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2020 Investment Manager's Report.
by Stephen Yiu

16 Feb 2021


Some years are so uneventful that they fade into memory while others seem to have a decade of change compressed into one year. 2020 certainly belonged to the second camp where the rate of change in the economy, business practices and social norms spiked all at once. Brexit was brokered, a pandemic was declared, and lockdowns were imposed. Words like “unprecedented” became cliché and creative adaption at all levels became the only way to survive.

As fund managers entrusted with our investors’ capital, our job is to position our portfolio to navigate safely through uncertainty and highly volatile markets. We are pleased to report that the Fund rose 26.4% (based on the I Sterling Accumulation share class) in 2020, outperforming the average fund in the IA Global sector by 11.5%1.

Last year also marked our Fund’s three-year anniversary. This is a critical milestone for us as we build our track record through economic and market cycles. We are pleased to report that from launch in September 2017 to the end of 2020, the Fund gained 80.2% (based on the I Sterling Accumulation share class) as compared to 38.2% for the average fund in the IA Global Sector2.

At the fund level, several factors contributed to our strong performance last year.

Due to our strict valuation discipline, we had 11% cash in our portfolio at the start of February. This enabled us to buy instigate new holdings and to add to existing holdings at discounted rates after the global pandemic triggered a significant sell-off. By the end of March, our cash position was at 3%.

Our focus on high quality companies saw significant performance contribution from those with highly resilient business models.

We benefited from the explosion in eCommerce from our holdings in PayPal and Amazon. Even prior to the acceleration of online shopping during lockdown, we saw both companies enabling and spearheading the generational shift in consumer behaviour. We added to both positions when prices weakened in February and March but reduced our holdings in Amazon in the second half of the year, again in line with our strict valuation discipline.

We also benefited from the acceleration in digital transformation among large businesses through our holdings in Microsoft, Adobe and Autodesk. We held these companies for their critical role in the digitisation of their customers’ industries, but they also exhibited high levels of resilience by having the right products available to benefit from emergent trends like working from home and growth in the freelancer economy. We added to all three when the markets were under pressure in March.

We exited our positions in franchised hotels after it became apparent that they would not be able to adapt quickly to a world where business and leisure travel were indefinitely put on hold by travel restrictions. The cash from our sales of Wyndham Hotels and Intercontinental Hotels Group was reinvested into eCommerce and digital transformation.

Notable additions in the year include Nintendo, the owner of high-value content like Mario and Pokemon, whose latest console represents a gamechanger in its category.

As a company, our house is built on delivering consistent, significant outperformance for our investors. To achieve this, we are equipped with an investment team of five – larger than most other funds our size – and in the new year, we will be making further additions to our team.

2020 was a year when the resiliency of business models was put to the test. Our investee companies – as well as our own firm – have adapted and thrived. Nevertheless, we are not a firm that rests on its laurels. This year, as we see the rollout of vaccination and economic recovery from the pandemic ahead of us, we remain vigilant against complacency – both within investee companies and within our own.

As the world changes around us we as an organisation adapt with it, however, there are two elements to our investment process that we hold constant:

  1. We continue to invest in high quality companies: the ability of companies to exhibit fundamental outperformance is constantly in flux and our team of investment professionals will continue to chart these changes.
  2. We maintain a strict valuation discipline: the market is a dynamic beast and prices often diverge from what we see in the fundamentals – we will never dogmatically hold or avoid companies irrespective of the weight of economic gravity.


1Source: Blue Whale Capital
2Source: Blue Whale Capital


Please note that the information provided in this article is not to be construed as advice and any views we express on holdings do not constitute investment recommendations and must not be viewed as such. If you are unsure as to the suitability of an investment for your circumstances, please seek independent financial advice. Investments can go down in value as well as up so you may get back less than you invested. Your capital is at risk. Past performance is not a guide to future performance.