Comment: Cold blast from Smit was most welcome

He was the lead speaker, setting the tone for last week’s showpiece Baillie Gifford Investment Trust conference in Edinburgh. By the time he finished, the marketing manager must have been praying for the trams to start running so he could run under one.

The headlines in my notebook included: “Fund managers are not that clever”, “incapable of predicting economic newsflow, let alone market movements”, and “we gave up quarterly reviews. They didn’t make sense.”

You would think this was the sales pitch from hell, but his audience loved it. For an industry so beset by its own demons and pretensions, this honesty was well received.

So, given all that, what is it that Baillie Gifford, and Smit in particular, does that is different to or better than other trusts?

The answer came the next day with the trust’s figures for the year to end March. Over this period its net asset value total return was 23 per cent and the share price total return 28.9 per cent – far above the benchmark (the FTSE All-World Index) total return of 6.8 per cent. The summary release could fairly claim that this has been a landmark year: the shares crossed the £10 threshold and Smit’s gross assets topped £3 billion, now within a hairsbreadth of Alliance, the UK’s biggest trust.

Indeed, Smit’s performance is quite a wake-up call for its Dundee rival. It is in the top quartile of trust performance, gaining just over 16 per cent over the latest 12 months compared with Alliance – fourth quartile, down 1.3 per cent. And the Smit yield is slightly higher.

For the record, Smit’s share price has risen by 226 per cent over five years against the FTSE All World index gain of 101 per cent. Over ten years it has gained 314 per cent against the index gain of 132 per cent.

The progress since 2003 has been little short of astonishing. Back then Smit had assets of £1bn and a share price of 234p. Now, with the share price close to £10 there is to be (shareholders permitting) a five-for-one sub-division of shares. How has Smit achieved this? It makes big bets on a relatively small number of shares. And the shares it selects have marked hi-tech and innovation-driven growth characteristics.

Its biggest holding is Amazon, representing 7.6 per cent of its portfolio and valued at £228 million. Then comes Illumina (6.7 per cent), Baidu (6.1 per cent) Tencent Holdings (5.8 per cent), Google (3.8 per cent), followed by Apple, Facebook and Alibaba. All told, the trust’s 30 largest holdings account for 80 per cent of the portfolio, a contrast from the interminable lists in other trusts.

Some noteworthy changes are under way, most of these benign, some question-begging. Overall, however, this was a great presentation from an outstanding company leading the way.