The issue with thematic funds is often that they are concentrated in a handful of stocks. The issue with technology thematic funds is that they are concentrated in a handful of stocks, which almost every other global fund also owns. These funds delivered a strong performance this year but investors might want to look under the bonnet.
Polar Capital Technology (PCT) is a case in point. The trust was up 39.9 per cent in the year to 22 July. Until June, before the woes of tech stocks in the past few weeks, it was outperforming its notoriously hard to beat benchmark, the Dow Jones Global Technology index, on a one-year basis. In its recently published annual results to 30 April, manager Ben Rogoff explains how he decided to “rotate decisively towards AI as a primary investment theme” and how the trust benefited.
Success still revolves around calling the US mega stocks right. By far the largest contribution to the trust beating its benchmark was because it owns less in Apple (US:AAPL), which struggled in the year to April (but has since recovered some ground) and accounted for nearly 13 per cent of the Dow Jones index in April. The trust’s top five holdings as of June were Nvidia (US:NVDA), Microsoft (US:MSFT), Alphabet (US:GOOGL), Apple and Meta (US:META), for a total exposure of 39 per cent. This was about 27 per cent for the S&P 500 and about 19 per cent for the MSCI World.