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Tech sector poised to power up

05 мая 2009

Equity fund managers have, on the whole, acted according to the script during this slowdown, switching their sector allocation to traditional defensives and away from growth and consumer discretionary industries.

For managers in the technology and telecommunications sector, their investment universe appears to have matured since the dotcom boom of the 1990s and the dark "dotbomb" days of the early noughties.

The products and services of the companies they cover have made the transition "from luxuries to indispensable to most people's lives in the developed world," says Jeremy Gleeson, manager of the Axa Framlington Global Technology fund.

"People used to associate technology with computers. It's much more than that now," he says.

His investment strategy rests on seven growth themes, including Web 2.0 (encompassing social networking, blogs and services such as YouTube and iTunes) and digitalisation, elements inconceivable only 30 years ago.

Increasing global dependence on technology and telecoms has helped migrate this traditionally "higher-risk" area into a more defensive position. "You can only wait so long to upgrade your infrastructure before it dies," points out Stuart O'Gorman, manager of Henderson's £151.5m ($226m) Global Technology fund, "There is already a lot of pent-up demand for technology spending and you are likely to see a huge boom if the economy recovers."

Capital spending on technology as a percentage of US GDP growth has risen from virtually nothing to 4 per cent over the past 40 years, he adds, and it is set once again to become the largest sector in the S&P 500.

Martin Wood, a senior analyst at Financial Express, points out that emerging economies are expanding their technological reach, while European technology companies occupy just 16 per cent of the total market compared with their American peers accounting for 30 per cent in the US. This, he says, demonstrates the scope of opportunity available.

Hugh Grieves, manager of the £34m top-quartile GLG Technology Equity fund, echoes the positive outlook. He believes businesses in a low-growth environment will boost productivity through technological investment and says technology and telecoms companies "have no debt and lots of cash", making them more attractive than sectors characterised by "limited pricing power, excess capacity and overleverage".

Tell that to Microsoft, sceptics would say. Its quarterly revenues fell by 6 percentage points in the fourth quarter. The sector itself has dwindled since its introduction in May 2001 when it had a total of £2.6bn assets under management. Now the sector only commands £483m and half of its funds -
10 in total - operate with assets at or under the £20m mark - a level that brings into question the viability of such funds.

On April 24, Jupiter merged its £27.1m Global Technology fund into the £178m Jupiter Global Managed fund. It is only over three months to date that the sector has posted positive returns - 7 per cent on average - although the three best-performing funds returned 13-16 per cent over that period, perhaps supporting claims of a sunny outlook in a gloomy climate.

Источник: Financial Times

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