Allianz Technology

ATT offers a unique portfolio of technology stocks, performing strongly during COVID-19…

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Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Allianz Technology. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Allianz Technology

Allianz Technology Trust (ATT) is a highly differentiated trust offering exposure to technology stocks, with its managers seeking to capitalise on the winners of emerging trends within the sector. The trust’s allocation is spread across a range of market caps, with a current overweight to mid-caps compared to its mega-cap-dominated benchmark.

COVID-19 has created a turbulent yet positive period for the technology sector, accelerating the adaption of several trends with examples including working-from-home software and automation (as discussed in the Portfolio section). The team see COVID-19 as having reinforced the dominance of the sectoral winners, with companies which were not able to adapt to the pandemic falling further behind. That being said, having been well positioned going into the pandemic, the team are happy with the current allocation of their portfolio and this is something that is reflected in their performance. They are instead looking more towards a post-COVID-19 world, upping their exposure to cyclical names while feeling increasingly bearish towards the mega-cap names.

ATT has performed well so far during the pandemic, outperforming both its benchmark and its closest peer. As we detail in the Performance section, over the last five years ATT has generated an NAV return of 321% against the 235.7% return of the benchmark. Over 2020 so far, ATT has generated impressive absolute NAV returns of 70.7% (as at 04/12/2020).

ATT’s share price has largely traded at a premium over the year, apart from the short moment of volatility during the COVID-19 crash which is detailed further in the Discount section. ATT currently trades at a 0.6% premium and continues to be a net issuer of shares.

Kepler View

ATT has a refreshingly different approach to technology investing, with a far more diverse allocation in terms of market capitalisation when compared to both its benchmark and broader technology funds, and this has been a key attraction of the trust. We believe that the management have been vindicated in their identification and use of thematic investing. Many of the trends which they identified pre-COVID-19 have been the main winners of the pandemic, and ATT’s performance has reflected this.

While past performance shouldn’t guide decisions, the ATT team have continued to add to their track record of successfully identifying themes ahead of the curve. The team are already looking past COVID-19 to the future winners, which they believe to be more cyclical names. With the potential for a COVID-19 vaccine, plus more stimulus expected from the US’s new Democratic presidency, we see plenty of tailwinds for this new allocation. However, we also believe the more recent themes can continue over the longer term, given how prevalent themes such as working from home have become in all of our lives.

The trust continues to trade at a slight premium, which we believe is a fair outcome considering how resilient its performance has been over the year. ATT also has an increasingly loyal investor base, which should hopefully sustain its premium into the future.

BULL Bear
Offers diversification from the benchmark due to a mid-cap bias, and is underweight to mega caps
Mid-cap stocks can trade with higher volatility than larger-cap names
Superior expected earnings growth with a strong track record of identifying trends
ATT could be caught up in a broader rotation to value post-COVID-19
Strong, seasoned investment team who have achieved very strong performance during 2020
Thematic investing can offer less diversification within portfolios
David Johnson
David is an investment trust analyst and joined Kepler in September 2020. Prior to this he ran multi-asset model portfolios at a discretionary fund manager, and has worked in both asset management and investment banking during his career. He holds a Masters in Finance from the University of Warwick and is a CFA charterholder.

Fund History

Disclaimer

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

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