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This document is solely for the use of professional investors and should not be relied upon by any other person. It is not intended for use by retail clients.
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For decades, investors have treated public and private markets as separate asset classes. Public equities offered liquidity and transparency, while private markets provided access to earlier-stage growth opportunities. Increasingly, however, that distinction is becoming harder to justify.

The Scottish Mortgage Investment Trust (SMT) is an investment company that gives shareholders liquid, low-cost access to a concentrated portfolio of some of the world’s most exceptional growth companies, listed and private.

SMT was set up in 1909 to finance the rubber industry boom and has been managed by Baillie Gifford since its inception. It has since evolved into one of the largest and best-known global growth investment trusts, with a long-term focus on transformational companies. 

The trust is listed on the London Stock Exchange (part of the FTSE 100) and has a market capitalisation of around €18.5bn, with a very low ongoing charge of 0.33% (per annum). 

SMT’s purpose is to identify, own and support businesses with the potential to shape the future economy, using the advantages of the investment trust structure to take a take long-term view. It can invest up to 30% of assets in private companies at time of purchase, with additional capacity of up to £250 million (~€290 million) to make follow-on and new investments in private companies when above the 30% limit. The top holdings include SpaceX, TSMC, NVIDIA, ByteDance, Stripe, MercadoLibre, ASML, and Anthropic. Its active share has been consistently high, reflecting a portfolio that looks very different from the index.

According to Hamish Maxwell, Investment Specialist at Baillie Gifford, where he focuses on SMT, investors should focus less on where a company is listed and more on the quality of the opportunity itself.

“We’re looking for the best growth opportunities around the world,” he says. “For us, what matters is the investment case. An IPO is simply a change of trading venue; it is not a change in the investment thesis.” 

That view reflects a structural shift in capital markets. As companies stay private for longer and innovation increasingly takes place outside public markets, investors risk missing a significant part of the growth journey if they focus exclusively on listed equities.

The missing years of growth

One of the most significant developments in capital markets over the past decade has been the steady delay in public listings.

According to Maxwell, the average age of companies at IPO has increased from around seven years in 2014, to roughly eleven years a decade later. 

Several factors have contributed to this trend. Private capital has become deeper and more accessible, while remaining private allows management teams to focus on long-term execution without the pressures of quarterly reporting and short-term market scrutiny. 

The result is a rapidly expanding universe of mature private businesses. Globally, there are now over 1500 so-called unicorns, while the amount of capital invested in late-stage private companies has grown dramatically over the past decade. 

“If you’re completely ignoring this market, you’re ignoring a really important stage of growth,” Maxwell says. 

For long-term investors, the implication is clear: a growing share of value creation is taking place before companies ever reach public markets.

Innovation no longer belongs exclusively to listed markets

The traditional perception of private companies as immature or unproven businesses is increasingly outdated.

Many of today’s most influential companies achieve substantial scale while still private, particularly in areas such as artificial intelligence, digital finance and space technology. Baillie Gifford and SMT have experienced this first-hand through investments in companies such as SpaceX, Stripe, ByteDance and Anthropic.

Returns from certain private investments have therefore been exceptional. But for Maxwell, private investing is not simply about accessing additional return streams. It also provides a deeper understanding of where future disruption may emerge.

“By having private investment capabilities, we gain a window into disruption that may eventually reshape public markets.” This is particularly relevant in sectors undergoing rapid transformation. Whether in artificial intelligence, digital commerce or space infrastructure, many of the companies shaping tomorrow’s economy can now be found on both sides of the public-private divide. 

“The boundary breaks down,” Maxwell argues. “The IPO becomes just a day in the lifecycle of a growth company.” 

Why structure matters

Recognising the opportunity is one thing. Accessing it is another.

Unlike public markets, private companies often get to choose their investors. Access often depends on long-standing relationships, credibility and a reputation for supporting businesses over extended periods. 

The investment structure is equally important. Maxwell argues that a closed-ended investment trust structure, like SMT, with liquidity and an efficient cost structure that is well below market average for actively managed UCITS funds is particularly well suited to combining public and private holdings because it allows managers to hold less liquid assets without facing redemption pressures. 

That flexibility supports what Maxwell views as the most important ingredient in growth investing: patience.

“It takes five to ten years, not quarters, for companies to realise their opportunity,” he says. 

In a market often dominated by short-term thinking, that longer time horizon can be a significant advantage. It allows investors to focus on the scale of an opportunity rather than near-term market fluctuations.

Conclusion

The case for combining public and private markets is ultimately not about diversification. It is about capturing innovation wherever it occurs.

For years, investors could access most of a company’s growth journey through public markets alone. That is no longer the case. Companies are staying private for longer, private capital markets have matured, and a growing share of innovation now occurs before businesses reach a stock exchange. 

The implication is not that investors should choose between public and private markets. Rather, they should recognise that the most compelling growth opportunities increasingly span both.

As Maxwell puts it, what matters is the investment case, not the listing venue. 

For professional investors, that may require a shift in mindset. The future of growth investing is unlikely to be found exclusively in public markets or exclusively in private markets. Instead, it may belong to portfolios capable of following exceptional businesses throughout their entire lifecycle, from promising private challenger to global public leader.

In a world where the IPO has become “just a day in the lifecycle of a growth company”, the most effective growth strategies may be those that combine the accessibility and liquidity of public markets with the unique opportunities increasingly available in private ones. 

Scottish Mortgage

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