It’s been an eventful 2021 so far for Scottish Mortgage Investment Trust (LSE: SMT). The fund manager of the multi-billion portfolio, James Anderson, has announced his retirement. This follows the sell-off of many tech and growth stocks earlier in the year, due to fears of higher inflation and interest rates.
I’ve mentioned before that I think the real gem is Scottish Mortgage Investment Trust’s unquoted portfolio. There’s a significant amount that is invested in private companies. In fact, as at the end of February, approximately 17% of the trust is held in unquoted holdings. Some of these have gone onto float on the stock markets through an initial public offering (IPO). And I don’t think this is by fluke.Â
I’m still bullish on the trust and would buy it in my portfolio. But what really caught my eye is the fact that the it has dipped its toe into the world of cryptocurrency. Here’s my take on this investment.
The recent addition
It has been revealed that Scottish Mortgage has invested $100m (£72m) into Blockchain.com. This is the UK’s biggest cryptocurrency firm. And the amount is the single largest investment in the company to date.
The $100m was part of a $300m funding round, which values Blockchain.com at $5.2bn. It also means that Baillie Gifford, the asset manager behind the trust, is the largest external shareholder in the London-based firm.
In terms of the size of the unquoted holding in the portfolio, it’s insignificant. Scottish Mortgage Investment Trust’s current assets are worth approximately £18bn. This investment would mean that it represents 0.4% of the overall trust portfolio. It’s safe to say that it’s a very tiny amount.
Blockchain.com
So what does Blockchain.com do? It’s a platform where retail and institutional investors can buy, sell, and store various cryptocurrencies.
I think it’s a timely investment for Scottish Mortgage as Coinbase recently made its US stock market debut. Blockchain.com, like Coinbase, is making cryptocurrency widely available.
So what does this mean?
This is the trust’s first significant investment in the digital asset. I think is also continues to highlight that cryptocurrency is going mainstream and is becoming more widely accepted.
I’m not surprised by this holding. The fund managers of the Scottish Mortgage Investment Trust are not afraid to make bold moves. I think it has served them well. In fact, the long-term performance of the portfolio will verify that. To be frank, I’m amazed they had not made a cryptocurrency investment earlier.
Risks
While the long-term track record of the Scottish Mortgage Investment Trust is impressive, the stock does come with risks. There is no guarantee this stellar performance will continue. In fact, the tech sell-off highlights how the shares can be impacted.
Also unquoted holdings can be risky. A lot can can go wrong and institutional investors such as the trust can see their holdings fall significantly.
But what I like about Scottish Mortgage is that the private company portfolio is very diversified across a number of firms. This is why I’d buy the trust at the current price in my portfolio.