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The return of technology

Chris Salih reports that Ignis is stepping into the tech sector which is showing some stellar returns

Ignis has taken a tentative step into the technology sector with the soft launch of a global fund in the final quarter of this year.

The Dublin-domiciled fund will have 40 to 55 stocks and will be benchmarked against the MSCI all companies global IT index.

The fund, which is managed by Geoff Paton, will have no geographical, index weighting or market capitalisation constraints.

Multi-managers and advisers are now taking a closer look at the sector, which produced an average return of 50 per cent in 2009 and 18.5 per cent in the past 12 months.

Technology funds have struggled to shake off their terrible reputation among advisers since their fall from grace in 2000. Before 1999, there were only three dedicated technology vehicles but the number leapt to 28 the following year as attractive returns boosted investment interest throughout the Isa season.

But soon after, the bubble burst and people saw the value of their investments fall rapidly. Some fund firms quit the technology sector, with Jupiter, Artemis, Scottish Equitable and Aegon all closing or merging their technology funds.

The latest Morningstar figures show a total of 12 funds in the technology and telecommunication sector but only four have over £100m in assets. However, with stocks such as Apple and Google continuing to make waves, can fund companies continue to ignore the sector?

Hargreaves Lansdown investment manager Ben Yearsley says there is real interest in the sector again and fund firms will not be put off by having their fingers burnt in the past.

He says: “If we assume we are in a low-growth environment, corporates will look to cut costs by boosting their technology spending, which will be a massive boost to the sector.

“If you look at a number of the bigger companies in the tech sector, they have delivered on their promises in the past 10 years. Companies like Google and Amazon have made huge profits and continued to grow.”

Paton says technology can be classified into two camps – legacy and new age companies.

He says his fund will focus on new age technology stocks, which take advantage of strong secular trends, such as cloud computing and the mobile internet.

He says: “We will be particularly focused on this category of stocks, where there are a number of long-term secular trends that will give rise to powerful investable themes and strong returns for investors.”

Aegon Asset Management head of sales Steve Kenny says he could not see the firm launching a new technology fund following its decision to close the original after 20 years in May 2007.

He says: “I am not sure if it is investor appetite for technology or just displeasure with a number of the other sectors but technology seems to have caught the eye again.

“Our funds are not constrained, so we can cover it with sufficient exposure to the sector if it is on the up. That being said, those who want full exposure to tech should look to a pure fund.”

Bestinvest senior investment adviser Adrian Lowcock says the sector has moved on from funds and companies being tagged as a technology investment.

He says: “Vodafone, Apple and Google are now more than just technology stocks – they are mainstream international companies. I think fund management firms recognise that and have incorporated across their range, for example, in a smaller companies fund. There will always be some funds that offer pure technology funds but many will choose to incorporate technology offerings across various funds within their ranges.”

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