Image source: Getty Images
Baillie Gifford is best known for the Scottish Mortgage Investment Trust. However, it also operates many other trusts, including Edinburgh Worldwide Investment Trust (LSE:EWI). Edinburgh Worldwide is a volatile, FTSE 250-listed investment trust with significant holdings in SpaceX, quantum, and disruptive stocks. Let’s take a closer look.
A concentrated portfolio
Edinburgh Worldwide has a high-conviction approach, with a relatively concentrated portfolio — its top 10 holdings account for 46.2% of assets. The trust’s largest exposure is to SpaceX, representing 13.6% of the portfolio.
SpaceX’s valuation has surged in recent years, driven by its dominance in the space sector, including its Starlink satellite network and the development of its Starship rocket. The company’s ability to launch rockets at an unprecedented rate and its potential to revolutionise space travel have made it a cornerstone of Edinburgh Worldwide’s strategy.
Quantum computing’s another key theme, with PsiQuantum, the trust’s second-largest holding at 7.9%, leading the charge. PsiQuantum has attracted significant government funding and is at the forefront of developing commercially-viable quantum computing technology.
While PsiQuantum is privately held, this sector is highly volatile, as seen in the public markets, where quantum stocks have experienced incredible swings in value. The trust’s exposure to this nascent but transformative technology — the trust has additional quantum holdings — underscores its long-term growth focus, even if the sector remains speculative in the near term.
Performance lags
Performance-wise, Edinburgh Worldwide does stand out, with a 13.3% return over the past year but a 12.5% drop in the last month. Over five years, the trust has delivered a 23.9% return. That’s actually a vast underperformance of the FTSE 100 and FTSE 250.
However, it may just be the trust’s time to shine. It currently trades at a 5.7% discount to its net asset value (NAV), slightly narrower than its 12-month average discount of -7.92%. This discount may present an opportunity for investors seeking exposure to high-growth sectors at a reduced price.
High-risk, but potentially high-reward
As alluded to, Edinburgh Worldwide isn’t without risks. Its concentrated portfolio and focus on early-stage companies make it susceptible to volatility. What’s more, the trust borrows to fund investments (called gearing). This increases risk by amplifying losses if investments fall (or gains if an investment performs well), as borrowed funds must be repaid regardless of performance.
However, for investors with a long-term horizon and a tolerance for risk, the trust offers a unique opportunity to consider to access transformative technologies, from space exploration to quantum computing, via a single investment vehicle.
Personally, I’m not sure if this is the right investment for my portfolio. However, it’s something I’m going to watch very closely. There’s certainly massive potential within the Edinburgh Worldwide portfolio. But I prefer investing in companies where I can see a margin of safety. That’s not possible here.
