Blue Whale Growth: February 2026 fund update

• Stephen Yiu has managed this fund since launch in September 2017

• Yiu leads an investment team of five in hunting for high-quality companies with plenty of growth potential

• The fund has performed better than its IA Global peer group sector average since launch

• This fund does not feature on our Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

WS Blue Whale Growth aims to grow investors’ money over a five-year period by investing in companies from around the world, many of which reside in developed markets like the US and Europe. Whilst the managers have the flexibility to invest in higher-risk emerging markets, they tend not to invest much there, which means it could work well alongside other investments dedicated to these regions. Alternatively, it may complement portfolios focused on more value orientated companies with recovery potential.

Blue Whale Asset Management is backed by Peter Hargreaves, shareholder of Hargreaves Lansdown Ltd, which prohibits the fund from inclusion in the Wealth Shortlist.

Manager

Stephen Yiu has been lead manager of the fund since launch in September 2017. His career began in the investment team at Hargreaves Lansdown. Since his departure in 2007, Yiu has worked at Artemis, New Star (now Janus Henderson) and Nevsky Capital. Yiu is supported by co-managers Matthew Stonebridge and Mohammed Mulla as well as two other dedicated analysts.

Alongside his fund management responsibilities, Yiu is Chief Investment Officer of Blue Whale Capital, the company he co-founded in 2016 with Peter Hargreaves. We consider this role to be complementary to his fund management responsibilities and not a distraction from stock selection. If the company launches new investment products in the future, we believe it would need additional resources to do so effectively.

Process

Yiu and his team conduct detailed analysis to uncover companies they believe are of the highest quality. Each analyst can look at any sector and the team spends a large amount of time combing through company data and keeping a close eye on the competition. They look for companies with strong balance sheets, significant growth potential and robust business models that are resilient to the threat of disruption and fluctuations in the wider economy. They also favour experienced management teams whose interests are well-aligned with their companies’ prospects.

Once a potential candidate for investment has been identified, the team constructs a unique financial model to assess its valuation. Their forecasts are then sense-checked against what other analysts in the market are predicting. This usually provides a good indication of how expensive or cheap a company’s share price is compared with its potential.

The fund currently invests in 33 companies. This gives each holding the potential to make a big difference to the fund’s performance, but it’s a higher-risk approach. 71.9% of the fund is currently invested in North America with 16.0% invested in Europe and 11.8% invested in Asia. Companies in the technology sector account for 45.8% of the fund but this includes a diverse array of businesses, including semiconductor company Nvidia, transportation company Uber and communication services company Motorola Solutions.

Yiu made a number of changes to the fund over the last year. He sold US software company Microsoft and US social media and advertising platform Meta (Facebook). Both had performed well, but Yiu is cautious about the amount they’re spending on AI and whether this could start to affect their profitability. He also sold Japanese video game company Nintendo.

The manager also made several new investments. US transportation company Uber was added to the fund, as Yiu believes it has the quality growth characteristics he looks for. He also invested in South Korean memory chip supplier SK Hynix, which he believes is well positioned to benefit from the ongoing buildout of AI infrastructure.

Culture

Blue Whale Capital is a small boutique asset manager, currently running just the one fund. Its investment team has a flat structure which means each member can propose ideas and voice their opinions in an open and collegiate environment.

As well as the five investment professionals, the company benefits from two senior advisers, Mark Skinner and Jeremy Leadson, who between them have around 60 years’ experience in financial services. Co-founder Peter Hargreaves is Chairman. Additionally, Toby Hampden-Acton is the Chief Compliance and Risk Officer. This is a small team, but it should expand as the firm grows.

ESG Integration

Blue Whale Capital, founded in 2016, became a signatory to the Principles for Responsible Investment (PRI) in February 2023 – the most recent firm under our coverage to do so.

The manager sees Environmental, Social and Governance (ESG) as a risk factor, and he considers how likely it could impact the performance of the companies he invests in. His high-quality investment approach means the fund won’t invest in companies generally perceived to be doing the most harm to the environment, such as thermal coal mining, where he believes profits will be held back by the shift to cleaner alternatives.

When it comes to voting, the manager will generally vote with management unless he believes doing so is against investors’ interests. He also engages with the companies he invests in, but the engagement process is not as systematic as that implemented by some other managers. The firm doesn’t produce any engagement or voting report (aside from a headline voting summary), making it much less transparent than most other mainstream fund houses.

Cost

The WS Blue Whale Growth fund is normally available for an annual ongoing charge of 1.09%. We negotiated a 0.25% saving though, so it’s available on the HL platform for 0.84%. The HL platform fee of up to 0.45% per year also applies, except in the HL junior ISA, where no platform fees apply. From March 2026, the amount clients pay to invest with us will change. Find out more about these changes.

Performance

The fund has performed well since launch in September 2017 and delivered stronger returns to investors than the average fund in the IA Global sector. Over this period the fund has grown 253.95%*, ahead of the 106.31% return generated by the IA Global sector. Past performance is not a guide to future returns.

The manager’s growth-focused investment style has been in favour for most of the fund’s existence. It was a headwind in 2022 though when value investing fared better than growth investing. As global central banks started to raise interest rates to combat high inflation, shares priced largely on expected higher cashflows far into the future fell out of favour, sending their share prices down. In this type of environment, we expect this fund to lag.

Over the last 12 months the fund delivered a return of 25.38%, outperforming the IA Global sector return of 5.89%.

Our analysis suggests that Yiu has added value with his stock selection, most notably in the technology sector. Investments in AI related companies performed particularly well. Yiu currently favours companies who are on the receiving end of the significant amount of spending on AI. This includes semiconductor equipment supplier Lam Research and South Korean memory chip supplier SK Hynix. Both companies have performed well over the last 12 months.

On the other hand, a number of financial services companies detracted from performance. US asset management company Apollo Asset Management, US financial services company Ares Management and UK financial services company London Stock Exchange Group detracted. Several healthcare companies also struggled over the last 12 months including US healthcare company UnitedHealth and German healthcare company Sartorius.

Investors should bear in mind the meaningful amount invested in US and technology companies. Investors should build diversified portfolios with exposure to a variety of investment styles, sectors, countries and asset classes.