Scottish Mortgage Trust

Sally2020

Has anyone had any experience with the Scottish Mortgage trust, its an investment trust listed on the LSE. Has paid a dividend every year and with focus on tech and healthcare. Is it worth diversifying into it? I stick to Vanguard funds due to the low fees and good performance?

Ciprico

High risk high reward. Most of the companies it holds didn't exist ten years ago ie Amazon, Tesla, various US and Chinese internet stocks...

It's a serious company and been around 100 years so weathered 2 world wars and various stock market crashes.

Maybe also take a look Monks investment trust....

AnotherJoe

I own some. It's reputable. As for "experienced it" you can look at past performance easily enough and also look at the main constituents and decide if that's the sort of area you'd like to,spice up your investing with.

bowlhead99

I have experience with it. I'm one of its shareholders.

My guess is you only really signed up to the site really to promote your trading 212 referral link, tickr and freetrade referrals links.

Giving you the benefit of the doubt, I can tell you that it is a highly concentrated fund invested in a mix of quite volatile listed and high risk unlisted growth stocks, with a specific investment style. It is pretty much the opposite of the Vanguard funds you stick to. Its fees are quite reasonable IMHO, given its historic success and the potential returns when markets are favourable.

As it holds a concentrated portfolio of stocks in certain sectors or regions that its managers like, it has the potential to double your money quicker than the average Vanguard fund, and it also has the potential to lose 70-80% in a global equity crash. So, greater potential rewards than the average Vanguard fund and greater risks too.

Most Vanguard funds sold to UK retail investors are trackers which offer diversified exposure to markets. If you already have tracker-based exposure to world markets, you won't really 'diversify' your exposure by buying SMT, you will concentrate it into the investments that the SMT management prefer.

Tyrion_Lannister

First, I’m new to the forum and this is my first post so hello to all fellow members.

I’m a shareholder in SMT too and have been really happy with it since I first invested about 5 years ago.

As bowlheas99 says, most Vanguard funds are trackers, one of the most popular is Life Strategy 80 which has returned 54% over 5 years, Scottish Mortgage in that time has returned 144%.

AnotherJoe

bowlhead99 wrote: »

Most Vanguard funds sold to UK retail investors are trackers which offer diversified exposure to markets. If you already have tracker-based exposure to world markets, you won't really 'diversify' your exposure by buying SMT, you will concentrate it into the investments that the SMT management prefer.

To be fair, the unlisted stocks it holds does mean some diversification even if inevitably there would be a concentration is some areas as well, eg chances are Tesla and Tencent etc will also be in a global fund like VLS100.

bowlhead99

AnotherJoe wrote: »

To be fair, the unlisted stocks it holds does mean some diversification even if inevitably there would be a concentration is some areas as well, eg chances are Tesla and Tencent etc will also be in a global fund like VLS100.

Yes, I was going to add another paragraph or two but then the phone rang and as I was typing the message on the phone at the time, I just submitted it and didn't bother to edit it afterwards.

The biggest holding of SMT is Amazon which is an twelfth of the value of the whole fund. If you have a US or global tracker you will already have Amazon in your top 4 holdings, so it doesn't seem to diversify your holdings to buy a huge amount more of it. Likewise, Tencent and Alibaba are both top 20 holdings in MSCI's all companies world index, taking a similar allocation to Amazon in that tracker between them- and they account for another eighth of SMT's value. If you already have a portfolio built of global or regional tracker funds, then out the holdings making up SMT's top ten (half the value of the fund), only Delivery Hero is outside the top few hundred things you aleady own (being about 1200th position in an iShares AWCI tracker; Ferrari another major holding is about 500th).

So while SMT's portfolio construction bears little resemblance to its benchmark (>90% active share) - if your strategy is to track world equities broadly you will not really diversify to a broader set of holdings if you selectively double up on things you already have. It's true that in the bottom half of SMT's holdings by value there are some unlisted shares that aren't on public markets (a fifth of the holdings by value are unlisted). But if you were really looking for broad exposure to unlisted shares you could get exposure to 1000 private equity holdings by buying something like Harbourvest Global Private Equity or Pantheon International.

In summary SMT is not a good 'diversifier' for someone who has a bunch of trackers. However, it may be attractive for someone who wants to tilt their portfolio away from a general mix of global growth and value companies towards high growth prospects, with the consequence of high volatility.

To save regurgitating the content of 100+ posts over the last year, here's links to previous recent threads on SMT:

https://forums.moneysavingexpert.com/discussion/6010754/scottish-mortgage-trust-bright-future
https://forums.moneysavingexpert.com/discussion/5690648/scottish-mortgage-it-smt
https://forums.moneysavingexpert.com/discussion/5692678/lindsell-train-vs-fundsmith-vs-scottish-mortgage
https://forums.moneysavingexpert.com/discussion/6076000/scottish-mortgage-investment-trust

You could go back even further and find the one where former member RyanFuturistics identified that it was a trust he would love to buy because of its track record and high active share, "but waiting for a better entry point (while US shares are sky high)". That was in February 2015. In the four years and eleven and a half months since then, it's returned over 130%.

Aminatidi

I hold some money in SMT and I didn't do it to diversify I did it to concentrate.

LHW99

I have looked at SMT, but decided I already had enough of Amazon Tencent etc for my needs

MarkCarnage

It is a concentrated high growth portfolio. The position sizing in it reflects the philosophy of running winners. A number of smaller holdings are unlisteds, ones which haven't performed well, or new holdings.

At the risk of oversimplification, the manager's strategy is along the lines of - of any ten stocks we hold, one will deliver game changing performance that will see the value grow factorially from our original investment, two will be very good performers, two will be index like performers, and the other five will underperform or even go bust.

The overlap with Monks holdings isn't that high, and Monks is a lot less concentrated. Disclosure, I hold both and have done for over 10 years.

AnotherJoe

bowlhead99 wrote: »

But if you were really looking for broad exposure to unlisted shares you could get exposure to 1000 private equity holdings by buying something like Harbourvest Global Private Equity or Pantheon International.

I will investigate, thanks. I have some money to invest when the Corona scare dies down and was looking to diversify out of what i already have. Or just buy another 20 Tesla to up it to a neat 200, I like round numbers