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Polar Capital Technology Trust – another great year

Polar Capital Technology Trust recently released its annual results to the end of April 2019. In this update, we look at how the trust's performed and review some of its main investment themes.

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 up-and-coming technology trends
  • We think it's a reasonable option for exposure to some of the most promising technology companies
  • NAV total return of 24.7% compared with 21.4% for the trust's benchmark
  • Share price total return of 17.9% as the discount widened over the year

Technology is one of the most exciting and fast-moving parts of the stock market. In recent years there have been leaps forward in areas like artificial intelligence, machine learning and gaming.

Ben Rogoff and Nick Evans, managers of the Polar Capital Technology Trust, are experienced investors in technology companies. They look for established technology businesses with an advantage over competitors and a high quality product or service.

The trust's done well over the long term. An investment of £10,000 made 10 years ago would be worth £73,838* before charges although there are no guarantees these exceptional returns will be repeated. All investments can fall as well as rise in value so you could get back less than you invest.

Annual percentage growth
Jun 14 -
Jun 15
Jun 15 -
Jun 16
Jun 16 -
Jun 17
Jun 17 -
Jun 18
Jun 18 -
Jun 19
Polar Capital Technology Trust 17.8% 8.3% 55.0% 29.6% 6.5%

Past performance is not a guide to the future. Source: *Lipper IM to 30/06/2019

We think this trust is a reasonable option for exposure to some of the world's most promising technology businesses. But its focus on a single sector, and the managers’ use of gearing (borrowing to invest), make it higher risk. The trust also has a performance fee. You can find more details about the risks and charges in the latest annual reports & accounts.

How's the trust invested?

Rogoff and Evans look for themes that could develop in the technology industry over the next few years. Then they invest in companies they believe should be able to benefit, wherever they're located. Below we look at some of the trust’s main themes.

Media content

It's been estimated US consumers spend around 82 minutes per day viewing digital video, while time spent watching broadcast TV has been in decline since 2012. Companies benefiting from this trend include video streaming company Netflix, which now has 139m paying users, and music streaming service Spotify, with 207m monthly active users.

However, the success of Fortnite – an online game with more than 200m registered users – shows TV and music are increasingly competing with gaming for user screen time. The managers think a number of their investments could benefit from the increasing popularity of gaming including Electronic Arts.

Digital advertising/marketing

Advertising is big business. And an increasing amount of it is being done online, where adverts can be targeted towards particular groups of people. The online advertising market is dominated by a few large players, including Alphabet (formerly Google) and Facebook. Shares in both companies are held in the trust.

Artificial intelligence

Artificial intelligence (or AI) has the potential to change our lives in more ways that we can imagine. The managers focus on finding companies where AI could have a significant impact on their business model in time. Recent investments include precision instrument maker Shimadzu. It combines existing technologies with AI to make them faster and more efficient.

How did the trust perform over the year?

The year to the end of April 2019 was a volatile one for technology companies but the trust performed better than the broader global technology market.

The strongest performer was US semiconductor company Advanced Micro Devices (AMD). Its share price rose almost 230% as the company set out a more robust strategy for selling its products. It also won big contracts with companies like Samsung and Alphabet.

Payment-related businesses did well too. Investments in PayPal, GMO Payment Gateway, and Visa all rose strongly. A lack of exposure to big technology companies that performed poorly, like IBM, Baidu and Intel also helped performance.

More about this Trust, including charges

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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