Scottish Mortgage Investment Trust (LSE:SMT) shares are an excellent way to gain exposure to growth-oriented companies. The trust is diversified and its managers have an excellent track record of picking the next big winner. Of course, given the fact that it’s investing in growth-focused companies, it can be quite volatile, but the long-term returns have been very impressive. It’s up around 340% over 10 years and 2,665% since 1993.

So, what’s the exciting alternative to think about? Well, it’s another Baillie Gifford-managed trust. And it’s called Edinburgh Worldwide Investment Trust (LSE:EWI). This global investment trust typically focuses on smaller and entrepreneurial companies. Management’s previous policy was to make the first investment in these companies when their market value was under $5bn. But that was recently upped to $25bn to provide more opportunities.

What does it invest in?

The Edinburgh Worldwide portfolio contains a blend of listed and unlisted holdings, with its top two positions — SpaceX (12.3%) and PsiQuantum (7.5%) — comprising nearly 20% of total assets. While these innovative private companies present significant growth potential. their lack of financial transparency — only listed companies need to publish earnings — and presumed pre-profit nature adds a layer of risk.

The remainder of the top 10 includes holdings in sectors like biotechnology (Alnylam Pharmaceuticals, Exact Sciences, Oxford Nanopore), technology (Zillow, Doximity), and defense (Axon Enterprise, AeroVironment). Together, the top 10 positions represent 42.8% of the portfolio. This means its investments are more concentrated than Scottish Mortgage. This mix could offer outsized returns but requires an appetite for higher risk and volatility.

I also appreciate that none of these companies are household names, perhaps with the exception of SpaceX. This reinforces the risk/reward nature of the trust. These are high-potential companies, which may become the household names of tomorrow. By comparison, Scottish Mortgage’s top holdings also include well-known companies like Nvidia, Amazon, Tesla, and even Ferrari. It’s also worth noting that SpaceX is Scottish Mortgage’s largest holding as well.

Diversification is still key

Baillie Gifford has an excellent track record and its trusts are some of the most popular in the UK. Moreover, Edinburgh Worldwide shares are currently trading at a 7.1% discount to the net asset value (NAV) of the trust. The NAV is the reported value of all the the fund’s holdings. As such, a discount is highly attractive.

However, Edinburgh Worldwide’s high-risk, high-reward profile may make it unsuitable as a sole investment, but it could be a valuable addition to a cautious portfolio. Its focus on innovative, growth-oriented companies offers diversification and the potential for outsized returns.

Moreover, investors should also consider their time horizon. Edinburgh Worldwide will likely demonstrate more volatility than Scottish Mortgage. The long-run trajectory may be upwards, but the could be lots of bumps on the way.