Scottish Mortgage Investment Trust ups dividend despite fall in assets

The UK’s largest and most popular investment trust has increased its dividend by 5 per cent despite a sharp drop in the value of its investments due to market turmoil.

Baillie Gifford’s Scottish Mortgage Investment Trust reported a 15 percent drop in its net asset value, or NAV, since late March following a drop in the shares of many of its holdings.

That was more than double the 7 percent drop in the broader FTSE All-World index, noted the company, which is heavily invested in technology stocks.

The 113-year-old trust also announced it had cut its exposure to China, including long-term investments in Alibaba and Tencent, amid an ongoing Beijing crackdown on tech companies.

“Regulation in China remains challenging, and we are concerned that the ongoing uncertainty will damage the risk-tolerant culture that has fueled the long-term success of the Chinese private sector,” it told investors.

Online retailer Alibaba, which accounted for 2.5 percent of the trust’s portfolio in March, now accounts for 0.9 percent of total investments.

At the end of September, SMIT also reduced its stake in tech giant Tencent from 4.2 percent to 2.8 percent.

However, it increased its stake in European electric vehicle battery maker Northvolt, which is now its fifth-largest holding, accounting for 3.6 percent of its portfolio.

The trust said Northvolt “seems to be increasingly well placed to meet the rapidly growing demand for electric vehicles.”

It also invested in start-up Climeworks and lab meat manufacturer Upside Foods, as it bets on companies “with ambitious plans to reduce the world’s carbon footprint.”

Northvolt, the European producer of electric car batteries, is now SMIT’s fifth largest participating interest

The trust, now managed by Tom Slater and Lawrence Burns after James Anderson’s departure, said it continued to support Tesla “despite the economic headwind” and its shares fell 45 percent this year.

“Tesla has been able to sell every car it can produce and continues to rapidly scale its production capabilities,” it told investors.

“Executing it in a challenging work environment was impressive, as was the ability to control costs while growing revenue.”

Moderna, the US company behind the Covid vaccine, remains Scottish Mortgage’s largest holding, accounting for nearly 7 percent of total investment. The share is a quarter lower this year.

SMIT said it continues to believe in the pharmaceutical company, which now wants to develop a personalized cancer vaccine to treat melanoma.

“Our premise has always been that Moderna’s technology would have applications far beyond Covid, and commercial partners are now putting serious capital into such developments,” it said.

Scottish Mortgage Stocks were 0.6 percent higher at 804.90p in Friday afternoon trading.

However, they have lost about 46 percent of their value since last year