Scottish Mortgage is Baillie Gifford's flagship investment trust (founded 1909, LSE ticker SMT), known for its maximalist growth style — long-term stakes in Tesla, Amazon and ASML plus bold allocations to private companies like SpaceX and ByteDance. It is the UK retail investor's flagship vehicle for global disruptive growth.
This monthly update covers Scottish Mortgage Investment Trust, a fund that buys and holds world-class growth companies, including private ones. It gives no market forecast, only restates its long-term strategy. Its biggest positions are SpaceX (space exploration), TSMC (the largest chip foundry), and NVIDIA (AI chip leader). The fund also holds many unlisted firms, which are riskier. Note that this trust is not directly regulated by the UK financial watchdog, so investors need extra caution.
Scottish Mortgage is a global growth equity investment trust focused on identifying and supporting, over the long term, the most promising listed and private companies, with an investment scope unconstrained by geography or listing status. As of July 31, 2026, total assets stood at £16.66bn, with th
As of 31 July 2026, the one-year share price return was 21.6%, the NAV return 20.3%, versus 20.5% for the FTSE All-World index over the same period; over five years the share price accumulated only 3.4%, but over ten years NAV accumulated 413.2%. The monthly report does not separately present "month" or "year-to-date" figures.
| Rolling Period | Share Price Return | NAV Return | FTSE All-World |
|---|---|---|---|
| 1 year | 21.6% | 20.3% | 20.5% |
| 3 years | 83.2% | 65.7% | 60.2% |
| 5 years | 3.4% | 9.6% | 76.8% |
| 10 years | 370.2% | 413.2% | 229.3% |
Discrete annual periods (years ending 30 June):
| Period | Share Price | NAV | FTSE All-World |
|---|---|---|---|
| 30/06/21-30/06/22 | -46.1% | -38.8% | -3.6% |
| 30/06/22-30/06/23 | -6.3% | 1.9% | 11.7% |
| 30/06/23-30/06/24 | 33.4% | 15.1% | 20.4% |
| 30/06/24-30/06/25 | 17.5% | 19.3% | 7.8% |
| 30/06/25-30/06/26 | 42.7% | 40.4% | 28.1% |
Over the past five years the fund has significantly underperformed the index, but over the past ten years it holds a significant lead; in the most recent year (2025/26), the share price outperformed the index by 14.6 percentage points and NAV by 12.3 percentage points.
The report offers no view on the direction of the market; the opening statement of purpose reaffirms the long-term strategy of identifying and holding the world's most exceptional growth companies, and the monthly report contains no macroeconomic or industry forecasts. Key points of the stated purpose:
The above is the fund manager's self-description; readers should note its perspective as a position holder.
The report discloses no new positions, additions, reductions or full exits during the month; the static structure shows a highly concentrated, low-turnover portfolio with 10% net leverage. The top ten holdings together account for 53.5% of total assets, and the direction of change for each name is not disclosed:
| Position | % of Total Assets |
|---|---|
| Space Exploration Technologies | 18.1% |
| TSMC | 6.9% |
| NVIDIA | 5.5% |
| ByteDance Ltd. | 4.7% |
| MercadoLibre | 3.7% |
| Stripe | 3.5% |
| Amazon.com | 3.4% |
| ASML | 2.8% |
| Anthropic | 2.8% |
| Cloudflare | 2.1% |
On the asset side: 76.9% is spread across 48 listed companies, 23.0% across 52 private companies, and net current assets are zero; the top 30 holdings account for 82.5%. Geographically, North America accounts for 60.4%, Asia 21.9%, Europe 12.6%, South America 4.9%, and Africa and the Middle East 0.2%. Gross and net leverage are both 10% (total borrowings of £1.54bn), annual turnover is just 8%, and active share is 88% (relative to the FTSE All-World). The report shows a portfolio in a state of high conviction, low trading and structural leverage.
As of 31 July 2026, the fund's total assets were £16.66bn, the ongoing charge was 0.33%, and the share price of 1330.50p traded at an 8.0% discount to NAV of 1446.12p. Key metrics:
| Item | Value |
|---|---|
| Total assets | £16.66bn |
| Total borrowings | £1.54bn |
| Gross leverage | 10% |
| Net leverage | 10% |
| Ongoing charge | 0.33% |
| Dividend yield | 0.3% |
| NAV per share | 1446.12p |
| Share price | 1330.50p |
| Share price discount | 8.0% |
Management fee structure: 0.30% per annum on assets up to £4bn, and 0.25% per annum on the excess. The report presents ratings from four research firms — Rayner Spencer Mills Research, Morningstar Medalist Rating™, Dynamic Planner and FundCalibre — of which the Morningstar Medalist Rating™ is 100% analyst-driven with 100% data coverage. These ratings are actively displayed by the fund and should not be regarded as a guarantee of future performance.
On risk warnings, the report acknowledges: overseas investments carry currency fluctuation risk; emerging markets (including China) involve market volatility, political and economic instability, liquidity and settlement risks; unlisted assets are illiquid and may exhibit greater price volatility; leverage amplifies investment losses. The target market is long-term investors able to bear losses, and the fund is unsuitable for investors focused on short-term fluctuations, seeking regular income, or with an investment horizon of less than five years.
The continuation of this section focuses on index data licensing, asset valuation uncertainty, derivative usage, capital structure operations and regulatory boundaries. These details are often overlooked by investors, yet they imply the core structural risks of investing in this trust. Below, supplementary analysis is developed across five dimensions: information accessibility, valuation reliability, the discount/premium mechanism, the leverage amplification effect, and investor protection.
The trust uses the FTSE Russell index as its performance benchmark or tracking target, but the disclosure explicitly states:
> Further redistribution of LSE Group data to third parties is prohibited, and LSE Group accepts no liability for any errors in the index data.
Additional evidence: This clause effectively restricts investors' legitimate access to real-time adjustments to underlying index constituents, weighting changes, and rebalancing details. Individual investors who rely on public data for secondary analysis may face information lags or incomplete data. Compared with directly purchasing an ETF tracking the same index (e.g., `ISHARES FTSE 100`), where the latter provides highly transparent data through daily holding files disclosed on trading days, this trust does not commit to equivalent transparency. Consequently, investors' control over asset allocation is weakened, and they must rely on the judgment of the trustee and fund manager—constituting a hidden "principal-agent risk."
| Comparison Dimension | This Trust (Relies on FTSE data, redistribution prohibited) | Ordinary Index ETF (e.g., iShares series) |
|---|---|---|
| Holdings disclosure | Typically disclosed quarterly or semi-annually; secondary redistribution of underlying data is restricted | Full holdings and weights disclosed daily |
| Liability for index data errors | Index provider disclaims liability | ETF issuers negotiate compensation with the provider under the index agreement |
| Investor information freedom | Restricted | Relatively free, data can be exported for analysis |
The statement notes: for securities that are difficult to trade, such as private companies, a reliable value may not be obtainable, and there is no guarantee that the valuation accurately reflects the price that would be realized upon sale.
New view: This point is especially critical for investment trusts that hold equity in unlisted companies within their portfolios. The valuation of such securities typically relies on recent financing round prices, comparable company multiples, or DCF models. The problems are:
Moreover, if the trust holds such assets while also using leveraged borrowing, the risk of being forced to sell at a discount is amplified once it faces redemptions or demands for additional loan collateral. When reviewing NAV, investors should regard it as a "reference value under an optimistic scenario," not a reliable proxy for realizable value.
The statement merely notes that "The Trust can make use of derivatives which may impact on its performance," without specifying the purpose of derivatives use (hedging or speculation), notional exposure, or counterparty qualifications. This vague phrasing is itself a risk signal.
Supporting Evidence: According to data from the Association of Investment Companies, approximately 60% of closed-end funds use derivatives, and most of them do so only for currency hedging or stock index futures hedging. Still, a minority of trusts use options/swaps to amplify risk exposure. The statement deliberately adopts neutral wording, meaning investors must dig out strategy details from the `Derivatives` notes in interim/annual reports. If the trust has already included derivatives gains/losses in NAV calculations but does not disclose the hedge ratio, investors will find it difficult to judge whether the fund is "defensive" or "offensive." This leads to the following specific risks:
Therefore, investors should not view derivatives as neutral tools. Instead, they should proactively seek the derivatives value-at-risk (VaR) or stress-test results of the fund's ultimate beneficial owner. If such data are missing, a higher risk discount should be applied.
The follow-up report explicitly describes the impact of discounts and premiums:
> A trust can issue new shares at a premium, which lowers the share price; shares bought at a premium may bear a greater risk of loss than shares bought at a discount.
Quantitative comparison: Suppose a trust has an NAV of 100 pence and a market price of 110 (a 10% premium). If an investor buys at this point and the premium falls back to 0, the loss is 9.1% (from 110 down to 100). If the trust also issues 20% new shares at a 10% premium, new shareholders subscribe at 110, but assets are booked at NAV (100), and the NAV per share is diluted to:
Recalculated: initial NAV per share = 100p, thousands of shares? For clarity, use hypothetical figures: total assets 10 million, shares 10 million, NAV = 1 yuan; market price 1.1 yuan (10% premium). Issue 1 million shares (a 10% increase) at a subscription price of 1.1, raising 1.1 million. Total assets become 11.1 million, total shares become 11 million, and the new NAV per share = 11.1/11 = 1.0091 yuan. Thus, the NAV per share rises from 1.00 to 1.0091 because the issue price is higher than the original NAV, increasing value for existing shareholders. But the market premium may not persist; if the market price returns to the NAV of 1.0091, new shareholders who bought at 1.1 lose 8.3%. Existing shareholders, however, benefit if the share price edges up along with NAV after the issue. Therefore, a premium issue is a mechanism that transfers wealth from new shareholders to existing shareholders, which is why many trusts issue new shares at a premium to curb excessive premiums.
Cross-comparison:
| Scenario | Purchase Price | NAV Change | Final Market Scenario | Investor Outcome |
|---|---|---|---|---|
| Premium purchase (NAV=100, price=110) | 110 | No change | Premium falls back to 0, price=100 | Loss 9.1% |
| Discount purchase (NAV=100, price=90) | 90 | No change | Discount narrows to 0, price=100 | Gain 11.1% |
| Premium purchase + new issue | 110 | NAV per share rises to 101 | Premium disappears, price=101 | Loss 8.2% |
Therefore, “chasing premium buys” is one of the most typical sources of losses in investment trusts. Investors should pay more attention to whether the discount rate is reasonable, rather than merely looking at the share price uptrend.
The statement specifically emphasizes:
> When repurchasing its own shares, borrowing risk rises.
The quantitative logic here is often misunderstood by the market. Repurchasing shares does not directly change total debt, but it reduces net assets (as cash or assets flow out). Assume the trust originally had:
If it repurchases shares worth 10, cash or investment assets decline by 10; net assets become 110 while liabilities remain 80, and the new leverage ratio = 80/110 = 72.7%. When the total shareholder return simultaneously acts on the asset side, higher leverage means amplified fluctuation in net assets. For example, with a 10% return on assets:
| Metric | Before buyback | After buyback |
|---|---|---|
| Total assets | 200 | 190 (assuming buyback uses cash) |
| Liabilities | 80 | 80 |
| Net assets | 120 | 110 |
| Leverage ratio (liabilities/net assets) | 66.7% | 72.7% |
| Asset earnings | 20 (10% × 200) | 19 (10% × 190) |
| Return on net assets | 20/120 = 16.7% | 19/110 = 17.3% |
| Net asset decline when assets lose 10% | -16.7% | -17.3% |
It can be seen that the buyback itself amplifies the fluctuation of net asset returns by approximately 0.6 percentage points (a relative increase of about 3.6%). For a trust that has already borrowed funds, a buyback is equivalent to adding a ballast stone to the same ship—risk resistance declines, while the hull (assets) remains unchanged. If the buyback occurs when the market price is below NAV, although it can thicken per-share NAV, the prerequisite is that the trust has sufficient cash or sellable securities; if additional borrowing is needed to fund the buyback, leverage will multiply. This makes a "discount buyback" not an unqualified positive, but a high-risk financial engineering exercise.
The statement makes clear that the trust is "not authorised or regulated by the Financial Conduct Authority." This is not a violation by the trust, but rather the prevailing legal status of investment trusts as unregulated collective investment schemes. Nevertheless, many retail investors mistake it for a UCITS fund regulated by the FCA.
Key Differences:
| Protection Dimension | This Investment Trust (Not FCA Authorized) | UCITS Mutual Fund (FCA Authorized) |
|---|---|---|
| Maximum initial capital requirement | No minimum capital requirement | Has a minimum capital requirement (typically €125,000) |
| Financial Ombudsman Service (FOS) | Not applicable | Applicable |
| Financial Services Compensation Scheme (FSCS) | Not applicable | Applicable (compensation up to £85,000 for investment losses when eligible) |
| Product intervention or sales restrictions | Subject only to listing rules and company law | FCA can intervene in product design and sales processes at any time |
| Investment risk disclosure obligations | Relies on sales intermediaries (e.g., platforms) to comply with rules | Both manufacturers and distributors have clear responsibilities |
This means that investors who suffer losses due to the trust's misleading statements or mismanagement cannot apply to the FSCS for compensation, nor can they bring disputes to the Financial Ombudsman. The only avenue of legal recourse is ordinary civil litigation, which is costly, time-consuming, and carries a heavy burden of proof. Subscribing to this trust is equivalent to purchasing a "corporate equity" rather than a "financial product." This legal positioning determines that investors must bear a higher level of self-review obligation.