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Scottish Mortgage (Baillie Gifford)Deep research26 Jun 2026Source: scottishmortgage.com

Manager Review: Tom Slater

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.

Tom Slater、Lawrence Burns · 1909 · 英国爱丁堡Aggressive growth / Public & private

In plain words

This report comes from Scottish Mortgage, a publicly listed fund that invests in innovative tech companies. Its central claim: the biggest story isn't political upheaval, but the global build-out of artificial intelligence (AI). The fund's largest bet is SpaceX, Elon Musk's rocket and satellite company, which it sees as a near-monopoly in launch services and satellite internet. It also admits China has been painful, as price wars in e-commerce and food delivery hurt its holdings. For everyday investors, it shows that AI is a powerful trend but concentrated bets are risky—even professionals make mistakes. Worth reading for a clear, realistic view of where AI money is flowing and what could go wrong.

AI SummaryAI-generated · may contain errors · verify against the original

At a Glance

The collapse of the old order is merely the backdrop; the AI-driven rebuilding of global infrastructure is the central theme. Scottish Mortgage prefers to own the companies driving change rather than hide from them—this fiscal year it delivered a 27.4% NAV return, outperforming the benchmark by 9.4 percentage points. [Cautiously Optimistic]

  • AI infrastructure is still early but accelerating: capital expenditure at the major cloud platforms has more than tripled since 2023, with the largest player investing over $100bn annually; TSMC's high-performance computing has risen to 58% of its business.
  • SpaceX is the largest source of returns and the largest holding: more than 19% of assets; listing documents filed, targeting a mid-June listing; Starlink added over 4.6 million active customers in 2025, reaching 9 million cumulative.
  • China is the portfolio's most difficult area: Alibaba and JD.com combined subsidy costs exceeded $14bn over two quarters; Meituan swung from substantial operating profit to a full-year loss; CATL and RedNote were initiated as new positions, exceptions to the "involution" dynamic.
  • Portfolio rebalancing: reduced ASML to add NVIDIA; trimmed Meta, Amazon, and Temu; exited Wayfair; new positions include AppLovin, MongoDB, Anthropic, MiniMax, CATL, and RedNote; added to Nu, Hermès, and Sea.

The Old Order Crumbles; the AI New Order Is the Central Theme

The author argues that over the past 12 months, multiple assumptions of the postwar international order were deliberately dismantled, but what truly matters is not the collapse of the old order but the AI-driven "construction of a new order."

The author lists a series of events: a new U.S. administration's withdrawal from WHO and dismantling of USAID on its first day in office; April tariffs imposed on nearly all U.S. trading partners; the longest government shutdown in U.S. history; military intervention in Venezuela; and, in February 2026, U.S.–Israeli strikes on Iran that closed the Strait of Hormuz and disrupted one-fifth of global oil trade. The author calls this a "grave state of affairs," noting that some positions paid a direct price for it. But the author judges that after tariff regimes are renegotiated and the Strait of Hormuz reopens, the global economic restructuring around AI will still accelerate. Macro stance: [cautious] on geopolitics, [optimistic] on AI infrastructure; the report makes no comparison with consensus or the prior issue's views. The author's opening line reads: "Scottish Mortgage would rather own the companies driving that change than shelter from it," meaning Scottish Mortgage prefers to own the companies driving that change rather than shelter from it. In the author's view, companies in the infrastructure layer of the AI transformation are largely insulated from geopolitical disruption, while positions more sensitive to cross-border trade, consumer confidence, or China's weak-demand environment performed quite differently, and the gap between the two groups of companies widened markedly.

Cloud Platform Capex Has More Than Tripled in Three Years

The author judges that AI infrastructure is the most important structural change since the birth of the internet and is still in its early stages.

The combined capital expenditure of major cloud platforms such as Microsoft, Amazon, and Google has more than tripled since 2023, with the largest player investing well over $100bn annually. The author believes that China's DeepSeek proved that the most advanced AI is not a U.S. monopoly, triggering competitive responses and further accelerating spending. The author also acknowledges that physical constraints — power, land, and manufacturing capacity — will ultimately slow the pace of spending growth, but the absolute level of investment required is unlikely to decline for several years.

SpaceX Is the Largest Source of Returns

This section gives no comparison figures for overall portfolio returns versus the benchmark; the author attributes the year's largest single source of returns to SpaceX and acknowledges the concentration risk of that position.

At year-end, SpaceX accounted for more than 19% of the trust's assets; the author calls this concentration "highly unusual for the trust" and acknowledges that this magnitude could bring volatility. The author attributes the year's portfolio performance to the divergence between two groups of companies: AI infrastructure-layer companies continued to grow amid geopolitical turmoil, while positions more sensitive to cross-border trade, consumer confidence, or weak Chinese demand paid a price as the world changed faster than valuation assumptions.

SpaceX Defined as a Dual Monopoly in Launch and Connectivity

The author argues that SpaceX should no longer be viewed as an aerospace contractor, but rather as a "dual monopoly" of launch services and global connectivity utilities.

Thesis: bullish. The author argues that while launch vehicles attract media attention, valuation is driven mainly by Starlink; Starlink is building the kind of predictable, high-margin revenue stream that software companies pursue, with assets in orbit that are extremely difficult to replicate. The incorporation of xAI adds a new dimension that the market has only just begun to price.

Evidence: Starlink added more than 4.6 million active customers in 2025, reaching 9 million cumulative, and entered 35 additional countries; the acquisition of EchoStar wireless spectrum advances the direct-to-phone business, allowing standard smartphones to connect directly to Starlink satellites without dedicated terminals; the U.S. Department of Defense's Golden Dome missile-defense contract highlights the U.S. government's national-security dependence on SpaceX's infrastructure. The author says that in a year when governments reassessed their communications dependencies and the closure of the Strait of Hormuz showed how quickly critical infrastructure could be disrupted, SpaceX's competitive position rose rather than fell.

Risks: The author acknowledges that a position of over 19% is highly concentrated and could bring volatility; the original text gives no specific Starlink revenue or profit figures.

Orbital Solar and In-Orbit Compute Are the Long-Term Upside

The author believes that AI's exponential demand for electricity and supply bottlenecks mean SpaceX's long-term value extends beyond the connectivity business to the intersection of launch, energy, and AI.

AI's electricity demand is growing exponentially, but supply is constrained by permitting, grid capacity, and construction speed; orbital solar can be up to 10 times more efficient than ground-based panels and is not subject to the atmosphere or the day-night cycle. The author's original words: "It is positioning itself at the intersection of launch, energy, and AI in a way that no other company on Earth can replicate," meaning it is positioning itself at the intersection of launch, energy, and AI in a way that no other company on Earth can replicate. The author believes that if Starship achieves the rapid full reusability envisioned in its design — and the trajectory of progress suggests it will — the economics of deploying compute infrastructure in orbit would shift from "speculative" to "compelling." The author says this is precisely why SpaceX has become the trust's largest position. The author uses "unreplicable" and "dual monopoly" to justify the largest position; readers should note this is the perspective of a position holder.

IPO Imminent; Closed-End Structure Lets the Trust Navigate the Lock-Up Period

The author says SpaceX filed its listing documents in April 2026, targeting a listing in mid-June; ahead of the IPO, existing holders including the trust will enter a lock-up period, but the closed-end structure means it does not have to sell at listing.

The author views this listing as a microcosm of a broader trend: the trust also holds several of the world's most valuable private companies, among which SpaceX, Anthropic, Databricks, ByteDance, and Stripe are all realistic listing candidates in the coming years. The author emphasizes that this is not speculation about timing, but rather a point that the assumption that "private holdings are all early-stage, speculative assets" no longer matches reality — these are large enterprises with substantial revenues, and some have profits large enough to rank among the world's biggest listed companies. A listing only changes the trading venue; the opportunity and the rationale for holding remain unchanged. The report does not disclose whether the trust added to or trimmed its SpaceX position, stating only that it will hold through the listing transition.

Position Direction Core Logic (One Sentence) Key Data
SpaceX Hold/Watch Dual monopoly; plans to hold after listing; closed-end structure can navigate the lock-up period >19% of assets; IPO filing submitted April 2026, targeting mid-June listing; Starlink added >4.6M active customers in 2025, 9M cumulative
Anthropic / Databricks / ByteDance / Stripe Not disclosed Named as possible IPO candidates, but no trading actions disclosed Original text gives no position/valuation data for each

TSMC Sits at a Key Node of AI Infrastructure

The author believes that with major cloud platforms' infrastructure spending exceeding the defense budgets of most countries, TSMC sits at a key node of this AI build-out.

TSMC posted record revenue during the reporting period, with high-performance computing rising to 58% of its business, and announced cumulative investment of $165bn across six manufacturing sites in Arizona. The author does not separately indicate a buy or sell direction for TSMC.

~31 min full read · 18 sections
Deep Analysis

ASML Trimmed, NVIDIA Added

ASML was trimmed throughout the year as the position grew, with some capital rotated into NVIDIA; the author believes the latter's valuation is more attractive relative to its growth trajectory and that it continues to benefit from insatiable demand for AI compute.

ASML is the sole manufacturer of the lithography machines indispensable to advanced chip production, and the author describes it as even more deeply protected: every dollar of global AI ambition flows through its order book. The letter notes that ASML was trimmed over the year as the position grew, with some of the proceeds recycled into NVIDIA. The author believes NVIDIA's valuation is more attractive relative to its growth trajectory, and that it continues to benefit from the insatiable demand for compute needed to build and run AI systems. Stance [Optimistic]: The author is optimistic about continued growth in AI compute demand.

Company Direction Core Thesis (One-Liner) Key Data
ASML Trimmed Took profits after position growth; extremely deep lithography monopoly Every dollar of global AI ambition flows through its order book
NVIDIA Added Valuation more attractive relative to growth trajectory; robust AI compute demand Absorbed part of the capital trimmed from ASML

Meta and Amazon Trimmed; AI Beneficiaries

Meta and Amazon were both trimmed over the year but remain significant holdings; AI is now embedded in both of their core businesses and has brought measurable improvements.

AI's impact extends far beyond infrastructure providers. Meta has embedded AI into content recommendation and advertising systems, delivering measurable engagement gains on Facebook and Instagram; Amazon has deployed AI across its logistics, retail, and cloud operations. The letter notes that both were trimmed over the year but remain significant holdings.

Company Direction Core Thesis (One-Liner) Key Data
Meta Trimmed AI drives recommendations and ads, lifting engagement Measurable engagement growth on Facebook/Instagram
Amazon Trimmed AI deployed across logistics, retail, and cloud operations No specific figures given

AI Efficiency Gains Pressure Software Valuations

Shopify has embraced AI tools that allow merchants to do more with fewer people; but the same capability is compressing valuations across the traditional software industry.

Shopify has integrated AI tools into its platform. The author specifically mentions its CEO's internal memo: teams are required to prove that AI cannot do a task before requesting headcount. The author believes this captures a cultural shift across many of the fund's holdings. This trend has an unsettling corollary: when AI agents can write, test, and deploy code at a fraction of the cost of a human engineering team, the per-seat pricing model that many software companies depend on will face fundamental pressure. Stance [Cautious]: The letter notes that software company valuations contracted sharply over the year.

New Positions Bet on AI Applications

New positions in AppLovin and MongoDB; Spotify and Roblox also benefit from AI personalization and made notable contributions.

AppLovin's AI-driven advertising platform is scaling rapidly; MongoDB, as database infrastructure, supports the growing development of AI-native applications. Both are new positions. Spotify and Roblox both made notable contributions, and both benefit from AI-enhanced personalization—an approach that strengthens rather than threatens their competitive positions. The letter does not disclose directional actions for the latter two.

Company Direction Core Thesis (One-Liner) Key Data
AppLovin New position AI-driven ad platform scaling rapidly No specific figures given
MongoDB New position Database infrastructure supporting AI-native app development No specific figures given
Spotify Not disclosed AI personalization contributes notably, strengthening competitive position No specific figures given
Roblox Not disclosed AI personalization strengthens rather than threatens competitive position No specific figures given

Private Portfolio Bets on the AI Frontier

The private portfolio initiated a position in Anthropic, which the author calls one of the world's most important AI companies; MiniMax, bought at its IPO, validates world-class AI capabilities beyond the United States.

Anthropic sits at the center of the transition from narrow AI tools to true capability systems. The author calls it one of the world's most important AI companies. MiniMax is a Chinese AI foundation-model company bought at its IPO. The author believes it directly validates that world-class AI capabilities are being built outside America's large technology companies.

Company Direction Core Thesis (One-Liner) Key Data
Anthropic New position Central to the shift from narrow AI to true capability systems Called one of the world's most important AI companies
MiniMax New position (bought at IPO) Chinese foundation model; validates capabilities outside the U.S. Bought at IPO

Trade Rifts Hit Portfolio Holdings

The tariff regime poses a structural challenge to the free-trade order; Temu trimmed, Wayfair exited, Adyen under pressure.

The letter notes that even if tariffs are later reduced and their legal basis keeps shifting, they still represent a structural challenge to the free-trade order on which the global economy is built. PDD's Temu, built almost entirely on cheap cross-border shipping from China, is one of the businesses in the portfolio most directly affected, and was therefore trimmed; Temu has responded by rapidly expanding local sourcing in key markets. Adyen, the Dutch payments infrastructure company, saw its shares fall as transaction volumes on the Asian e-commerce platforms most affected by tariffs slowed sharply. Wayfair was completely exited — the author believes headwinds to U.S. consumer discretionary spending had pushed risk-reward to a level he was unwilling to hold.

Here the author makes a core judgment, in his own words: "When the trade architecture changes, everything built on top of it must adapt."

The author also stresses that these disruptions are not temporary — imbalances in the global economy, trade, debt, and political cohesion have accumulated for years, and the current administration has merely brought the adjustment forward. Stance [Cautious].

Company Direction Core Thesis (One-Liner) Key Data
PDD (Temu) Trimmed Cross-border low-price model hit by tariffs; shifting to local sourcing Temu rapidly expanding local sourcing in key markets
Adyen Not disclosed Slowing volumes on Asian e-commerce platforms weigh on shares Share price fell
Wayfair Exited U.S. consumption headwinds make risk-reward unattractive Full exit

Sea Faces Intensified Competition; Luxury Disrupted

Sea is forced to reinvest as Temu and TikTok Shop compete for share with subsidies, and the early-year add was poorly timed; Hermès was added into weakness, while Ferrari's management prioritizing brand protection earned the author's approval.

Sea Limited faces a different but related challenge: Temu and TikTok Shop are grabbing share in Sea's Southeast Asian home market with aggressive subsidies, forcing Sea into heavy competitive investment that weighs on profits and the share price. The author acknowledges that the early-year position increase was poorly timed.

The growth model that underpinned the luxury industry for two decades—built on expanding Chinese wealth, aspirational cross-border travel, and frictionless high-end goods trade—is now similarly caught in structural disruption. Hermès significantly underperformed as Asia-Pacific demand came in below expectations, and the author added to the position, viewing the weakness as an opportunity to increase exposure to "one of the highest-quality businesses in the world"—readers should note this is the perspective of a holder. Ferrari suffered its worst single-day performance since listing after its Capital Markets Day: management chose to prioritize long-term brand protection over the growth trajectory the market had priced in. The author believes this was the right decision for the company, even if not what short-term investors wanted to hear.

Company Direction Core Thesis (One-Liner) Key Data
Sea Limited Added Subsidy competition forces heavy reinvestment, hurting profits and shares Early-year add was poorly timed
Hermès Added Weak Asia-Pacific demand seen as buying opportunity in a high-quality business Significant underperformance
Ferrari Not disclosed Brand protection prioritized over growth; author approves Worst single-day drop since listing after Capital Markets Day

Meituan's Price War and China's Involution

The hardest area for the portfolio this year was China; the real problem was not tariffs but involution. Meituan, attacked by subsidies from Alibaba and JD.com, swung from substantial operating profit to a full-year loss.

Meituan's decline is the starkest example of involution. Alibaba and JD.com attacked its core food-delivery business with aggressive consumer subsidies, with the three companies together spending over $14bn in two quarters. Meituan swung from substantial operating profit to a full-year loss. The author sees this as a war started by competitors fighting for share in an economy where growth is scarce—a domestic reckoning rooted in the property adjustment and increasingly cautious consumers.

The author further explains China's "involution" (neijuan): in the author's own words, "a competitive dynamic in which everyone runs harder for diminishing returns." Local government subsidies, cheap state-bank financing, and tax incentives that reward output have created world-class companies while simultaneously destroying profit margins across entire industries. Solar manufacturers are still losing billions despite record shipments; BYD's average price per vehicle keeps falling even as the technology content of each car rises.

The author says that companies able to survive this environment will possess cost structures and engineering capabilities that are extremely difficult to match elsewhere in the world—which is exactly why he continues to invest in the best of them, although the selection process is brutal. The letter does not disclose any position action on Meituan.

China Exceptions: CATL and RedNote

CATL was among the largest new positions this year; RedNote was also newly initiated. Both are exceptions within China's involutionary environment.

CATL's technology and manufacturing leadership in EV batteries has proven resilient. Energy-transition demand for its products does not change with the domestic cycle, and years of sustained investment have built a moat; the letter notes it was one of the largest new positions this year. RedNote has become China's leading lifestyle and consumption-discovery platform, with notable engagement and an advertising model still in its early stages, and was a new position.

Company Direction Core Thesis (One-Liner) Key Data
CATL New position Battery technology and manufacturing leadership; energy-transition demand independent of domestic cycle One of the largest new positions this year
RedNote New position Leading lifestyle platform; advertising model in early stages Notable engagement

ByteDance Risk Mitigated, but Valuation Discount Remains Large

The author argues that TikTok’s U.S. operations splitting into a joint venture majority-owned by U.S. shareholders in January 2026 removed the sharpest binary risk, yet the market still undervalues ByteDance as a whole because of regulatory concerns.

ByteDance is Scottish Mortgage’s third-largest holding. The original text says it is the only non-U.S. company to achieve dominant consumer reach at global scale across cultural and linguistic borders, via TikTok internationally and Douyin domestically. The author argues that investors’ focus on TikTok’s U.S. regulatory status has consistently undervalued the broader business: Douyin is the leading short-video and e-commerce platform in the world’s second-largest consumer economy, and ByteDance’s advertising technology ranks among the most sophisticated in the industry. Thesis: Bullish; Evidence: If the company were listed, its profit scale would rank among the world’s largest technology companies, but private market transaction prices reflect a significant discount to comparable U.S. platforms; Risk: The author concedes “the gap between business quality and the price the market is willing to assign to this type of Chinese tech asset remains large.” The author’s original words were: “We do not believe the right response to geopolitical complexity is to invest only in places where the outlook feels comfortable.” — i.e., “We do not believe that, in the face of geopolitical complexity, the correct approach is to invest only where the outlook feels comfortable.” This is the author’s attitude toward geopolitical risk: not avoiding assets in complex regions.

Financial Digitization: Banking Licenses and Payment Infrastructure

The author argues that financial digitization has evolved from “disruption” to “becoming the financial system itself,” as Nu Holdings and Revolut have each crossed the threshold into regulated banking.

AI has been the dominant narrative this year, but the author stresses that the portfolio’s other long-standing themes — financial digitization, transportation evolution, and healthcare innovation — continue to advance. Thesis: The financial digitization theme continues to deliver. MercadoLibre is one of the largest holdings: MercadoPago has become the dominant payment platform in Latin America, and its e-commerce business continues to gain share; the company is reinvesting heavily in e-commerce and fintech, compressing near-term margins, but the author sees this as infrastructure investment required for long-term dominance. Stripe is moving from payments toward AI-driven autonomous commerce and digital currency infrastructure, which the author describes as “the next layer of financial plumbing.” Nu Holdings was increased, continuing profitable expansion in Brazil, Mexico, and Colombia, and in January received conditional approval from U.S. regulators to establish a national bank; Revolut obtained a full U.K. license in March. The author stresses that both are now regulated banks, not “fintech companies that want to become banks.”

Transportation Automation Enters Commercial-Scale Stage

Drone delivery, driverless freight, and eVTOL all advanced during the year from pilot or certification stages, but the author concedes that these companies’ revenues are far from matching their ultimate opportunity.

  • Zipline: Transitioning from pilot to commercial scale. The Dallas-Fort Worth expansion began with Walmart’s launch in Mesquite in April 2025 and grew to approximately 20 sites by year-end, with more than a dozen retail and restaurant partners, including Chipotle, Panera, and Wendy’s, already on the platform; more than 2 million deliveries globally, with expansion to Houston and Phoenix announced.
  • Aurora Innovation: Launched commercial driverless freight in the Dallas-Houston corridor, with more than 100,000 miles safely driven without incident.
  • Joby Aviation: Made further progress in the FAA airworthiness certification process.
  • Risk note: The author says none of these companies generates revenue commensurate with its ultimate opportunity, and the market’s patience with long-cycle narratives has shortened markedly during the year.

mRNA and Healthcare Data Portfolio Rebounds

After a few difficult years, Moderna has become a positive contributor, sentiment toward mRNA vaccines has recovered, and long-term cancer vaccine data reinforce the view that the technology extends beyond its pandemic-era applications.

Moderna’s next-generation COVID-19 vaccine launched successfully; the flu-COVID combination vaccine is nearing European approval; and the seasonal flu vaccine is approaching a U.S. regulatory decision. Long-term data from the personalized cancer vaccine program in partnership with Merck are positive, which the author believes supports the view that mRNA technology applications extend far beyond the pandemic era. Tempus AI continues to apply its genomic data platform to cancer diagnosis and treatment; Insulet’s automated insulin pump is described by the author as one of the most compelling medical device businesses in the portfolio. The author believes that the combined opportunity across mRNA medicines, genomic data, and AI-driven drug discovery “has never been more exciting.” (Note this is the position holder’s view.)

Added to Nu; Most Holdings Held for Observation

The only active move explicitly disclosed in this chapter is an increase to Nu Holdings; the remaining major positions are described primarily as holds under observation, with Meituan appearing only as an example of absorbing volatility.

Position Action Core Logic (One Sentence) Key Data
ByteDance Hold/watch TikTok U.S. joint venture removes tail risk; Douyin remains the leading domestic short-video/e-commerce platform Third-largest holding; TikTok U.S. business carved out into a majority-U.S.-shareholder JV in January 2026; private market at a significant discount to comparable U.S. platforms
MercadoLibre Hold/watch MercadoPago dominates Latin American payments; e-commerce continues to gain share One of the largest holdings; reinvestment pressures near-term margins
Stripe Hold/watch Moving from payments to AI-driven commerce and digital currency infrastructure Described by the author as the next layer of financial plumbing
Nu Holdings Increased Profitable cross-border expansion; crossed into regulated banking Received conditional U.S. national bank approval in January; operates in Brazil, Mexico, Colombia
Revolut Hold/watch Received U.K. banking license Obtained full U.K. banking license in March
Zipline Hold/watch Drone delivery reaches commercial scale Approximately 20 sites; more than 2 million global deliveries; expanding to Houston and Phoenix; partners include Walmart, Chipotle, Panera, Wendy’s, among others
Aurora Innovation Hold/watch Commercialization of driverless freight Dallas-Houston corridor; over 100,000 accident-free miles
Joby Aviation Hold/watch eVTOL airworthiness progress Advancing through FAA certification
Moderna Hold/watch mRNA pipeline recovering Next-generation COVID vaccine launched; flu/COVID combination near European approval; flu vaccine near U.S. decision; positive long-term data for Merck-partnered cancer vaccine
Tempus AI Hold/watch Genomic data platform for cancer care No quantitative data provided
Insulet Hold/watch Automated insulin pump among the most compelling medical device businesses No quantitative data provided
SpaceX Hold/watch Long-term holding in a private company yields asymmetric returns Invested approximately £150m (150 million pounds), now worth billions of pounds
Meituan Not stated Volatility such as price wars is described as the cost of achieving asymmetric returns No action stated in the original text

SpaceX Demonstrates the Asymmetric Returns of Long-Term Holding

The author argues that SpaceX’s growth from approximately £150 million to billions of pounds demonstrates that a closed-ended investment trust’s long-term structure can capture opportunities unavailable to passive and conventional active funds.

Thesis: Bullish on long-term structures and concentrated holdings. Evidence: A private company in which it invested approximately £150 million a few years ago, which most funds could not hold; during the holding period, the private valuation was unpopular, but ultimately compounded into a multibillion-pound position. The author argues that passive investors and active managers constrained by indices, quarterly reviews, and prohibitions on private holdings could not have achieved this result. The trust was able to do so because of its closed-ended structure, long-term mandate, patient shareholders, a board that reviews performance annually rather than quarterly, and a willingness “to look stupid along the way.” Risk: The author acknowledges that this volatility is the cost of holding, citing Meituan’s price war, compression of software valuation multiples, and the repricing of Chinese assets as examples. The author said, “Most stocks underperform cash over their lifetimes. The entire excess return of the equity market is generated by the outliers.” — i.e., “Most stocks underperform cash over their entire life cycle; the stock market’s entire excess return is created by a tiny minority of outlier companies.” From this it follows that if one does not hold outliers or sells them too early, one will almost certainly underperform. This argument serves the author’s existing concentrated-holding strategy; readers should note that this is the position holder’s perspective.

The Index Is a Concentrated Bet; Short-Term Volatility Is the Opportunity

The author is cautious about the current market structure: buying a global index now is not the default diversification option, but rather a concentrated bet on the U.S., technology, and ten mega-caps; volatility driven by short-term capital is an opportunity for long-term holders. (Stance: [Cautious])

Evidence: Global indices currently have 63% exposure to the U.S., 33% to technology, and more than 35% of capital concentrated in ten companies. The author argues this is not a “default diversified allocation” but a concentrated portfolio carrying specific assumptions. The index design does precisely the opposite: it buys what has gone up and sells what has gone down. Fundamental investors represent less than 15% of U.S. equity trading volume; the remainder is driven by participants with daily/weekly time horizons, and leveraged capital amplifies every move. During the collective selloff in March, some stock prices moved 20% or 30% within days, unrelated to company fundamentals. The author points out that Scottish Mortgage has held concentrated positions for years and can invest in private companies; such volatility is “opportunity, not risk.” The gap between ten-year enterprise value and the daily pricing of short-cycle participants has long been its operating range, and that gap is widening. Risk: The author acknowledges that this makes holding the fund less comfortable than being benchmarked against an index; the volatility is real and not to be dismissed. But if one moves closer to the index to reduce short-term deviation, at a time when judgment matters ever more, one ends up holding less of what one believes in and more of what one does not.


Holding Seven Top Private Companies, a Full-On Bet on AI and Global Infrastructure Transformation

The author explicitly states that Scottish Mortgage holds seven of the world's ten most valuable private companies and firmly believes these companies' future opportunities outweigh their past.

The author argues that the current key trends—AI buildout, retreat from multilateralism, and the reshaping of China's competitive landscape—are interwoven rather than isolated events. The strategy is to hold quality companies for the long term and tolerate periodic volatility. The author's exact words: "We would rather be invested in the companies driving that change than sheltering from it." This reflects the holder's aggressive, proactive stance. Readers should note this is the fund's self-positioning narrative, not an objective assessment.

NAV Return of 27.4% for the Fiscal Year, Outperforming the Benchmark by 9.4 Percentage Points

In the current year (ended March 31, 2026), Scottish Mortgage Trust's NAV grew 27.4%, with a share price return of 26.8%, both significantly ahead of the FTSE All World Index's 18.0%.

Performance comparison:

Year ended March 31 2022 2023 2024 2025 2026
Share Price (%) -9.5 -33.5 32.5 6.0 26.8
NAV* (%) -13.1 -17.8 11.5 11.2 27.4
Benchmark** (%) 12.8 -0.9 21.0 5.5 18.0

NAV is after deducting borrowings and measured at fair value. *Benchmark is the FTSE All World Index (GBP) total return.

The author does not provide a specific attribution for the year's performance (e.g., which asset class contributed the most), only emphasizing the long-term holding strategy. The data itself shows that NAV has been volatile over the past five years (declining significantly in 2022–2023), but has consistently outperformed the benchmark over the past two years.