Successful investments are at the heart of an asset manager’s business. But what happens when a single holding appreciates so much that it begins to dominate the structure of an entire portfolio?

That is precisely the situation Baillie Gifford now faces with the Scottish Mortgage Investment Trust. As of the end of July, Space Exploration Technologies, better known as SpaceX, accounted for 18.1 percent of total assets. That makes the aerospace company by far the portfolio’s largest holding. TSMC follows at 6.9 percent and Nvidia at 5.5 percent.

Based on total assets of £16.66 billion, the SpaceX stake has an implied value of around £3 billion.

Almost 20 Times the Capital Originally Invested

A look back illustrates just how extraordinary the investment has been. Scottish Mortgage first invested in SpaceX in December 2018 and continued building its position until August 2021. In total, the trust invested just £151 million, or around $200 million at the time, in the company. It has committed no additional capital for the past five years.

By the end of March 2026, the stake was already valued at £2.98 billion, or $3.94 billion. That represents almost 20 times the capital originally invested. At that point, SpaceX was also the trust’s largest contributor to returns over one, three and five years.

For Baillie Gifford, the development is a striking validation of its investment philosophy. The Scottish asset manager is known for identifying companies with significant long-term growth potential at an early stage and holding them for many years.

But that success has now created a problem of its own.

Success Becomes a Concentration Risk

A single company now accounts for almost one-fifth of the Scottish Mortgage portfolio. The ten largest holdings together represent 53.5 percent of total assets.

At one point, the concentration was even significantly higher. Following SpaceX’s Nasdaq IPO on June 12 and the jump in its share price on the first day of trading, the holding represented around 25 percent of the entire Scottish Mortgage portfolio.

Such a weighting is unusual even for an investment trust that deliberately concentrates on a relatively small number of exceptional growth companies.

Scottish Mortgage manager Tom Slater made clear at the annual general meeting in Edinburgh that the concentration needs to be addressed. Having such a large proportion of the trust invested in a single stock is unusual in Scottish Mortgage’s history, and the managers intend to reduce the position as it becomes possible to do so.

The central question surrounding the trust’s most successful investment has therefore changed fundamentally. Access to SpaceX is no longer the issue. The challenge is deciding when and how much of the investment to realize.

IPO Changes the Equation

SpaceX went public on the Nasdaq on June 12, 2026, marking an important turning point for Scottish Mortgage.

Until then, the stake had been held as a private-market investment and valued periodically. Since the IPO, SpaceX has had a continuously observable market price. Movements in its share price therefore feed directly into Scottish Mortgage’s net asset value.

Baillie Gifford itself has noted that this is likely to result in greater day-to-day volatility in the trust’s NAV.

The IPO also resolves one of the traditional constraints associated with large private-market holdings: limited liquidity. Scottish Mortgage can now, in principle, sell its stake through the public market.

But not immediately, and not all at once.

Baillie Gifford Can Start Selling

As is customary following an IPO, shares held by existing investors are subject to lock-up restrictions. Scottish Mortgage’s stake is therefore being released for sale in stages.

Since August 6, the trust has been able to sell up to 20 percent of its SpaceX position for the first time. Further tranches are expected to become available over the coming months. Slater expects the holding to become progressively liquid over a period of roughly six months.

How many shares Baillie Gifford will actually sell remains unclear. The strategic direction, however, is evident: the unusually high concentration is to be reduced.

That leaves the asset manager facing a classic active-management dilemma. SpaceX became such a large holding precisely because the original investment thesis proved extraordinarily successful. Selling shares reduces concentration risk, but it also reduces exposure to a company in which Baillie Gifford continues to see substantial long-term growth potential.

SpaceX Brings New Volatility

The latest quarterly results illustrate how significantly developments at SpaceX can now affect Scottish Mortgage.

The company increased second-quarter revenue by 92 percent to $7.8 billion, exceeding analysts’ expectations of $6.8 billion. Its net loss narrowed to $541 million from $1 billion in the same period a year earlier.

Investors, however, focused on another figure: sharply higher capital spending. Capital expenditure rose from $2.83 billion to more than $18 billion, according to «Daily Business». The shares subsequently came under pressure in after-hours trading, falling almost 7 percent.

For Scottish Mortgage, such a move is anything but marginal. With SpaceX accounting for roughly one-fifth of the portfolio, significant movements in the company’s share price can have a substantial impact on the performance of the trust as a whole.

The private-market valuation risk that previously characterized the SpaceX investment has therefore been replaced by a different risk: the direct transmission of daily stock-market volatility to Scottish Mortgage’s NAV.

Private Markets Remain Important

SpaceX may now be publicly listed, but private markets continue to play a significant role in the Scottish Mortgage portfolio.

As of the end of July, 23 percent of the trust’s assets were invested across 52 private companies. These include prominent names such as ByteDance, Stripe and Anthropic.

Scottish Mortgage therefore remains a bridge between public and private markets. Investors buy shares traded on the London Stock Exchange while simultaneously gaining exposure to some of the world’s most valuable private technology and growth companies.

Baillie Gifford does not, however, regard its private-market allocation as a separate asset class or a tactical portfolio quota. Instead, the asset manager argues that the distinction between listed and private companies is secondary to its long-term investment approach. What matters is a company’s long-term growth potential and quality. From that perspective, an IPO is simply a change in trading venue, not the end of an investment thesis.

SpaceX is currently the most prominent example.

Valuation Questions Remain

For the private companies that remain in the portfolio, however, one important difference from SpaceX persists: there is no continuously quoted market price.

That creates opportunities, but it also raises valuation questions. Baillie Gifford explicitly notes that for difficult-to-trade private holdings, there can be no assurance that the assigned valuation accurately reflects the price the trust could achieve in an actual sale.

That distinction is particularly relevant for an investment trust. Investors buy and sell Scottish Mortgage shares on the London Stock Exchange, while part of the underlying portfolio consists of assets that are valued only periodically.

Investors Demand a Discount

The trust’s valuation may indicate that investors are factoring in these risks.

At the end of July, net asset value stood at 1,446.12 pence per share, while the shares themselves traded at 1,330.50 pence. That represented a discount of around 8 percent to NAV.

The discount has persisted. By mid-August, Scottish Mortgage was trading at roughly an 8.5 percent discount to net asset value.

At the same time, performance has recovered significantly. Over three years through the end of July, the share price gained 83.2 percent, outperforming the FTSE All-World Index, which returned 60.2 percent. Over five years, however, the picture was markedly different: Scottish Mortgage returned just 3.4 percent, compared with 76.8 percent for the benchmark.

The figures illustrate the consequences of an investment approach that deliberately concentrates on a relatively small number of exceptional growth companies.

A Case Study in Active Management

For professional investors, Scottish Mortgage offers a compelling case study in active management.

The SpaceX holding demonstrates the potential value an asset manager can create by gaining access to an exceptional growth company years before it goes public. An initial investment of around $200 million developed into a multibillion-dollar position.

But that success has created its own risk.

The key question is therefore no longer whether Baillie Gifford was right about SpaceX. The investment’s performance has already provided a compelling answer. The challenge now is how the asset manager manages down one of the biggest investment successes in its history without exiting a long-term winner too early.

That is the high-class problem facing Baillie Gifford: the portfolio’s biggest risk is also one of its greatest investment successes.

Access to the trust is limited for Swiss investors. It has not been approved by Finma for offering to non-qualified investors and may therefore only be offered or marketed to qualified investors in Switzerland.