Scottish Mortgage has been one of the big winners in the investment company sector through 2020 to date, as its disruptive portfolio of companies has helped it return 56.3% compared to its MSCI FTSE All World benchmark’s 3.3% gain.
The newest holding in the trust, Zoom, has been a particular beneficiary of working from home. What was the rationale behind that purchase?
We had already been holding Zoom because we are in a world where people are more conscious about their carbon footprint and travel. I think the difference between video calling - being able to see people's facial reactions and to interact - is really important versus telephone communication.
Perhaps people will do a mixture. It is not about a straight-out replacement or saying people will never fly again; it is about giving people the option to do some of their client meetings, or business pitches, digitally without having to get on a plane.
We still think that the structural shift may well come, it has just accelerated because now everybody knows how to Zoom. You know that a company has managed to provide a service that is valuable when their own name becomes a verb.
You mentioned the food delivery space and the trust recently sold Grubhub in favour of Meituan. How do the managers assess the likely winners, and those they wish to be invested in, within any sector, and those they do not?
Some of what we look at is really basic - simple microeconomics, cash flow dynamics; do management know what they are doing? If you are investing in businesses for five years and beyond, management is absolutely critical.
Is there potential for this company not just to double in size, but to double again and double again? Does it have the innovation in the way that its management team thinks and allocates capital?
Really, what we are looking for is the very small handful of companies that drive long-run equity market returns. They are the companies that have large enough end-addressable markets that they can keep doubling.
Also, it is no good just having one individual. Once you get to a certain scale, you need to be able to delegate [management responsibilities].
Jeff Bezos is not the only person at Amazon; the largest shareholders would include Jeff Wilkie and Andy Jassy. You have got the partnership structure at Alibaba with the express intent to survive across two centuries - that is very, very rare in a public company.