UK investment trusts are dramatically increasing their exposure to private companies as investors seek access to high-growth firms like SpaceX before they go public. Holdings in non-listed companies have surged 65 per cent to £13.4bn over five years, with some trusts now holding SpaceX stock at valuations around $800bn. This trend reflects both the changing market dynamics and investor demand for early access to promising startups.

Several major trusts have pushed the boundaries of traditional investing. Scottish Mortgage recently sought shareholder approval to lift its 30 per cent cap on unlisted holdings after SpaceX's valuation boosted its private company exposure beyond 15 per cent of its £15bn portfolio. Other Baillie Gifford trusts show similar patterns, with the US Growth Trust at 41 per cent unlisted holdings and its Schiehallion fund dedicated entirely to private assets. These moves come as companies stay private longer, averaging 11 years compared to 6.9 years in 2014.

Performance has been mixed but generally positive for trusts taking this approach. Scottish Mortgage returned 58 per cent in net asset value over three years, while the US Growth Trust achieved 66 per cent. However, challenges remain around valuation transparency and liquidity management. As Morningstar's Daniel Haydon notes, private assets can be "more extreme and more lumpy" than public markets, with periodic revaluations potentially significantly altering portfolio weightings.