Open-end | Review | Global | 17 Mins Read | by AG Latto
The Blue Whale Growth Fund and stands out in a number of respects. The fund manager is backed by the co-founder of Hargreaves Lansdown, Peter Hargreaves. Lead fund manager Stephen Yiu has also not been afraid to speak his mind.
Blue Whale Fund's mission statement:
We aim to be the number #1 global fund in the country, delivering the best returns for our investors.
The fund - sterling institutional accumulation class - has increased by 22.2% since inception on 11 September 2017 to 28 February 2019.
This puts it in fourth place out of 286 funds in the UK Investment Association Global Sector.
The return since inception to 21 March 2019 is 26%. This is ahead of the Fundsmith Equity Fund (I Acc class) and the iShares S&P 500 tracker over the same period.
Blue Whale's strong performance to date
At the end of February 2019, the Blue Whale fund had £100 million of assets and held 28 stocks. The ongoing charge on the Institutional fund class of the fund is 0.89% - available on investment platforms.
The track record of the Blue Whale Fund is limited. It is reassuring, though, that the fund quickly bounced back from the equity market sell-off in the fourth quarter of 2018.
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The alternatives to the Blue Whale Growth Fund are up for debate. The best active alternative appears to be the Fundsmith Equity Fund. The best passive alternative is probably the iShares S&P 500 ETF.
Growth fund alternatives
Another option is to look for other growth orientated funds to invest in. Baillie Gifford is probably the most successful growth investor and runs a number of funds.
Scottish Mortgage Investment Trust (SMT) is one of the largest and has performed well. I have personally, though, been concerned about some of the stocks in SMT's portfolio (i.e Tesla and Netlfix)
it is notable that Scottish Mortgage hasn't hit new highs since the Q4 2018 sell-off. Low quality companies can see investor sentiment worsen in short measure.
Scottish Mortgage Investment Trust holdings
Scottish Mortgage versus Blue Whale
Technology fund alternatives
You can also argue that a technology fund is an alternative. This is because technology is the largest sector in Blue Whale at 43% of the fund. If we exclude the cash position then the technology sector is 50% of the fund.
The iShares S&P 500 information technology IT sector ETF offers exposure to the sector. However one of its largest positions is Apple - a company that Blue Whale is not keen on.
Two global active technology funds are Polar Capital Technology Trust and Alliance Technology Trust. The trouble with a bet on technology is that it can be a volatile sector.
The Blue Whale fund may also shift away from technology if the valuations are too demanding.
Passive IT sector fund
Two active technology funds
Performance of tech funds versus Blue Whale
The Blue Whale Fund has delivered roughly the same return as the S&P 500 IT sector ETF since inception. It has outperformed the Polar Capital Technology Trust but has been beaten by the Allianz Technology Trust.
The trouble with the two technology investment trusts is that the tech sector can go out of favour. The Blue Whale fund should move into other areas if technology stocks are too highly valued.
Blue Whale versus the S&P 500 IT sector
Blue Whale March fact sheet covering February 2019
Source: Blue Whale
Blue Whale's investment philosophy
Source: Blue Whale