ (AIC) Global sector, where the average is 0.50%. View limitations & usage restriction. Chinese tech giants Tencent (0700.HK) and Alibaba (BABA.N) were 5.9% and 5.4% positions. You're a power user moving through this website with super-human speed. All rights reserved. Additional information is available in this. It is free to register and only takes a minute or two. The investment trust has been a … Morningstar analysts have downgraded the Scottish Mortgage Investment Trust (SMT) following changes to the way that funds are rated.

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