Allianz Technology Trust: May 2025 update

• The trust invests in companies that use innovative technology to gain a competitive advantage in their industry.

• Michael Seidenberg took over as the trust's lead manager in July 2022 but has a lot of experience, having been involved in managing technology funds since 2001.

• Themes in the fund include AI/Machine learning, cybersecurity and Robotics.

How it fits in a portfolio

Allianz Technology Trust aims to deliver long-term capital growth by investing in technology companies from around the world. The managers favour those that are innovating to gain a competitive advantage in their industry, addressing global trends or improving existing technology. They mainly invest in large and medium-sized technology companies but have the flexibility to invest in higher-risk smaller companies too.

Investing in the trust could help boost long-term growth potential but this is a specialist area so adds risk. We think funds and investment trusts investing in a specific sector should usually only form a small part of a well-diversified investment portfolio. Investors in investment trusts should be aware the trust can trade at a discount or premium to net asset value (NAV).

Manager

Michael Seidenberg became the lead manager of the trust in July 2022, having been a part of the Global Technology team for nearly 15 years. He took over from Walter Price and Huachen Chen who retired. Seidenberg was recruited by Price in 2009, and worked closely with him from then onwards, so was a natural choice as successor to manage the trust.

Over his career, Seidenberg has gained a lot of experience across the technology industry. He began working in the software industry in 1996 and started his investing career with Citadel Investment Group in 2001. He's covered most technology sectors over his tenure.

When Price and Chen retired, it meant that the trust and wider technology team lost a lot of experience. They worked together for over 30 years covering every aspect of technology over that time.

That said, the team surrounding Seidenberg remains exceptionally strong. The four team members assigned to help Seidenberg with the trust have a total combined experience of 97 years – one of the most experienced teams in the industry. Erik Swords was recently named co-manager on the trust. He has 25 years of experience and is the Global Head of Technology.

Process

Seidenberg continues to apply the same tried and tested investment approach which has been used for many years. The team scour the technology universe for high-quality companies they believe have the potential to ride major trends and be successful over the long term. This means they prefer companies with traits like high-quality management teams and healthy balance sheets. Companies must also exhibit dominance in their respective industry, strong pricing power and sustainable earnings growth over time.

Placing an emphasis on these types of characteristics can offer opportunities in different market environments. Because of this the companies they invest in typically fit into three categories:

High growth innovators - emerging or transformative areas of tech, offering higher growth potential but higher risk.

GARP (growth at a reasonable price) - established companies that have potential to grow but where the shares aren't overpriced.

Cyclical growth - companies that are sensitive to economic conditions and could grow as the economy grows.

The trust currently invests over 90% of its assets in technology companies listed on the US stock exchange. The team find a range of opportunities here, including some of the largest US technology companies such as NVIDIA, Apple, Microsoft, Alphabet and Meta Platforms (previously Facebook). It’s important to point out that whilst these companies are all headquartered in the US, they make their money globally and their fortunes are not exclusively tied to the US economy.

The rest of the trust is diversified across other countries, including the UK and Europe, and has some small investments in Emerging Markets, which are higher risk than developed markets.

The team invest in an array of technology sectors, including software, semiconductors, interactive media & services and hardware. They also find opportunities in some less obvious areas, where technology is nonetheless key, such as communications and financial services. Despite the changes to the team over the last few years, the manager continues to run the trust using the same process that has always been used, so the number of changes to the trust's investments has been limited.

At the end of March the top holdings in the fund included Apple, NVIDIA, Apple, Meta Platforms, Microsoft Corporation and Alphabet. The top ten stocks make up 53.8% of the portfolio. At the end of the trust’s financial year (31/12/24) there were 45 investments in the fund. Investing in a relatively small number of companies gives the potential for each to contribute significantly to performance, but could increase risk.

The manager added some new stocks to the portfolio over the year, including Marvell Technology (a semiconductor manufacturer), Reddit (a social networking platform) and Paypal (an online payments provider).

The trust has exposure to several themes that the manager believes will drive the technology market going forward. These include AI/machine learning, cybersecurity, robotics and the metaverse.

The manager has the flexibility to use gearing which can magnify any gains or losses. Investors should be aware that if used, this will increase risk. Although they have this flexibility, to date, the managers have not seen the need to take on the additional risk.

Culture

The trust was formed in December 1995 and was relaunched with a new team at the helm in 2007 by AllianzGI. The board appointed AllianzGI to oversee the trust based on their experience and in-depth expertise of investment trust management. The management team has experience across the industry and is committed for the long term.

In July 2022, AllianzGI’s US investment operations was sold to Voya Investment Management. Seidenberg and the Allianz board members believe this is a positive partnership that will help bolster the available resources each team has access to. The culture is also similar to Allianz, so the transition has been relatively smooth so far.

As part of the partnership, Grassroots Research, which used to be a division within AllianzGI, is now owned by Voya. This remains an available resource for Seidenberg and his team to draw on for idea generation. Grassroots Research is a global network of journalists, field investigators and industry contacts that gather additional research. The network is able to talk to companies and industry experts, gaining valuable market insights for the team.

ESG integration

Environmental, social and governance (ESG) factors have become increasingly prominent in recent years and form an important part of Allianz's DNA. The main area of focus is governance within technology companies, specifically the strength and makeup of the board. Allianz can hold the companies’ management teams to account but also help influence and improve their behaviours, which Allianz believes can lead to more sustainable long-term performance.

The managers of this trust are still able to draw on the ESG work of Allianz, which means they continue to benefit from having a separate ESG research team and are less reliant on third party data. They also now benefit from an increase in available ESG resource following the partnership with Voya. Having this increased resource should be beneficial.

Cost

The ongoing charge, over the trust's financial year to 31 December 2024, fell slightly to 0.64% compared to 0.70% the previous year. Investors should refer to the latest annual reports and accounts and Key Information Document 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 p.a. for a SIPP and £45 for an ISA) per annum also applies. Our platform fee doesn't apply if held in a Fund and Share Account or a Junior ISA. As investment trusts trade like shares, both a buy and sell instruction will be subject to our share dealing charges within any HL account except online deals in a Junior ISA.

Performance

Over the long term the trust has performed well, rising by 470.74%* over the ten years to the end of April 2025. Returns have been quite variable though and remember Seidenberg has only been lead manager since July 2022, so the trust’s performance for most of this period can’t be solely attributed to him, though he has been part of the team for nearly 15 years.

Over the trust’s financial year to the end of December 2024, its net asset value rose by 35.6%, in line with the trust’s technology benchmark, and its share price rose by 38.1%. The difference is due to a narrowing of the discount (the difference between the price of the trust’s shares and the value of the underlying assets it owns) as the trust became more popular with investors. However, in the four months since the end of the Trust’s financial year, the share price has fallen, dragged down by wider volatility in global equity markets. Remember past performance is not a guide to the future. All investments fall and rise in value so you may get back less than you invest.

As at the trust’s financial year end, it was trading at a discount of 8.6%. This compares to a discount of 10.3% at the end of the previous financial year (31/12/2023). To put this into context, over the last ten years (to the end of April 2025) the trust has traded on an average month-end discount of 6.25%.

2024 was another good year for technology companies, which led the wider market. The “magnificent Seven” returned around 60%, but many smaller technology companies also performed well. This was good news for the trust as it meant that it could keep pace with its benchmark without having to hold big positions in the largest companies in the benchmark.

Semiconductors were one of the biggest contributors to returns over the trust’s financial year. While NVIDIA performed well, the fund was slightly underweight the company for risk management purposes and this detracted from returns. However, their holdings in Taiwan Semiconductor Manufacturing Company (TSMC) and Broadcom, which returned 95.4% and 114.2% respectively, were very helpful.

The software companies in the fund also performed well. However, the biggest single contributor to returns was Palantir Technologies, which operates in data analytics including AI applications. The stock performed well, riding the wave of momentum for AI and also on the news that it would be added to the S&P 500 index.

It wasn’t all good news though. MongoDB, a document database provider, struggled as companies scaled back their spending on IT. The IT services sector was also a weak area for the trust.

N/A** The AIC Investment Trust – Technology & Technology Innovation sector was formed in March 2023. Returns for the sector prior to this date are not available.