Ian Cowie: too soon to tell if I chose right Baillie Gifford trust

At the start of the year our columnist picked Edinburgh Worldwide over Scottish Mortgage to gain exposure to the commercialisation of space. Here, he runs through performances so far, and explains his rationale for not buying Scottish Mortgage.

25th July 2024 09:16

by Ian Cowie from interactive investor

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Too clever by half or not clever enough? Six months ago in this space, I explained why I had invested in the global smaller companies investment trust Edinburgh Worldwide Ord (LSE:EWI), instead of its better-known and bigger brother, Scottish Mortgage Ord (LSE:SMT). Both are run by the out-of-favour fund manager Baillie Gifford.

Please don't laugh but my contrarian strategy is having a tepid time so far. While EWI has delivered meagre total returns of less than 3% since the start of the year, SMT has surged 11% higher.

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Making matters worse, it’s only fair to ‘fess up that another investment trust I considered and rejected back in January has done exponentially better. Seraphim Space Investment Trust Ord (LSE:SSIT) has soared 66% into the stratosphere since the start of this year.

Readers of a certain age might like to reflect that for every shilling’s worth of gain obtained in EWI, I could have had £1 in SSIT. No wonder I keep misreading the ticker.

More sympathetic souls may have guessed what attracted me to all three funds; the commercialisation of space. Not so long ago, that was the stuff of science fiction but now it has become an economic fact.

Elon Musk’s Space Exploration Technologies Corporation - also known as SpaceX - is the most high-profile example. It has launched and landed its Falcon 9 rockets more than 300 times, put 6,000 small satellites into orbit and - according to Bloomberg - achieved a $210 billion (£163 billion) off-market valuation.

Sad to say, SpaceX is not listed on any recognised stock exchange. So those of us who are not on first-name terms with Elon but want to get some exposure to his ventures on this new frontier need to consider a small number of investment trusts that hold this unlisted stock.

SMT would have been the smart way to do so six months ago. One of Britain’s biggest investment trusts, with total assets of £13.7 billion, SpaceX had been among its major holdings but has since slipped out of the top 10.

Part of the problem was that I remain slightly sore about failing to invest in SMT more than a decade ago after lunch with its manager back then, James Anderson. A reluctance to become a late buyer was part of what made me sniffy about SMT and, when I noticed EWI’s bigger exposure to SpaceX, it looked like a better way to buy.

EWI has 9.4% of its £729 million assets invested across two tranches of SpaceX stock. Never mind the talk of taking folk to Mars, my modest stake in SpaceX also gives exposure to its subsidiary, Starlink. The latter’s satellites provide mobile internet access to more than 80 countries and could, in theory, eventually replace every fixed-line wi-fi provider on this planet.

Here and now, that’s all pie in the sky. I thought I was being clever buying EWI but, in the short term, it would have been wiser to invest in the more mainstream and obvious SMT. The latter was oversold last year and has bounced back strongly this year.

Or I could have been both more clever and more wise by going totally off-piste with SSIT, where SpaceX is absent from the top 10 holdings in a portfolio of unfamiliar names. Even after its eye-stretching recovery since January, this fund remains priced -39% below its net asset value (NAV).

To be candid, SSIT’s top three holdings - ICEYE, D-Orbit and ALL.Space - remain too risky for me, nor is there much comfort lower down the batting order. By contrast, in addition to the SpaceX stake discussed above, EWI also features top 10 exposure to the Taser-maker Axon Enterprises; the military drone-maker AeroVironment Inc (NASDAQ:AVAV); and the online grocery logistics company Ocado Group (LSE:OCDO).

Without wishing to sound dystopian, I suspect Tasers and drones will become more ubiquitous aspects of reality in future. Meanwhile, online shopping is already part of daily life.

That’s why this investor, who likes to ‘follow the money’ and back the evidence of my own eyes, instead of a more technical approach, feels comfortable with EWI as a small part of a diversified portfolio. So-called moonshot investments often fall to earth with a bump but that need not matter too much, if it only affects 1% of my life savings.

To return to where we began, was my decision to favour EWI over SMT and SSIT too clever by half or not clever enough? I reckon it’s too soon to tell.

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

Ian Cowie is a shareholder in Edinburgh Worldwide (EWI) as part of a globally diversified portfolio of investment trusts and other shares.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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