Technology-focused funds have almost gained back losses since the global well off in late February due to the COVID-19 pandemic, according to data.
FE Analytics data found, within the Australian Core Strategies universe, there were six technology-focused funds and all had started to recover in mid-March.
Since the start of the year to 31 May, 2020, the top-performing fund was BT Technology Retail fund at 17.8%.
This was followed by Fiducian Technology fund at 15.3%, CFS Wholesale Global Technology and Communications fund at 15.08%, BetaShares Asia Technology Tigers ETF at 9.6%, ETFS Morningstar Global Technology ETF at 9.4%, and Platinum International Technology C fund at 7.5%.
All funds beat the specialist sector average return of 0.1%.
Technology-focused funds performance versus sector average since start of the year to 31 May 2020
Source: FE Analytics
Over the three years to 31 May, 2020, the top-performing fund was again the BT fund at 89.3%, followed by the ETFS ETF at 86.3%.
Over the 10 years to 31 May, 2020, the BT fund was again the top performer at 516.5% followed by the Fiducian Technology fund at 500.8%.
Fiducian investment manager, Conrad Burge, told Money Management that the turnaround of the funds was a reflection of the technology itself as it had outperformed other sectors and had managed to regain losses.
“Some technology companies have done very well out of the changes in behaviour that have been caused by the restrictions put in place to counter the virus, particularly working from home. A lot of online companies have been selling products online and have done very well,” he said.
“Some of the more conventional sectors have struggled to stay afloat but tech had less difficulty than other sectors because of the ability to do things through computers rather than to physically engage.”
Burge noted that the big FAANG (Facebook, Alphabet Amazon, Netflix, Google) stocks were very resilient and were perpetually in their top holdings. Currently, the fund’s top holdings are Microsoft (4.9%), Amazon (4.6), Apple (3.9%), Marvell Technology Group (3.7%) and Alibaba (3.4%).
The funds, he said, were invested in two underlying sectors of biotech and information technology more generally.
Since the COVID-19 pandemic, Burge said that inflows had continued and while during the height of the down-market inflows had slowed down but had since been strong in April, May, and June as technology had performed better than other sectors.
According to Bank of America June global fund manager survey found that while fund managers decrease their net exposure to technology, pharmaceuticals, and communications services the three sectors were still overweight.
Source: Bank of America
When the managers were asked which were the most crowded trades in June, 72% said Long US technology and growth stocks, followed by long cash (9%), long US treasuries (6%), and long gold (4%).
“People say that some of these stocks are expensive and they’ve been saying that for years and on some valuation approaches they do look expensive. But these are genuine growth stocks and if you’re looking at the long run and their position in the tech sector many of these stocks are in very strong positions with growth prospects over the coming years,” Burge said.
“Investors want to be in these stocks and growth stocks have been outperforming for some years now. The question is whether there will be a big shift back to other sectors and I think that’s questionable.”
He noted that the valuation of the sector was only slightly above the general market which he said was “fair”.
“I think the growth prospects are stronger for technology than other sectors at this time. Therefore we’re not overly concerned if the whole market tanks, then tech will likely tank as well but we don’t expect it to be an underperforming sector relative to other parts of the stock market,” he said.
