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HL Select  - 4th Anniversary

HL SELECT UK GROWTH SHARES
HL SELECT UK INCOME SHARES
HL SELECT GLOBAL GROWTH SHARES

HL Select - 4th Anniversary

Managers' thoughts

Important information - The value of this fund can still fall so you could get back less than you invested, especially over the short term. The information shown is not personal advice and the information about individual companies represents our view as managers of the fund. It is not a personal recommendation to invest in a particular company. If you are at all unsure of the suitability of an investment for your circumstances please contact us for personal advice. The HL Select Funds are managed by our sister company HL Fund Managers Ltd.
Steve Clayton

Steve Clayton - Fund Manager

15 January 2021

The HL Select UK Growth Shares fund reached its 4th birthday in early December 2020.

Two sister funds have joined it along the way – the HL Select UK Income Shares fund which started in March 2017, and the HL Select Global Growth Shares fund in May 2019. We now look after almost £950m on behalf of almost a hundred thousand HL clients.

We wanted to make it easier to invest in the stock market. Funds have been around for a long time of course, but all too often investors are left pretty much in the dark about how their money is invested.

We set out to change that, letting investors see the funds portfolios in full and updating them when we bought and sold shares.

We believe that successful investing is about taking the long view. Indeed, after four years, we’re only getting started.

We want to invest in businesses that have great competitive strengths. Businesses with pricing power and robust cash generation. Businesses that keep their finances strong, so they can hopefully prosper even when others are blown off course. Most importantly, businesses that keep looking ahead, reinvesting and reinventing themselves to stay at the forefront.

We want to own these companies of all sizes for years to come. Few meet our requirements, so HL Select funds are concentrated portfolios, with each holding big enough to make a difference. This does raise the riskiness of the funds compared to more diversified ones or those investing only in larger companies, but we believe it offers greater potential for performance over the long term.

Lessons along the way

Asking all the important questions before you commit pays dividends in the long run. If that sounds obvious, the tricky bit is knowing which questions are important.

We analyse companies to ensure that we unearth what really matters before investing. And constantly review how we approach the process, bringing in new learnings and making each decision better than before.

Great businesses are rewarding to own, so don’t let go of something good. We spend our time making sure that the companies we’ve backed are still great, rather than worrying too much about their share prices.

A stock might look expensive, but if we’re right about the quality of the business, the chances are it will soon enough grow into its share price, and we will still own a great business. Don’t be afraid to pay for quality.

Experian, which we bought on day one for the HL Select UK Growth Shares fund has looked “expensive” pretty much all the time we’ve owned it, but it has delivered at every step of the way and generated great returns.

Above all, we take the long view. The value of a company’s shares depends on all the profit that the firm will make in the future. The real value is far more affected by how well positioned the business is for the long haul, rather than if it meets the market’s expectations for next quarter’s earnings. So we spend time thinking about how industries will develop and if a business is well placed to manage change.

Important - This article isn’t personal advice. If you’re not sure whether an investment is right for you, please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Progress so far

It’s been an extraordinary few years, with Brexit, the Trump Presidency and a pandemic unfolding along the way. But overall, we are pleased with the results so far.

2020 saw unprecedented numbers of companies cutting their dividends in response to the pandemic which decimated revenues for many firms. Our HL Select UK Income Shares fund was not immune, but we have been able to pay our investors dividends every month and the fund has outperformed the majority of other funds in its sector since launch in March 2017*. Past performance is however not a guide to the future. Income is variable, and not a guide to future income.

Recent years have seen investors increasingly looking for companies seen as winners in the digital economy. That has played to the strengths of our two Growth funds. Both have beaten 90%* of funds in their sectors since their respective launches in December 2016 and May 2019 generating attractive growth along the way. These funds have significant exposure to technology shares and businesses driving digital changes in other industries. Some of our holdings have delivered double-and triple-digit returns, but not everything has gone to plan and we’ve had some big losers too.

30/11/15 - 30/11/16 30/11/16 - 30/11/17 30/11/17 - 30/11/18 30/11/18 - 30/11/19 30/11/19 - 30/11/20
HL Select UK Growth Shares N/A 21.54% 2.67% 15.62% 1.55%
IA UK All Companies 6.57% 15.23% -4.13% 12.49% -6.93%
FTSE All-Share 9.77% 13.35% -1.46% 11.01% -10.29%
HL Select UK Income Shares N/A N/A -1.28% 11.59% -7.58%
IA UK Equity Income 4.55% 12.67% -4.16% 10.30% -10.55%
FTSE All-Share 9.77% 13.35% -1.46% 11.01% -10.29%
HL Select Global Growth Shares N/A N/A N/A N/A 31.14%
IA Global 20.36% 15.65% 2.85% 12.77% 13.50%
FTSE World 25.75% 15.66% 5.47% 12.67% 11.32%

Past performance isn’t a guide to the future. Source: *Lipper IM to 30/11/2020.

N/A - performance for this time period is not available.

But we’re excited about the future. Governments have supported economies through the storm and interest rates are at rock bottom levels. With vaccines now rolling out, economies will hopefully soon begin to reopen on a sustainable basis. We see growth increasingly underpinned by all of this and expect quality stocks to remain highly sought after.

In the HL Select Global Growth Shares fund we see Zebra Technologies playing a crucial role in enabling industries around the world to automate more and more of their processes with its goods-tracking technologies.

GB Group, held in both our HL Select UK funds, facilitates e-commerce and digital financial services with software that protects against fraud, confirms identities and validates locations, enabling clients to do business with confidence, all around the globe. We can only see demand for these services growing over time.

Experian, one of the HL Select UK Growth Shares fund’s largest holdings, is using data to enable banks and retailers to make the key decisions about who to do business with, putting it in a cornerstone position within the digital economy.

The largest holding in our HL Select UK Income Shares fund is Tritax Big Box REIT, a property company that owns the giant distribution centres that support firms’ ecommerce operations and logistics. Supply is tight and demand strong, providing a great position for both capital and income growth in the portfolio.

We’re excited about the prospects for all our funds in the years to come.

Find out more about these funds

HL Select UK Growth Shares Key Investor Information

HL Select Global Growth Shares Key Investor Information

HL Select UK Income Shares Key Investor Information

Important - This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information. Unless otherwise stated performance figures are from Bloomberg and estimates, including prospective yields, are a consensus of analyst forecasts from Bloomberg. They are not a reliable indicator of future performance. Yields are variable and not guaranteed.