HL Select
UK Growth shares

What is HL Select UK Growth Shares?

Steve Clayon, Head of Equity Funds at Hargreaves Lansdown, speaks to an interviewer off camera:

“We think that there is a type of company that is capable of generating fabulous long-term returns and that's why we launched the HL Select Growth Shares fund. We wanted companies that can create a virtuous circle businesses that have got a product or a service that is so good that their customers will pay up for it - they've got pricing power. And companies that can set their own prices can generate strong profit margins and generate a lot of cash in the process and if they're generating cash then they don't need to be too reliant on the banks. And that means that when times get tough they're strong when their rivals a weak and they can pick them off, and all the while they can keep reinvesting back into those products and services to keep themselves at the forefront and generate the next cycle of growth as the virtuous circle turns around. And that's what the HL Select UK Growth Shares fund is all about. It's about building a portfolio packed full of these extraordinary businesses.”

What do you look for?

Charlie Huggins, Fund Manager at Hargreaves Lansdown, speaks to an interviewer off camera:

“Fundamentally the main thing we look for is companies that are growing so those that we think in 5, 10, 15, years’ time will be earning higher profit and more cash than they are today.”

How is the strategy working?

Steve Clayton:

“It is early days yet we're very long term in the way that we run the fund and we're thinking about where we want to be in five and ten years and please remember that past performance is no guide to the future but we're encouraged with progress to date.”

There is a table of the performance for HL Select UK Growth Shares, FTSE All-Share Index and IA UK All Companies Sector, showing the growth of each over the past 5 years.

This is as follows:

For December 2014 to December 2015 there is no data for the HL Select UK Growth Shares fund as it was launched in December 2016.
From December 2014 to December 2015 the FTSE All-Share Index saw 2.22% growth.
From December 2014 to December 2015 the IA UK All Companies Sector saw 5.47% growth.

For December 2015 to December 2016 there is no data for the HL Select UK Growth Shares fund as it was launched in December 2016.
From December 2015 to December 2016 the FTSE All-Share Index saw 8.69% growth.
From December 2015 to December 2016 the IA UK All Companies Sector saw 4.93% growth.

From December 2016 to December 2017 the HL Select UK Growth Shares fund saw 22.04% growth.
From December 2016 to December 2017 the FTSE All-Share Index saw 13.37% growth.
From December 2016 to December 2017 the IA UK All Companies Sector saw 15.37% growth.

From December 2017 to December 2018 the HL Select UK Growth Shares fund saw 3.04% growth.
From December 2017 to December 2018 the FTSE All-Share Index saw -0.06% growth.
From December 2017 to December 2018 the IA UK All Companies Sector saw -2.21% growth.

From December 2018 to December 2019 the HL Select UK Growth Shares fund saw 14.64% growth.
From December 2018 to December 2019 the FTSE All-Share Index saw 9.03% growth.
From December 2018 to December 2019 the IA UK All Companies Sector saw 10.50% growth.

In summary:

Since the HL Select UK Growth Shares fund launched 3 years ago it has grown 44.16%
Since the HL Select UK Growth Shares fund launched 3 years ago the FTSE All-Share Index has grown 23.53%
Since the HL Select UK Growth Shares fund launched 3 years ago the IA UK All Companies Sector has grown 24.67%

Past performance is not a guide to the future. The source of this data is Lipper IM to 02/12/19.
The data here represents A class Accumulation units for the HL Select UK Growth Shares fund.

How has the portfolio changed?

Steve Clayton:

“The portfolio today still looks a lot like the portfolio that we launched with because we're long-term investors when we are backing companies for the long term. What we have done over the three years is taking advantage of some opportunities to diversify we've introduced some of the world's leading technology names, a fabulous luxury goods producer as well to give the portfolio a bit more diversity.“

What’s worked well?

Charlie Huggins:

“It has evolved over the last three years I'd argue that the portfolio now is higher quality we've weeded a few names out that haven't worked so well or where there's been some concerns over the business model.”

Steve Clayton:

“The biggest theme in the portfolio so far has been the digital transformation that's going on and backing the companies that are leading that because they're growing faster and their shares have tended to outperform as a result and we don't see any sign of that change coming to a halt anytime soon, it is just a massive long term transformation going on all around the world, and we intend to keep backing it.”

Charlie Huggins:

“We've had a number of companies that we've owned that have worked well for us a lot of the themes we identified at launch things like the shift towards e-commerce and data and analytics have come through very strongly over the last three years so that's benefited names like G B group and Rightmove and Auto Trader. So it's broadly as we expected inevitably some stuff hasn't worked out but overall we're quite pleased with how it's gone so far.”

Lessons learned

Steve Clayton:

“The lesson that Charlie and I have learnt is that once you find a business that has got that virtuous circle you should just stick with it. Economies go up and down, market sentiment ebbs and flows depending on what appearing on the screens, but if you can finds a business that has got the circle turning in its favour it tends to work out.”

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This video is not personal advice or a recommendation to invest. If you are unsure whether an investment is right for you, please seek advice. The value of investments can fall as well as rise, so you could get back less than you invest. Past performance is not a guide to the future. The HL Select UK Growth Shares fund is managed by our sister company HL Fund Managers Ltd. Please see the fund’s key investor for more details on risks and charges.

The fund is a concentrated portfolio which means holding can have a significant impact on returns, but it is a high risk approach. The fund can hold higher-rish smaller companies.

Comments about individual companies represent our view as managers of the fund and is not a personal recommendation to invest in a particular company

November 2019