Allianz Technology Trust (ATT) is a highly differentiated and actively managed trust, aiming to profit from technological innovation and disruption. Importantly, the trust uses its structural advantages to invest, from time to time, in mid-cap high growth companies as well as large and mega-caps. As we discuss in the Performance section, this has helped the trust to outperform peers and the benchmark over the longer term.
The recent equity market fall has prompted some rapid adjustment by the team. When we caught up with them recently, the team had been asking themselves whether each holding could benefit from lockdowns occurring around the world, and whether each company could continue to sell its products in such a challenging market.
The resulting portfolio is positioned to benefit from remote working and a stay-at-home environment, including software companies providing cyber security, workforce collaboration, video streaming, and communication services. The team have added (amongst others) to holdings in Amazon, Netflix, Ringcentral and Zynga (gaming). Within security software, they have added to CrowdStrike and ZScaler, as we detail in the Portfolio section.
Technology stocks have outperformed during Q1 2020. Over this period, world equity markets (MSCI ACWI £) fell by 16%, while ATT NAV fell by only 1.4%. Relative to its benchmark, ATT has outperformed on a NAV basis by 25% over five years, and by 175% since 2007 (as of 31/03/2020).
Recently ATT’s share price has continued to trade close to NAV, aside from a brief period of particularly extreme market volatility. In fact at the time of writing the shares trade at a premium, and the trust continues to issue further stock.
As we discuss in the Performance section, ATT has been a very strong performer over time – both relative to the benchmark and when compared to specialist technology funds globally. In the short term, many of the companies in ATT’s portfolio are potentially among the few beneficiaries of the current crisis. Taking a longer view, the crisis could potentially accelerate longer-term trends towards some of the themes in the portfolio. The outperformance of technology during Q1 illustrates how fundamental technology companies are in helping us in our daily lives. Far from being a niche, technology is absolutely critical to our modern day lives – however we lead them.
Lead manager Walter Price has now developed a strong and loyal investor following, as evidenced by the resilience of the share price. Other than in the most volatile periods in the last month, the trust’s premium rating has remained. Indeed the board continues to issue shares. The team’s active investment process, flexibility and high-conviction approach sets them apart from competitors, although it has meant a slightly higher standard deviation.
This year’s return builds on a longer-term pattern of outperformance – both of wider equities and the technology benchmark. The team have reacted to the crisis in a positive way, identifying companies that they think will be positively affected by social distancing on a global scale, and also picking up companies at what they see as attractive valuations for when life gets back to normal.
|Portfolio is characterised by superior earnings growth compared to the benchmark||The portfolio trades at a reasonably high valuation premium to the benchmark index|
|An active 'pure' portfolio for investors looking to access the technology sector||Tilt towards mid-cap growth companies means the trust has a slightly higher standard deviation than Polar Capital Technology|
|While AUM has grown through share issuance, ATT remains at a size which allows it to be nimble||A change in market sentiment could lead lead to discount widening, exacerbating losses|