Have you ever watched a share price climb almost fivefold in five years, then crash nearly 60% in the space of eighteen months, only to rocket back up 150% and set a fresh all-time high? That is exactly the journey holders of Scottish Mortgage Investment Trust have lived through. It has been exhilarating, uncomfortable and, for those who stayed the course, ultimately rewarding. I keep coming back to this trust because it forces you to confront a simple but difficult question: are you really prepared for the full emotional ride that genuine growth investing demands?
Why Scottish Mortgage Keeps Capturing Investor Attention
Scottish Mortgage Investment Trust has long stood out among global growth funds. Managed by Lawrence Burns and Tom Slater, it focuses on companies the managers believe can deliver exceptional long-term returns, whether those businesses are listed on public markets or still private. The approach is deliberately concentrated and patient. The managers are not trying to hug a benchmark or deliver smooth, predictable returns every quarter. They are hunting for businesses that can compound capital at high rates for many years.
That philosophy produced spectacular gains in the years leading up to late 2021. Then higher interest rates, inflation worries and a sharp rotation away from growth stocks triggered a brutal drawdown. Many investors lost their nerve. Those who held on have been handsomely rewarded as the trust recovered and pushed to new highs. Over the most recent three-year period the performance sits at the very top of the global funds table. That kind of ranking does not happen by accident.
What makes the story particularly interesting right now is the combination of listed technology winners and a carefully selected group of private companies. The private side of the portfolio has become a defining feature. Back in 2012 the managers decided to allocate capital to unlisted businesses. The limit was later formalised at 30% of the portfolio. Today the actual weighting sits around 22%, a meaningful but not overwhelming exposure.
The SpaceX Story That Still Dominates Conversations
One name continues to generate more discussion than almost any other holding: SpaceX. Scottish Mortgage first invested in 2018 when the company was valued at roughly $31 billion. After the initial public offering in June, the market capitalisation has surged past $2 trillion. The trust has reduced its position from more than 25% of the portfolio down to about 15%. That is still a very large stake for any single investment.
The managers have been clear about their intentions. They have no plans to exit completely and expect to hold the shares for a decade or more. In my view that stance is consistent with the overall philosophy. They are not trading around short-term valuation swings. They are backing what they see as a transformative company with a long runway. Whether you agree with the valuation or not, the discipline of maintaining a long time horizon is rare among fund managers.
We have no intention of selling out and expect to hold the shares for ten years.
That kind of conviction can feel uncomfortable when markets turn volatile, yet it is precisely the mindset that has historically generated the trust’s best outcomes.
Private Holdings Still Shaping the Portfolio
SpaceX is not the only private or recently listed name of note. Anthropic, the artificial intelligence company, was roughly 3.9% of the portfolio in late September and is expected to climb above 5% at the target valuation as it heads toward its own public offering. ByteDance, the owner of TikTok, accounts for around 4.4% and looks likely to remain private for the foreseeable future. Stripe, the payments business, sits at about 2.9% and also shows no immediate plans to float.
These positions illustrate both the opportunity and the complexity of investing in private markets through a listed investment trust. Valuations are less transparent. Liquidity is limited. Yet the managers argue that access to these businesses at earlier stages of their growth journeys has been one of the most important decisions the trust has made. Looking at the overall track record, it is hard to disagree that the private allocation has been vindicated so far.
I have always found the private equity angle particularly compelling because it gives ordinary investors exposure to companies that would otherwise be available only to large institutions or specialist funds. Of course the discount or premium at which the trust itself trades can amplify both gains and losses, so timing still matters.
Tesla Exit and the Logic Behind It
Not every high-profile holding has been retained. Scottish Mortgage did extremely well from Tesla over the years but sold the entire position this year. Tom Slater has explained the reasoning clearly. Tesla played a pivotal role in accelerating the shift toward electric vehicles and forced traditional carmakers to respond. That contribution is not in doubt.
However the competitive landscape has intensified, especially in China. While autonomous driving software and robotics could eventually become very large and profitable businesses, the managers believe the current share price already prices in a great deal of that future success. In other words, they feel they would be paying too much for the remaining opportunity. Selling a long-term winner is never easy, yet knowing when a position has become fully valued is part of disciplined portfolio management.
This decision also highlights an important point. The trust is not married to any single company or sector. It is prepared to take profits and redeploy capital when the risk-reward balance no longer looks attractive. That flexibility has served investors well over multiple market cycles.
Moderna’s Remarkable Recovery Story
Few holdings illustrate the emotional volatility of growth investing better than Moderna. Between the end of 2019 and September 2021 the shares soared twenty-two times. The company became the largest position in the portfolio at one stage. Then reality set in. Revenues that had exploded from $60 million in 2019 to $18.5 billion in 2021 collapsed as Covid vaccine demand faded. Profits of $12 billion turned into losses. Patent disputes added further pressure. The share price fell 94% over the following four years.
Many investors would have thrown in the towel. The managers of Scottish Mortgage held their nerve. Progress in respiratory vaccines gradually improved sentiment. Then in August a phase III trial of a vaccine for late-stage skin cancer, used in combination with another well-known immunotherapy drug, produced encouraging results. Experts have urged caution, as they should, but the market reaction was swift. Moderna roughly doubled and now represents nearly 4% of the portfolio again.
This episode is a textbook example of why conviction and patience matter. Technology platforms that can address multiple medical conditions retain optionality even after a dramatic commercial setback. The managers were willing to look through the near-term pain. Whether that patience continues to be rewarded remains to be seen, but the recovery so far has been impressive.
The Growing Role of Artificial Intelligence
Artificial intelligence sits at the heart of the current optimism. Lawrence Burns has been particularly vocal about the opportunity. Companies that lean into AI are seeing greater value creation, he notes. Demand drivers are only getting stronger. Hyperscalers building data centres cannot afford to fall behind. Businesses across industries are redesigning processes around AI capabilities. Hardware returns remain strong and the underlying technology continues to improve. More computing power will be required if the potential keeps expanding.
The trust already benefits from listed holdings such as Nvidia and TSMC that sit at the centre of this infrastructure build-out. It also holds a small position in PsiQuantum. Burns is careful to emphasise that the fund invests in growth rather than pure technology. The quantum computing stake will remain modest until conviction increases. Still, the managers recognise that many natural phenomena are extremely difficult to model with conventional computing. The long-term potential in that area looks substantial.
In my experience the most successful growth investors are those who can separate genuine technological progress from temporary hype cycles. Scottish Mortgage has navigated both the boom and the subsequent reassessment of AI-related valuations better than most. That does not mean the path ahead will be smooth. It does suggest the managers have a clear framework for evaluating these opportunities.
Performance Context and Portfolio Construction
Looking at the numbers in isolation can be misleading. The five-year rise of nearly 400% followed by a 60% decline and then a 150% rebound creates an extraordinary chart. Yet the underlying process has remained consistent. The managers seek companies capable of delivering multi-year compounding. They accept that valuations will sometimes look stretched and that share prices will be volatile. Concentration in a relatively small number of high-conviction ideas is intentional.
The mix of public and private holdings adds another layer. Public market names provide liquidity and daily pricing. Private investments offer access to earlier-stage growth but introduce valuation uncertainty and reduced flexibility. Balancing those two elements is one of the more distinctive aspects of the trust’s approach.
Investors should also remember that the share price of the trust itself can trade at a premium or discount to net asset value. Those swings can amplify returns in both directions. During periods of strong performance the premium can expand. During sell-offs the discount can widen sharply. Understanding that dynamic is essential before committing capital.
Risks That Cannot Be Ignored
No discussion of Scottish Mortgage would be complete without acknowledging the risks. Growth stocks as a group remain sensitive to changes in interest rates and risk appetite. A sustained period of higher real yields would likely pressure valuations again. Concentration risk is real. The largest positions can move the entire portfolio meaningfully on any given day.
Private company valuations are less frequent and more subjective. Write-downs can arrive with little warning. Liquidity constraints mean the managers cannot always exit positions as quickly as they might like. Geopolitical developments, regulatory changes affecting technology companies, and shifts in competitive dynamics within key industries all represent additional sources of uncertainty.
Perhaps the biggest risk is behavioural. Investors who buy after a strong run and then panic during the next drawdown often lock in permanent capital destruction. The historical volatility of this trust demands a long time horizon and a genuine tolerance for large interim losses. If that description does not match your own temperament, there are many other ways to gain exposure to global growth.
Is Now the Time to Consider a Position?
After such a powerful recovery, some existing holders may feel tempted to trim. That is understandable. Taking some profits after a 150% rebound from the lows is a rational way to manage risk. At the same time the managers remain constructive about the opportunity set, particularly around artificial intelligence and selected private companies with long growth runways.
I tend to view trusts of this nature as core satellite holdings rather than all-weather portfolio anchors. They can deliver exceptional returns over full market cycles, but they will almost certainly experience periods of significant underperformance. Position sizing therefore becomes critical. An allocation that is large enough to matter if the thesis works, yet small enough that a 50% drawdown does not derail the broader portfolio, usually makes the most sense.
New investors should also consider the current premium or discount to net asset value. Buying when the trust trades at a meaningful discount has historically improved subsequent returns, although timing those opportunities is never straightforward.
Lessons From a Volatile Journey
Several broader lessons emerge from studying Scottish Mortgage’s recent history. First, genuine long-term compounding rarely happens in a straight line. The path is often jagged and emotionally challenging. Second, the willingness to hold high-conviction positions through periods of severe underperformance can be the difference between ordinary and exceptional results. Third, access to private markets through a listed vehicle offers both opportunity and complexity that pure public-market funds cannot match.
Fourth, knowing when to sell is just as important as knowing what to buy. The Tesla exit demonstrates that even successful investments eventually reach a point where the remaining upside no longer justifies the risk. Finally, thematic exposure to transformative technologies such as artificial intelligence and space exploration can generate outsized returns, but only if the managers maintain rigorous standards around valuation and competitive dynamics.
These principles are not unique to this particular trust, yet few vehicles embody them as clearly or have delivered such dramatic real-world results in recent years.
Looking Ahead With Eyes Wide Open
Scottish Mortgage Investment Trust remains one of the purest expressions of high-conviction growth investing available to ordinary shareholders. The combination of listed technology leaders, carefully selected private companies, and a management team that thinks in decades rather than quarters continues to set it apart. The recent rebound has been powerful. Whether the next decade matches the previous one is impossible to know.
What does seem clear is that the opportunity set the managers are focusing on – artificial intelligence infrastructure, advanced computing, space-related technologies, and selected private innovators – still has substantial room to expand. At the same time the risks of concentration, valuation sensitivity and behavioural mistakes remain very real.
For investors who understand the rollercoaster nature of this style of investing and who can commit capital for the long term, Scottish Mortgage continues to deserve a place on the shortlist. Just do not expect a smooth ride. The managers themselves would probably be the first to tell you that smooth is not the goal. Exceptional long-term returns are. And those rarely come without turbulence along the way.
In the end the decision comes down to personal circumstances, risk tolerance and time horizon. There is no universal answer that fits every portfolio. What I can say is that few investment stories of the past decade have been as dramatic, as instructive, or as potentially rewarding for those who stayed the course. The next chapter is still being written.
