- Large diverse range of global companies
- Mixes rapid growth companies with more established and cyclical holdings
Of all the blockbuster funds flying the Baillie Gifford flag, it is Scottish Mortgage Investment Trust (SMT) that tends to turn heads. That attention looked fairly justified as 2020 drew to a close: the trust’s shares roughly doubled in price this year, placing them among the 10 best-performing UK stocks.
While outperformance could well continue, cautious investors might question if such price momentum is sustainable and whether big weightings to the likes of Tesla (US:TSLA) will ultimately land the portfolio in hot water. Those wishing for a more nuanced global equity portfolio with less high-octane characteristics might instead turn to a Baillie Gifford stablemate, Monks Investment Trust (MNKS).
Monks certainly has similarities with Scottish Mortgage, from a focus on growth trends to positions in big tech and digital businesses, including Amazon (US:AMZN) and China’s Meituan Dianping (HK:3690) which provides food delivery services - among other activities.
However, Monks arguably has more nuance, and less aggression. The portfolio is better diversified for starters: Monks had around a fifth of assets in its top 10 holdings at the end of October, compared with 51.4 per cent for Scottish Mortgage.
The Monks investment approach also comes with a reassuring level of breadth and flexibility. In its latest half year report, the trust’s board noted a focus on buying “adaptable companies which seek to remain on the right side of change”. The Monks investment process, which involves buying companies across four different growth categories (stalwart, rapid, cyclical and latent), shows adaptability of its own.
This multi-faceted approach means the team can back some of today’s winners, from “growth stalwarts” such as Moody’s (US:MCO) and Microsoft (US:MSFT) to rapid growth plays including Napsters, Alibaba (HK:9988) and Sea (US:SE). The portfolio also has exposure to cyclical names such as Taiwan Semiconductor Manufacturing Company (Tai:2330), as well as some contrarian recovery picks within its 'latent growth' bucket.
The trust's investment team recently outlined three major portfolio changes made during the six months to the end of October. They have made a meaningful investment in “new frontiers” of the internet, including online furniture name and Scottish Mortgage holding Wayfair (US:W), while also focusing on opportunities that appear uncorrelated with the existing portfolio, such as BHP (Aus:BHP) and Rio Tinto (Aus:RIO). The team has also backed some businesses where near-term demand looks “bleak” in anticipation of a recovery, including Ryanair (RYA) and online travel agent Booking Holdings (US:BKNG).
Monks will not always beat Scottish Mortgage when it comes to excitement or even performance, but it remains a thoughtful and nuanced play on global growth stories.
Charles Plowden and his Global Alpha team have run the trust since 2015. But Mr Plowden is due to retire at the end of April 2021, at which point deputy manager Spencer Adair will become lead manager and Malcolm MacColl will continue as deputy manager. However, Baillie Gifford funds tend to be run via a team approach according to a set strategy, so the departure of one manager tends not to result in wholesale change.