Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.
Most investors are familiar with the idea of investing in a wide range of funds that vary by geography, style, or asset class. Thinking of your investments in these terms has helped identify outperformers, as well as easy avenues to diversify your portfolio.
However, market performance recently has been broadly driven by companies best able to adapt to a changing world. That’s seen certain “themes” pull ahead of the pack.
The Allianz Technology investment trust has long recognised this trend. That’s why it invests in companies that use technology in an innovative way to gain competitive advantage. In particular, it likes those that tie into major growth trends by replacing existing technologies with whole new innovations, transforming their industries in the process. Ones that provide solutions which help companies to save money or deliver revenue growth are also attractive.
Manager Walter Price’s interest in cloud computing - which allows companies to store data on internet servers rather than hard drives - is a good example of his approach. Cloud technology throws up a complete sea change across industries and sectors, and a major growth opportunity for investors.
Further insights into his thinking are gleaned by looking through the trust’s portfolio. They’re all there - Google owner Alphabet is the top position, currently accounting for 6% of the total portfolio, while Amazon, Microsoft and Facebook are not far behind.
These firms are recognisable because they’ve transformed not just their industries, but the way we live today.
What’s different about this trust?
Price is not the only manager to have noticed technology’s growth potential. This is a crowded marketplace, with many outperformers for investors to choose from.
One key advantage of the Allianz Technology investment trust is that it ventures further from its benchmark than most.
As well as the larger companies that dominate the top 10 list of holdings, the trust has a greater leaning towards medium-sized companies than some competitors. It’s aided in this regard by its investment trust structure, which grants managers control over their fund’s capacity limits, allowing them to take larger stakes in fast-growing, smaller names.
Freedom to roam from its benchmark, the Dow Jones World Technology Index, means less of the portfolio is held in the top 10 holdings than other trusts (35.7% at time of writing), while also holding fewer stocks altogether (66 at time of writing). A more concentrated portfolio and a higher weighting to smaller names can enhance the trust’s growth potential, but may also lead to a more volatile share price.
And while the trust is ostensibly a global fund, the vast majority of its holdings tend to lie in the US, where the team is based. The Allianz GI Global Technology team, which manages the trust, works near Silicon Valley in San Francisco. Price likes to keep close to that action to compliment his bottom-up stock selection process. It’s here that he can visit companies in person, get to know their management teams, and see their products in action.
Over recent years, exposure to the US has been a key driver of performance. It does, however, leave investors relatively less exposed to global technology trends than other funds of the same ilk.
Investors should also note that the trust can charge an additional fee if performance is particularly strong. In 2018, for example, that took its ongoing charge up from 0.91% to 2.05%. The flipside is that the performance fee will only be charged when returns are particularly strong.
Performance certainly has been strong, driven by Price’s ability to spot “global leaders” that can drive change throughout their industries. Over the past five months, it’s been the third best-selling investment trust on Fidelity’s platform.
Under the helm of one of the most world’s most experienced managers in this field, and with its team located in a global hotspot of tech innovation, the Allianz Technology Trust could appeal to investors looking for exposure to a major investment theme.
Find out more about the Allianz Technology Trust
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. The shares in the investment trust are listed on the London Stock Exchange and their price is affected by supply and demand. The investment trust can gain additional exposure to the market, known as gearing, potentially increasing volatility. Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. The trust invests in a relatively small number of companies so may carry more risk than funds that are more diversified. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.
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