Allianz Technology Trust 26 March 2024

Allianz Technology Trust (ATT) offers exposure to the exponential growth potential in the technology sector. Mike Seidenberg has managed the strategy since July 2022, alongside a five-strong team of highly experienced technology-focused analysts at Voya Investment Management, based in the innovation capital of the world, San Francisco. Mike maintains a high active share relative to technology indices and strategies, with a focus on identifying the core secular growth themes set to drive the global economy over the long term including: artificial intelligence, cloud computing and cybersecurity (see Portfolio).

ATT has delivered exceptional returns over multiple time frames, particularly in environments that favour high-growth strategies, as discussed under Performance. That said, the technology focus can leave the trust exposed to greater volatility than diversified global strategies, with major sell-offs, as in 2022 and the first half of 2023. As a result, Mike is averse to adding to this risk through gearing.

The lower level of inflation and expected fall in interest rates towards the end of the year has seen the trust respond positively since November 2023, particularly this year to date. As a result, Mike has been top-slicing high-performing stocks and redeploying capital into what he calls ‘derivative exposures’ further down the market-cap spectrum, enhancing the mid- and large-cap bias of the trust. Given the cheaper valuations in this area of the market, he believes they may provide better growth opportunities over the long term and as part of a broader-based recovery.

Investor sentiment has improved in recent months, and the board’s active use of buybacks has seen ATT’s discount begin to narrow. However, at 9.6% is it still wider than its five-year average of 5.9% (see Discount).

ATT offers investors a concentrated exposure to an area of the market which has been, and will continue to be, at the forefront of global innovation, reflected in the trust’s and the technology sector’s long-term outperformance of global equity strategies. That said, there have been some challenging periods for these high-growth strategies along the way, which ATT hasn’t been immune to over the past couple of years. However, we believe Mike’s exposures to companies further down the market-cap spectrum could well be the biggest beneficiaries in a lower inflation and easing interest rate environment, if investors look to diversify away from the lofty valuations of the mega-cap tech stocks, providing a good diversifying exposure to a specialist strategy. That said, ATT does have some exposure to mega-caps, including core holdings in Meta and AI darling Nvidia, which have continued to deliver strong performance and earnings results at the start of this year.

It makes little sense to us that the discount has remained close to double digits, given the exceptional NAV returns in the sector and the positive outlook. As such, we think ATT’s shares look highly attractive at this point in time, offering cheap exposure to an area of the market that can often look expensive.