Scottish Mortgage Investment Trust increases dividend despite falling assets

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Scottish Mortgage Investment Trust raises dividend despite sharp decline in asset values ​​as it cuts exposure to China…and retains Tesla

  • The trust’s net asset value, or net asset value, fell 15% in the six months to the end of September
  • This is more than double the 7% drop across the entire FTSE ALL-World Index
  • Trust reduced its stakes in Alibaba and Tencent but increased its stake in Northvolt

The UK’s largest and most popular investment fund has raised its dividend by 5%, despite a sharp decline in the value of its investments due to market turmoil.

Baillie Gifford’s Scottish Mortgage Investment Trust has announced a 15% drop in its net asset value, or NAV, since the end of March, after shares of many of its holdings fell.

That’s more than double the 7% drop in the broader FTSE All-World Index, noted the company, which is heavily invested in tech stocks.

Scottish Mortgage cut its stake in online retail giant Alibaba to 0.9% from 2.5%

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

“The regulatory environment in China remains challenging, and we are concerned that the continued uncertainty could undermine the culture of risk tolerance that has driven the long-term success of China’s private sector,” he told investors.

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

SMIT also cut its stake in tech giant Tencent from 4.2% to 2.8% at the end of September.

However, he increased his stake in European electric car battery producer Northvolt, which is now his fifth-largest holding, accounting for 3.6% of his portfolio.

The trust said Northvolt “appears increasingly well positioned to meet the growing demand for electric vehicles”.

He has also invested in carbon capture start-up Climeworks and lab meat maker Upside Foods as he bets on companies “with ambitious plans to reduce the global carbon footprint”.

European electric car battery producer Northvolt is now SMIT's fifth-largest holding

European electric car battery producer Northvolt is now SMIT’s fifth-largest holding

The trust, now managed by Tom Slater and Lawrence Burns after the departure of James Anderson, said it continued to support Tesla “despite economic headwinds” and its shares were down 45% this year.

“Tesla has been able to sell all the cars it can make and continues to rapidly ramp up production capacity,” he told investors.

“His execution in a challenging operating environment has been impressive, as has his ability to control costs while increasing sales.”

Moderna, the US company behind the Covid vaccine, remains Scottish Mortgage’s largest holding, accounting for nearly 7% of its total investments. Its shares are down by a quarter this year.

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

“Our assertion has always been that Moderna’s technology would have applications far beyond Covid, and business partners are now committing significant capital to such developments,” he said.

Shares of Scottish Mortgage rose 0.6% to 804.90p on Friday afternoon.

However, they have lost around 46% of their value since last year.

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