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- Scottish Mortgage makes its first foray into the world of cryptocurrency
- Slatter, who will take over as top lead manager at the end of April, believes there will be more opportunities
- When Tesla stopped accepting bitcoin for car purchases, the Scottish mortgage sold 80 percent of its stake in the company
Following its $100 million (£72 million) investment in Blockchain.com, reported in April, Scottish Mortgage Ord SMT 0.12 percent is open to backing other cryptocurrency-related businesses. In an investment webinar, Tom Slater, co-manager of Scottish Mortgage, revealed why the global trust has dabbled in cryptocurrency. Slater said the most fantastic about bitcoin and related technology is digital scarcity. There are numerous interesting applications that arise as a result of this.
Baillie Gifford was honoured to be a part of the UK’s largest cryptocurrency firm’s journey, which was announced earlier this week. To date, this is the single largest investment in Blockchain.com. The $100 million investment was made through Scottish Mortgage, according to a Baillie Gifford spokesperson. The stake is small in Scottish Mortgage’s overall portfolio, accounting for around 0.4 percent of the company’s current net assets of £18 billion.
Slatter’s thoughts on cryptocurrency investment
Slater adds that technology is still in its infancy, and that, like other investments, the trust’s main focus is on finding companies run by interesting entrepreneurs. When fellow co-manager James Anderson retires at the end of April, Slater, who will become the trust’s lead manager, said he hopes there will be more opportunities to back other cryptocurrency-related companies in the future. However, he clarified that they are not investing in bitcoin as an asset class; rather, they are investing in a company that operates within the ecosystem.
While Scottish Mortgage’s investment in Blockchain.com is small, accounting for around 0.4 percent of the company’s assets, it has garnered a lot of attention and interest. The reason for this is that professional fund managers have been wary of investing in cryptocurrency until recently, believing the asset class and, by extension, the companies that operate within it, are too volatile, risky, and speculative.
Slater’s perspective on Tesla Inc
Tesla Inc. (TSLA), which recently halted bitcoin vehicle purchases due to climate change concerns, is another holding that has garnered a lot of attention for Scottish Mortgage due to the trust’s reduction in its stake in Elon Musk’s electric vehicle company. It has sold 80% of its stake in the company. Tesla, which the trust first purchased in 2013, no longer has such clout, according to Slater. There are two major reasons for this. Tesla had a 13.4% weighting in Scottish Mortgage last summer, but now has a 4.5 percent weighting.
Following Tesla’s strong share price rise (it was up over 700 percent in 2020), Slater notes that part of selling a significant number of shares we owned was due to having adequate diversification. The second factor at work, according to Slater, was the question of how can we make five times our money from here from that starting point? As a result, some more cuts were made. Scottish Mortgage, one of interactive investor’s Super 60 funds, invests in disruptive companies with a technological advantage over their competitors. In the 12-month period ending in March, the trust reported its best-ever annual return in its 112-year history.
It had a total return of 111.2 percent on its net asset value (NAV) and a 99 percent increase in its share price. The FTSE All World Index, on the other hand, has returned 39.6 percent. Scottish Mortgage outperformed its competitors by a wide margin. Over the same time period, the sector average for global trusts was 76.8% for NAV and 72.2 percent for share price returns.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
