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This top growth fund is outperforming both the FTSE 100 and Terry Smith

From my experience, many people are quite conservative when it comes to stock market investing. Often, people will simply just stick their money in a FTSE 100 tracker, content with a return of 6%-8% per year.

There’s absolutely nothing wrong with this approach, of course. However, by allocating a little bit of capital to a selection of more specialised funds, I think investors could potentially boost their overall portfolio returns by quite a bit without taking on too much extra risk.

With that in mind, today I want to highlight a growth fund that is literally smashing the FTSE 100 at the moment. If your goal is to generate strong long-term returns, I think this fund could definitely be worth a closer look.

Blue Whale Growth fund

The Blue Whale Growth fund is a relatively new investment fund that was only launched in September 2017. It has caught my eye recently for two reasons. First, its performance since inception has been fantastic, and second, billionaire Peter Hargreaves – who co-founded online broker Hargreaves Lansdown – is Chairman of Blue Whale, and has apparently invested a ‘substantial proportion’ of his family’s wealth into this fund. Managed by portfolio manager Stephen Yiu, the fund’s objective is to be the number one global fund in the UK which means it’s looking to go head-to-head with the likes of the Fundsmith Equity fund and the Lindsell Train Global Equity fund, both of which have generated brilliant returns in recent years.

High-conviction approach

Much like well-known fund managers Terry Smith and Nick Train, Yiu takes a high-conviction approach to investing. In other words, this is not the kind of fund which tracks the market. Instead, Yiu is looking to construct a portfolio of around 25-35 stocks which he believes can generate exceptional returns for investors. His goal is to find companies that can grow over time and improve profitability and buy these companies at the right price.

Fantastic performance

While it’s still early days here, Yiu appears to be doing an excellent job so far, as the fund is up around 26% over the last year, compared to a return of around 11% for the FTSE All World index and approximately 4% for the FTSE 100. It’s also beaten both the Fundsmith Equity fund and the Lindsell Train Global Equity fund over the last 12 months, which is an impressive achievement.

Top holdings

Taking a look under the bonnet, I really like the look of some of the holdings. For example, Adidas, Alphabet (Google), and Unilever are three stocks in the top 10 holdings that I believe have fantastic long-term growth prospects. 

I also like the fact that the top 10 holdings include video gaming stocks Activision Blizzard and Electronic Arts. Given the increasing popularity of video gaming and ‘e-sports’ (the growth of this industry is phenomenal), these two companies, which are famous for their Call of Duty and FIFA gaming franchises respectively, could turn out to be winning long-term investments.

Risks

Of course, as with any fund, there are risks here. Given the fund’s concentrated approach, it could fall more than the broader market during an equity market downturn. The high-conviction approach also increases stock-specific risk.

However, overall, I think this fund looks very interesting. Available through the Hargreaves Lansdown platform with fees of just 0.89% per year, I’m certainly tempted to add it to my portfolio.

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Edward Sheldon owns shares in Unilever and Alphabet and has positions in the Fundsmith Equity and the Lindsell Train Global Equity funds. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (C shares) and Unilever. The Motley Fool UK has recommended Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.