Since its launch in September 2017, the Blue Whale Growth fund has been one of the top performing global equity funds in the UK. Indeed, according to its 31 August fact sheet, the fund has delivered an annualised return of 20.8% since inception, which means that it is giving the likes of the Fundsmith Equity Fund and the Lindsell Train Global Equity Fund – the two most popular global equity funds in the UK – a run for their money. Here, I’ll explain why I’ve bought the Blue Whale Growth fund for my own Stocks & Shares ISA.
Diversification
One of the main reasons I’ve chosen to invest in Blue Whale is that I see it as a good way to diversify my portfolio, which has a heavy focus on FTSE 100 dividend-paying companies. As a global equity product, Blue Whale gives me exposure to higher-growth companies that are listed overseas. Currently, top holdings include the likes of Microsoft, Mastercard, and PayPal.
I also like the fact that Blue Whale’s portfolio holdings are different to that of Fundsmith and Lindsell Train, which I also own in my ISA. Given that these two funds are highly concentrated, adding this fund to the mix lowers my overall portfolio risk.
Performance
While Blue Whale doesn’t have a long-term performance track record, its performance since its inception has been fantastic. Between its launch in 2017 and 31 August 2019, the fund delivered a total return of 44.9%, making it the third-best performing fund out of the 288 in the Investment Association’s ‘Global’ sector over that investment horizon. That kind of performance is hard to ignore, in my view.
Investment approach
I also like fund manager Stephen Yiu’s approach to picking stocks. The investment philosophy at Blue Whale is to invest in high-quality businesses at an attractive price. In this regard, Yiu and his team spend a considerable amount of time looking for businesses that are fundamentally attractive, while also focusing heavily on valuation. One interesting fact about this fund is that you won’t find companies that are competing against each other in the portfolio. The reason for this is that Yiu only invests in what he considers to be genuine industry leaders.
Compared to Fundsmith and Lindsell Train, this fund is unique in that portfolio turnover is quite high. Whereas Terry Smith and Nick Train are very much long-term investors, Yiu is not afraid to move in and out of stocks on the basis of their valuations.
Risks
Of course, like any fund, there are risks to consider with Blue Whale. For a start, it is highly concentrated, which adds stock-specific risk. If one or two major holdings were to underperform, the fund’s performance could be impacted negatively. Secondly, it currently has high exposure to the US (nearly 70% at 31 August) and the technology sector (approx 45%). If US stocks, or the technology sector were to underperform, performance could suffer.
There are also fees to consider. Through Hargreaves Lansdown, I pay a net ongoing charge of 0.89%, plus the 0.45% annual fee on funds. This means investing in Blue Whale is more expensive than buying a tracker fund.
However, overall, there’s a lot I like about Blue Whale. Given its unique approach and top performance, I see it as a great way to diversify my global equity exposure.
