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Rula Khalaf, editor of the Financial Times, selects her favorite stories in this weekly newsletter.
How did you start:
Our philosophy
Our goal is simple. Maximize total returns over the long term. To do this, we aim to own the world's most distinguished public and private growth companies. We limit fees so shareholders keep more of any returns generated.
Invest in progress
The returns we aim to achieve for shareholders will appeal to many, but the path we took to achieve them may not. Investing in companies undergoing structural change means that stock price rises and falls are inevitable, both for the companies we own and for the fund itself.
But in our experience, stock prices follow fundamentals, and progress always prevails. We ask Scottish Mortgage holders to share our long-term outlook, our commitment to investing in progress, and to recognize that returns are not delivered in a straight line.
Find a few
What happens to the average company is not important to us. We believe that only a small number of companies with exceptional growth will deliver returns. We aim to find them and own them for long periods of time.
The companies we seek have long growth runways ahead of them. They address large and growing opportunities. They possess a lasting competitive advantage, disrupting their industries or even creating new ones. Many are founder-led and have a cultural advantage that tilts the chances of success in their favor.
How are you:
Scottish Mortgage is saving at least £1bn for buybacks over the next two years.
Scottish Mortgage's public and private portfolio is delivering strong operating results, evidenced in part by free cash flow from portfolio companies which has more than doubled over the past year. Collectively, portfolio companies have adapted to the rising cost of capital and are financing their future growth. Against this background and having strengthened the Company's balance sheet, the Board of Directors now intends to take more coordinated action to address the discount on net asset value at which the Company's shares continue to trade.
According to Jefferies, this is the largest buyback program ever undertaken by a UK investment fund, with £1 billion representing 9 per cent of the Scottish Mortgage Investment Fund's shares.
Trying to address the widening gap between SMIT's share price of 781p and its net asset value of 927p is understandable, but a very strange use of money by an investment vehicle that very loudly promotes how it aims to “identify, own and back the world's largest companies”. Exceptional growth companies,” which now seems to include himself.
Jefferies points out that SMIT has “plenty of room” to do this, having deleveraged and improved performance after a terrible 2022, and “importantly, the program likely reflects the board’s confidence in the company’s own property valuations”.
maybe. But if Baillie Gifford's investment fund is so concerned about NAV reductions in share prices, perhaps a better move would have been to write down the value of its huge holdings of private companies to something closer to what the market clearly believes they are worth. ?
Or did they simply not invest nearly a third of their assets in private companies, most of them at the end of one of the longest and strongest bull markets in history?
