Scottish Mortgage Investment Trust

History

The origins of Scottish Mortgage lie in a credit crisis, the Panic of 1907. By 1909 the growing popularity of the motorcar, including the Model T Ford, was creating significant demand for tyres, which rubber planters in Southeast Asia were keen to exploit, but credit was still difficult to obtain. In Edinburgh, the recently formed legal partnership between Colonel Augustus Baillie and Carlyle Gifford (which ultimately became Baillie Gifford & Co) spotted an opportunity. They established The Straits Mortgage and Trust Company Limited to lend money to the planters, secured on the rubber estates.

Within a couple of years, however, the credit crisis was over and rubber planters no longer required finance from Straits Mortgage on the scale anticipated. In 1913, the Trust's investment remit was widened to include bond and equity markets worldwide, and its name changed to The Scottish Mortgage and Trust Company Limited.

“By 1913 it was obvious the future of the trust lay in operating as a normal investment trust – that is to say, one which invested in a broad range of securities, very largely overseas, as was typical of Scottish investment trusts of the period, with a strong bias towards North America – rather than the Rubber plantation specialist that had originally been envisaged. In recognition of this, the Board decided to change its name to “The Scottish Mortgage and Trust Limited”; this change of name received official approval on 31 May 1913.”

Early investments reflected the rapid global industrialisation that characterised the period, including shares in oil and railway companies and loans to the Argentine, Indian, Chinese and Imperial Ottoman governments.

From early on, North American investments featured in Scottish Mortgage's portfolio, but these were augmented substantially in the mid-1930s with the proceeds of European investments sold in reaction to the deteriorating political situation in Europe. By 1940, 22 per cent of the portfolio was invested in US names. Soon after, however, the British government mandated the sale and repatriation of all American securities owned by British citizens, including those of Scottish Mortgage. The government's representative overseeing this formidable exercise was Carlyle Gifford. The proportion invested in the US fell to 6.6 per cent by 1942, not to be rebuilt until the 1950s. By 1957, in the midst of the post-War boom in equities, the chairman noted, "...we have over 44 per cent of our assets...in USA and Canada. Indeed, a higher proportion would have been even better".