I own quite a few different open-ended investment funds in my Self-Invested Personal Pension (SIPP). And year to date, the majority of them have done well.
There’s a clear winner, however, this year. And that’s the Blue Whale Growth fund.
Brilliant returns
Launched just over eight years ago, Blue Whale is managed by Stephen Yiu, who is based in London. His focus is on high-quality growth stocks with strong financials and durable competitive advantages.
A concentrated fund, it only ever holds around 25 to 30 stocks. This allows Yiu and his team to focus on their best ideas.
Now, I’ve been invested in this fund since 2019 and while it has been volatile at times, it has done really well for me over the long run. Over the last year, it has returned about 30%, while over the last three, it has returned about 90% (according to Hargreaves Lansdown).
This year, it has experienced some volatility, but still managed to deliver great returns. Over the last six months, it has returned about 24%, which is impressive given that it experienced a near-20% pullback in late March and April.
Note that FTSE 100 and S&P 500 index funds have only returned about 9% and 12%, respectively, over that period. So, Blue Whale is really smashing index funds right now.
AI exposure
What has Yiu done right? Well, for a start he’s had significant exposure to the global artificial intelligence (AI) build out – one of the most powerful themes on the planet today.
Here, he has names like Nvidia, Broadcom, Lam Research (NASDAQ: LRCX), Taiwan Semi, and Oracle in the portfolio. All of these stocks have done really well recently as spending on AI has remained strong.
| Stock | One-year gain (%) |
| Nvidia | 51% |
| Broadcom | 122% |
| Oracle | 83% |
| Lam Research | 57% |
| Taiwan Semiconductor | 57% |
One name in particular worth highlighting is Lam Research, which makes sophisticated chip-making equipment needed to develop advanced AI processors. It has been a top-10 holding for the fund for a while now and this will have paid off.
Recently, the company provided strong earnings and guidance on the back of the global AI build-out. And since then, many analysts have raised their price targets for the stock.
Now, I’m not saying that this stock is not expensive today – it has shot up recently (it’s up 22% in a month) and now looks a little expensive. But it’s a good example of how Yiu isn’t afraid to back stocks that aren’t widely owned.
Note that he may not hold this AI stock forever. He is quite valuation focused so he could decide to take profits after its recent pop (which has pushed its price-to-earnings (P/E) ratio up to around 27).
A winning strategy
Aside from the focus on AI, Yiu has benefitted from taking large positions in his best ideas, focusing on valuation, and looking for quality. This strategy – which has a resulted in a fund that looks very different to your average index – has really worked.
Looking ahead, I plan to stay invested in this fund. While it has its risks due to its concentrated nature, I think it complements index funds really well and is worth considering as a growth investment.
