BLUE WHALE GROWTH FUND: Fund keeps getting bigger

There is no doubt that the 2017 launch of investment fund Blue Whale Growth has proved an unequivocal success. 

In the past few days, the fund’s share price has broken through the £2 mark – double its £1 launch price nearly four years ago. For billionaire Peter Hargreaves, co-founder of investment platform Hargreaves Lansdown, the fund has yet again demonstrated his shrewd business sense – and ability to build winning companies. 

Together with fund manager Stephen Yiu, Hargreaves set up investment business Blue Whale Capital in 2017. The global fund, Blue Whale Growth, followed shortly afterwards with Hargreaves investing £25million of his own money at launch. 

Ever since, Hargreaves and his family have been investing more of their money in the fund. The result is that today, their holding in the £850million fund is worth £200million-plus, and Hargreaves has no intention of taking profits. In a buoyant note published last week, he confirmed that his family were ‘still adding to their holdings’ and proclaimed that the six-strong investment team, led by Yiu, had the hunger ‘to keep in the forefront of performance’. 

The fund’s performance has been consistently excellent with returns in calendar years 2019 and 2020 being 27 and 26 per cent respectively So far this year, the fund has generated a return of ten per cent. 

Yiu, who learnt his trade as a fund manager at Artemis, New Star and hedge fund Nevsky Capital (as well as Hargreaves Lansdown), remains incredibly humble about the fund’s success. ‘You would think you can’t keep making 20 per cent a year,’ he says. ‘Maybe 15 per cent per annum over the medium term, but not 20 per cent.’ 

He is also mindful of the threat that inflation poses for equity markets. ‘Inflation is a worry,’ he says. ‘If it moves towards four or five per cent, here or in the US, that will present some headwinds for equity markets – and it could lead to a correction. But it’s not part of our current thesis.’ The fund only has a small cash position, representing a tad over two per cent of the portfolio, and Yiu says there is no intention to raise this ‘at the moment’. 

Some of the fund’s 29 holdings, Yiu adds, have sufficient dominance in their markets to counter any uptick in inflation by raising prices – the likes of Amazon and Microsoft. Companies such as Visa and Mastercard – both top ten holdings – would also not be adversely impacted as they would earn more fees on higher transaction values. 

Although some 70 per cent of the fund is invested in companies listed in the US, Yiu is keen to point out that these companies earn their revenues globally. They also generate their profits across a broader range of business sectors than their stock market categorisation would suggest. So, while 54 per cent of the fund’s portfolio is classified as ‘technology,’ only a fifth of the holdings’ revenues are generated from technology business. 

Yiu has not made any drastic changes to the fund’s portfolio. Five of the top ten holdings – Adobe, Alphabet, Facebook, Mastercard and Microsoft – were first bought in the early stages of the fund’s life. Disposals this year include stakes in Unilever – ‘we saw better opportunities elsewhere’ – and medical device supplier Boston Scientific – ‘a couple of hiccups over product launches’.

Yiu says Blue Whale Capital will remain focused on managing global portfolios. A new investment trust is a possibility although ‘we are not ready yet’. 

Blue Whale Growth has annual charges of 0.87 per cent, pays minimal income, and its stock market ID code is BD6PG78.

This post first appeared on Dailymail.co.uk