Investment Trust Select list update - June 2023

What is the AJ Bell Investment Trust Select list?

The AJ Bell Investment Trust Select list is designed to lighten your research load. There are hundreds of investment trusts out there – so we’ve narrowed the field by selecting a high-quality shortlist of trusts we believe can deliver on their objectives over the long-term. To make the list, each trust needs to pass our robust, independent selection process.

What have we changed?

We keep our Investment Trust Select list under constant review to ensure we have the highest conviction in the trusts on the list, and to look for other trusts with better potential to achieve their objectives.

As a result of this work, we recently removed the Scottish Mortgage Investment Trust from the Investment Trust Select list.

Why did we remove it?

The Scottish Mortgage Investment Trust focuses on investing in companies that can deliver high levels of growth, and which are shaping the future of the world. To achieve this, it invests in companies either listed on a stock exchange or still owned privately (known as ‘unlisted’).

But over the past 18 months, the market has shunned these types of companies. Due to rapidly rising interest rates, their prices have fallen sharply. Fast-growing companies often need access to more investment to help maintain their speed of growth, and can often be loss making.

Scottish Mortgage holds almost 30% in unlisted companies, which is the maximum it is allowed. If these unlisted companies require more investment, the trust won’t be able to stretch to this. That may result in the value of these holdings falling back.

In addition to the problem with unlisted companies, the trust has had some recent high-profile issues with its Board, which led to changes in its members. In our view, this reflects poorly on the Board and the overall governance of the trust.

On balance, we believe the trust faces continued challenges that may make achieving its objectives difficult. We continue to hold a high opinion of the broader fund management team at Baillie Gifford, but the specific headwinds impacting this particular trust are why we’ve removed it from the AJ Bell Investment Trust Select List.

The AJ Bell Investment Trust Select List is designed to help you choose your investments but isn’t a personal recommendation. You may own trusts not included on the list – this doesn’t mean we recommend that you sell them. If you’re not confident about making your own financial decisions, or are looking for advice, you should speak to a suitably qualified financial adviser. Remember that the value of investments can change, and you may not get back the amount you originally invested.