For the six-month period to the end of June, the FTSE 100 index generated a total return (capital appreciation plus dividends) of 13.1%. That’s certainly not a bad return in just half a year. Having said that, a number of growth funds smashed this performance, with some generating returns nearly twice that of the Footsie. Here’s a look at two such funds.
The Fundsmith Equity fund, which has been a brilliant performer since its inception in 2010, continued to generate fantastic returns in the first half of the year. It delivered a total return of 23.9%, outperforming the FTSE 100 by over 10%. With a performance like that, it’s little wonder that this is one of the most popular funds in the UK.
Fundsmith is a global fund meaning that it is able to invest in companies all over the world. That is no doubt one of the reasons it has outperformed the FTSE 100 – exposure to fast-growing companies listed in the US such as Microsoft and Paypal has boosted returns. Portfolio manager Terry Smith’s focus on quality (companies that are highly profitable and have strong balance sheets) has also worked very well in recent years.
Fundsmith won’t be suited to all investors as it is a growth-focused fund, and also quite concentrated, which increases risk. However, for those seeking growth, and looking to invest internationally, it’s an excellent fund to own, in my view. Annual fees are 0.95% through the Hargreaves Lansdown platform.
Blue Whale Growth
Performing even better over the six-month period was the Blue Whale Growth fund. An under-the-radar fund that was only launched in September 2017 and had assets under management of just £174m at the end of June, this fund returned a very impressive 25%.
I last covered Blue Whale back in early May. At the time, I noted that its performance over the prior 12-month period had been outstanding and that it had actually beaten both the Fundsmith Equity fund and the Lindsell Train Global Equity fund over the investment horizon – a fantastic achievement. I was so impressed with the performance that I decided to add it to my ISA shortly after my article, and so far, that decision has paid off as the fund has continued to perform very well.
This fund is managed by Stephen Yiu, who like Terry Smith, invests with a high-conviction approach. The portfolio only holds 25-35 stocks at a time, and Yiu focuses on companies that are benefiting from structural growth trends, and are growing their profits significantly. Additionally, Yiu’s goal is to invest in industry leaders, so the fund never invests in companies that are competing against each other. Top holdings at the end of June included Microsoft, Amazon, and Adobe.
Like Fundsmith, the Blue Whale Growth fund won’t be suited to all investors. It is also highly concentrated. However, if you’re investing for growth, and comfortable with the concentrated nature of the portfolio, I think it’s a fund that is definitely worth considering for your portfolio. Annual fees are 0.89% through Hargreaves Lansdown.
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Edward Sheldon owns shares in Hargreaves Lansdown and has positions in the Fundsmith Equity fund and the Blue Whale Growth fund. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon, Microsoft, and PayPal Holdings. 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.