Scottish Mortgage Investment Trust
Encyclopedia
Scottish Mortgage Investment Trust is a publicly traded investment trust
listed on the London Stock Exchange. It invests globally, looking for strong businesses with above-average returns. Scottish Mortgage is managed by Baillie Gifford & Co
, the Edinburgh based investment management partnership.
planters in Southeast Asia were keen to exploit, but credit was still difficult to obtain. In Edinburgh
, the recently formed legal partnership between Colonel Augustus Baillie
and Carlyle Gifford
(which ultimately became Baillie Gifford & Co) spotted an opportunity. They established The Straits Mortgage and Trust Company Limited.” to lend money to the planters, secured on the rubber estates.
Within a couple of years, however, the credit crisis was over and rubber planters no longer required finance from Straits Mortgage on the scale anticipated.
In 1913, the Trust's investment remit was widened to include bond and equity markets worldwide, and its name changed to The Scottish Mortgage and Trust Company Limited.”.
Early investments reflected the rapid global industrialisation that characterised the period, including shares in oil
and railway companies and loans to the Argentinean, India
n, Chinese
and Imperial Ottoman
governments.”. These reflected Scottish Mortgage’s flexible, unconstrained investment policy which enabled managers to invest shareholders' money in whatever and wherever the manager believed to be the best available opportunities.
From early on, North America
n investments featured in Scottish Mortgage's portfolio, but these were augmented substantially in the mid-1930s with the proceeds of Europe
an investments sold.” in reaction to the deteriorating political situation in Europe. By 1940, 22 per cent of the portfolio was invested in US
names.”. Soon after, however, the British government mandated the sale and repatriation of all America
n securities owned by British
citizens, including those of Scottish Mortgage. The government's representative overseeing this formidable exercise was Carlyle Gifford. The proportion invested in the US fell to 6.6 per cent by 1942, not to be rebuilt until the 1950s. By 1957, in the midst of the post-War
boom in equities, the chairman noted, "...we have over 44 per cent of our assets...in USA and Canada. Indeed, a higher proportion would have been even better".
In the 1960s, the Trust was among the first to take advantage of the lifting of restrictions on foreigners investing in the burgeoning Japan
ese market; a sound investment decision, but a controversial one with wartime memories still fresh.”. In later decades, investments in Southeast Asia
sought to take advantage of that region's development.
The amount invested in the UK allocation has also varied. During the early 1970s, UK equities and bonds fell from 63 per cent in 1972 to nearly 45 per cent of the Trust two years later. While some of this decline reflects steep relative falls in the UK stock market, it also reflects a deliberate move away from the UK. The exasperation of the chairman comes through in his 1975 statement: "The fact is that this country has got itself into a really dreadful mess... We continue to have more confidence in investment prospects overseas than in the UK".
Investment trust
An Investment trust is a form of collective investment found mostly in the United Kingdom. Investment trusts are closed-end funds and are constituted as public limited companies....
listed on the London Stock Exchange. It invests globally, looking for strong businesses with above-average returns. Scottish Mortgage is managed by Baillie Gifford & Co
Baillie Gifford
Baillie Gifford is an investment management firm which is wholly owned by 36 partners, all of whom work full time for the firm. It was founded in Edinburgh in 1908 and still has its headquarters in the city...
, the Edinburgh based investment management partnership.
History
The origins of Scottish Mortgage lie in a credit crisis, the Panic of 1907. By 1909 the growing popularity of the motorcar, including the Model T Ford, was creating significant demand for tyres, which rubberRubber
Natural rubber, also called India rubber or caoutchouc, is an elastomer that was originally derived from latex, a milky colloid produced by some plants. The plants would be ‘tapped’, that is, an incision made into the bark of the tree and the sticky, milk colored latex sap collected and refined...
planters in Southeast Asia were keen to exploit, but credit was still difficult to obtain. In Edinburgh
Edinburgh
Edinburgh is the capital city of Scotland, the second largest city in Scotland, and the eighth most populous in the United Kingdom. The City of Edinburgh Council governs one of Scotland's 32 local government council areas. The council area includes urban Edinburgh and a rural area...
, the recently formed legal partnership between Colonel Augustus Baillie
Augustus Baillie
Lieutenant Colonel Augustus Charles Baillie DSO was one of the founders of Baillie Gifford, one of the United Kingdom's largest investment managers.-Career:...
and Carlyle Gifford
Carlyle Gifford
Thomas Johnstone Carlyle Gifford was one of the founders of Baillie Gifford, one of the United Kingdom's largest firms of investment managers.-Career:...
(which ultimately became Baillie Gifford & Co) spotted an opportunity. They established The Straits Mortgage and Trust Company Limited.” to lend money to the planters, secured on the rubber estates.
Within a couple of years, however, the credit crisis was over and rubber planters no longer required finance from Straits Mortgage on the scale anticipated.
In 1913, the Trust's investment remit was widened to include bond and equity markets worldwide, and its name changed to The Scottish Mortgage and Trust Company Limited.”.
“By 1913 it was obvious the future of the trust lay in operating as a normal investment trust – that is to say, one which invested in a broad range of securities, very largely overseas, as was typical of Scottish investment trusts of the period, with a strong bias towards North America – rather than the Rubber plantation specialist that had originally been envisaged. In recognition of this, the Board decided to change its name to “The Scottish Mortgage and Trust Limited”; this change of name received official approval on 31 May 1913.”
Early investments reflected the rapid global industrialisation that characterised the period, including shares in oil
Oil
An oil is any substance that is liquid at ambient temperatures and does not mix with water but may mix with other oils and organic solvents. This general definition includes vegetable oils, volatile essential oils, petrochemical oils, and synthetic oils....
and railway companies and loans to the Argentinean, India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
n, Chinese
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
and Imperial Ottoman
Ottoman Empire
The Ottoman EmpireIt was usually referred to as the "Ottoman Empire", the "Turkish Empire", the "Ottoman Caliphate" or more commonly "Turkey" by its contemporaries...
governments.”. These reflected Scottish Mortgage’s flexible, unconstrained investment policy which enabled managers to invest shareholders' money in whatever and wherever the manager believed to be the best available opportunities.
From early on, North America
North America
North America is a continent wholly within the Northern Hemisphere and almost wholly within the Western Hemisphere. It is also considered a northern subcontinent of the Americas...
n investments featured in Scottish Mortgage's portfolio, but these were augmented substantially in the mid-1930s with the proceeds of Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
an investments sold.” in reaction to the deteriorating political situation in Europe. By 1940, 22 per cent of the portfolio was invested in US
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
names.”. Soon after, however, the British government mandated the sale and repatriation of all America
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
n securities owned by British
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
citizens, including those of Scottish Mortgage. The government's representative overseeing this formidable exercise was Carlyle Gifford. The proportion invested in the US fell to 6.6 per cent by 1942, not to be rebuilt until the 1950s. By 1957, in the midst of the post-War
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
boom in equities, the chairman noted, "...we have over 44 per cent of our assets...in USA and Canada. Indeed, a higher proportion would have been even better".
In the 1960s, the Trust was among the first to take advantage of the lifting of restrictions on foreigners investing in the burgeoning Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
ese market; a sound investment decision, but a controversial one with wartime memories still fresh.”. In later decades, investments in Southeast Asia
Asia
Asia is the world's largest and most populous continent, located primarily in the eastern and northern hemispheres. It covers 8.7% of the Earth's total surface area and with approximately 3.879 billion people, it hosts 60% of the world's current human population...
sought to take advantage of that region's development.
The amount invested in the UK allocation has also varied. During the early 1970s, UK equities and bonds fell from 63 per cent in 1972 to nearly 45 per cent of the Trust two years later. While some of this decline reflects steep relative falls in the UK stock market, it also reflects a deliberate move away from the UK. The exasperation of the chairman comes through in his 1975 statement: "The fact is that this country has got itself into a really dreadful mess... We continue to have more confidence in investment prospects overseas than in the UK".
Dividends
Over the entire history of Scottish Mortgage, it has cut its dividend only once, in 1933 - after the effects of the Depression ravaged its portfolio. In every other year, it either maintained or increased its dividend, even during both World Wars. In 1942 the chairman wrote with masterly understatement of "some important adverse influences... Our revenue has suffered from the almost complete stoppage of dividends from the invaded areas".Present day
Scottish Mortgage celebrated its centenary year in 2009. As at 30 September 2011 the Trust had total net assets of approximately £1.7 billion. Investments continue to reflect the global-nature of the Trust with holdings in fast-growing economies such as China and Brazil.Time Line
- 1909 - Launch of Straits Mortgage & Trust Limited
- 1913 - Name change to Scottish Mortgage & Trust Company Limited
- 1914-18 - First World War
- 1929 - Wall Street Crash
- 1933 - Scottish Mortgage cuts dividend - the only time in its history
- 1939-45 - Second World War
- 1957 - Macmillan tells Britons they have "never had it so good" - reflects post-war economic and stock market boom
- 1965 - Finance Act - major tax changes
- 1969 - Scottish Mortgage merges with two other trusts: Second Scottish Mortgage & Scottish Capital
- 1973-4 - Oil shock and stock market crash
- 1975 - Start of a 25-year bull run in equities
- 2000 - Long bull market ends with bursting of technology bubble
- 2002 - Name change to Scottish Mortgage Investment Trust PLC
- 2003-7 - Market rally led by emerging markets and commodities
- 2008 - Scottish Mortgage annual dividend per share reaches record high of 10.3 pence. Severe stock market falls as banking and credit crisis takes place
- 2009 - Scottish Mortgage's 100th AGM held in June in Edinburgh.
- 2010 - Tom Slater appointed Deputy Manager of Scottish Mortgage Investment Trust PLC