HL Select UK Shares Fund - what happens next?

The launch of the HL Select UK Shares fund has been a huge success, with over £168m raised during the fixed price launch offer period. We'd like to thank investors for their support and we look forward to keeping them in touch with their investment. Now we are focused on investing this cash into our chosen stocks, at the best possible prices we can get.

How will the monies be invested?

Due to the size of orders we need to place, we have our own dedicated dealer for the HL Select UK Shares fund. Lennie Shaw has twenty years of experience in dealing for large institutional clients. He will utilise a number of different avenues aiming to get the best price for our chosen stocks.

We’ve been able to take advantage of the weak markets in the last two days to build positions with little market impact. We’ve used programme trades, whereby brokers bid their best rates to trade tens of millions of pounds worth of the shares we have selected, for some of these positions.

We can also access electronic platforms where we and other institutions can anonymously show interest in trading blocks of shares. When a match is identified, the system brings buyer and seller together instantly. Neither party ever learns the identity of the other, but both are vetted before being allowed onto the platform. We’ve already been able to pick up a multi-million pound block of a normally hard-to-buy stock for the fund using this route.

Some orders have been given to traditional stockbrokers, where we know they have a high share of trading in a particular stock, and should be well placed to find a matching seller for us. Some of these positions will be dealt swiftly, but others could take a long time to build up.

Keeping the money in the market

We believe one of the biggest drags on fund manager performance over the long term is holding cash. The last thing we want is to be sitting on cash if a “Santa Rally” gets underway before we've built our positions.

Whilst we are busily investing into the stocks we want to own for the longer term, we will aim to maintain market exposure, by investing as much of the un-allocated cash as we can, into highly liquid Exchange Traded Funds (ETFs) that replicate the market, or key sectors. It's the cheapest way to ensure our investors' money is in the market, whilst we build the portfolio.

So don't be surprised to see holdings of ETFs appearing on the portfolio breakdown initially. They may start quite large, but as we find the sellers of the actual shares we want to buy, those ETF positions will shrink.

Progress so far

By using multiple routes to market, we’ve made pretty encouraging progress. Already over half of the fund has been invested, into 27 stocks so far. Some positions are nearly complete, others are barely begun. It will get harder from here, because most of the positions where we still have a lot of stock left to buy are smaller companies whose shares trade less frequently. We anticipate being able to show many of our positions and explain why we’ve taken them on Monday 12th December.

We leave a short delay, before showing holdings, to create a smokescreen around Lennie’s dealings in the market. He’ll get better prices when trading for the HL Select UK Shares fund, if he can operate without the market knowing where he’s heading. For this reason too, we’ll only reveal holdings once we’re happy our trading is finished.

Right now, we’re a one-way dealing desk, just buying, not selling, because we’re investing the money that was raised. But the delay in publishing holdings will also allow us to sell things, further down the line, without the market immediately spotting what we’re up to.

So the portfolio breakdown page will start off like a shaken Christmas snow globe, taking time to settle and become perfectly clear, but as it does, we’ll be explaining why we’ve chosen all those newly revealed positions.

As with all investments, the value of the fund will fall as well as rise, so investors could get back less than they invest.

Invest now

More about HL Select UK Shares

Read more blog articles