BLUE WHALE GROWTH FUND: Fund keeps getting bigger

BLUE WHALE GROWTH FUND: Share price breaks through £2 – almost four years ago double launch price of £1

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

In recent days, the fund’s share price has broken through the £2 mark – double its launch price of £1 almost four years ago. For billionaire Peter Hargreaves, co-founder of investment platform Hargreaves Lansdown, the fund has once again demonstrated his astute business acumen — and ability to build winning companies.

Together with fund manager Stephen Yiu, Hargreaves founded investment firm Blue Whale Capital in 2017. Growth of blue whales, followed shortly afterwards with Hargreaves investing £25 million of his own money on launch.

Since then, Hargreaves and his family have been investing more of their money in the fund. As a result, their stake in the £850 million fund is now worth more than £200 million, and Hargreaves has no intention of taking any profits.

In a cheery note published last week, he confirmed that his family “continued to complement their interests” and stated that the six-member investment team, led by Yiu, was “hungry to remain at the forefront of performance.”

The fund’s performance has been consistently excellent with returns in the 2019 and 2020 calendar years of 27 and 26 percent respectively. So far this year, the fund has returned ten percent.

Yiu, who learned 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’d think you couldn’t keep making 20 percent a year,” he says. “Maybe 15 percent per year in the medium term, but not 20 percent.”

He is also aware of the threat inflation poses to stock markets. “Inflation is a concern,” he says. “If it goes towards four or five percent, here or in the US, that’s going to create some headwind for the equity markets – and it could lead to a correction. But it is not part of our current dissertation.’

The fund has only a small cash position, representing just over two percent of the portfolio, and Yiu says there is no intention to increase it “at the moment.”

Some of the fund’s 29 holdings, Yiu added, have enough dominance in their markets to counter any rise in inflation by raising prices, such as Amazon and Microsoft. Companies such as Visa and Mastercard – both top ten holding companies – would also not be adversely affected as they would earn more fees at higher transaction values.

While approximately 70 percent of the fund is invested in companies listed in the US, Yiu would like to point out that these companies earn their income globally. They also generate their profits in a wider range of business sectors than their stock market categorization would suggest.

So while 54 percent of the fund’s portfolio is classified as “technology,” only one-fifth of the holdings’ income is generated from technology activities.

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 purchased in the fund’s early life stages. Divestments this year include stakes in Unilever – ‘we saw better opportunities elsewhere’ – and medical device supplier Boston Scientific – ‘a few issues with product launches’.

Yiu says Blue Whale Capital will continue to focus on global portfolio management. A new investment trust is a possibility, although ‘we are not ready yet’.

Blue Whale Growth has an annual fee of 0.87 percent, pays a minimum income, and the scholarship ID code is BD6PG78.