Scotish Mortgage Investment Trust not risky?

intowhere

I have read on here that people think SMI Trust is a great investment but rather volatile, even relative to other Global Investment Trusts. However I've been looking at Trustnet and from there I've understood that this trust's BETA is 0.82 and its volatility is 11.2%, both of which are in the 3rd quaterlie for their fund's sector. Does this not mean SMI is less volatile that most other Global Investment Trusts, and therefore 'more of a safer investment'.

https://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=ITSMT

1y 3y ? Volatility 11.41 15.25 ? Alpha 13.41 2.63 ? Beta 0.82 1.41 ? Sharpe 2.95 1.43 ? Info Ratio 0.77 0.81 ? R2 0.15 0.61 ? Quartiles:1 2 3 4

dunstonh

When you are dealing with investments that are, in isolation of any others you may hold, risk 9 out of 10, using phrases like "more of a safer investment" doesn't really apply.

Its a fund that is capable of 60% loss in 12 months. When you are looking at that level of loss and risk, you tend to find people are not worried whether the loss potential may be 55% instead of 60%

bowlhead99

intowhere wrote: »

I have read on here that people think SMI Trust is a great investment but rather volatile, even relative to other Global Investment Trusts.

It's a good long term performer but has a pretty small and concentrated set of investments driven by the manager's convictions. It has tended to do well in rising markets and has literally doubled in the last 3 years. So, it could easily halve (or quite a bit worse) over the next 3 without anyone being surprised.

However I've been looking at Trustnet and from there I've understood that this trust's BETA is 0.82 and its volatility is 11.2%, both of which are in the 3rd quaterlie for their fund's sector.

Those are 1-year figures, so are not much of a predictor of long term trend. And over that 1 year, the fund had a very low (4th quartile, ie at least three quarters of its peers had better scores) 'r-squared' score. As they say on the site, "The R-Squared measure is an indication of how closely correlated a fund is to an index or a benchmark. R-Squared is a key ratio, in that other measures of a fund's performance - such as Alpha and Beta - will have been calculated by reference to its benchmark.The weaker the R-Squared correlation, the more unsuitable the benchmark is, and the more unreliable these measures will be in assessing the fund".

So, whatever the 'beta' score is, it's not going to be very useful - as the fund was not highly correlated to its benchmark anyway, having a very concentrated set of holdings that caused it to move by different relative amounts at different times to the benchmark.

Does this not mean SMI is less volatile that most other Global Investment Trusts, and therefore 'more of a safer investment'.

No, being in the third quartile for volatility means that if you line up all the funds in a row, at least 2 quarters (half) of the other funds had a better volatility score.

As a 1-year period is not very meaningful for volatility, being only a small snapshot over which it was measured, you could look at the 3-year period instead. Over 3 years it has a higher volatility score, of over 15, which is in the fourth quartile of its peer group. So, at least three quarters of the group have a better score, it is in the worst quarter.

So, that doesn't mean SMT is "...less volatile that most other Global Investment Trusts, and therefore 'more of a safer investment' ." It means the exact opposite.

StellaN

As an example look how much it has lost in the last 2 days. I think the share price has gone down from 432.00 to 418.00 in just 2 days trading so that's pretty volatile.

Thrugelmir

SMT hold 13% of their investments in unquoted companies, i.e. private equity. NAV could move significantly in short time frames as a consequence.

StellaN

I was thinking of selling SMT a few weeks ago and finally decided to sell at 432.00 because I've had a good run with this IT over the past 3 and half years. I didn't particularly need to sell but I just thought I had made a very good profit and now was the time to switch to another IT such as Witan that is less volatile.. I do realise that SMT may go even further in share price but I'm very happy with the profit I have made.