SCOTTISH MORTGAGE INVESTMENT TRUST
/ LONG-TERM FUNDS /
PERFORMANCE OF SECTORS OVER 20YRS
Sector
20yrs (%)
IA Europe ex UK 310.19
IA European Smaller Companies 750.76
227.4
IA North America
IA North American Smaller Companies 392.26
IA UK All Companies 213.28
IA UK Smaller Companies 605.77
Source: FE Analytics
“Small caps are outperforming
their larger counterparts by a
significant amount across all
major regions in the long term”
manager in Premier’s multi-asset
team, says you should consider
passives “if you literally don’t
want to change your investment
for 30 years. Passives have the
edge”. This is not only because of
the lower costs associated with
passives but because of the key-
man risk that inevitability comes
from a fund manager retiring or
dying on the job. Nonetheless, he
thinks a purely passive approach
may mean sacrificing a lot of extra
returns for the sake of failing to
review your portfolio once a year.
“If you could be certain that your
active manager would stay for the
entirety of your investment period,
and that they wouldn’t allow the
fund to get too big, then I’d say
active is by far the better option in
fact. Especially over long periods
where the inevitable periods of
16
underperformance can be ironed
out, and their advantage can be
compounded in to much higher
returns,” he adds.
Jason Hollands, managing
director of Tilney, notes it is worth
obs erving just how much the
world can change over the extreme
long term.
“Thirty years ago, the internet
was just a twinkle in a clever
person’s mind and names such
as Google, Facebook and Netflix
were unheard of. Many of the
incumbent dominant companies
back then simply no longer exist
now and have fallen prey to the
creative destruction of capitalism,”
he explains.
Evan-Cook and Hollands say
asset allocation is also enormously
important for the very long-term
investor.
For example, Evan-Cook says
small caps are a great area to
invest in, outperforming their
larger counterparts by a significant
amount across all major regions in
the long term.
“I think you also need to be wary
about individual sectors on a long-
term basis. As plenty of investors
saw with commodities, there’s a
real danger of getting sucked into
yesterday’s winners at exactly the
wrong point,” he warns.
Rob Morgan, pensions and
investment analyst at Charles
Stanley Direct, also believes small
caps, alongside emerging markets,
are the best places to start for long
term investors due to their higher-
growth characteristics. He also
recommends holding some equity
income funds for the foundation
provided by their compounding
dividend income. This would then
allow you to add more thematic
portfolios such as the £5bn
Scottish Mortgage Investment
Trust, which buys “disruptive
companies”.
Berkshire Hathaway chairman
Warren Buffett has long said
he simply buys good quality
companies that he wants to hold
forever and lets compounding do
the rest. For the rest of us, it’s best
to be honest and realise that we
don’t know what the future will
hold, so backing one firm, country
or theme runs the risk that you
pick the one that’s on the wrong
side of history – less Buffett, more
buffoon.
trustnetdirect.com
SCOTTISH MORTGAGE
ENTERED THE FTSE 100 INDEX
IN MARCH 2017
THAT’S PERFECT.
When it comes to investing, imbalance can be a very good thing. Scottish Mortgage Investment Trust
embraces the asymmetry of equity returns. It’s an important fact that even in the worst case the most any
stock can fall by is 100% while some may increase many, many times more than that over the long term.
So we focus on the potential upside of investment decisions rather than seeking to avoid loss. History
shows that stock market returns are driven by a small group of big winners and our job is to identify such
companies and then invest in them with conviction. We think we’ve done a good job so far. Over the last five
years Scottish Mortgage, managed by Baillie Gifford, has delivered a total return of 221.2% compared to
118.7% for the sector*. And Scottish Mortgage is low-cost with an ongoing charges figure of just 0.44%. †
Standardised past performance to 30 June*.
2013 2014 2015 2016 2017
Scottish Mortgage 26.9% 28.9% 25.8% 4.9% 48.8%
AIC Global Sector Average 22.9% 16.7% 13.2% 1.7% 32.1%
Past performance is not a guide to future returns.
Please remember that changing stock market conditions and currency exchange
rates will affect the value of your investment in the fund and any income from it.
You may not get back the amount invested.
For a decidedly imbalanced approach, call 0800 917 2112
or visit us at www.scottishmortgageit.com
Long-term investment partners
*Source: Morningstar, share price, total return as at 30.06.17. † Ongoing charges as at 31.03.17. Your call may be recorded for training or monitoring
purposes. Scottish Mortgage Investment Trust PLC is available through the Baillie Gifford Investment Trust Share Plan and the Investment Trust ISA, which
are managed by Baillie Gifford Savings Management Limited (BGSM). BGSM is an affiliate of Baillie Gifford & Co Limited, which is the manager and secretary
of Scottish Mortgage Investment Trust PLC.