Last year, everybody was either scrambling to get in on the technology
stock boom or the high-yield corporate bond junket. While the technology
story is still very much in play despite recent market volatility, several
fund managers are looking to give investors a diff- erent offering which
incorporates technology via a global theme fund.
Mercury and CGU have both launched global funds in recent months. But
Invesco GT got there early, launching its fund in 1997. It says technology
funds are thematic investment at its most concentrated and thematic
investment need not necessarily involve putting all your assets into the
Fund manager Tim Miller says: “Taking a perspective on industrial groups
rather than geographic regions, we came up with seven dynamic themes which
we believe will increasingly shape the world in the 21st Century.”
He says the seven dynamic themes each represent between 5 and 30 per cent
of the total portfolio They centre on not only the high-profile technology
and telecoms industries, but also consumer prod- ucts and services,
healthcare, financial services, natural resources and infrastructure.
“The full quotient is only around 70 stocks, so a great deal of effort
goes into selection and monitoring. Existing holdings are reviewed
constantly,” says Miller.
“In telecoms, data traffic is growing so fast in many quarters that
infrastructure providers are finding it hard to keep up. Telecoms stocks
are among those we most favour. Dedicated-line growth has exceeded
expectations in each of the last two years and could well do so again this
Miller believes cable and satellite broadband systems will speed up
delivery of information for companies and will replace analogue lines. Once
consumers get rapid communication speeds at work, he reckons they will want
them at home too.
“There will be pressure upon the network operators to upgrade
infrastructure to deliver information at a faster rate with an emphasis on
reliability. Technology is forming an increasingly important part of daily
lives at home and work. In the US, it is estimated that 50 cents of every
dollar invested in a business goes on technology and that is likely to
rise,” says Miller.
The fund has a substantial exposure to fast-growing technology companies.
It holds Intel, the world's biggest producer of microprocessors for the
personal computer market. The company unveiled the world's fastest
processor in February and has a $1.5bn deal that will involve supplying
chips to Ericsson for the next three years.
Miller says: “Consumer goods and services are a long-term theme fuelled by
rising disposable income and falling trade barriers around the world. We
are particularly excited by media and broadcasting companies.
“New technologies, such as digital TV, digital versatile disk (DVD) and
the downloadable MP3 music format are driving demand for media content.”
Miller says the AOL-Time Warner deal is a reminder of the importance of
having good content. Time Warner is, arguably, the world's top content
company, with a massive library of films, cartoons and TV series. He says:
“In view of the 'AOL anywhere' strategy, the partnership looks formidable.”
The fund has picked a financial services theme because it sees the
continuing growth in the financial services industry as inevitable, with
provision for retirement falling increasingly on the individual.
An ageing population in the developed world and rising living standards in
emerging countries are driving the healthcare market forward. Miller also
sees a strong recovery in Asia helping to boost infrastructure stocks.
He says the key attraction of the thematic approach is that it enables
Invesco to avoid problematic global sectors such as manufacturing.
“We can take a global perspective on the really exciting industries with
the brightest futures,” he says.