ADVERTORIAL
GOING LONG: THE PURSUIT OF EXTREME RETURNS The value of an investment, and any income from it, can fall as well as rise and investors may not get back the amount invested. Companies that can deliver extreme returns are by their very nature rare. Being able to invest globally and be agnostic between public and private companies gives Scottish Mortgage the best opportunity of finding them. Whether investing in private or public markets, the goal is always the same: to identify the small number of companies that have the potential to deliver the exceptional growth characteristics that its managers are looking for. Trying to maximise returns for shareholders over five and ten years means the investors tend to have a different focus to many of the other shorterterm participants in the financial markets. It’s not that they are blind to economic headwinds, such as rising inflation or global conflict, but that they are able to see through them. By backing structural trends, the holdings are less dependant than average growth companies are on GDP growth or other elements. As Lawrence Burns, deputy manager, explains, “We’re trying to own companies that face a really transformational, secular growth opportunity, that in all but the strongest of macro headwinds should come to fruition and be meaningful.” He cites Mercado Libre, one of Scottish Mortgage’s holdings, as an example. It operates online marketplaces in Latin America. “Ultimately, the investment case is
about whether you think people are going to buy more online in the future or less, irrespective of how large that retail pie is? And I think that’s answered by the fact that despite the macroeconomic difficulties, over the past five years, Mercado Libre has grown its revenues over eightfold.” One of the reasons the company has been able to do this is that online retail is a better and more efficient way to consume. And ‘a better way of doing things’ is a common theme among the companies Scottish Mortgage backs, whether they are in healthcare or ecommerce. Companies that can lower the price and the cost to the end consumer/patient by providing a better way of doing things. This makes the advantages that they offer even more important and, ultimately, more valuable for shareholders in the long term. It gets to the heart of what Scottish Mortgage is trying to invest in, which is the big changes on a tenyear view.
The views expressed and any stock examples mentioned in this article should not be considered as advice or a recommendation to buy, sell or hold a particular investment. This article contains information on investments which does not constitute independent investment research and is therefore not subject to the protections afforded to independent research. The Trust has a significant investment in private companies. The Trust’s risk could be increased as these assets may be more difficult to sell, so change in their prices may be greater. The Trust invests in overseas securities. Changes in the rates of exchange may also cause the value of an investment (and any income it may pay) to go down or up. The investment trusts managed by Baillie Gifford & Co Limited are listed UK companies and are not authorised or regulated by the Financial Conduct Authority. Issued by Baillie Gifford & Co Limited which is authorised and regulated by the Financial Conduct Authority (FCA).