And the winner is...
Winner: Allianz Technology
Half the 10 leading contenders for this award, including Scottish Mortgage Trust, Edinburgh Worldwide and HgCapital Trust, invest substantially in companies capitalising on technological advances. However, Allianz Technology Trust (ATT) and Polar Capital Trust (PCT) focus exclusively on the technology sector. ATT retains this award with the best returns of any of our award winners, while Polar Capital came closest to matching it and remains highly commended.
Both have capitalised on the remarkable growth and diversification of the technology sector over the past decade. As ATT’s longstanding manager Walter Price comments: “Technology is the driver of innovation across many industries, for both business and consumers.” On the other hand, technology is so fast-moving that successful products and services can rapidly become obsolete, meaning sector specialists must keep closely in touch with a wide spectrum of companies.
Price’s core team of four are well-placed in this respect, as their San Francisco base is within easy reach of most of North America’s technology businesses, which account for around 85% of ATT’s portfolio. The portfolio comprises 70 holdings, with around 40% in companies capitalised at $10 billion (£8 billion)to $100 billion, 30% in mega-cap companies and the balance in smaller companies.
With California hard-hit by coronavirus, Price points out that employees of almost all companies in Silicon Valley are working from home. He expects a surge in infections over the coming months will badly hurt a lot of tech companies, especially those relying on advertising for their revenue, while others such as cloud companies with subscription models will continue growing, but at a slower pace.
He has therefore rotated the portfolio to those with more favourable prospects, and raised some cash. Despite this worrying picture, Price remains positive. “There is no question in our minds that the present events will spur the use of technology and change how we work in the future,” he says. “We think most of our portfolio companies should have a decent 2020 and a great 2021.”
Managed by: Walter Price since 2007
Sector: Technology & media
3-year NAV total return: 100.4%
3-year share price total return: 111.1%
Average sector discount: -1.6%
Ongoing charges: 2.05%
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Polar Capital Technology Trust’s portfolio is more benchmark-aware than ATT’s, with a less pronounced underweight in mega-caps – which helped it perform slightly better than ATT in 2019. It is more diversified, with over 220 holdings, but has only 18% in companies capitalised at less than $10 billion. At end-January the US accounted for 71%, with 19% in Asia Pacific including Japan.
Longstanding manager Ben Rogoff is London-based and supported by nine managers specialising in technology. He seeks to avoid “last-generation winners”, looks for real-world changes in user behaviour and secular themes, and tries “to separate reality from hype” by focusing on revenue growth and cash-flow inflections.
He shares Walter Price’s belief that the technology sector continues to offer exciting and attractively priced investment opportunities.
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