Technology – what do our favourite fund managers think?
Technology isn’t just a sector – it’s an integral part of the global economy. As such, fund managers must consider it when managing money, whether they run a technology fund or not.
We don’t have any technology-specific funds on our Wealth 150 list, but the following three of our favourite fund managers all have an interesting viewpoint on technology.
Below they explain how they think about tech and how it affects their investment process.
This article isn’t personal advice. The views expressed are those of the fund managers, and any shares mentioned aren’t investment recommendations. Please seek advice if you’re not sure an investment is right for you.
The value of investments can go down as well as up, so you could get back less than you put in. You’ll find more details of each fund’s risks in its key investor information.
Nick Train and Michael Lindsell – Lindsell Train Global Equity
Our most important theme is the disruptive potential of technology.
Not just within the technology industry itself, but across all the sectors we invest in, including consumer goods.
We invest in top-tier consumer goods brands, and expect companies such as Unilever, Diageo and Heineken to be alert to ways they can benefit from tech.
The internet, and the rise of artificial intelligence like Amazon’s Alexa, offers infinite shelf space for these companies' products.
They're also making acquisitions to benefit from technological disruption. Unilever bought Dollar Shave Club, which offers a subscription service for razor blades and is taking business from competitor Gillette.
More than a quarter of Diageo’s media spend is now on digital (in the US it’s up to 40%). It owns major drinks brands such as Johnnie Walker, Smirnoff and Guinness. We want to be sure that consumers will ask Alexa to order Johnnie Walker – and that Amazon will stock it.
Entertainment content is another key theme. The internet presents an opportunity for companies like Disney, another of our holdings. Disney boasts 11 franchises worth over $1bn each. It intends to launch its own branded streaming service in 2019, which highlights the value of its unique content.
More information on the Lindsell Train Global Equity Fund
Key investor information
Lindsell Train Global Equity invests in Hargreaves Lansdown plc shares
Giles Hargreave and Guy Feld – Marlborough UK Micro Cap Growth
We have the freedom to invest across all sectors, but we find a lot of opportunities in technology. The sector is home to lots of fast-growing and innovative small companies.
Around 20% of our fund is in pure tech stocks. But a lot of the other companies we hold use technology to get ahead of their competitors, or to open up new markets.
Our largest investment is Learning Technologies Group. It's a market leader in delivering training via digital platforms for clients including governments and multinational companies. Training is delivered through online courses, interactive video and educational games. It’s even created virtual reality learning experiences for the Science Museum and Tate Modern.
We also like Next Fifteen, a technology-driven marketing group. It serves many of the tech giants, including Google, Apple and Amazon. It has a strong management team and should benefit as technology continues to shake up the marketing world.
Focusrite is another top investment. Musicians around the world use its audio technology to produce high-quality sound for recording and live performances. It also provides ways to connect instruments to computers, and makes software and apps used to create electronic music. Focusrite benefits from the trend of people recording their own music at home and uploading it to websites such as Soundcloud and YouTube.
More information on the Marlborough UK Micro Cap Growth Fund
Key investor information
Chris St John – AXA WF Framlington UK
When investing in technology, investors often focus on companies that make products like smartphones, or their components. But the benefits of innovation are widespread, among creators and users.
I'm fascinated by the ingenuity of the companies I meet and impressed by the way they embrace technology to gain competitive advantage. Technology is being used in all areas of business, not just to maximise profits, but to cut costs.
Rio Tinto, the mining company, uses driverless trucks. Iron ore production relies on a lot of transportation, so any technology that can reduce fuel bills and maximise the use of equipment is welcome. Driverless trucks don't need holidays, they don't require training, they can work 24 hours a day, and they reduce the risk of human injury.
Rio Tinto's autonomous trucks already account for one quarter of the material moved across their Pilbara mines in Australia. On average, each truck operated about 700 hours more than conventional trucks in 2017. Load and haul costs were also 15% lower.
I also invest in Future – a media company that produces special interest magazines, such as music and gaming. It ensures advertisers are connected to consumers that have a relevant and specialist hobby.
Consumers that read their online magazines are also offered the chance to buy products via the internet. In some cases they can read a review of a particular product, then buy it immediately through a price comparison window. Future then earn a commission from the sale.
More information on the AXA WF Framlington UK Fund
Key investor information
FAANGs - the $3trn acronym