Many fund managers who are in the “twilight” of their careers are slow to understand the “new world” which the Blue Whale fund is a part of, according to Peter Hargreaves.
In a note to investors today (September 8), the Hargreaves Lansdown founder said the Blue Whale fund team was “part of the new world” which understood “new technologies, new entertainment streams, new work patterns”.
This understanding had helped the fund deliver nearly three years of solid outperformance and achieve the “holy grail” of investment management, Mr Hargreaves added.
Managed by Stephen Yiu, the Blue Whale fund invests in global equities and aims to achieve capital growth over any five-year period.
It has outperformed its peers in the Investment Association sector since its launch in September 2017, returning 72 per cent compared with the sector’s 24 per cent average.
The £530m fund is among the sector's top performers and appears in the top quartile across a three-month, six-month and one-year period.
According to Mr Hargreaves, many investment professionals would “hold onto losers” in their portfolio in the hope they would come good when it was sometimes the wrong thing to do.
He said: “[Mr Yiu] explained his ruthless approach to dealing with investments that would likely suffer due to Covid-19 – he simply cut them from the portfolio.
“Cutting your losses and moving on takes real conviction, a trait I love to see in people investing on my behalf.”
Mr Hargreaves said Blue Whale’s success so far also stemmed from the extensive research of the team, the “generalist” nature of the fund and Mr Yiu’s eye for US companies.
He said: “In the global sector there are many sub-sectors that wax and wane to top the charts one day, and then disappear into oblivion the next.
“For example, if healthcare were the flavour of the month, a fund with a remit specific to this area would outperform its peers by simply riding the wave.”
As Blue Whale does not have a specific remit, its ability to “keep pace” with those sectors surging ahead and then drop them when they run out of steam was “admirable”, he added.
In terms of the US, Mr Hargreaves said most UK-based managers seemed neither interested nor capable of sifting through the “plethora of opportunities” in North America, but that Mr Yiu could highlight those with the greatest potential.
He added: “I had no doubt from the beginning that this would be a success, however I did not envisage we would be in such a fantastic position so soon – especially considering the unenviable market conditions the team has had to navigate.