Thames River Multi-Capital says the recent outperformance of the IMA technology and telecoms sector is due to an increasing reliance on technology as companies use it to increase efficiency and reduce staffing needs.
In its latest Fundwatch survey, the multi-manager firm highlights the IMA technology and telecoms sector as the best-performing of all 36 IMA sectors in the first quarter of this year, returning 14.7 per cent in the three months to March 31, based on Lipper data.
Thames River says returns have been achieved mainly through the technology element of the sector rather than telecoms. It says throughout the credit crunch, many companies panicked about costs and fired staff, cancelled capital expenditure and dividend payments.
But companies rely on software to carry out their everyday business and Thames River says software licensing payments have held up well.
Co-head Rob Burdett says: “The technology companies are well financed and had their own version of the credit crunch before, which they survived. The feedback from tech mangers is that technology is seen as a way of increasing efficiency.”
The IMA European smaller companies and IMA UK smaller companies sectors were the second and third-best performers over the quarter, with respective returns of 14.6 per cent and 14.1 per cent.
Burdett says this is because the trend for the quarter was “risk on”, which means investors are more positive and feel safer investing in riskier assets. That tends to be the time when people look at less liquid areas of the market such as smaller companies.
Gary Potter is co-head of Thames River Multi-Capital