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Is it time for technology?

Adviser Fund Index

Just one fund from the Investment Management Association’s Technology & Telecommunications sector – Artemis new enterprises – has been selected for the Adviser Fund Index.

This appears to reinforce the view that technology stocks are still widely mistrusted by advisers and investors following the huge losses of 2001 and 2002.

But is now the time for investors to put aside painful memories and reassess the sector objectively?

Yes, says Mark Hinton, research analyst at Bestinvest and AFI panellist. He says: “Technology is certainly an area we are getting more interested in. It is coming from the fund managers and the general view is that tech is re-emerging, with corporate spending on the rise. It is becoming a sector you can no longer ignore.

“Investors will be two years behind the cycle when the mainstream advisers get interested but they will come back when the funds do well.”

Hinton adds that any significant return to the sector is unlikely in the immediate future, with investors needing reassurance on American growth and the threat of a global recession.

Hinton highlights two managers – Lindsay Whitelaw of Artemis and Alan Torry, head of technology at Société Générale Asset Management and manager of the £70m SGAM technology fund – as the “main guys” in the sector.

Hinton says the lack of specialist technology funds in the AFI is surprising but he adds that a number of portfolios – including Merrill Lynch UK absolute alpha, JP Morgan UK dynamic and Axa Framlington UK smaller companies – have exposure to the sector.

He also expects direct technology exposure in the AFI to increase gradually over the next 18 months.

One panellist who will not be adding to his technology weighting at the next AFI rebalancing point in November is Brian Dennehy, managing director of Dennehy Weller. The pressing issue with technology, he says, is that there are still too many investors holding on to funds that they should already have sold. He says: “They need to take a painful decision – to lock in the losses they have made. As a long-term holding, I cannot see the point. They are satellite funds to be bought and sold over shorter periods. There is no appetite for tech and, while that is sometimes a good buy signal, it is an area that is best left forgotten.”

Sales figures from the Investment management Association show a continuous pattern of monthly outflows from the technology sector since November 2003 and Dennehy doubts that a separate category will be sustainable over the longer termHe says: “It is unclear whether or not the sector will exist in five years time. There is only a small number of funds with the size to carry on as specialist products.”

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