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№ 155 16 filings · 2021-06-25 → 2026-05-27

SCOTTISH MORTGAGE INVESTMENT TRUST PLC

SMT
Financial Services Market cap £17.2bn Overall fit 540 /1000

Excellent AI-receiver portfolio (TSMC, ASML, NVIDIA, SpaceX, Anthropic) at a very low cost, but the shares have re-rated from a 9-10% discount to a modest premium, eliminating the valuation cushion; the trust itself has no operating leverage so upside surprise in portfolio profits is captured only via NAV, not amplified.

Fair value range 1,300p–1,500p Mid case · £15.1bn
Absolute upside -12.4% vs current market cap
Conviction 4/5 confidence in fair call
Supports the call
  • Daily-reported NAV with 58% of book in Level 1 listed equities
  • Clean disclosure, audited, low and stable cost structure
  • Active buyback and discount management programme constrains price-NAV gap
Limits the call
  • 42% of NAV in Level 3 private holdings (SpaceX alone >19%) with judgement-driven marks
  • Post-March 2026 NAV must be estimated from listed-market roll-forward
Methodology

NAV with adjustment for private-mark uncertainty and premium/discount

In one line · bull case

Lowest-cost UK-listed vehicle for concentrated AI-infrastructure and frontier-private exposure, with active buybacks supporting NAV-to-price discipline.

In one line · biggest risk

SpaceX (>19% of NAV) and other large private positions are valued judgementally and a delayed or weak IPO would force NAV write-downs and discount widening simultaneously.

Drivers
AI beneficiary 82 /100
Portfolio is dominated by AI-infrastructure receivers: TSMC, ASML, NVIDIA, plus private-market AI plays Anthropic, Databricks, MongoDB, Cloudflare, ByteDance, MiniMax, Horizon Robotics.
Operating leverage 35 /100
Trust's own cost base is a near-linear 0.33% of NAV; no fixed-cost inflection. Underlying portfolio companies have leverage but shareholders capture it only as NAV growth.
Earnings vs expectations 55 /100
Two big benchmark beats (FY25, FY26) after two big misses (FY23, FY24); whippy rather than consistent — a not-enough-consistency 55.
Growth momentum 78 /100
FY26 NAV TR +27.4% with continued private-mark uplift on SpaceX/Anthropic; momentum strong heading into 2026.
Moat 45 /100
Trust structure offers unique private-company access at 0.33% cost — modest differentiation, but the underlying assets are replicable for sophisticated investors.
Earnings quality 60 /100
Listed marks are clean; Level 3 marks (42% of NAV) rely on Baillie Gifford / S&P Global process and have produced material write-downs (Northvolt 2025).
Management quality 75 /100
Baillie Gifford long-tenured, low-fee, transparent, candid in shareholder communications; 43 consecutive years of dividend growth.
Cyclicality 65 /100
High-beta growth equity exposure; -33% share-price total return in FY23 vs +27% in FY26 illustrates the cycle.
Leverage 30 /100
Gearing modest at 11% with weighted cost 3.6%, long-dated unsecured notes mostly maturing post-2036; comfortable but not net cash.

Scottish Mortgage Investment Trust PLC (SMT) — Research Note

Executive summary

Scottish Mortgage is a global closed-end investment trust managed by Baillie Gifford, holding a concentrated portfolio of public and private growth companies, with very heavy exposure to AI infrastructure (TSMC, ASML, NVIDIA), AI software (Anthropic, Databricks, MongoDB, Snowflake, Cloudflare), and the SpaceX/Starlink complex. NAV total return rebounded sharply to +27.4% in FY26 (year to 31 March 2026) after a weak 5-year stretch, with private holdings — SpaceX in particular (now >19% of assets) — driving the bulk of the upward revaluation 2026-05-27 final results. The single most important valuation point today is that the shares now trade at a modest premium to NAV after years of discount, meaning the obvious value-versus-NAV opportunity that existed at the FY25 9.5% discount has largely closed.

Fair value estimate

Methodology: NAV-based. For a closed-end fund, fair value equals NAV per share adjusted for an appropriate discount/premium for: (i) gearing risk, (ii) Level 3 private-company valuation uncertainty (~42% of investments at March 2026), and (iii) embedded SpaceX IPO upside.

Key inputs (from 2026-05-27 final results):

  • NAV per share (borrowings at fair value) at 31 March 2026: 1,315.8p
  • NAV per share (borrowings at book): 1,282.0p
  • Shares in issue (ex-treasury): 1,078.2m
  • Listed equities 58% / private 42% of investments
  • Gearing: 11%; weighted cost of debt: 3.6%

Since 31 March 2026, the FTSE All-World has continued to rise and the SpaceX IPO has been filed (April 2026); applying ~7–12% mark-to-market roll-forward to the listed book and modest upward private revaluation, estimated NAV today is c. 1,400–1,500p. The board confirms shares are now trading at a "modest premium" post year-end.

Fair value range: 1,300p – 1,500p per share (i.e. NAV ± modest band reflecting uncertainty on private marks).

  • Implied market cap range: £14,016m – £16,173m
  • Mid-point: ~£15,094m
  • Current market cap: £16,933m
  • Absolute downside: ~ -11% to mid; mid-to-high range puts the stock fair-to-slightly-rich.

View: fair to modestly overvalued.

Sector context

ICB classifies SMT under Financial Services / Financials. It is not a typical financial — it is a UK-listed closed-end equity investment trust with growth/private-equity exposure. Quality is above peers on cost (0.33% OCR vs. industry typically 0.50–0.80%) and on long-term track record (10y NAV TR +435% vs. FTSE All-World +234% 2026-05-27). Comparable listed peers: Polar Capital Technology Trust (PCT), Allianz Technology Trust (ATT) for the technology angle; Pershing Square Holdings (PSH) and HgT as closed-end vehicles with private/concentrated equity exposure.

Investment thesis

  1. Best low-cost listed vehicle for direct AI-receiver exposure. Top holdings include SpaceX (>19%), ASML, TSMC, NVIDIA, Meta, ByteDance, Anthropic, Databricks, MongoDB, Cloudflare, Snowflake — i.e. the physical and data infrastructure of the AI buildout, not the buyers of it 2026-05-27 final results, Manager Reviews.
  2. Unique private access at low fee. Holds 7 of the 10 most valuable private companies globally (incl. SpaceX, Anthropic, Stripe, ByteDance, Databricks) with an ongoing charge of 0.33% and no performance fee — exposure unavailable elsewhere at this cost 2026-05-27 Chair statement.
  3. Active capital allocation programme has narrowed the discount. Since March 2024 the trust has repurchased £2.6bn of shares, moving from a persistent 9–20% discount to a slight premium by late May 2026; if private marks continue rising on SpaceX/Anthropic, NAV growth + buybacks compound 2025-11-07 half-year; 2026-05-27 final.

Key risks

  1. Concentration in SpaceX (>19% of assets) and other large private positions. A delayed or weak SpaceX IPO would compress private mark assumptions and reverse the recent re-rating 2026-05-27 Manager Review.
  2. Level 3 valuation reliance. 42% of investments are unlisted (£6.4bn), valued via a Baillie Gifford-led process with S&P Global advice. Historical write-downs (Northvolt bankruptcy in FY25 wiped accrued interest income) show downside is real 2025-05-22 final results.
  3. Premium-to-NAV reversion. The historical norm has been a discount; if growth sentiment turns or AI buildout cools, the shares could trade back to a 5–10% discount on top of any NAV fall — a double-hit (not disclosed but inferred from 2022–2024 price history; consistent with 2025-05-22 disclosure of 9% discount).

Operating leverage

This is the weakest fit with the investor profile. Scottish Mortgage is a closed-end fund whose costs are dominated by a tiered management fee (0.30%/0.25%) plus modest admin expenses (~0.33% OCR total). The fee scales linearly with NAV, so the trust itself has almost no operating leverage — incremental NAV growth lifts the absolute fee bill roughly in proportion. The underlying portfolio companies (TSMC, ASML, NVIDIA, software platforms, SpaceX/Starlink) do exhibit strong operating leverage, but shareholders capture that only via NAV growth, not via the trust's own P&L. Income statement shows revenue of just £33m on £15.4bn of investments — this is a capital-return vehicle, not a margin-leverage story 2026-05-27 income statement.

Value-trap signals

None identified. Trust has 43 years of consecutive dividend growth (AIC Dividend Hero), low cost of debt (3.6%), modest gearing (11%), and clean cash conversion at the trust level. The risk profile is one of growth-cycle drawdown, not structural value-trap.

Earnings vs. expectations

Investment trusts don't issue earnings guidance and aren't tracked by sell-side consensus in the way operating companies are. The relevant comparator is NAV total return vs. the FTSE All-World benchmark:

  • FY26: NAV TR +27.4% vs benchmark +18.0% — clear beat 2026-05-27
  • FY25: NAV TR +11.2% vs benchmark +5.5% — beat 2025-05-22
  • FY24: NAV TR +11.5% vs benchmark +21.0% — miss 2024-05-23
  • FY23: NAV TR -17.8% vs benchmark -0.9% — material miss 2023-05-17
  • 5-yr NAV TR +12.8% vs benchmark +68.2% — lagged badly 2026-05-27

Pattern: extreme volatility around the benchmark, with two big misses (FY23, FY24) followed by two beats (FY25, FY26). The strategy delivers concentrated bets that work spectacularly in growth/AI tailwinds and badly in growth drawdowns; the 10-year record is comfortably ahead of benchmark but the 5-year is materially behind.

Conviction

Conviction: 4 — high. I am highly confident that fair value sits close to current NAV; the share price is approximately fairly valued today. Anchors: (a) NAV is independently audited and reported daily; (b) 58% of investments are Level 1 listed equities with observable prices; (c) buyback programme and active discount management cap the gap. Caveats: (a) 42% of NAV is Level 3 private holdings where mark-to-market is judgement-dependent (SpaceX alone is >19% of assets at a Baillie Gifford-set fair value); (b) post-31 March NAV has not been formally reported, so my mid-2026 NAV is estimated.

Driver scoring rationale and overall score

The investor wants (1) AI-receiver exposure, (2) valuation discipline, (3) operating leverage, with downside protection. SMT scores high on (1) and acceptable on downside protection, but is now trading at a premium to NAV (failing (2)) and has essentially no operating leverage at the trust level (failing (3)). It's a good vehicle for AI exposure but bought at a price that no longer offers a margin of safety.

Filings consulted · 19

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

  1. 2026-05-27Scottish Mortgage Final Results2026-05-27_9586449_scottish-mortgage-final-results.md1.00
  2. 2025-11-07Scottish Mortgage Half Year Results2025-11-07_9218380_scottish-mortgage-half-year-results.md0.77
  3. 2025-07-04Result OF Agm2025-07-04_8964699_result-of-agm.md0.26
  4. 2025-05-22Scottish Mortgage Final Results Replacement2025-05-22_8892010_scottish-mortgage-final-results-replacement.md0.65
  5. 2025-05-22Scottish Mortgage Final Results2025-05-22_8891254_scottish-mortgage-final-results.md0.65
  6. 2024-11-18Half Year Report2024-11-18_8556721_half-year-report.md0.58
  7. 2024-07-05Result OF Agm2024-07-05_8297193_result-of-agm.md0.20
  8. 2024-05-23Scottish Mortgage Invt Tst Plc Final Results2024-05-23_8215961_scottish-mortgage-invt-tst-plc-final-results.md0.45
  9. 2023-11-14Half Year Report2023-11-14_7880516_half-year-report.md0.41
  10. 2023-11-06Half Year Report2023-11-06_7861449_half-year-report.md0.41
  11. 2023-06-28Agm Statement2023-06-28_7600843_agm-statement.md0.18
  12. 2023-05-17Scottish Mortgage Inv Trst Final Results2023-05-17_7530058_scottish-mortgage-inv-trst-final-results.md0.25
  13. 2022-11-18Half Year Report2022-11-18_7417013_half-year-report.md0.23
  14. 2022-11-11Scottish Mortgage Inv Trust Half Year Report2022-11-11_7336752_scottish-mortgage-inv-trust-half-year-report.md0.23
  15. 2022-07-01Agm Statement2022-07-01_7153049_agm-statement.md0.10
  16. 2022-05-19Scottish Mortgage Investment Trust Final Results2022-05-19_6933096_scottish-mortgage-investment-trust-final-results.md0.25
  17. 2021-11-17Half Year Report2021-11-17_6789759_half-year-report.md0.23
  18. 2021-11-08Half Year Report2021-11-08_6686333_half-year-report.md0.23
  19. 2021-06-25Agm Statement2021-06-25_6842058_agm-statement.md0.10

This research note was authored by a large language model after reading 16 regulatory filings published between 2021-06-25 and 2026-05-27. 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.