Allianz Technology Trust 09 February 2022
Disclosure – Non-Independent Marketing Communication
This is a non-independent marketing communication commissioned by Allianz Technology Trust. 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 Trust (ATT) aims to capitalise on the most exciting companies within the global technology sector. Run by lead portfolio managers Walter Price and Huachen Chen, who each have approximately four decades of industry experience, the team follow a bottom-up approach to stock selection that blends a thematic approach to investing with a highly diversified portfolio.
Recently the team have found new opportunities in the semiconductor and cyber security sectors, with recent developments leading to their increased confidence, as we discuss in the Portfolio section. The team are also increasingly confident in the long-term tailwinds behind the broader technology sector, given the increasing gap between the demand for the services the sector provides and its ability to fulfil them. The team have also re-initiated a large position in Tesla in recent months, encouraged by the company’s increasing production levels and profitability.
ATT has been able to demonstrate enviable long-term performance, beating both its benchmark and closest peer over the last five years. However, ATT has underperformed over the last 12 months, though this is primarily a consequence of the team’s commitment to diversification, which prevents them from overweighting the mega-cap technology stocks that dominate its benchmark. We describe ATT’s recent returns, as well as the long-term potential of the strategy, in the Performance section.
ATT has recently seen its Discount widen, likely as a result of the volatility which growth stocks have seen in light of increased inflation rates. ATT currently trades on a 7.4% discount, which is wider than its five-year average.
In our view, ATT continues to represent one of the most compelling ways to access the technology sector, and by extension provides an opportunity for investors looking to add a growth-factor strategy to their portfolio. Given ATT’s formidable track record, the team’s thematic approach to stock selection has clearly been a benefit. Yet what is arguably more of an advantage is the team’s commitment to diversification, as it allows ATT to offer investors a truly diversified portfolio of global technology stocks. This attribute, along with ATT’s allocation to mid-cap stocks, differentiates the trust from wider global and technology indices, which are increasingly dominated by mega-cap tech stocks. We also note that the team’s enormous amount of experience is a clear advantage for the trust (see Management), as it has allowed the managers to witness the rise and fall of numerous trends within the tech sector.
While unfortunate, we believe ATT’s recent performance should not be a concern for long-term investors. It is natural for growth stocks like many of ATT’s holdings to be broadly sold off in an inflationary environment as investors react to levels of inflation not seen in four decades. Given the macro-driven nature of the sell-off, investors may view the resulting discount that ATT currently trades on as an attractive entry point, given the team’s faith in the secular trends driving growth in their underlying companies.
|Highly diversified portfolio in a sector dominated by a handful of companies
|Potential to underperform in certain market environments, given its active approach
|Strong track record of outperformance relative to both benchmark and wider peers
|Higher risk profile may be unsuitable for cautious investors
|Discount potentially offers attractive entry point
|Pays no dividend