Scottish Mortgage Investment Trust’s lead manager Tom Slater set out how the FTSE-listed giant aims to identify the next generation of market leaders, in a conversation that speaks to the core challenges facing growth investors today. Appearing on Merryn Talks Money this week, Slater discussed how the trust is refining its hunt for companies that can compound value over long periods, even as markets shift and rates stay higher than in the last decade.
The discussion arrives as the UK’s flagship growth trust continues to navigate sharp swings in sentiment. The goal, Slater suggested, is steady focus on long-term value creation and patience through cycles. The trust’s approach—active, research-heavy, and comfortable with holding private companies—remains under close watch from retail savers and institutions alike.
“Scottish Mortgage Manager Tom Slater joins Merryn Talks Money to explain how the UK investment trust is trying to find tomorrow’s market winners.”
A Long-Horizon Strategy Tested By Volatility
Scottish Mortgage has long stood for a global, high-conviction style. Run by Baillie Gifford, it seeks out businesses with strong growth runways, advantaged market positions, and founder-led cultures. That strategy helped it during the era of ultra-low rates, when capital was cheap and innovation was rewarded.
The tide turned as inflation rose and borrowing costs increased. Many growth names fell, and valuations reset. Investment trusts can also trade at a discount or premium to the value of their assets, adding another layer of volatility for investors. For Scottish Mortgage, those swings sharpened a debate on how to balance conviction with risk control.
Finding Durable Growth In A Tougher Market
Slater’s message centers on staying anchored to fundamentals while scanning for companies with room to expand across new products and geographies. The trust’s framework typically weighs the size of the opportunity, the strength of the moat, the quality of leadership, and the ability to reinvest at high returns.
- Focus on businesses with large addressable markets and pricing power.
- Back founder-led or mission-driven teams with strong execution records.
- Accept periods of drawdown in exchange for long-term compounding.
- Own both public and private companies to capture growth earlier.
This mix is designed to capture upside from structural trends that can last a decade or more. While high rates can compress valuations, companies that keep gaining share and innovating may still deliver strong results over time.
Private Markets: Earlier Access, Added Scrutiny
One of Scottish Mortgage’s defining features is its willingness to invest in private firms alongside listed ones. That can secure earlier entry to fast-growing platforms and allow long holding periods. It also demands careful valuation work and clear communication with shareholders.
Investment trusts can use modest borrowing and have the flexibility to hold unlisted stakes within policy limits. Supporters argue that this broadens the opportunity set in areas like software, artificial intelligence, life sciences, and clean energy infrastructure. Critics point to the risk of opaque pricing and the impact on net asset value during market stress.
Balancing Concentration And Diversification
High-conviction portfolios can deliver outperformance when the thesis lands, but they also increase single-name risk. Slater’s approach has historically centered on a select group of secular winners, offset by a longer tail of emerging ideas. The art is sizing positions so that setbacks do not derail overall results.
Diversification across themes helps. Digital infrastructure, advanced semiconductors, platform software, and healthcare innovation often move to different rhythms. That can cushion shocks, even if the overall style skews to growth.
What Investors Should Watch Next
The near-term path for rate cuts and inflation will influence how markets value growth. But the more important question for long-term holders is execution at the company level: product cycles, margin expansion, and market share gains.
For Scottish Mortgage, the tests are clear: can its holdings keep compounding cash flows, and can the trust communicate discipline on valuation and risk? If so, periods of volatility may offer entry points for patient investors.
Slater’s appearance signals a steady course: seek out durable advantages, accept bumps along the way, and let time do its work. For savers weighing growth exposure, the message is both simple and demanding. Success depends on picking innovators early, holding them through cycles, and being honest when the facts change. The coming year will show whether that blend of conviction and humility can turn today’s uncertainty into tomorrow’s winners.
