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№ 138 8 filings · 2023-09-11 → 2026-05-14

THE SCHIEHALLION FUND LIMITED

MNTN
Financial Services Market cap $2.3bn Overall fit 380 /1000

Indirect AI exposure through a diversified fund wrapper, no operating leverage at the fund level, and the discount-arbitrage opportunity has already largely closed — a partial fit for an investor wanting direct AI-receiver exposure with operating leverage at a fair price.

Fair value range $1.20–$1.45 Mid case · $1.3bn
Absolute upside -41.9% vs current market cap
Conviction 2/5 confidence in fair call
Supports the call
  • NAV-based methodology is unambiguous for an investment trust
  • Independent third-party (S&P Global) input into Level 3 valuations
  • Clean balance sheet with no debt and a buyback in place
Limits the call
  • Latest disclosed NAV is from 31 Jan 2025; H1 2025 figures not in supplied filings
  • 77% of portfolio is Level 3 unobservable, with SpaceX alone ~10% of NAV
Methodology

NAV with illiquidity/concentration discount

In one line · bull case

Hard-to-replicate access to a basket of top-tier private growth companies, several of them direct AI beneficiaries, with a clean balance sheet and active buyback — but most of the discount-narrowing upside has already played out.

In one line · biggest risk

77% of NAV sits in Level 3 private marks with SpaceX alone ~10%, so a growth-equity correction or a SpaceX setback would punch a meaningful hole in reported NAV that the now-narrow discount no longer cushions.

Drivers
AI beneficiary 55 /100
Meaningful AI-receiver exposure via Databricks, Tempus AI, Wayve, Tenstorrent, Runway, PsiQuantum, but diluted by ~70 other non-AI holdings.
Operating leverage 25 /100
Closed-end fund — costs (mgmt fee 0.7-0.9% of NAV) scale with NAV, so no fixed-cost dilution effect at fund level.
Earnings vs expectations 50 /100
Not applicable in the traditional sense — investment trusts have no EPS consensus; set to 50 with this caveat.
Growth momentum 60 /100
NAV +12.9% in FY25 with strong SpaceX and Bending Spoons revaluations; portfolio aggregate revenue growth ~34% (top-10 42%).
Moat 45 /100
Baillie Gifford's access to top-tier private rounds is real but not unique; Scottish Mortgage and others compete.
Earnings quality 40 /100
77% of NAV is Level 3 unobservable, marked using third-party model inputs — quality of marks is inherently lower than cash earnings.
Management quality 65 /100
Baillie Gifford competent and disciplined on fees and capital allocation (buybacks); offset by losses in Northvolt, McMakler, Convoy.
Cyclicality 60 /100
Sensitive to growth-equity risk appetite, IPO windows, and interest rates — visible in 2022-24 drawdown.
Leverage 10 /100
Net cash, no borrowings — fortress balance sheet for a fund vehicle.
Value-trap signals · 3
  • Discount has compressed from ~40% to ~20% (and possibly lower today), removing the contrarian setup
  • Gross IRR since launch only 4.2% and MOIC 1.1 — modest absolute delivery over 6 years
  • History of high-profile holding write-offs (Northvolt, McMakler, Convoy)

THE SCHIEHALLION FUND LIMITED (MNTN) — Research Note

Executive summary

Schiehallion is a Guernsey-domiciled closed-end investment trust managed by Baillie Gifford that takes long-term minority stakes in late-stage private growth companies (SpaceX, ByteDance, Stripe, Databricks, Bending Spoons, Wise, Affirm, Tempus AI, Wayve and ~70 others). After a brutal 2022-23 re-rating during which the share price discount to NAV widened to ~40%, the FY25 results showed a sharp rehabilitation — NAV +12.9% and share price +51.0% in the year to 31 January 2025, with the discount narrowing to ~19% 2025-03-26 annual. The single most important valuation point today is that the discount has now largely closed — the easy "discount arbitrage" trade is gone, leaving the holder dependent on Baillie Gifford's privately marked NAV continuing to compound.

Fair value estimate

Methodology: NAV-based (the only sensible framework for a closed-end fund), adjusted for a discount that reflects (i) illiquidity of the Level 3 private holdings, (ii) ongoing charges (~0.92%), and (iii) concentration risk (SpaceX alone ~9.4% of NAV).

Key assumptions:

  • Last hard NAV datapoint: 133.69¢ per share at 31 Jan 2025 2025-03-26 annual. H1 to 31 Jul 2025 results were released 6 Oct 2025 but the body of that announcement was not in the filings — figures not available.
  • Roll-forward: assume NAV has grown 10-20% since Jan 2025, driven primarily by continued SpaceX uplifts and the broader private growth-equity recovery. That implies a current NAV of roughly $1.47-$1.60.
  • Appropriate discount: 10-20%, reflecting Baillie Gifford private-company peers (SMT, USA, Edinburgh Worldwide all trade at meaningful discounts to NAV through the cycle).

Fair value range per share: $1.20 – $1.45 Implied market cap range: $1,217m – $1,471m (on ~1,014m shares outstanding post-buybacks per the May 2026 AGM authority) Mid-point mcap: ~$1,344m

Versus the disclosed market cap of $1,496.4m, this implies roughly 10% downside at the midpoint. The shares now look fair to slightly rich — the discount that made this a compelling trade in late 2023 / early 2024 has largely been arbitraged away.

Sector context

ICB classification (Financials / Financial Services) is correct in label only — this is a closed-end private growth equity vehicle. Direct listed peers: Scottish Mortgage Investment Trust (SMT), Pershing Square Holdings (PSH), Chrysalis Investments (CHRY), and to a lesser extent HgCapital Trust. Schiehallion's quality vs. typical "Financial Services" peers is hard to compare — it has no underwriting/lending exposure, a fortress balance sheet (net cash, no borrowings), but its earnings power is wholly dependent on portfolio mark-to-market gains. The growth profile is materially above sector norms; cyclicality (to risk appetite and IPO windows) is also above.

Investment thesis

  • Hard-to-replicate access to top-tier private growth companies, several of which are direct AI beneficiaries. SpaceX (9.4%), Databricks (2.8%), Tempus AI (3.4%), Wayve (2.6%), Tenstorrent (0.7%), Runway AI (0.7%), PsiQuantum (1.7%), Kepler Computing (1.5%) — collectively give meaningful exposure to AI infrastructure, autonomous systems and AI-pharma platforms a retail investor cannot easily build directly 2025-03-26 annual list of investments.
  • Disciplined valuation framework with track record of conservatism. Baillie Gifford marks private holdings using independent third-party (S&P Global) inputs and notes that back-testing of 15 real price-discovery events showed an average +10% move in their favour, i.e. the valuation process is "marginally conservative" rather than aggressive 2023-09-11 half-year. NAV up 12.9% in FY25 was driven primarily by SpaceX (+86%) and Bending Spoons (+89%) — both validated by real funding rounds, not management assertion 2025-03-26 annual.
  • Fortress balance sheet plus active buyback and potential UK investment-trust conversion catalyst. No debt, $83m in US T-Bills, $6m cash, ~5.6% net current assets 2025-03-26 annual. Buyback authority renewed at 14.99% in May 2026 2026-05-14 AGM. The Board is exploring UK tax residency and joining the UK investment-trust regime, which could improve domestic investor access and narrow the discount further 2025-03-26 annual chairperson statement.

Key risks

  • Discount has already closed sharply — the easy money has been made. Discount went from 39.6% to 19.2% in one year 2025-03-26 annual. Further re-rating requires NAV growth, not multiple expansion. Given the disclosed market cap of $1,496m vs. a 31-Jan-25 NAV-implied mcap of ~$1,371m, the shares may already be near or at NAV — eliminating the cushion that has historically attracted contrarian buyers.
  • Heavy reliance on Level 3 unobservable valuations. $999.6m of $1,290.5m total investments (77%) are Level 3 private holdings, of which $712m sits in preference shares with liquidation preference rights 2025-03-26 annual Note 7. Marks lag both up and down; a public-market growth-stock correction would force write-downs with a delay. The Northvolt (Chapter 11) and McMakler (recapitalised, value ~99% destroyed) write-downs illustrate the risk 2025-03-26 annual investment manager review.
  • SpaceX concentration. SpaceX alone is 9.4% of NAV and was the single biggest performance driver in FY25 (+86% mark-up to a $350bn secondary). A SpaceX setback (Starlink competitive pressure, Starship setback, valuation-round disappointment) would punch a meaningful hole in NAV 2025-03-26 annual review of investments.

Operating leverage

Effectively zero at the fund level. Schiehallion is a closed-end investment company, not an operating business. Costs are dominated by the tiered investment management fee (0.7-0.9% of NAV ex-cash) plus modest admin (~$2m). Total ongoing charges 0.92% in FY25, up from 0.85% the prior year 2025-03-26 annual. Crucially, the management fee scales with NAV — there's no fixed cost base whose dilution would amplify returns. A 20% NAV upside translates to roughly a 20% NAV-per-share gain, not a multiple. The only "operating leverage" available to the equity holder comes from share-price re-rating (discount narrowing) layered on top of NAV growth — and that lever has already been pulled. Operating-leverage exposure at the underlying portfolio company level does exist (Databricks SaaS, ByteDance ad platform, Bending Spoons app portfolio all have classic fixed-cost economics), but it is heavily diluted by the fund wrapper and the many non-AI consumer/industrial holdings.

Value-trap signals

  • Structurally narrowed discount removes the contrarian setup — discount was 39.6% in Jan 2024 and is now ~10-12% (estimated, current). The opportunity has compressed.
  • Track record of single-name blow-ups (Northvolt, McMakler, Convoy, Blockstream, Scopely sold below carrying value) — inherent in private-growth investing but a reminder that NAV is not safe.
  • NAV total return since inception (March 2019 to Jan 2025) is +34.1% over ~6 years — roughly 5% annualised, which is well below what listed equity benchmarks delivered in the same period 2025-03-26 annual. The Gross MOIC since launch is 1.1 with Gross IRR 4.2% — modest absolute outcomes despite the high-conviction marketing.

Otherwise no obvious value-trap structural issues — balance sheet is clean, no related-party transactions of concern, governance is competent.

Earnings vs. expectations

Not applicable in the traditional sense — investment trusts don't issue earnings guidance or have a consensus EPS line. The closest analogue is NAV total return: FY24 NAV -0.9% (poor period after 2022 rate shock), FY25 NAV +12.9% (strong recovery). Share-price total returns have been far more volatile (-22.3% FY24, +51% FY25) reflecting discount swings rather than fundamental delivery. No pattern of "beats/misses" exists to score in the conventional way.

Conviction: 2/5

Anchoring factors: (i) NAV is the right valuation framework and is fully disclosed; (ii) Baillie Gifford's valuation governance is reasonably robust with independent third-party input and quarterly cycle.

Limiting factors: (i) the most recent NAV figure available in these filings is from 31 January 2025 — the October 2025 H1 report body was not included, so my roll-forward to today is an assumption rather than a fact; (ii) 77% of NAV is Level 3 and could move sharply in either direction; (iii) SpaceX alone is ~10% of NAV and dominates outcomes. This is appropriately a "low conviction" call — I think the shares are fair-to-slightly-rich but I'd want the latest NAV print to firm up the view.

Filings consulted · 9

Every document the LLM read for this note. Click any row to open the source.

  1. 2026-05-14Result OF Agm2026-05-14_9569364_result-of-agm.md0.30
  2. 2025-10-06Half Year Report2025-10-06_9152553_half-year-report.md0.77
  3. 2025-05-22Result OF Agm2025-05-22_8892806_result-of-agm.md0.20
  4. 2025-03-26The Schiehallion Fund Limited Annual Results2025-03-26_8797036_the-schiehallion-fund-limited-annual-results.md0.65
  5. 2024-09-26Half Year Report2024-09-26_8441833_half-year-report.md0.58
  6. 2024-05-13Result OF Agm2024-05-13_8192200_result-of-agm.md0.14
  7. 2024-04-04The Schiehallion Fund Limited Annual Results2024-04-04_8119752_the-schiehallion-fund-limited-annual-results.md0.45
  8. 2023-09-22Half Year Report2023-09-22_7771751_half-year-report.md0.41
  9. 2023-09-11The Schiehallion Fund Limited Half Year Report2023-09-11_7747692_the-schiehallion-fund-limited-half-year-report.md0.41

This research note was authored by a large language model after reading 8 regulatory filings published between 2023-09-11 and 2026-05-14. Each citation refers to a specific RNS announcement in the underlying data set. The note is an opinion, not advice. Do your own work before risking capital.