Yahoo Finance Scottish Mortgage Investment Trust biggest faller on FTSE 100
Shareholders of former market darling Scottish Mortgage Investment Trust (SMT.L) have had a rough start to 2022 as its share price declined drastically since the end of last year.
The company's share price is down nearly 25% on the year, making it the biggest FTSE 100 (^FTSE) faller.
The 113-year-old trust has been a top FTSE 100 performer in the past decade, with its share price rallying more than 100% in 2020. It was up almost 700% during that period.
Managed by James Anderson, who is set to leave Baillie Gifford at the end of April, and Tom Slater, the £15bn ($20.4bn) trust is packed full of fast-growing stocks.
The trust offers investors ways to invest in companies like carmaker Tesla (TSLA), SpaceX and Epic Games that are among the trust's unlisted holdings, which make up 20% of the portfolio.
It counts the likes of pharmaceutical firm Moderna (MRNA), Chinese video games giant Tencent (TCEHY) and US chipmaker Nvidia (NVDA) amongst its top 10 holdings.
Read more: European stock markets mixed as Biden and Putin agree to Ukraine summit
Experts think one of the reason for the decline is higher interest rates after the Bank of England raised rates for a second time in three months, to 0.5%, after they were slashed to near 0% at the start of the coronavirus pandemic. This coupled with rising inflation has impacted Scottish Mortgage Investment Trust (SMT) thanks to its heavy exposure to unlisted and growth stocks.
The trust's tech-heavy holdings could offer another explanation for the turn down as rising rates could wipe the appeal off tech stocks.
A recent tech sell-off meant SMT's holdings tumbled in price, further pushing down its share price. Technology firms benefitted from global governments pumping money into economies and slashing interest rates during the pandemic.
So far this year, the tech-heavy Nasdaq (^IXIC) is down 14.4% year-to-date, and down 16.4% since hitting an all-time high in mid-November, just before the Omicron variant hit global markets.
Read more: Scottish Mortgage Investment Trust shares have crashed. Is it time to buy?
However, despite the fast declines, SMT shares are still 55% higher compared to two years ago, according to financial advice firm The Motley Fool.
The trust's investment team has been stellar at identifying innovators and high growth stocks in the past, sometimes years before they go public.
It outperformed in the global category in the past, with returns of 143%, 214% and 757%, over three, five and 10 years.
Its share price has soared almost 160% since 2017, with investors benefitting from nearly 830% gain in the last decade. This compares to 222% by the MSCI AC World index (ACWI).
Shares in SMT were 4.2% lower on Monday afternoon in London, and down 8% on the week.
Peter Hewitt, manager of the BMO Managed Portfolio trust recently said that there is a chance that the trust lags its rivals in the next 12 months. But on a five to 10-year view, he expects SMT to continue to deliver attractive returns.
"Holding Scottish Mortgage may mean that I underperform in January, but I am not too worried because in the long run you make big gains from sticking with these types of trusts and where they are invested," he told the Telegraph.
