Interactive Investor

Monks shifts focus from tech giants to new disruptors

29th June 2021 11:27

Kyle Caldwell from interactive investor

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The trust, regarded as a less aggressive version of Scottish Mortgage, is backing new tech names. 

Monks (LSE: MNKS), one of the top 10 most-popular investment trusts among interactive investor customers in May, has reduced exposure to household-name technology giants in favour of “a new wave of digital companies”.

The Baillie Gifford-managed trust, which is regarded as a less aggressive version of Scottish Mortgage (LSE:SMT), has reduced its positions in Alibaba (NYSE:BABA), Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG), Facebook (NASDAQ:FB) and Tesla (NASDAQ:TSLA)

The money raised from the reductions have been re-invested in a “new wave of digital companies”. These include payments platforms Adyen (EURONEXT:ADYEN) and Stripe, and firms operating in the cloud computing sector, namely Twilio (NYSE:TWLO), Cloudflare (NYSE:NET), Datadog (NASDAQ:DDOG) and Snowflake (NYSE:SNOW).

Spencer Adair and Malcolm MacColl, the lead and deputy fund managers of Monks, describe the companies as ‘digital natives’ due to not having “the baggage of legacy businesses which could act as a brake on growth”. Former lead manager Charles Plowden retired at the end of April.

The duo added: “The cloud is one of the most important technology leaps since the personal PC became mainstream in the mid-1980s. New online entrants looking to disrupt traditional businesses now have very low barriers to entry, as a key raw material in data and storage can be rented cheaply from day one. We think these companies have huge growth opportunities if they can go on to dominate in their respective niches.”

The shift in focus for Monks was detailed in its annual results, which were released this month. Over its financial year to 30 April 2021, Monks’ net asset value (NAV) total return was 55.5% compared to a total return of 33.9% for the FTSE World Index (in sterling terms). Monk’s share price total return for the same period was 53.1%.

All holdings in the portfolio fall into one of four categories: rapid growth, growth stalwarts, cyclical growth and latent growth.

Scottish Mortgage, also in the Baillie Gifford stable, has similarly been reducing its exposure to large technology companies. Last November we reported that the trust had been trimming weightings to Amazon and Tesla, while Facebook was sold. It has sold 80% of its holding in Tesla.

Last month, Scottish Mortgage reported the strongest ever yearly return in its 112-year history in the 12-month period to end of March 2021.

It posted a net asset value (NAV) total return of 111.2% and a share price rise of 99%. In contrast, its benchmark – the FTSE All World Index – returned 39.6%.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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