11 Sep 2018
A year ago I provided start-up capital for Blue Whale Capital. I was also the initial investor in their inaugural fund. Those two investments are proving very fortuitous!
People ask “what motivated these decisions?” There are many but the main ones I indicate below.
I have been, for some time, keen to seek and invest with a young investment team that I could trust. Most well-known managers today are approaching, or are over, 60 years old. Managing money diligently is hard work and time consuming - very few sexagenarians have the energy or motivation. What happens when they retire? I don’t want to sell their funds because I would pay an enormous amount of CGT. The question is “will the new manager fill the retired guru’s boots” – unfortunately there are endless examples where the new man was not up to the job.
Another reason for investing in this fund was Stephen’s belief that he and his team could highlight great stocks in the world’s largest and most entrepreneurial market – namely the US. For 40 years I have been surprised at U.K. wealth managers’ omission of exposure to this incredibly important country. Most portfolios have less than 10% in the USA - some have none. The excuses have been endless but most quoted has been “lack of decent US invested funds”. A lame excuse - even a tracker would have been better than shunning the market. Blue Whale has embraced the US market and holds roughly 60% of its portfolio there, it is however not shackled to the US - there will be times when Wall Street and NASDAQ look less attractive. Blue Whale is truly an international fund and has capitalised on the opportunity across the pond but will continue to scour the globe for the best opportunities whenever and wherever they arise.
So why did I invest with a new manager? The experience that Stephen Yiu and his team have is very rarely accessible by retail investors. Whilst Stephen has co-managed various different portfolios at Artemis and New Star (now Janus Henderson), he has also got experience in the hedge fund world. By combining his experiences across these different investment remits he has developed his own ideas about what makes a successful portfolio. People are afraid of new funds, but what they so often forget is the ‘star’ managers of today made their name as new managers with exceptional performance. I believe this team falls into this category.
The Blue Whale team are the most conscientious hard-working group of young people I have ever met. I firmly believe they are more knowledgeable on the companies in which they invest than many of the employees of those companies. I have had the pleasure of sitting in on some of their investment meetings. It is a joy to experience. This young team aren’t afraid to be brutal with each other, asking the most probing and forthright questions to ascertain a stock’s suitability for the portfolio.
All this being said, the proof of the pudding was always going to be in the eating. I have now digested the first year’s performance and I believe my confidence has been rewarded. The fund in its first year has grown in excess of 24%, but remember past performance is not a guide to future returns, and my initial investment of £25m has grown by over £6m. I also know these guys are years from retirement, so I don’t have to worry about capital gains tax.
I have known Stephen Yiu for 16 years and always marvelled at his work ethic. It is no surprise this fund has succeeded. But he is only part of the story - his young team exhibit the same ambitions and the same diligence.
I have every confidence Blue Whale will become a major force in the UK investment industry, meaning my initial start-up capital should also prove to be a successful investment too.
Am I pleased? I don’t think I have ever made an investment that has returned this much for me in its first year – it has been the best performing fund in my portfolio. And even more pleasingly, I see of no reason why this level of performance shouldn’t carry on far into the future and I will continue to add to my holding.