Tesla’s biggest independent shareholder has cut its investment in the electric car maker, generating profits of about $17bn in just eight months after a six-fold surge in the company’s valuation.

Scottish fund manager Baillie Gifford said on Wednesday it had reduced its stake in Elon Musk’s company to less than 5 per cent in August to comply with guidelines limiting the weight of a single stock in clients’ portfolios.

The Edinburgh-based group, with £262bn in assets under management and more than 200 of its clients owning positions in Tesla, now holds $19.7bn of the company’s stock, or 4.25 per cent.

“We remain very optimistic about the future of Tesla. We intend to remain significant shareholders for many years,” said James Anderson, co-manager of Scottish Mortgage Investment Trust, Baillie Gifford’s flagship fund. 

The Scottish investment manager has sold just under half of its Tesla shares so far this year, reducing its holding from 7.7 per cent at the end of December, which was then worth just $5.8bn. It was the second-biggest shareholder after Mr Musk at the time.

Tesla’s share price has rallied nearly 500 per cent this year. It was trading at $422.56 on Wednesday after a 5-for-1 stock split in August that was designed to make the shares more affordable for retail investors. 

Baillie Gifford started investing in Tesla in January 2013 when the share price, adjusted for the stock split, was less than $7. Clients of Baillie Gifford are sitting on profits from investing in Tesla conservatively estimated at between $17bn and $20bn. 

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The Palo Alto-based group intends to raise an additional $5bn by selling shares to invest in its “cybertruck” pick-up model and to fund its international expansion including plans for a European manufacturing and battery centre in Germany. 

Mr Anderson said Tesla no longer faced difficulty raising large amounts of fresh capital from outside sources, but Baillie Gifford would consider increasing its investment again if there was any serious setback in the share price. 

“Tesla is driving forward a transportation and energy revolution in the face of persistent scepticism and often downright hostility. The possibility of averting climate disaster would be significantly reduced without Tesla’s efforts,” said Mr Anderson.

Tesla’s stock trades at more than 300 times the group’s expected earnings this year but Mr Anderson dismissed concerns about the expensive valuations attached to many tech stocks.

He believes investors have to be ready to pay “unreasonable prices” for high-growth stocks because the scale of future returns can be dramatic, an approach that has influenced other portfolio managers.

Bold bets on US tech stocks, Chinese equities and innovative private companies have transformed Baillie Gifford in less than 20 years from a little-known Edinburgh-based investment boutique into the UK’s fastest-growing asset manager.

It has retained its early structure as an unlimited liability private partnership, an arrangement which is unique among modern fund management companies.

Via Financial Times