From the investor’s point of view, the area should be treated as
highly speculative, and with the understanding that it is perfectly possible to lose most of one’s investment over even a relatively short period of time. Those unlucky to have purchased Framlington NetNet (now AXA Framlington Global Technology) at its launch in late 1999 would have lost 9.4% per year annualised through 31 March 2006. As of September 30, 2002, near the nadir of the technology bear market, they would have lost just over 76% of their original investment. Investors here are also likely to have to pay nosebleed prices for their investments. Only one actively managed fund in the sector carries a TER of less than 1.80%.
If you still need to choose a fund from this unattractive group, we’d usually suggest looking for one with a manager who has been through a full bull/bear market cycle at the same fund, low costs, and a portfolio that is reasonably well diversified across technology subsectors. Sadly, there aren’t any. The top three performers over the past five years are Close FTSE techMARK, Artemis New Enterprises, and AXA Framlington Global Technology. The first of these is a tracker that offers virtually no exposure to large global technology firms, and charges far too much for what it is. The second is intriguing, but its since-inception record is less impressive, and it’s very much a niche offering, with a recent focus on small- and mid-cap UK tech concerns. It’s well worth a look, but will not suit those looking to invest in mainstream global technology firms. The Axa offering showed some spark from 2003 through 2005, but its performance has been exceedingly lumpy, and, what’s more, it’s extremely volatile and is very US-centric at the moment. Its 2.44% TER is also unconscionably high, and presents the manager with a difficult hurdle to overcome in the long-term.
One to Watch?
Frankly, we can’t get too excited about any of the funds in the sector. L&G Global Technology Index Trust is a perfectly acceptable offering that will give you cap-weighted exposure to the world’s largest technology firms; we think investors who wish to add tech exposure could do a lot worse than choose this fund (although it’s 1% fee is too high for a tracker). On the actively managed front, an interesting dark-horse is M&G Global Technology. It just went through a management transition in early 2007, but new manager Cyrille Filott has plenty of technology experience, and the fund offers better global and industry diversification than many of its rivals. We also think M&G has done a good job with the reorganisation of its management team. This is by no means a screaming buy, but it intrigues us a bit more than some of the funds at the top of the heap today.
A version of this article previously appeared in Investment Adviser, Financial Times Ltd.
