RE: Sentiment on the change?19 Sep 2023 09:28
Thanks Walp - I found this bit interesting: "Scottish Mortgage has experienced similar - and larger - falls throughout its 114-year history. The most recent ranks in the top ten but not in the top five."
When things aren't going to plan, it can be tempting to conclude that the wheels have fallen off, prompting a knee-jerk reaction from investors. Sometimes this can be the right course of action, with things only getting even worse over time.
But a bit of context can be useful when you're dealing with a fund that's been around well over a century. Of course, no-one can say for certain that things will be the same this time round and that the last two years will prove to be a blip. For one, fund managers change over time and history will show some to be savvier than others.
But at least there've been previous setbacks, akin to - and in several cases worse than the current one. And in the past, that hasn't stopped SMT outperforming its benchmarks in the long term. That said, no investor has the luxury of unlimited time to hold on in the hope of eventual recovery.
Slater hasn't actually suggested investors hold for 9 years or more. He's simply said the current average period SMT's managers retain their holdings in growing companies is 9 years.
What I do find heartening is his parting comment:
"In this environment where there is a higher cost of capital, our focus has increased on the resiliency and self-financing of our holdings. On the whole, we have seen them react well to the tougher fundraising environment. With cheap capital gone, our holdings have been able to use their position to consolidate market share and increase profitability."
To me, that sounds like a sensible discipline. Focus on well-capitalised companies which have high potential. Without the need to dilute existing holders via multiple future placings.
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