- Net assets underperform benchmark by 7% in 2022
- NAV discount widens to 12.2%, versus 3.4% five-year average
- Megacap tech now dominates portfolio’s top stakes list
Buying more Apple (AAPL:NASDAQ), Microsoft (MSFT:NASDAQ) and Alphabet (GOOG:NADAQ) exposure is what Allianz Technology Trust (ATT) has been doing.
One of the UK’s most popular tech funds with retail investors, the investment trust has traditionally held larger weightings in higher growth, mid cap companies, but this had to change, the trust’s lead manager Mike Seidenberg decided last year.
This was the area hit hardest in 2022 as investors reappraised valuations in light of the changing interest rate environment. It now means that the three technology giants mentioned earlier are now its top tree holdings.
Not that this saved Allianz Technology from underperforming its Dow Jones Technology Index benchmark through 2022. NAV, or net asset value - the valuation of its portfolio holdings collectively - fell 34% during the year, the trust’s full year results confirmed, 7% more than the benchmark’s 27% decline, with the fund ‘behind the mark in terms of reducing risk in the portfolio,’ according to Stifel analysts.
The share price fell more sharply still, down 40.4% as the trust’s discount widened. The discount to NAV currently stands at -12.2%, versus a five-year average -3.4%. Allianz shares declined a little more than 2% to 211.5p in response to the announcement.
WHAT DID THE TRUST SELL OFF?
For example, cybersecurity firm Okta (OKTA:NASDAQ) struggled to integrate its Auth0 acquisition and the manager exited the position. Seidenberg also top-sliced the trust’s long-standing exposure to Tesla (TSLA:NASDAQ), not because he likes to investment case any less, but simply because the holdings had become ‘overweight’ in the portfolio, exerting too much influence on performance.
Allianz Technology also held a relatively high level of cash during the year - around 6% on average. ‘This was a reflection of the uncertainty of the environment and a desire to retain optionality in the portfolio,’ said Stifel.
2023 AND BEYOND
The Allianz Technology Trust still believes in the long-term sweet spot to find fast-growing, dynamic technology companies.
Optimism for long-term growth prospects for many high growth companies in areas such as cloud computing, data analytics and cyber security remains, and these themes remain reflected in the portfolio mix.
Nevertheless, the trust recognises that sentiment is likely to be against them while the economic climate remains weak.
Still, share prices have fallen a long way, as Stifel notes, and now reflect much of the implied negative economic news. ‘Many technology companies continue to deliver strong earnings in spite of the economic conditions and have a significant runway of growth ahead of them,’ believes Allianz Technology.
Equally, the trust also believes that potential weakness in the dollar ‘should help those technology companies with large global markets, such as Apple and Microsoft.’
DISCLAIMER: The author of this article, Steven Frazer, owns shares in Allianz Technology Trust.
