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Allianz Technology Trust: December update 2020

Investment Analyst Josef Licsauer shares our analysis on the manager, process, culture, cost and performance of Allianz Technology Trust.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

  • The trust invests in companies that use innovative technology to gain a competitive advantage in their industry
  • The managers have over six decades’ combined experience investing in technology
  • Long and short term performance has been strong

How it fits in a portfolio

Allianz Technology Trust aims to deliver long-term capital growth by investing in technology companies around the world that use innovation to gain a competitive advantage in their industry, address global trends or help improve existing technology. The trust mainly invests in large cap technology companies but has the flexibility to invest in higher-risk small and medium-sized companies. The managers can also invest in emerging markets to help boost returns but this will increase risk.

The trust could help boost long-term growth potential. However, we think funds and investment trusts investing in specialist areas, such as a specific sector, should usually only form a small part of a well-diversified investment portfolio. Investors in closed-ended funds should be aware the trust can trade at a discount or premium to NAV.

Manager

Walter Price has been a part of the San Francisco based Allianz GI Technology team since 1974 and co-heads the team with senior portfolio manager Huachen Chen. The two have worked together for more than 30 years and have decades of experience within the tech sector.

Over his time with Allianz, Price has migrated from an analyst responsible for the chemical and technology sector to becoming lead manager of the Allianz Technology Trust in April 2007. Price has the support of two other experienced portfolio managers/analysts; Danny Su and Mike Seidenberg.

While the team behind the trust may seem small they have over six decades of collective experience in the technology industry. They are also supported by more than ten global sector analysts and as a team cover a variety of areas including semiconductors, software, IT services, medical tech, automobiles and hardware.

Process

The managers look to identify technology companies that they believe have the potential to ride major trends and become successful over the long-term.

These types of companies offer potential opportunity in different market environments and typically fit into three categories; high growth innovators - emerging or transformative areas of tech, offering larger growth potential but higher risk, GARP (growth at a reasonable price) - established companies that have potential to grow but aren’t overpriced, or cyclical growth - companies that are sensitive to economic conditions and could grow as the economy grows.

As the trust concentrates assets in just one sector - technology at around 73% of the portfolio - it increases risk, so they look to diversify across the industry, ranging from companies like Zoom, a video communication platform, to Micron Technology, a memory and storage manufacturer. They also invest across the consumer goods & services, industrials, financials and healthcare sectors to help increase diversification. Portfolio diversification does not ensure against loss.

Grassroots Research, a division within Allianz GI, is used by the team to utilise a global network of journalists, field investigators and industry contacts who gather research, talk to companies and industry experts helping them identify new stock ideas and sector trends.

The managers believe that the coronavirus has spurred both the use and innovation of new technology. They recently added to their positions in Amazon, Salesforce.com and Samsung due to the increased demand for online services, and trimmed positions in Zoom and payment solutions provider, Square.

The trust has the flexibility to use gearing and derivatives which can magnify any gains or losses. Investors should be aware that if used, each increases risk.

Culture

The trust was formed in December 1995 and was relaunched with a new team at the helm in 2007 by Allianz GI. The board appointed Allianz GI to oversee the trust based on their experience and in-depth expertise of investment trust management.

The team behind the trust has experience across the industry and is committed to the trust for the long-term. The newest member, Seidenberg, has been a part of the team for over a decade.

Environmental, social and governance (ESG) factors have become increasingly prominent in recent years, and form an important part of Allianz’s DNA. The managers benefit from a separate ESG research team that critiques the portfolio decisions and challenges any stock selection ideas. The main area of ESG focus is governance within technology companies, specifically the strength and makeup of the board.

Cost

The ongoing annual charge over the trust's financial year to 31 December 2019 was 0.88%, compared to 1.01% the previous year. The trust also has a performance fee. Investors should refer to the latest annual reports and accounts and Key Investor Information for details of the risks and charging structure.

If held in a SIPP or ISA the HL platform fee of 0.45% (capped at £200 per annum for a SIPP and £45 per annum for an ISA) also applies. The platform fee doesn’t apply if the trust is held in a Fund and Share Account.

Performance

The trust has outperformed the global technology stock market since launch and also since Price became lead manager in April 2007.

Despite the impact of coronavirus and the market volatility it has created, the trust has performed well so far. Over the past 12 months* the share price rose an impressive 59.4% and the net asset value (NAV) saw an increase of 61.8% but remember past performance is not a guide to future returns. Ultimately, all investments can fall as well as rise in value so you could get back less than you invest. At the time of writing (30 November 2020), the trust trades at a 0.04% premium to NAV.

Cloud based security company, Zscaler, performed strongly over the past 12 months. The accelerated shift towards remote workforces and increases in companies fast tracking their digital transformation has seen demand for cyber protection rise drastically. Similarly, cloud based HCM (human capital management) provider, Paycom Software, has performed well benefitting from increased need for online payroll and HR technology.

In contrast, underweight positions in Microsoft and Apple hurt the trusts performance. The managers missed out on fully capitalising on both companies’ recent successes; development of cloud computing service Azure and the new iPhone launch. The value focused portion of the trust has performed poorly which is mainly made up of physical equipment and manufacturing resources which have been hindered by global supply chain disruptions.

Annual percentage growth
Oct 15 -
Oct 16
Oct 16 -
Oct 17
Oct 17 -
Oct 18
Oct 18 -
Oct 19
Oct 19 -
Oct 20
Allianz Technology Trust 37.4% 42.7% 16.7% 16.6% 59.4%

Past performance is not a guide to the future. Source: *Lipper IM to 31/10/2020.

Find out more about Allianz Technology Trust including charges

Allianz Technology Trust Key Information Document

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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