There are only some funding trusts listed on the FTSE 100 and plainly ChatGPT’s high funding belief to purchase on the index can also be my very own. Scottish Mortgage Funding Belief (LSE:SMT) is a Baillie Gifford-managed entity investing predominantly in US tech. Its long-run efficiency is spectacular.

What ChatGPT stated

I requested ChatGPT to provide me a abstract of its thesis for investing in Scottish Mortgage, and right here’s what it stated: “The Scottish Mortgage Investment Trust is a top choice due to its exceptional long-term growth, driven by investments in high-growth global companies, particularly in tech, healthcare, and renewable energy.”

It goes on to spotlight that the agency has achieved important success by investing in innovation and disruptive sectors. Noting firms like Tesla and Amazon, ChatGPT stated that the belief’s publicity to high-growth firms is arguably unmatched on the index. The substitute intelligence (AI) platform additionally praised Scottish Mortgage’s comparatively low charges and traditionally robust efficiency.

Broadly, I agree with the bullishness. Low charges and a terrific monitor file for an actively managed fund. Nevertheless, ChatGPT’s data did show to be somewhat outdated in some instances.

A powerful monitor file

Many Britons see Scottish Mortgage as their essential publicity to the fast-moving know-how sector. Nevertheless, there’s extra to it than that. It’s an actively managed portfolio and the fund managers have a powerful file of selecting the following large winners.

For instance, Scottish Mortgage first took a place in Amazon again in 2004, lengthy earlier than the e-commerce large turned the worldwide powerhouse it’s right now. This early funding capitalised on Amazon’s disruptive potential in retail and cloud computing, which has since delivered important returns.

Equally, the belief invested in Tesla in 2013, effectively earlier than the electrical car (EV) revolution gained mainstream traction. Tesla’s inventory price surged over the next decade, making it certainly one of Scottish Mortgage’s most profitable holdings and contributing considerably to its portfolio efficiency. Administration seems to have lowered the fund’s stake just lately, probably capitalising on the inventory’s pre-Christmas surge.

In recent times, Scottish Mortgage has additionally made strategic investments in non-public firms, together with SpaceX. The belief first invested in Elon Musk’s rocket firm in 2018, recognising its potential to revolutionise house exploration and satellite tv for pc know-how.

SpaceX has since develop into Scottish Mortgage’s largest holdings, with its valuation hovering to $350bn in 2024, up from $255bn in 2023 and $27bn in 2018. This funding has offered a major enhance to the belief’s web asset worth (NAV).

In fact, previous efficiency isn’t a assure of future success, nevertheless it’s good to see.

Not with out its dangers

Scottish Mortgage’s use of gearing (borrowing to take a position) amplifies each features and losses. Whereas it will probably improve returns in rising markets, it will increase losses throughout downturns. Moreover, its important publicity to unlisted non-public firms (27% of the portfolio) provides liquidity and valuation dangers, making it extra risky and delicate to market situations. Nonetheless, it’s an funding I proceed to pursue, having just lately added to my place. There’s loads of cause to consider it can carry out over the long term.