Scottish Mortgage Investment Trust could be the third trust to ever become listed on the FTSE 100 when the stock exchange embarks on its final reshuffle of the year.
Managed by James Anderson, the £4.2bn trust has consistently outperformed its benchmark over five years, raking in more than 186 per cent compared to the Global sector which has returned 83 per cent, according to figures from FE.
Helal Miah, investment research analyst at the Share Centre, said the trust could be a contender for the FTSE, particularly because 95 per cent of its holdings are weighted towards international investments.
“It’s possible that its recent success and subsequent rise to the top could be down to it benefitting from the weaker pound,” he said.
Mark Dampier, head of research at FTSE 100 firm Hargreaves Lansdown, said the trust is competing with packaging company Smurfit Kapita, which has been hovering around the FTSE 100 for some time.
He said Smurfit could be pipped to the post by Baillie Gifford’s investment company Scottish Mortgage, largely because the trust has benefitted from sterling’s weakness since the EU referendum, and because of its “solid” track record.
In June, the trust increased its limit on unquoted investments to a quarter from 15 per cent, and at 30 September it had exposure to holdings such as Airbnb, Funding Circle and Dropbox.
Mr Dampier said technological advancement remains a key theme within the portfolio, but warned the high-conviction, unconstrained investment approach increases the potential for periods of volatility.
“The trust’s small number of themes could take several years to reap any rewards and therefore a long-term, patient, investment horizon is necessary.”
He also said the managers have the flexibility to invest in emerging markets and use derivatives, which adds risk.
“While many investors remain focused on political issues in the US, slowing global economic growth, and the UK’s prospective exit from the EU, the managers continue to focus on companies they believe will thrive, regardless of wider economic issues.
“These trends, and the companies benefiting from them, will not bear fruit overnight, but given time and patience they could reward investors.”
Analysts also predict Russian gold producer Polymetal International could be relegated from the FTSE after suffering from the reversal of the gold price since the US election, while builders merchant Travis Perkins could fall off after being hit by Brexit.
The FTSE reshuffle will take place after market close tomorrow (30 November).
If the Baillie Gifford trust is promoted to the FTSE 100 then it will be the third investment company to ever be listed, after Foreign & Colonial and Alliance Trust, the Association of Investment Companies revealed.
katherine.denham@ft.com
