Top City broker tells investors to sell Scottish mortgage

The influential broker Investec has downgraded the Scottish Mortgage Investment Trust to “sell” after it suffered one its worst years in its 113-year-old history.

In a research note to clients published today, Investec said it believed the £11 billion investment fund was “vulnerable to a sharp correction in the coming months” and warned of “significant” risks to its assets.

The flagship fund of the prestigious Scottish investment partnership of Billy Gifford is Scottish Mortgage. It provides investors with exposures to growth stocks in the US, China, such as Amazon, Apple, and Alibaba. It is the second largest fund in BritainIn the last five years, 70 percent of total assets have been returned to shareholders.

“I’ve been covering mutual funds since the early 90s and I don’t remember ever having a negative stock recommendation,” Alan Brierley of Investec, a coauthor of the research note, said to the Telegraph. [Scottish Mortgage]. “

Investec is concerned about the high level of borrowing, or “going above” credit. It now stands at 17%, well over the fund’s 10 percent target, and its highest level for a decade. This is a risk due to the fund’s exposure for private investments, which accounts for 35.9 percent its net asset value. It will not be simple to sell such investments.

The broker also expressed concern over the “valuation delay” that late-stage venture capital investments are experiencing relative to similar listed companies. It stated that it expected a decrease in valuations for private mortgage investments in Scotland to “gain momentum” over next year.

Investec stated that the global economy is facing downside risks, but the Scottish mortgage will continue the to suffer. Preference for stocks with “explosive” growth.

Ewan Lovett Turner of Numis, another broker said that it had been an “extremely hard time” for Scottish Mortgage shareholders since its peak in 2021, when economic headwinds drove a wave technology selling. The fund’s emphasis on growth stocks was costly in 2022 when it lost huge amounts in holdings such Spotify and Tesla.

Lovett Turner said he was satisfied with the fund’s “robust” approach to evaluating private investment. He said that the Scottish mortgage was still worth allocating, as it was the most active approach to the valuation of unlisted companies among its peers.

Mr. Lovett Turner said that the fund reviews about a third unlisted companies each month and that there have been “a lot of adjustments” to valuations during the past 18-months.

Billy Gifford was contacted for comment.