The popular tech trust looking beyond the Magnificent Seven

Out of all the hundreds of different investment trusts, only a few regularly make it onto Fidelity’s list of investment trust best-sellers, which is why the appearance of Allianz Technology in each of the last four months deserves closer attention. It is certainly a decision that has paid off handsomely so far, as it was one of the best performers during the first quarter.

Most of the interest in this area has been focused on the mega-cap beneficiaries of Artificial Intelligence (AI), yet there is a lot more to the sector than just AI. If you think that the market leadership could broaden out then you might want to consider adding the Allianz Technology Trust to your portfolio.

Management and strategy

Manager Mike Seidenberg has done an excellent job since taking over the lead role from Walter Price in June 2022. He has a well-resourced team behind him, which is based near Silicon Valley to help keep abreast of the latest developments in this rapidly evolving area. 

Allianz has a bottom-up stock picking approach that is driven by exposure to key themes. The aim is to identify fast growing companies that are trading at a reasonable valuation and that have the ability to deliver sustained growth over long periods of time.

What are the manager’s latest views?

Seidenberg is optimistic about the long-term secular growth prospects for technology, especially AI, machine learning, the internet of things, cybersecurity and digital assets. Because of this he thinks the tech sector can provide some of the best return opportunities in the equity markets.

He says that the prospect of lower interest rates in the US should enable economic growth to accelerate during the year, as easier financial conditions should result in higher demand, better access to capital and increased levels of investment.

“Earnings growth looks poised to expand in 2024 and should be conducive to a broadening of performance further down the market capitalisation spectrum, away from the mega-caps. There are likely bumps along the way and the market might be due for a short-term breather after the recent strength, but there are reasons to be optimistic for 2024.” ¹

Positioning

In order to take advantage, the fund has a structural underweight exposure to the biggest stocks in the sector, as he thinks that a “more fertile spot” for greater growth opportunities can be found in the mid and large caps.

The portfolio has a total of 42 holdings with the top ten accounting for just under half of the assets.² These include members of the Magnificent Seven such as Nvidia, Microsoft, Meta, Apple, Amazon and Alphabet, although some of them are considerably underweight compared to the benchmark.

Allianz Technology - top 10 holdings

1. Nvidia
2. Microsoft
3. Meta Platforms
4. Apple
5. Broadcom
6. Amazon
7. Alphabet
8. Lam Research
9. Advanced Micro Devices
10. Monolithic Power Systems

Source: Fidelity International, 29.2.24

How has it performed?

Over the five years to the end of February the NAV was up by an impressive 165.2%, although this was still behind the 177.9% gain in the Dow Jones World Technology benchmark. The shares are currently available 10% below NAV, despite the active share buyback programme that is intended to limit the figure to 7%.³

Important information- investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Shares in the trust are listed on the London Stock Exchange and their price is affected by supply and demand. The trust can gain additional exposure to the market, known as gearing, potentially increasing volatility. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.