Scottish Mortgage Trust (SMT) has invested $100m (£72m) in Blockchain.com, the UK’s biggest cryptocurrency company, in its first significant investment in digital money.
The investment made in a $300m funding round last month makes Scottish Mortgage and its fund management group Baillie Gifford the largest external shareholder in the London-based company, valuing it at $5.2bn.
Blockchain announced Baillie Gifford’s involvement yesterday and today the company confirmed that Scottish Mortgage, its global flagship and the UK’s largest investment trust, was the only one of its funds taking the plunge.
The move sees Baillie Gifford follow Lightspeed Venture Partners, DST Global, Future Fifty, Lakestar and Vy Capital which were Blockchain’s early top investors. According to the Crunchbase website, the Series C funding round came just a month after the company tapped investors for $120m. It has raised $490m in six rounds since August 2014.
Although Baillie Gifford’s stake is a coup for Blockchain, whose chief executive Peter Smith described the Scottish fund manager as an ‘invaluable partner’, it represents a small stake of around 0.4% of Scottish Mortgage’s current net assets of £17.5bn.
This makes Blockchain the 45th private company in Scottish Mortgage’s burgeoning £3.3bn unquoted portfolio, which accounted for nearly 17% of the trust at the end of February.
The initial investment in Blockchain, which lets retail and institutional investors buy and store cryptocurrencies such as Bitcoin, is around half the size Scottish Mortgage fund managers James Anderson and Tom Slater have built up in Wise. The international money transfer specialist, formerly known as Transferwise, is reportedly heading for a stock market flotation this year.
Smith told the Telegraph Blockchain also planned to go public but declined to say whether the initial public offer (IPO) would happen in the UK or the US.
Last week Coinbase, where Blockchain co-founder Ben Reeves worked before setting up the company, briefly hit a $100bn valuation when it listed in New York.
Scottish Mortgage’s investment in Blockchain comes amid increasing signs that cryptocurrency is going mainstream after several years of speculative and volatile trading.
This week the chancellor said the Treasury and Bank of England would explore a central bank digital currency, which he dubbed ‘Britcoin’, as the UK attempts to keep ahead of the innovation in payments.
Last week, Brevan Howard, the hedge fund manager behind London’s BH Macro (BHMG) and BH Global (BHGG) was reported to be preparing to invest 1.5% of its Master Fund in digital assets including cryptocurrencies.
Ruffer, a cautious fund manager focused on capital preservation as much as growth, stunned observers last November when it invested 2.5% of its assets in bitcoin, explaining the move, which affects Ruffer Investment Company (RICA), was to diversify risk and to complement its holdings in gold.
Scottish Mortgage’s dipping its toe into the world of cryptocurrency comes after a volatile period in its own shares, up 1.4% at £12.07 today after closing yesterday at a 3% discount below their asset value.
One of last year’s big winners of the global shift online during the pandemic when the trust’s shares more than doubled, Scottish Mortgage suffered a correction in February when technology and growth stocks sold off on fears of higher inflation and interest rates.
The shares remain £2 off their peak after last month’s announcement that Anderson, the architect of its transformation into one of the world’s best investors in growth companies, would retire next year.
The shares are down 1% this year but over 10 years have soared 800%, the best performance of any UK listed, closed-end fund.