More than six years have passed since Stephen Yiu set up investment house Blue Whale Capital with backing from Peter Hargreaves, his former employer at investment platform Hargreaves Lansdown, and now the company’s chairman.
Although it hasn’t been the easiest of journeys what with lockdowns and soaring inflation, the company’s flagship investment fund which Yiu runs – Blue Whale Growth – has been a big success.
Supported by a £25 million initial investment from Hargreaves – and followed by a series of investments totalling £70 million – the fund now has assets of £880 million, and investors in from the start have done rather well for themselves.
They have enjoyed returns in excess of 105 per cent – far better than the 60 per cent profits registered by the average fund in its global peer group. Hargreaves’ £95 million has become £155 million.
Despite the impressive long-term gains, and managing to survive in an industry where big established brands dominate, Yiu takes nothing for granted. Indeed, he understands the pain that his investors experience when the fund goes through a rough patch – as it did in the first half of 2022 when the global economy was knocked sideways by high interest rates and soaring inflation.
‘A lot of people invested in 2021 when we were doing well,’ says Yiu, whose only personal investments are in Blue Whale Growth. ‘They then saw the value of their investments dip in 2022. It was disappointing and damaging – and many exited the fund. Thankfully, we were able to prove last year that our investment strategy still works.’
The result is that the losses in the first half of 2022 of just over 30 per cent have been made good by the near 36 per cent return made in the subsequent 18 months.
The fund, set up to deliver capital growth rather than income, invests in 29 listed companies across the globe. Although it has held the likes of Adobe, Mastercard, Microsoft and Visa from day one, it is now a somewhat eclectic portfolio.
As a result, stocks such as artificial intelligence specialist Nvidia (the fund’s biggest holding and largest contributor to recent investment gains) sit alongside US financial services giant Charles Schwab, energy titan Canadian Natural Resources (CNR), German healthcare specialist Sartorius and Italian drinks firm Campari.
‘The idea is to hold high quality companies that will perform irrespective of the economic backdrop,’ says Yiu. ‘That means businesses such as Nvidia that are thriving on the back of the boom in AI – and CNR which should benefit from a sticky oil price as a result of continued geopolitical tensions, especially in the Red Sea.’ Not everything has worked – for example its foray into North American railway companies (Union Pacific and Canadian National Railways) which it abandoned late last year.
‘It was too slow burn as an investment idea,’ he says.
Other fund disposals include US software companies Autodesk and Intuit – and Dutch semi-conductor giant ASML.
Yiu, 45, has built a solid investment infrastructure around the fund and is supported by a six-strong investment team who are constantly looking for new opportunities. ‘The company’s focus must be on delivering returns for fund investors. Performance is the only thing that is important,’ he says.
He is enthused by the fact that the average age of the team is only 35. ‘We have a long road ahead of us and we want to serve our investors with distinction over the long term.’
Hargreaves has backed the fund since day one and has yet to dispose of any of his holdings. Annual fund charges total 0.83 per cent.
