SCOTTISH MORTGAGE INVESTMENT TRUST (SMT) SHARES 2025 OUTLOOK
What’s driving Scottish Mortgage Investment Trust in 2025? A deep dive into its performance, catalysts, challenges and forward-looking strategy for UK investors.
Key drivers of SMT’s 2025 performance
Scottish Mortgage Investment Trust (LSE: SMT), one of the UK’s most followed investment trusts, has continued to attract investor attention in 2025 amid a mixture of market volatility, technological innovation, and macroeconomic shifting. Known for its growth-oriented strategy and exposure to global disruptors, SMT’s 2025 performance is shaped by several key internal and external variables. Below, we delve into these key factors determining Scottish Mortgage’s investment profile this year.
1. Reliance on high-growth technology stocks
The trust’s longstanding exposure to dynamic growth companies, including US tech giants like Tesla and private markets entrants like ByteDance and SpaceX, remains a double-edged sword. In 2025, the Nasdaq’s recovery—largely buoyed by AI-related investments—has benefited SMT, particularly via its holdings in Nvidia, ASML, and other AI-aligned enterprises. The secular demand for AI infrastructure has worked in SMT’s favour, reinforcing a rebound in its net asset value (NAV) earlier this year.
2. Continued private market exposure
One of SMT's defining features is its allocation—around 30%—to unlisted companies. In 2025, improved valuations in private markets contributed positively. However, there's growing investor scrutiny over the transparency and liquidity of these private holdings. SMT’s diversified exposure to sectors like fintech, biotech, and sustainable energy continues to bring return potential, but also valuation sensitivity.
3. Shifting interest rate environment
As central banks, including the Bank of England, continue grappling with inflationary pressures, the interest rate trajectory plays a crucial role in growth equity valuations. While the base rate has been nudged lower to 4.5% in mid-2025, higher-for-longer interest rate conditions still impose relative pressure on the discounting of long-term cash flows—particularly for high-growth, early-stage firms. SMT’s portfolio remains sensitive to rate sentiment and bond yield movements.
4. Currency effects and global exposure
Given that much of SMT’s portfolio is denominated in currencies like USD and EUR, currency fluctuations against the pound have had a tangible impact on returns. In 2025, a mildly strengthening pound has marginally tempered returns in sterling terms. Currency hedging remains limited, adding to NAV performance volatility for UK shareholders.
5. Corporate governance and manager strategy
Baillie Gifford, the firm managing SMT, maintained a high-conviction, long-term investment philosophy throughout 2025, with a focus on transformational innovation. While this approach supports long-term alpha, it sometimes misaligns with short-term performance interests. Ongoing changes in SMT’s board composition and communication strategy have been welcomed by the market as signs of improved governance responsiveness.
6. Investor sentiment and retail flows
SMT's share price premium to NAV fluctuated throughout 2025, at times trading at a discount due to weakened investor confidence following issues around transparency and unlisted asset valuations. However, retail investor flows began returning in Q3 2025, suggesting improved trust in SMT’s core investment thesis and future trajectory.
In totality, SMT's performance in 2025 has been largely shaped by resurgent tech valuations, improved private market conditions, and macroeconomic factors, albeit tempered by governance concerns and valuations risk. The trust's international exposure and growth-centric model continue to underpin its role as a high-risk, high-reward vehicle for UK investors looking beyond borders.
SMT’s milestones and financial performance in 2025
Scottish Mortgage Investment Trust’s 2025 journey has been characterised by several milestones and financial updates that have shaped its profile in the eyes of UK investors. Against a backdrop of innovation-led equity markets, SMT’s strategic decisions, earnings outlook, and NAV performance reveal valuable insight into both the health of the trust and its forward-looking posture.
1. Net asset value (NAV) trajectory
After a dismal 2022–2023 period, SMT's NAV showed signs of recovery in 2025. According to the trust’s half-year results (announced in September 2025), total NAV return stood at approximately 14.6%, driven by a rally in tech-heavy indices and valuation uplift from unlisted tech holdings. This represents a significant turnaround relative to prior years, suggesting that previous portfolio positioning is beginning to yield returns under more favourable economic conditions.
2. Share price performance and discount trends
SMT's share price climbed approximately 12% year to date as of late November 2025. However, the trust continues to trade at a discount to NAV—hovering around -9% throughout the second half of the year. This reflects lingering investor caution despite improved results. Discounts have historically attracted long-term investors aiming to capitalise on the convergence potential between NAV and share price.
3. Investment activity and portfolio turnover
SMT has made notable additions to its private and public holdings over 2025. New exposures include emerging AI and space technology firms in Scandinavia and East Asia, underscoring the manager’s forward-looking global vision. Portfolio turnover remains modest (~15%), consistent with Baillie Gifford's long-term investing style. Divestments included certain Chinese holdings following regulatory and geopolitical stresses.
4. Private company valuations under scrutiny
One of the watchpoints in 2025 has been the method of valuation for unlisted assets. While SMT officials defended their methodology—which follows International Private Equity and Venture Capital Valuation (IPEV) guidelines—investors and analysts called for increased quarterly transparency. In response, SMT introduced semi-annual breakdowns of its private holdings alongside NAV updates to bolster confidence.
5. Dividend policy and income generation
Scottish Mortgage traditionally offers low yield (~0.5%) focused mainly on capital growth rather than income. This pattern continued in 2025, with most distributions attributable to small realised gains or dividends from public holdings. For income-focused investors, SMT remains a less attractive option, reinforcing its designation as a capital appreciation vehicle.
6. Governance-related milestones
In 2025, the trust appointed two new non-executive directors with backgrounds in ESG and venture capital. This was widely welcomed by analysts highlighting the need for relevant industry expertise in overseeing increasingly complex portfolios. Additionally, the trust enhanced shareholder communications via increased webcasts and Q&A sessions during earnings reports.
7. Industry comparisons and peer ranking
SMT outperformed several global growth equity-focused investment trusts in 2025, particularly those with significant China exposure or limited private market experience. Yet, it still lags peers with tighter mandates or more income-oriented propositions. For investors seeking global high-growth exposure, SMT remains a frontrunner despite its volatility profile.
Collectively, 2025 has been a stabilising year for SMT, with visible green shoots of recovery following challenging periods. Improved NAV performance, steady share price recovery, and governance strides form the core of its 2025 milestone calendar, preparing the trust for future repositioning in 2026.
What to expect from SMT in 2026?
As investors look ahead to 2026, Scottish Mortgage Investment Trust faces a pivotal year that could redefine its investor appeal in a rapidly evolving financial climate. Questions surrounding global risk appetite, private equity transparency, and long-term growth conviction remain central to SMT’s trajectory. Here’s what to watch over the coming year.
1. Private asset liquidity solutions
A major spotlight in 2026 will be how SMT manages its exposure to private companies, particularly from a liquidity and exit readiness perspective. Markets anticipate more secondary market developments, structural changes in private portfolio reporting, or even partial listings to offer better price discovery for investors. Any moves to increase liquidity could spur interest among cautious retail and institutional backers.
2. AI-driven investment tailwinds
SMT’s large holdings in AI-beneficiary firms—public and private—urgently need to show continued earnings growth and product monetisation for valuation support. As the AI hype matures into tangible revenues, 2026 may see greater divergence between real winners and overvalued aspirants. SMT’s selection quality will be tested here, and its performance may hinge on accurately backing ‘true disrupters’ over thematic bets.
3. Geopolitical and regulatory pressures
Ongoing tensions in East Asia, EU regulation on digital platforms, and post-Brexit trade policy for UK-listed trusts all represent latent risks heading into 2026. SMT’s exposure to Chinese and American companies could face both upside opportunity and downside risk, depending on how the geopolitical outlook evolves. Investors will watch for further strategic portfolio shifts away from regulatory-heavy markets.
4. NAV discount convergence potential
SMT’s persistent discount to NAV remains a thorn for shareholders. If 2026 delivers repeat performance on NAV growth or includes liquidity events such as IPOs in the private portfolio, this discount may narrow. The trust might also consider measures to actively manage its discount—such as increased buybacks or transparency boosts. This presents a clear investor opportunity if convergence materialises.
5. Expanding shareholder engagement
Following positive reception of improved investor communication in 2025, SMT is expected to continue its theme of transparency and engagement in 2026. This may include enhanced ESG reporting, roadmap sharing for unlisted holdings, and digital Q&A forums. Such steps could improve sentiment, particularly among retail investors.
6. Potentially revised mandates or thematic shifts
SMT may also pivot thematically within its existing growth mandate. This might involve moving away deliberately from overvalued sectors into more nascent technologies—such as quantum computing or bioinformatics—or stepping up its exposure to sustainable and renewable energy, which shows robust long-term upside.
7. Economic backdrop and risk appetite
Finally, broader economic conditions—particularly UK inflation and Bank of England policies—will remain major contributors to risk sentiment. Should we see a return to risk-on environments, SMT’s high-beta profile could outperform. However, if recessionary indicators gather steam, SMT may lag more defensive-leaning trusts.
In summary, 2026 presents both opportunity and test for the Scottish Mortgage Investment Trust. How it responds to key macro and portfolio-specific questions will shape not only its returns, but its long-term reputation among risk-tolerant UK investors.
