By Charlie Conchie
Bosses at Scottish Mortgage Investment Trust are set to face down shareholders tomorrow after a “painful” year in which it has been rocked by a boardroom spat and a plunge in its share price.
The London-listed fund, which built a name for stellar returns with an innovation-focused investment strategy, has seen its value crater by over 58 per cent since a November 2021 peak.
Shareholders will now weigh in on the troubles tomorrow at the fund’s annual general meeting in Edinburgh.
“The fund managers will be bracing for some tough questions from its shareholders given it reported a share price loss of 33.5 per cent in its latest annual results” said Kyle Caldwell, analyst at Interactive Investor.
Caldwell told City A.M. that investors will be looking for answers over why the firm has not seen its share price improve in 2023 despite its exposure to AI-adjacent firms, as well as what is being done to tackle its wide discount on the value of its portfolio which is sitting at over 20 per cent.
Bosses will also be grilled over why the fund slashed its Nvidia holding ahead of its share price rally in response to the AI boom this year, Caldwell added.
A Scottish Mortgage Investment Trust spokesperson has mounted a defence today, however, telling City A.M. that the decline in value of many of the its holdings has been “driven by macroeconomic concerns, geopolitics and the ongoing shockwaves from Covid-19”. They added there was a “dislocation between share prices and the underlying fundamentals of our portfolio of growth companies”.
“The board continues to manage the discount to net asset value by buying back shares in the market to address excess supply,” the firm said.
The Investment Trust added that it is a “long-term holder” of Nvidia and the stock is still the trust’s fifth largest holding.
“We believe it has strong further growth potential,” the spokesperson said.
The tech-heavy investor has been caught up in the sharp tech sell-off over the past year as investors fled growth-focused firms amid soaring inflation and interest rates.
Writing in its most recent update last month, bosses said a range of holdings including gene sequencing firm Illumina, crypto firm Blockchain.com and synthetic biology firm Ginkgo Bioworks had fallen sharply in the year to March.
The Baillie Gifford-owned fund’s managers were forced to issue a defence of its strategy when they updated the market on its latest set of results, calling for shareholders to remain “disciplined and patient”.
The firm has also been embroiled in a high-profile boardroom spat after one of its former board directors was ousted in March before launching a series of grenades.
Amar Bhide, the now departed director, has raised concerns over the fund’s governance and filed a complaint with regulators claiming that it misled investors over his exit. The debacle triggered the exit of long-time chair Fiona McBain.
The firm has consistently rebuffed Bhide’s allegations.
Bosses at the fund will be breathing a sigh of relief that the votes at the meeting are likely to pass without incident tomorrow.
Powerful shareholder advisory firm Glass Lewis has told investors to wave through all the votes on the table, including re-electing directors and electing two new directors, as well as approving a final dividend of 2.5p per share.
