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The London Stock Exchange is home to around 275 investment trusts, so there’s plenty choose from, despite falling numbers in recent years. Here’s one that I think has strong growth potential in the next few years.
Staying private
One of the big trends over the last decade has been companies choosing to stay private for longer. This is depriving retail investors of the chance to put their money behind some of the greatest growth businesses of our time.
Just look at game-changing enterprises like SpaceX, TikTok-owner ByteDance, and OpenAI, the firm behind ChatGPT. None of these have gone public, but are each now worth more than the FTSE 100‘s largest company (AstraZeneca).
By the time they do list, their hyper-growth days will be behind them. The people making the big money will be institutional investors, not regular stock-pickers who have previously generated fabulous returns through the likes of Amazon, Nvidia, and Tesla.
Reasons
The reasons for this are threefold. First, unicorns can readily access capital in the private markets (they’re awash with cash).
Second, because of this, they don’t need to expose themselves to the pressures of meeting Wall Street expectations every 12 weeks. Management teams can instead focus on investing for the long term.
Finally, booming secondary markets allow employees and early investors to sell shares to approved buyers. No need for an IPO exit.
Enter Schiehallion
Schiehallion Fund (LSE:MNTN) went public in 2019 to give investors an option. It takes stakes in private growth companies, but then aims to stay invested when they go public. This is designed to capture more of the life cycle of a business.
This is why you see listed names like money transfer provider Wise and health-tech disruptor Tempus AI still in the portfolio. Buy now, pay later (BNPL) firm Affirm is also in there. It appears to have a long runway of growth ahead as more cash-strapped consumers adopt BNPL.
Over the past year, shares of Wise, Tempus AI, and Affirm are up 60%, 49%, and 87%, respectively. And top unlisted holdings like SpaceX, self-driving software start-up Wayve, and Databricks have been doing well. The latter was valued at more than $100bn in its latest funding round.
Top 10 holdings
| Company | Weighting | What it does |
|---|---|---|
| Bending Spoons | 13.2% | Italian app developer |
| SpaceX | 9.2% | Rockets and satellites |
| ByteDance | 7.3% | Owner of TikTok |
| Affirm | 7.2% | Buy-now, pay-later fintech |
| Wise | 4.4% | Cross-border money transfers |
| Tempus AI | 3.8% | AI-driven diagnostics |
| Databricks | 3.6% | Cloud data and AI platform |
| Wayve | 2.9% | AI for self-driving cars |
| Stripe | 2.8% | Online payments infrastructure |
| Tekever | 2.8% | European drone maker |
IPOs are coming
Now, Schiehallion is basically flat since IPO because 2022 saw a big reset in the value of growth companies. This could always happen again.
Meanwhile, the shares are also trading at a stubborn discount to net asset value (currently 25%). And there’s always a risk this discount could widen.
However, there are signs things are improving. One holding — US neobank Chime — went public in June. And management reckons several more are on the way as the IPO market warms back up.
Consequently, Schiehallion is starting to recover (up 47% in a year).
Looking forward, we believe that the pieces are coming into place for a fantastic period for private growth equity investors…Valuations have reset and are still below public market equivalents. This makes us very excited about the progress of our portfolio companies and our pipeline of opportunities for the rest of 2025 and beyond.
Schiehallion Fund
Given the pace at which artificial intelligence is progressing, the trust should have loads of investing opportunities. I think it’s well worth considering for growth investors today.
