Schiehallion Discount Doubles in 2023 as Buybacks Slow Pace of New Investments
The landscape for investors in growth stocks and private company investments has continued to be challenging through 2023, and this sentiment has significantly impacted Baillie Gifford’s Schiehallion fund. The fund, which is valued at approximately £1.2bn, has reported a troubling widening in its discount, coupled with net asset value (NAV) losses that underscore the tough market conditions it navigated over the past year.
In the year leading up to 31 January 2024, Schiehallion’s NAV experienced a marginal decline of 0.9%. However, the share price took a steeper dive, plummeting by 22.3%, which led to the discount rate spiraling from 23% to a staggering 40%. This surge in the fund’s discount highlights a growing investor apprehension towards growth and private equity markets, which traditionally are areas of high interest. The downward trajectory in share price, juxtaposed with the less significant NAV decrease, is emblematic of this broader market trepidation.
The year was marked by a tumultuous start, witnessing underwhelming performance which later saw a rebound in the latter half. The closing half’s recovery can be attributed to a combination of uplifts from public market performances and enhancements in the valuations of private holdings within the trust’s portfolio. This blend of factors contributed to stabilizing the fund’s trajectory, notwithstanding the evident challenges.
Zooming into the trust’s portfolio, a few standout listings include fintech firms such as Affirm, foreign exchange fintech Wise, and health insurance company Oscar Health. These entities notably enjoyed appreciable gains in their stock valuations, a bright spot in an otherwise difficult period. The upswing in valuation for these firms, especially in the latter months of the review period, played a critical role in mitigating the overall decline that the Schiehallion fund experienced.
The widening discount rate of Schiehallion, now doubled in 2023, casts a shadow on the investment outlook of growth stocks and private equity spaces. This scenario also underscores the importance of strategic investment approaches that can adapt and respond to such volatile market conditions. For investors and stakeholders, the ongoing adjustments and performance recovery in the second half of the year might serve as a potential signal for cautious optimism looking forward.
As we step further into 2024, the marketplace continues to watch the Schiehallion fund closely, discerning patterns and shifts that could hint at broader trends in the growth stock and private equity investment landscapes. The coming periods will undoubtedly be marked by keen observation and strategic adjustments as investors and fund managers alike strive to navigate the ongoing unpredictability in global financial markets.
