The manager of Baillie Gifford’s flagship fund has admitted that 2022 was a “humbling year” after the investment group lost more than $14bn on stakes in Tesla and ecommerce group Shopify.
Tom Slater, manager of the firm’s £13.8bn Scottish Mortgage Investment Trust, told an investor forum in London it had been “a mistake” to assume that changes in consumer habits during the coronavirus pandemic would last, “and we were slow to recognise the significance of the shattering in Sino-US relations”.
More than $8bn of losses on Tesla and $6bn on Shopify made these two of Baillie Gifford’s worst-performing holdings. Tesla is the Scottish Mortgage trust’s second-largest investment, accounting for 6.8 per cent of the fund. It also has a smaller stake in Shopify.
The fund group manages £228bn for customers across its range of funds and focuses on growth stocks, which have been badly hit by rising interest rates and worries about recession.
In an interview with the Financial Times, Nick Thomas, a partner at Baillie Gifford, said the group had been selling off its Tesla stake. Until 2019, it was the largest shareholder after the company’s chief executive, Elon Musk, owning about 8 per cent of the stock.
It has since reduced its holding to less than 1 per cent, but Thomas said it remained the 12th-largest shareholder.
“Yes, there was quite a lot of damage from the share price falling last year but it could’ve been a lot worse,” he said.
“Tesla’s actually been a giant success story. The amount of money we’ve realised from selling shares still far outweighs what we lost last year. It is still a meaningful holding for us so we still have a lot of conviction in its long-term prospects. It’s just been a difficult period.”
Tesla shares fell 65 per cent last year but have risen 1,908 per cent since Baillie Gifford first invested in 2013.
Shares in Shopify, which provides software to help small businesses sell online, fell by 74.8 per cent in 2022 but increased almost fivefold between the start of the pandemic and November 2021. Baillie Gifford has been adding to its stake in the company.
Thomas said: “Like a lot of our stocks, Shopify performed strongly in 2020, and then as the pandemic started to taper off, there were questions around how much of that extra demand will stick and how much is consumer behaviour, and what should the valuations of these companies be? That’s the big headwind we’ve been sailing into in the past 18 months.”
Shares in Scottish Mortgage Investment Trust, which is FTSE listed, fell 46 per cent last year but Slater told the forum on Thursday that the decline in valuations across the portfolio had nothing to do with the long-term prospects of these businesses.
“The trust provides access to a set of listed companies that are still at an early stage of their growth trajectory and a group of private businesses that would otherwise be very difficult for investors to access. Valuations have come down and this now provides a very attractive entry point for investors.”