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Scottish Mortgage set for payday as tech firm eyes IPO

Scottish Mortgage set for payday as tech firm eyes IPO
 john guccione/pexels

Investors in the Scottish Mortgage investment trust and other mandates run by Baillie Gifford are set for a payday after one of the firm’s long standing holdings announced plans for an Initial Public Offering (IPO). 

Ant Group is a Chinese payments company which was once part of the Alibaba Technology business, and in which the latter is still a major shareholder. 

Scottish Mortgage trust manager Tom Slater said on his trust’s website that he was able to invest in Ant Group in 2018 as a result of his existing relationship with Alibaba, a company in which the trust has been invested for over five years.

FTAdviser's sister publication the Financial Times reported that Ant is planning to float on the Shanghai and Hong Kong stock Exchanges. 

According to the FT the company is targeting a valuation of up to $300bn (£222.4bn) after it reported a profit of £1.95bn for the first six months of this year, a figure greater than the total profit for all of last year.  

In its most recent portfolio update, published on its website, Scottish Mortgage valued the 2 per cent of its portfolio at £224m. 

If the £220.4bn valuation is achieved by Ant Group, this would represent  ignfican gain for shareholders in the trust. 

A feature of Scottish Mortgage’s investment focus in recent years has been a pivot towards Chinese tech companies at the expense of those in the US.

In recent years the trust has reduced or sold exposure to Apple and to Facebook, on the basis that those companies, and the wider US technology sector, are less innovative now than in the past and less innovative than many Chinese technology businesses.      

Earlier this year, the board of the trust announced that up to 30 per cent of the fund’s capital could be invested in unquoted holdings from now on. 

Mr Slater said he “doesn’t view unquoted companies any differently” to those listed on stock exchanges, as the holding period for an investment in the trust is very long-term, the inability to sell an investment quickly is not relevant.

Scottish Mortgage is the largest investment trust in the UK market, with a market cap of £14.9bn, according to data from the Association of Investment Companies.

The trust has returned 62 per cent this year to date, compared with a return of less than 1 per cent for the average trust in the AIC Global sector in the same time period, according to data from FE Trustnet.

Baillie Gifford has been approached for comment.

david.thorpe@ft.com