Performance, Commentary & Portfolio
ISIN GB00BNG2M159 | SEDOL BNG2M15
Fund Manager’s Review
Portfolio Overview
Allianz Technology Trust’s Net Asset Value (NAV) total return was 10.12% in June, compared to the Dow Jones World Technology Index return of 9.31%.
Technology stocks rallied strongly in June thanks to the combination of earnings reports and optimism over an economic recovery, with headline inflation slowing to a 3-month low. Semiconductors continued their strong performance pace and software rebounded meaningfully following headwinds in prior months, while electronic equipment names lagged. There was a continuation of the relative outperformance of megacap and growth stocks, with a handful of companies accounting for a meaningful percentage of the benchmark performance.
Monthly relative results outpaced the benchmark due to positive bottomup stockpicking, which more than offset the impact from greater exposure in the large and mid-cap segments of the market. Performance was led by outsized gains in the semiconductor, software and interactive media and services industries. This was offset partially by short-term selections in technology hardware and storage as well as modest exposure to broadline retail (retailers who offer a wide range of products and merchandise to consumers).
Contributors
Our top performer for the month was CyberArk Software Ltd., an identity management platform provider. Shares rallied following strong upside earnings results in the prior month, as a marked improvement in software sentiment translated to consistent gains throughout June in an otherwise news-light period.
An above-benchmark allocation to Broadcom Inc., a supplier of semiconductor, infrastructure and cyber security solutions, aided results thanks to the continued strength in chip stocks combined with the rebound in cyber pure plays. The company’s stock price accelerated following outsized earnings results and an upbeat forecast, buoyed by demand for artificial intelligence (AI)-related solutions. The stock remains a top holding in the portfolio due to its proven track record and diversified exposure across key technology themes.
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We anticipate a potential broadening of performance across industries and market capitalisations |
Similarly, shares of Lam Research Corp., a supplier of innovative wafer fabrication equipment and services to the semiconductor industry, also advanced due to positive industry momentum and expectations of a revenue and profit acceleration within the industry. We continue to hold the stock given that the company’s leading technologies combined with the secular growth in AI-related applications could translate to greater demand for the company’s advanced tools for high bandwidth memory chips.
Shares of cloud-based data monitoring and analytics platform Datadog Inc. and data centre and cloud networking solutions provider Arista Networks, Inc. also contributed to performance during the month.
Detractors
Data storage and solutions provider Western Digital Corp. offset relative results as the company’s share price was flat in June following gains in the prior seven months. Investors are monitoring the proposed spinoff of their flash storage business, which is anticipated to be completed in the second half of this year, and the corresponding impact on its balance sheet. The company remains well-positioned to capitalise on their broadbased product portfolio to capture growth in digital content, which could translate to consistent growth and favourable margin trends.
Our avoidance of digital marketing and creative software developer Adobe Inc. offset results as the company’s share price rebounded, following declines in the prior four months, as earnings results were led by a greater-than-expected adoption of the company’s new AI-based tools. We continue to remain on the sidelines, given expectations of greater competition in the space alongside our preference for other software names with a higher degree of earnings visibility and a better alpha (the excess return to a benchmark) profile.
Shares of HubSpot, Inc., a cloud-based customer relationship management platform, declined slightly in June, offsetting speculation of a potential rumoured takeover bid for the company. There was little in the way of new news, besides an announcement at the end of the month that the company was investigating a cybersecurity incident with hackers attempting to gain unauthorised access to accounts. Overall, the relative performance differential appeared to be due to investors preferring other names within the technology sector which have potentially more visible near-term catalysts.
An overweight allocation to microprocessor and devices maker Advanced Micro Devices, Inc. offset results as did a below-benchmark allocation to Oracle Corp., which rebounded following stronger-than-expected bookings.
New buys and sells
Portfolio turnover remained fairly low in June, echoing our viewpoint that the portfolio was already well-positioned from a bottom-up and top-down thematic standpoint. In mid-June we purchased shares of enterprise and database software provider Oracle Corp. following the company’s positive earnings and favourable guidance, and with their cloud infrastructure opportunity likely to drive incremental growth. We also purchased entertainment services leader Netflix, Inc. due to its scale, engagement and diversified content which is likely to facilitate market share, particularly post the password sharing crackdown, which is expected to benefit advertising growth. We funded these new buys via the exit of Darktrace Plc., a UK based application software provider which leverages AI and machine learning to detect cyber-threats which was essentially trading for cash following a takeover announcement in late April. We also sold our stake in customer relationship management platform Salesforce.com due to a more muted growth outlook as corporate clients are increasingly spending incrementally on other areas in technology.
Outlook
Technology earnings results have been broadly positive and we continue to believe that the equity market rally can extend into the second half of the year. There has been a wider-than-typical performance differential between key technology industries in recent months as AI-related euphoria translated into divergent outcomes. Areas like semiconductors and hardware deemed as more direct plays on the AI trade were among the recent outperformers. However, software and IT services lagged due to their muted guidance and interest rate sensitivity, as expectations for the number of rate cuts by the Federal Reserve, the US central bank, have been lowered from six to under two, over the year-to-date period.
We anticipate a potential broadening of performance across industries and market capitalisations, consistent with a more normalised environment. Global economic conditions remain healthy, as labour markets, corporate earnings and consumer spending have been resilient. Valuations continue to be reasonable and we believe there is the potential for upward revenue and earnings estimates should we see a better spending environment in the second half of the year, but we continue to make sure we have exposures in subsectors who will receive budgetary allocations. Uncertainty in terms of geopolitical tensions, the U.S. Presidential elections and the timing and the level of U.S. Federal Reserve and other central bank interest rate cuts may translate to periods of rising volatility in the coming months.
Mike Seidenberg
18 July 2024
This is no recommendation or solicitation to buy or sell any particular security. Any security mentioned above will not necessarily be comprised in the portfolio by the time this document is disclosed or at any other subsequent date. Past performance does not predict future returns.
Key Information |
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Launch Date |
December 1995 |
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AIC Sector |
Specialist Sector: Technology, Media & Telecoms |
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Benchmark |
Dow Jones World Technology Index (sterling adjusted, total return) |
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Annual Management Charge |
0.8% p.a. on market capitalisation up to £400 million, 0.6% p.a. on any market capitalisation between £400 million and £1 billion, and 0.5% p.a. on any market capitalisation over £1 billion. In addition there is an admin fee of £55,000 p.a. |
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Performance Fee 1 |
Yes |
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Ongoing Charges 2 |
0.70% |
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Year End |
31 December |
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Final published in March, Half-yearly published in August |
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AGM |
May |
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Price Information |
Financial Times, The Daily Telegraph, www.allianztechnologytrust.com |
1.Calculated as 10% of outperformance against the benchmark, after adjusting for changes in share capital and will be capped at 1.75% of the Company’s average daily NAV over the relevant year.
2. As at the Trust’s Financial Year End (31.12.2022). Ongoing Charges (previously Total Expense Ratios) are published annually to show operational expenses, which include the annual management fee, incurred in the running of the company but excluding financing costs.
Registrations |
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Company No. |
03117355 |
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FATCA GIIN No. |
YSYR74.99999.SL.826 |
Codes |
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RIC |
ATT.L |
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SEDOL |
BNG2M15 |
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ISIN |
GB00BNG2M159 |
Awards & Ratings
Investment Week Investment Company of the Year Award 2021 – Specialist category
Allianz Technology Trust won this coveted award in November 2021, having also been a winner in similar categories in 2020, 2019, 2018, 2017 and 2015. This award recognises excellence in closed-ended fund management and highlights ATT’s consistent performance over time. The judging panel was made up of some of the UK’s leading researchers and investors in investment trusts and closed-ended companies, as well as several senior board members with many years’ experience in the industry.
Association of Investment Companies Shareholder Communication Awards 2021
Allianz Technology Trust won the Best Large Trust category, in recognition of its consistent, high achievement. The publication noted that ATT achieved the highest returns among this year’s award-winners (performance measured over three years to 31 January 2020), calling it “a worthy winner of our most prestigious sector award”. This accolade is an independent, statistical and qualitative assessment of ATT’s performance and highlights the Trust’s outperformance both in its class and against its peers.
Shares Awards 2020 – Best Investment Trust
Allianz Technology Trust was pleased to win ‘Best Investment Trust’ in The Shares Awards 2020. The awards were voted by readers of Shares and by the general public, making the award truly representative of the people who invest in the Trust and its peers. In presenting the award, Shares Magazine noted: “The technology sector had been in the ascendancy even before the events of 2020 but the global pandemic has super-charged this trend. We have been even more reliant on tech to tackle the day-to basics of work and home life. Staying in touch through video conferencing, ordering goods and food online and streaming entertainment to keep us entertained at home. Allianz Technology Trust is plugged into these themes and was voted Best Investment Trust in this year’s Shares Awards.”.
Kepler Growth Rating
Kepler Ratings are designed with investment trusts specifically in mind and aim to highlight those which they consider to be ‘best in class’ based on a clear, easy to understand set of quantitative tests. The selection system is entirely quantitative, setting aside all personal biases and views, looking at the universe in a purely objective way.
Morningstar Rating Allianz Technology Trust has a 5 star rating with Morningstar. This is a risk-adjusted, cost-adjusted comparison of fund performance within fund categories. The underlying methodology is robust and accounts for periods of volatility-downward volatility in particular-and also adjusts for fund expenses, including sales charges. That means the more expensive the fund is, the harder it will be for the fund to earn a high star rating.
A ranking, a rating or an award provides no indicator of future performance and is not constant over time.
Morningstar star rating © 2021 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.