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LF Blue Whale Growth: November 2020 fund update

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.
  • 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.

Manager

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.

Process

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.

Culture

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.

Cost

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

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 16 -
Oct 17
Oct 17 -
Oct 18
Oct 18 -
Oct 19
Oct 19 -
Oct 20
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.

Find out more on Blue Whale Global Growth, including charges

Blue Whale Global Growth Key Investor Information

Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.


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