Interactive Investor

Star tech investor steps back as sector braces for bumpy ride

9th March 2022 11:06

Sam Benstead from interactive investor

Allianz Technology Trust manager Walter Price is handing over the reins after a disappointing year for the trust.

Renowned technology investor Walter Price is stepping down as manager of the £1 billon Allianz Technology Trust (LSE:ATT) after 15 years at its helm.

Under his leadership the trust made investors 2,340% compared with a 623% return for global shares as technology stocks boomed.

Price will hand over the lead manager job to current portfolio manager Mike Seidenberg in July this year and will support Seidenberg until the end of the year. The trust’s board said the handover would not cause any changes to the investment approach. Seidenberg joined Allianz in 2009.

A spokesperson for Allianz told interactive investor that Price “has no current plans to retire”. The spokesperson added: “He will continue to work in partnership with Seidenberg and the rest of the team in managing the portfolio of the company. This change is part of a long-term development process.

“The change marks a natural step for Seidenberg as part of his ongoing career progression. Price will continue to work closely with Seidenberg and the rest of the team managing the portfolio. With regards to the portfolio, there will be no change to the investment approach.”

The news comes after a disappointing year for the trust. Allianz Technology underperformed its benchmark index in 2021 by eight percentage points because it missed out on returns from America’s biggest tech firms and was caught out by a sharp drop for expensive software firms.

Its net asset value rose 19.5% last year versus 28.2% for its benchmark, according to annual results published this week. 

Price said: “The reasons for the underperformance are straightforward. The company has had a long-term overweight to the highest-growth technology companies. It was these areas that were hit hardest as the market reappraised valuations in light of rising interest rates.”

Rising inflation is prompting central banks to increase borrowing costs to cool the economy. In this environment investors prefer profits today over profits tomorrow, which negatively impacts the  future value of earnings for technology companies.  

Chair of the trust Robert Jeens said technology valuations had “undeniably raced ahead over the past few years”, something which was making investors nervous about whether the sector was due a sustained period of being out of favour.

He added: “Some technology companies seem able to defy the laws of gravity in terms of their ability to grow into their valuations. For others though any disappointment can cause acute pain in terms of valuation.”

Last year, the best-performing technology shares were the largest and most profitable firms, which was an area that Allianz Technology invested less in than its benchmark – the Dow Jones World Technology Index.

Price said: “The only high-growth companies that continued to do well were the mega-caps, such as Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL). While we hold both these companies, they appear in the index in far higher weights.

“The underweight to Alphabet (NASDAQ:GOOGL) (Google) also hurt performance for similar reasons. Alphabet was up 67% as it exceeded earnings. It saw a significant hit in earnings in 2020 as the advertising market collapsed, which meant its year-on-year numbers looked good.”

Elsewhere, overweight positions in Paycom (NYSE:PAYC), Okta (NASDAQ:OKTA), Block Inc (NYSE:SQ) (formerly Square), and CrowdStrike (NASDAQ:CRWD) detracted from performance.

Price said: “They are all high-growth companies, with ambitious valuations relative to earnings. There were also some concerns on the competitive landscape for Crowdstrike and Okta during the year, though we believe both companies will head off this pressure with relative ease.”

Looking ahead, Price said artificial intelligence and the metaverse were themes to watch in the tech space.

“The metaverse is a digital world. It is still a stretch to suggest that plugging into a metaverse holds significant appeal beyond the 15-20% of people who are regular gamers. However, the concept is now firmly established.

“Artificial intelligence penetrated an increasing range of sectors as digitisation took hold. It spread to insurance, banking, food, health education and defence as companies realised the range of insights it could bring.”

The trust dropped charges last year to 0.69%, from 0.8% in 2020. This is due to its tiered fee structure based on the amount of money held by the trust. No performance fee was paid for its latest financial year, as it did not beat its benchmark.

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