Podcast | IC | 3 Mins Read | by
Allianz Technology Trust (ATT) and Polar Capital Technology Trust (PCT) have delivered in spades. Their ten-year annualized NAV returns to 14 August 2020 are 23% and 22.1% respectively.
The benchmark for both funds is the Dow Jones Global Technology Index (sterling terms and total return). This has also delivered strong returns.
IC podcasts with ATT and PCT help illustrate how the investment managers invest.
Both funds only invest in listed companies and have outperformed. The different periods below are due to different year-ends.
PCT 10 years to April 2020 - 18.5% NAV growth versus 16.3% for the benchmark. A 2.2% difference.
ATT 10 years to December 2019 - 19% NAV growth versus 17% for the benchmark. A 2% difference.
Walter Price, ATT, Key takeaways
- AWS and Azure slowing growth rates in Q2 - Hard to start new cloud migration projects during work from home (WFH) period. Expects growth to reaccelerate as the economy improves.
- Microsoft Azure - Microsoft has an advantage in the next phase of large enterprises moving to the cloud. But Amazon's clients are faster growing.
- Work from home - More flexible and agile when using cloud computing versus on-premise computing.
- Big tech - Discounted to market (except Amazon) due to more regulation, tax and scrutiny. But the growth rate should be sustained
- Facebook - A unique asset for marketers and helps small business. Trades at a 'reasonable multiple.'
- Apple - Average replacement time for iPhone over 4 years. iPhone SE is a 'low priced iPhone with new technology.'
- Outside of FAANGs - ATT holds semiconductor companies and software companies that were born in the cloud or enable companies to develop products in the cloud.
- Cloud computing - On-premise to cloud computing is a ten-year journey and we are currently two years in.
Ben Rogoff, PCT, Key takeaways
- PCT approach - Eye on the benchmark in terms of being overweight or underweight stocks. A lower risk approach and aims to deliver 2-3% outperformance.
- Benchmark - Has outperformed most of PCT's peers.
- Investment process - Focused on risk. Invest in themes and companies where they will inflect positively.
- Where to invest - Thinks thematically where they need to invest and where they don't need to invest. Easier to know what not to own.
- Eight core themes - These include e-commerce, 5G, artificial intelligence and online advertising. Taking profits in software due to valuations.
- Ringcentral/Zoom - Ringcentral sold on valuation concerns but Zoom kept.
- Natural monopolies - Many of the big tech companies are natural monopolies and have 'delivered incredible value to people.'
- Chinese stocks - Conservative exposure with ownership of Tencent, Alibaba and Baidu. Lessons learned from 2006 issues with mid-cap China stocks.
- Amazon - single largest relative bet versus the benchmark. AWS has changed the economics of the company.
- Apple - A mass affluent consumer brand business as opposed to just a tech business. This change merits the re-rating we have seen.
- Nvidia - Graphics processor key for artificial intelligence (AI). So key play on the AI theme.
- What is a tech company - Could this company exist without the internet? Could a company exist without transformative technology?
Polar Capital Technology Trust and Allianz Technology Trust have both performed well.
The two funds have the same benchmark but invest in different ways. Which one is best is a question of perspective.
PCT arguably adopts a lower risk approach by focusing on large-cap stocks. ATT offers the upside of investing in fast-growing mid-cap companies.