- The fund is managed by Stephen Yiu with the support of four analysts
- Performance has been very strong over the past year
- Our analysis shows the fund has benefitted from having a growth bias but the fund manager has also added value through stock selection
- Blue Whale is owned by Peter Hargreaves, majority shareholder in Hargreaves Lansdown Plc, which prohibits the fund from inclusion in the Wealth Shortlist. The manager also does not currently have a sufficient track record for our quantitative analysis criteria
How it fits into a portfolio
This is a global equity fund with a strong growth style bias, achieved through a large allocation to US stocks and the tech sector. It could be considered for a portfolio looking to add diversification to UK equities, or from existing value-style investments. Investors should be mindful that a robust portfolio holds a range of asset classes, geographies and investment styles.
Stephen Yiu has been the lead manager of the Blue Whale Growth fund since launch in September 2017. The investment team has grown in size as the fund has grown, and Yiu is now assisted by co-manager Dan Allcock and three investment analysts.
Alongside his fund management responsibilities Yiu is chief investment officer for Blue Whale Capital, but we consider the role to be complementary and, while the asset manager remains small, not a distraction from stock selection.
Prior to setting up Blue Whale Capital with Hargreaves Lansdown founder Peter Hargreaves in 2016, Yiu gained experience working at Artemis, New Star and Nevsky Capital.
Fund manager Yiu looks for companies he considers to be high quality with a strong growth outlook. The portfolio is concentrated to the stocks he has the highest conviction in, currently 25 holdings. Running a concentrated portfolio adds risk, as each individual position has the potential to have a large impact on performance.
The fund’s stated aim is to deliver consistent, significant outperformance – although this is no guarantee of returns. The manager looks to identify companies which are financially robust with little or no debt, and a clear competitive advantage over peers. Yiu likes businesses with strong management teams, and which can deliver profits regardless of the economic backdrop.
Though the fund sits in the IA Global sector, it currently invests predominantly in the US, with 74% of the fund currently in North American equities. The remainder is in Europe, the UK and Australasia. It is a very growth biased fund. Half of the fund is invested in tech companies, though Yiu states that he considers some of the holdings to be inaccurately classified; such as payments companies Visa and Mastercard which he considers financial stocks rather than tech firms.
He used the market weakness earlier this year to top up his investments in both Visa and Mastercard. He has also recently added medical equipment company Stryker to the portfolio. It sold off earlier in the year as scheduled operations were cancelled or delayed as the result of coronavirus, but which Yiu says will have created pent up demand. He also likes software stocks which he considers cash generative with high margins, such as Adobe and architectural design software AutoCAD.
Blue Whale Capital is a small boutique asset manager, currently running just the one strategy. As well as the five investment professionals, the company benefits from two senior advisers Mark Skinner and Jeremy Leadson who between them have 60 years’ experience in the financial services. Co-founder Peter Hargreaves holds the position of chairman. Additionally there is a chief compliance and risk officer. This is a small team but it should expand as the firm grows.
The firm integrates ESG (Environmental, Social and Governance) considerations into its stock selection process, and does not invest in industries where environmental concerns impact a company from sustainably growing revenues or profitability, such as coal mining. Yiu also avoids companies which do not look after their staff, which includes companies within the gig economy.
Blue Whale Growth charges an ongoing charge of 0.89% a year. This is in line with the average fund in the global equity sector. The HL platform fee of up to 0.45% per annum also applies.
Performance has been very strong since the fund was launched three years ago, outperforming both the benchmark and the IA Global sector. Our analysis suggests this is due to both being invested in growth-style stocks, which have been favoured by the market, and stock selection skills. However, investors should be mindful that three years is not a long track record, and so may not be sufficient to accurately analyse how Yiu would perform through a full market cycle.
Past performance is also no guarantee of future returns, a sentiment which Yiu himself expresses, saying that this year’s performance has been extraordinary and exceeds the targeted return for the fund. All investments fall as well as rise in value, so you could get back less than you invest.
|Annual percentage growth|
| Oct 15 -
| Oct 16 -
| Oct 17 -
| Oct 18 -
| Oct 19 -
|Blue Whale Growth||n/a||n/a||9.68%||18.57%||22.42%|
|IA Global TR||24.39%||13.79%||1.33%||11.03%||7.01%|
Past performance is not a guide to the future. Source: Lipper IM to 31/10/2020.
N/A – full year performance data is not available.