Why Scottish Mortgage bought into Revolut amid volatile markets 

The leading global investment trust plays into one of 'the world's most transformative trends' with a stake in British digital bank Revolut.

Scottish Mortgage (SMT ) has explained why it secured a new holding in British neobank Revolut, in a period of high turnover for the £11.7bn Baillie Gifford-run investment trust. 

In a first quarter update for 2025, investment specialist Hamish Maxwell confirmed the leading global trust had bought into what he called ‘the revolutionary British digital bank’. 

The trust, run by Tom Slater and Lawrence Burns, doesn’t typically play into macro trends but said it had taken advantage of opportunities amid recent volatility. Follow-up investments were also made into Chinese electric vehicle leader BYD and Korean ecommerce platform Coupang over the period.

Maxwell added that the investments were funded by significant reductions over the past 12 months including £700m taken out of Tesla and £1bn of sales of Nvidia. Positions in Tempus AI, Cloudfare and MercadoLibre were also reduced as ‘share price growth allowed for capital use elsewhere’. 

What ‘tipped the balance’?

Commenting on the Revolut buy at a media event late last month, Scottish Mortgage lead manager Slater said it was ‘banking licence announcements’ made last July that finally ‘tipped the balance’. 

Revolut has grown at breakneck speed since its launch almost a decade ago, and in 2024, which CEO Nik Storonsky called a ‘a landmark year’, enjoyed a 38% growth in its customer base. 

But the company has met with regulatory challenges along the way, taking three years to gain approval for its UK banking licence due to concerns over compliance frameworks from the FCA and other regulatory bodies.  

‘I think the banking licence announcements made last year were a really important sign of the growing maturity of the control environment in that business, and I think that’s crucially important in financial services, in particular,’ Slater said.

‘That was obviously a very drawn-out process, but actually getting through it was a sign that they’d reached a level of maturity in their systems that we could get comfortable with.’ 

Slater added that ‘a hard-driving, ambitious founder has to be married to that really conservative control environment for the good of users’, warning that ‘if you don’t have the two, you’re left with a pretty poisonous combination’. 

In the digital banking sector Scottish Mortgage has also bought Brazil’s Nu Holdings, owner of fast-growing Nubank, in the last year. 

The recent first-quarter update highlighted ‘the digitalisation of finance’ as a key theme for the coming year and one of ‘the world’s most transformative trends.’ Other positions in the area include Stripe and Affirm in North America, MercadoLibre in Latin America, Ayden and Wise (WISE) in Europe, and Sea in Asia. 

Lessons learn from Northvolt

Scottish Mortgage has also learnt lessons about robust regulation and holding out for shareholder protections from its involvement with Northvolt, a Swedish battery manufacturer which went bankrupt last year and from which the trust incurred heavy losses. 

Though Slater stood by the rationale for investing in Northvolt, saying ‘it really does make sense for Europe to have a domestic EV battery supplier’, he added that the lesson would be ‘more clearly differentiating between capital-intensive and capital-light businesses in those earlier stage companies, both in the pace you deploy capital into them and how you think about your rights as a shareholder.’

‘We’ve been very relaxed about investing in companies where founders have had voting control beyond their capital share and that’s been helpful to us because it’s allowed those individuals to take really long-term decisions. But I think that’s different in a company like Northvolt, where you’re so dependent on capital providers that the capital needs to have a stronger voice in things,’ he said. 

As a result, Slater said the trust had reassessed ‘the pace at which we deploy and what the rights of the capital providers are in those structures’.

Scottish Mortgage shares have returned 6.5% over the last year versus 3.7% for the MSCI AC World index, according to Deutsche Numis data. The trust currenty trades on a nearly 12% discount. 

While the trust is behind the benchmark over three and five years, the underlying portfolio has generated almost double the return of the global market over the past decade.