Perspectives on Progress #5
Claire Shaw – Portfolio Director
Ben James – Portfolio Director
Key Points
- Buy now, pay later specialist Affirm joins forces with Amazon to give shoppers more choice at checkouts
- UPSIDE Foods becomes the first cultured meat company to gain regulatory approval to sell its products in the US
- LVMH makes use of Epic Games’ Unreal Engine to give tech-savvy fashion shoppers new ways of experiencing its luxury goods
As with any investment, your capital is at risk.
Affirm and Amazon
A mutually beneficial ecosystem
Affirm has become the first ‘Buy now, pay later’ player to be offered by Amazon Pay, the service that lets shoppers buy goods at third-party stores using their Amazon account. Under the partnership, any US-based Amazon Pay merchant can let customers spread their payments over time by using Affirm’s Adaptive Checkout technology, which creates personalised plans.
This collaboration creates benefits for the two companies and, crucially, their customers. First and foremost, the partnership provides Amazon shoppers with more convenient, flexible payment options. Affirm lets consumers make purchases on Amazon and pay for them over time in fixed instalments, providing an alternative to traditional credit cards. For Affirm, teaming up with Amazon Pay unlocks a vast customer base and an extensive marketplace. The move expands Affirm’s reach and enhances its visibility among millions of potential customers, opening the door to increased sales and market penetration. Amazon’s reputation as a trusted ecommerce platform, combined with Affirm’s innovative approach to transparent financing, creates a compelling proposition. Customers gain confidence knowing they can rely on a reliable payment platform while enjoying the flexibility and affordability of Affirm’s instalment plans.
Commenting on the partnership, Libor Michalek, the president of Affirm, said: “Digital wallets are an increasingly critical part of the shopping experience and are expected to account for over half the ecommerce transactions worldwide by 2025.” By combining their strengths, we believe that Amazon and Affirm can create a mutually beneficial ecosystem that enriches millions of customers’ shopping experiences.
UPSIDE Foods
A new era in meat production
The cultivated meat company UPSIDE Foods has made history… again! In January’s edition of Perspectives On Progress, we celebrated the company receiving the world’s first 'No Questions' letter from the US Food and Drug Administration for cultivated meat, meaning the FDA assured that its products were safe to eat. That kept the company on track for the ultimate milestone: regulatory approval from both the FDA and the US Department of Agriculture. Well, that day has come, making UPSIDE Foods the world’s first cultivated meat company able to take its products to market.
The first stop is San Francisco’s Bar Crenn, where guests will soon enjoy UPSIDE’s chicken in a signature dish prepared by three-Michelin-star-chef Dominique Crenn.
UPSIDE Foods now turns its focus to scaling the production and distribution of its products. As ever, we are delighted to support the company as it continues to revolutionise the future of food.
To learn more about UPSIDE Foods and hear founder Uma Valeti describe his vision for this incredible company, check out our podcast, Invest in Progress.
Listen to the podcast here.
Epic Games
Digital fashion shows for LVMH
LVMH has announced a partnership with Epic Games which will enable new types of immersive digital experiences for the world’s biggest luxury conglomerate. LVMH will tap into Epic’s industry-leading 3D graphics creation tool Unreal Engine, using it to produce virtual fashion shows, fitting rooms and 360-degree product carousels.
LVMH’s move signals a shift to use Epic’s tools and services more widely. The fashion industry is one of many sectors grappling with how to present highly visual brands in digital environments. LVMH’s decision endorses our view that Unreal Engine can help companies engage with younger audiences more effectively, making it the ‘crown jewel’ of Epic’s products.
Carvana
Moving on
In the January edition of Perspectives on Progress, we addressed the challenges confronting the online used car dealer Carvana. Over the past six months, we have closely monitored its progress and engaged in discussions with its management. While Carvana holds significant growth potential, it remains hampered by its financial position. The firm has taken corrective measures, showing impressive progress in profitability. However, this has led to a slowdown in growth, creating a tug-of-war between profit and growth as the firm digests the substantial investments it made during a period of rapid sales expansion. While the company deals with this, its competitors are enhancing rival online platforms, potentially curtailing Carvana’s outlier returns. Despite our respect for the firm’s chief executive and the lucrative market opportunity, we have decided to sell our stake. To crystalise any loss is a hard decision to make, but we firmly believe it's in the best interest of our shareholders over the long term.
Housing Development Financial Corporation (HDFC)
Indian stalwart joins the world’s most valuable lenders
On 1 July, Indian mortgage lender HDFC merged with HDFC Bank, forming an entity with a market cap of approximately £140bn, surpassing HSBC, Bank of China and Morgan Stanley. The merger benefits the combined business’s 120 million customers by allowing it to cross-sell products and services, become more efficient and develop more sophisticated solutions thanks to the data it has to hand.
Scottish Mortgage has been an investor in HDFC since 2004. Since then, the firm has delivered more than a 40-fold total return. We expect even stronger financial characteristics from the merged entity. It gives the Trust exposure to India’s burgeoning middle class, rising income per capita and expanding financial services. This presents a considerable growth opportunity that is still in its early stages. However, it is not without risk, and we will monitor execution closely.
Scottish Mortgage Annual Past Performance To 30 June each year (net %)
| 2020 | 2021 | 2022 | 2023 | 2024 | |
| 55.4 | 62.8 | -46.1 | -6.3 | 33.4 |
Source: Morningstar, Share price, total return, sterling.
Past performance is not a guide to future returns.
About the author - Claire Shaw
Portfolio Director
Claire Shaw is a portfolio director and plays a prominent role in servicing Scottish Mortgage’s UK shareholder base. Before joining in 2019, she spent over a decade as a fund manager with a focus on managing European equity portfolios for a global client base. With a background in analysing companies and communicating investment ideas, Claire is also responsible for creating engaging content that makes the Scottish Mortgage portfolio accessible to all its shareholders. Beyond that, she works closely with the managers, meeting with portfolio companies and conducting in-depth portfolio discussions with shareholders.
About the author - Ben James
Portfolio Director
Ben James is a portfolio director serving Scottish Mortgage’s shareholder base. Ben joined the Scottish Mortgage team in 2023 and has worked with Tom Slater as the US equity investment specialist at Baillie Gifford since 2015. A former soldier, he developed a passion for the power of investment to drive progress during his overseas deployments. Ben works closely with the managers, meeting with portfolio companies and conducting in-depth portfolio discussions with shareholders. Alongside this, he creates engaging content that makes the Scottish Mortgage portfolio accessible to all its shareholders.
Regulatory Information
This content was produced and approved at the time stated and may not have been updated subsequently. It represents views held at the time of production and may not reflect current thinking. Read our Legal and regulatory information for further details.
A Key Information Document is available by visiting our Documents page. Any images used in this content are for illustrative purposes only.
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Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). The investment trusts managed by Baillie Gifford & Co Limited are listed on the London Stock Exchange and are not authorised or regulated by the FCA.
Baillie Gifford Asia (Hong Kong) Limited 柏基亞洲(香港)有限公司 (BGA) holds a Type 1 licence from the Securities and Futures Commission of Hong Kong to market and distribute Baillie Gifford’s range of collective investment schemes and closed-ended funds such as investment trusts to professional investors in Hong Kong.
Baillie Gifford Asia (Singapore) Private Limited (BGAS) is regulated by the Monetary Authority of Singapore as a holder of a capital markets services licence to conduct fund management activities for institutional investors and accredited investors in Singapore. BGA and BGAS are wholly owned subsidiaries of Baillie Gifford Overseas Limited, which is wholly owned by Baillie Gifford & Co.
Europe
Scottish Mortgage Investment Trust PLC (the “Company”) is an alternative investment fund for the purpose of Directive 2011/61/EU (the “AIFM Directive”). Baillie Gifford & Co Limited is the alternative investment fund manager (“AIFM”) of the Company and has been authorised for marketing to Professional Investors in this jurisdiction.
This content is made available by Baillie Gifford Investment Management (Europe) Limited (“BGE”), which has been engaged by the AIFM to carry out promotional activities relating to the Company. BGE is authorised by the Central Bank of Ireland as an AIFM under the AIFM Regulations and as a UCITS management company under the UCITS Regulation. BGE also has regulatory permissions to perform promotional, advisory and Individual Portfolio Management activities. BGE has passported its authorisations under the mechanisms set out in the AIFM Directive.
Belgium
The Company has not been and will not be registered with the Belgian Financial Services and Markets Authority (Autoriteit voor Financiële Diensten en Markten / Autorité des services et marchés financiers) (the FSMA) as a public foreign alternative collective investment scheme under Article 259 of the Belgian Law of 19 April 2014 on alternative collective investment institutions and their managers (the Law of 19 April 2014). The shares in the Company will be marketed in Belgium to professional investors within the meaning the Law of 19 April 2014 only. Any offering material relating to the offering has not been, and will not be, approved by the FSMA pursuant to the Belgian laws and regulations applicable to the public offering of securities. Accordingly, this offering as well as any documents and materials relating to the offering may not be advertised, offered or distributed in any other way, directly or indirectly, to any other person located and/or resident in Belgium other than to professional investors within the meaning the Law of 19 April 2014 and in circumstances which do not constitute an offer to the public pursuant to the Law of 19 April 2014. The shares offered by the Company shall not, whether directly or indirectly, be marketed, offered, sold, transferred or delivered in Belgium to any individual or legal entity other than to professional investors within the meaning the Law of 19 April 2014 or than to investors having a minimum investment of at least EUR 250,000 per investor.
Germany
The Trust has not offered or placed and will not offer or place or sell, directly or indirectly, units/shares to retail investors or semi-professional investors in Germany, i.e. investors which do not qualify as professional investors as defined in sec. 1 (19) no. 32 German Investment Code (Kapitalanlagegesetzbuch – KAGB) and has not distributed and will not distribute or cause to be distributed to such retail or semi-professional investor in Germany, this document or any other offering material relating to the units/shares of the Trust and that such offers, placements, sales and distributions have been and will be made in Germany only to professional investors within the meaning of sec. 1 (19) no. 32 German Investment Code (Kapitalanlagegesetzbuch – KAGB).
Luxembourg
Units/shares/interests of the Trust may only be offered or sold in the Grand Duchy of Luxembourg (Luxembourg) to professional investors within the meaning of Luxembourg act by the act of 12 July 2013 on alternative investment fund managers (the AIFM Act). This document does not constitute an offer, an invitation or a solicitation for any investment or subscription for the units/shares/interests of the Trust by retail investors in Luxembourg. Any person who is in possession of this document is hereby notified that no action has or will be taken that would allow a direct or indirect offering or placement of the units/shares/interests of the Trust to retail investors in Luxembourg.
Switzerland
The Trust has not been approved by the Swiss Financial Market Supervisory Authority (“FINMA”) for offering to non-qualified investors pursuant to Art. 120 para. 1 of the Swiss Federal Act on Collective Investment Schemes of 23 June 2006, as amended (“CISA”). Accordingly, the interests in the Trust may only be offered or advertised, and this document may only be made available, in Switzerland to qualified investors within the meaning of CISA. Investors in the Trust do not benefit from the specific investor protection provided by CISA and the supervision by the FINMA in connection with the approval for offering.
Singapore
This content has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this content and any other content or material in connection with the offer or sale, or invitation for subscription or purchase, of the Trust may not be circulated or distributed, nor may be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor (as defined in Section 4A of the Securities and Futures Act 2001, as modified or amended from time to time (SFA)) pursuant to Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the Trust is subscribed or purchased under Section 275 by a relevant person which is:
(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the securities pursuant to an offer made under Section 275 except:
(1) to an institutional investor or to a relevant person or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(c)(ii) of the SFA,
(2) where no consideration is or will be given for the transfer;
(3) where the transfer is by operation of law; or
(4) pursuant to Section 276(7) of the SFA or Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018.
