It's always fascinating to talk with technology fund managers, and many are surprisingly honest and open, about how they see the wider technology space and where opportunities may exist, but also about their own fund performance. Ben Rogoff, manager of the Polar Capital Technology Trust (PCT), is one of the most interesting. Three times during our brief chat he said, 'I probably shouldn't tell you this,' before going right ahead and telling me.
In my eyes, the trust's half-year to 31 October net asset value (NAV) performance of 0.8%, versus a -1.0% of its benchmark (the Dow Jones Technology Index*, if you're asking) was not exactly electric. 'No, it's not,' he admits, 'but every little helps,' adapting a well-used supermarket catchphrase.
Ben Rogoff, investment manager, Polar Capital Technology Trust
Here are some of his thoughts, first on trust performance:
> Smaller cap tech companies have 'trailed' as a whole during the period, With Polar's largely big-to-mega cap focus (see top 10 holdings below), this cyclical standpoint works best the other way around for PCT.
PCT's Top 10
Apple | 9.1 |
9.0 | |
Microsoft | 6.2 |
4.6 | |
Amazon | 3.1 |
Alibaba Group Holding | 2.3 |
Cisco Systems | 2.2 |
Salesforce.com | 1.6 |
Tencent | 1.6 |
Splunk | 1.5 |
And takeovers:
> There's also been a lot of large cap mergers and acquisition (M&A) activity among the lower growth giants - see Dell's $67 billion takeover of EMC (EMC:NYSE), the biggest tech deal ever - which has pepped-up performance about some struggling former incumbents, and that's not where Polar plays. Rogoff is looking for tomorrow's potential technology monopolies, not yesterday's.
Core holdings:
> The fund manager points out that strong third quarter figures from Amazon (AMZN:NDQ) and Google (now stupidly called Alphabet (GOOG:NDQ) in spite of retaining its old ticker symbol), in which the trusts holds big stakes has helped PCT, both have been hitting the ball out of the park of late, and the latter also pitched in with a '$5 billion share buyback,' the fund manager adds.
Unicorns:
> There are 65 or 70 venture capital-owned supposed tech superstars, yet off-market valuations look increasingly out-of-kilter with public markets. Mobile payments firm Square's (SQ:NYSE) recent twice downgraded IPO is a classic example of stock market investors simply being unwilling to match inflated valuations of venture capital players. Could this drag on tech IPOs down the line, I ask?
It already is, Rogoff points out, '2015 has been the quietest for tech IPOs since 2009.'
On UK exposure (just 2.2% of the trust):
> Most UK tech companies are simply too small, he explains, and with £800 million of assets under management, you can see why. Rogoff is also cautious currently about Britain's one true tech champion, ARM (ARM). He's a bit concerned about smartphone volumes on the slide globally, even if Shares differs in its opinion for reasons you can read here.
Elsewhere UK:
> Joined up NHS IT player EMIS (EMIS:AIM) is one Rogoff likes, and the trust owns, 'great recurring revenue, great visibility, huge barriers to entry,' he says, echoing Shares' own view on the company. Rogoff also has small stakes in Accesso (ACSO:AIM) ('great CEO, nice business model), a Shares Play, and YouGov (YOU), for its big data angle.
You can read Ben's regular thoughts on the global technology space and more on the PCT trust's own website, under the monthly commentary section.
*(total return, Sterling adjusted, with the removal of relevant withholding taxes)
