Best Technology Investment Funds – Our Top 5 Picks
If you are looking for long term growth and you are prepared for some volatility with your investment then it is worth taking a closer look at technology as an investment option.
We look at:
Latest Tech Fund Developments
The last 12 months have been good for technology funds with Covid-19 accelerating many of the trends which tech companies are benefiting from.
One of the areas that looks to continue to grow is cloud computing in 2021 with companies looking to accelerate their investment into cloud computing according to Jeremy Gleeson at AXA Famlington Technology.
According to Gleeson:
“The world has changed. Take the work-from-home phenomenon. The tools on which businesses have relied in the move to remote working are almost entirely dependent on cloud computing. Employees need to be able to access software products and company data from wherever they happen to be; only businesses making use of software-as-a-service subscriptions and cloud hosting solutions have been able to facilitate that”.
Ben Rogoff fund manager at Polar Capital Technology investment trust (LSE:PCT) expects:
“Covid-19 to drive rapid adoption of cloud computing upon which modern software and internet services sit.”
One of 2020′ star performing funds was the WisdomTree Cloud Computing ETF (LSE:WCLD) with a 100% increase in the share price over this period. The funds offers investors access to cloud companies directly involved in providing cloud software and services tracking the BVP Nasdaq Emerging Cloud Index (the “Index”).
Another sector that is likely to benefit from the pandemic is automation with producers looking to accelerate the reduction of human involvement on factory production lines and to bring in new processes that can deal with new logistical challenges that have been driven by online demand.
According to Walter Price at Allianz Technology Trust (LSE:ATT) supply side diversification has become a priority for many companies.
“China is no longer the default option because when it closed down, businesses that only had Chinese production facilities, or depended on Chinese suppliers, faced real problems.”
He went on to say that many firms will be looking at bringing production closer to home through automation investment.
Renewable energy is another sector that has benefitted from Covid-19 accelerating the global trend for reducing carbon emissions.
In the UK the government launched last November a 10 point plan for a green industrial revolution with a focus on making the UK a global leader in green technologies. Some of the plan focuses on investing in advancing offshore wind, greener buildings, green finance and innovation which is great news for the environment and good news for investors.
One of the renewable sectors growth stories is battery technology. Walter Price makes the point that the ability to store energy is key and companies such as Tesla (NASDAQ:TSLA) who are a market leader and SolarEdge (NASDAQ:SEDG) which last 12 months saw an increase of its share price of over 200% are well placed to deliver products to deal with increasingly huge demand from companies and households.
According to Wisdom Tree battery technology development represents an emerging megatrend driven by the need of global economies to address the challenges of climate change. Lowering carbon missions has become a focus for governments, companies and private individuals as the impact on the environment is becoming clearer.
Why invest in a technology fund?
Whilst you could carry out research yourself on technology companies, the advantage of a fund is that a team of experts do all the hard work for you and you can gain exposure to a spread of companies cost effectively. Some of the sectors within technology that a fund might provide exposure to include:
- Software and hardware manufacturers
- Electronic services
- IT services
- Business data processing
- Entertainment streaming services.
You can either opt for a low cost index tracker approach such as the L&G Technology Index fund which tracks the FTSE World Technology Index or you can opt for a actively managed fund.
Active fund managers such as Allianz Global Investors and Polar Capital have dedicated teams who focus purely on the technology sector. For example the Allianz Technology Trust has a focus on identifying trends that have the potential for identifying the tomorrow’s Apple or Microsoft.
2 Top Performing Tech Investment Trusts
A leading technology investment trust that aims to maximise long term capital growth through a diversified portfolio of global technology companies.
The Trust is currently trading at a discount of 8.93% (as at 19/2/2021) and according to corporate broker Numis Securities this offers an “attractive entry point” and compares favourably with Allianz Technology Trust which is trading at a slight premium.
In the last 12 months the fund is up 35.17% (as at 19/2/2021).
According to Numis ” The discount still appears wide given that Polar Capital Technology has outperformed its benchmark and most open-ended peers in the Investment Association’s Technology & Telecommunications sector.”
Polar Capital Technology has just under 25% of the fund invested in 4 tech giants, Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Facebook (NASDAQ:FB) with 10 holdings accounting for 52% of the fund.
Ben Rogoff fund manager says:
“We do not believe that technology outperformance has to end with the pandemic diminishing.
Covid-19 has clearly accelerated a number of key technology trends, but the redistribution of profit pools across myriad industries began long before the pandemic.
Companies have been forced to adapt their business models to a digital-first world.”
2. Allianz Technology Trust
Allianz Technology Trust is an investment trust investing in a diversified focused portfolio of companies that use technology in an innovative way to gain a competitive advantage.
Particular emphasis is placed on companies that are addressing major growth trends with innovation that replaces existing technology or radically changes products and services and the way in which they are supplied to customers.
In the last 12 months the fund share price is up 62.05% (as at 19/2/2021).
One of the funds strong performers has neen lithium ion battery produer Samsung SDI as a result of the Company capturing market share in the electric vehicle battery market. The fund manager Walter Price believes that:
“Samsung SDI remains well positioned to benefit from the accelerating revolutionary transformation of the auto industry toward a new era of fully electric vehicles”. The fund also has a position in Tesla (NASDAQ:TSLA) which had a strong 2020. The fund management team believes that this growth can be sustained as “investments Tesla makes today can scale to enhance its earning power”.
|Investment Trust||Ongoing Charge||1 Year Return*||5 Year Return*|
|Polar Capital Technology||0.89%||35.17%||328.18%|
|Allianz Technology Trust||0.88%||62.05%||472.2%|
2 Popular Tech ETFs
The energy changes that are needed to address climate change will see a shift from hydrocarbons including oil, gas & coal to renewable energies, but in order for this to happen effectively batteries will play a key part in this transition process.
Below are two funds that focus on this growing mega-trend which in January 2021 were on Interactive Investors top 10 most popular bought funds.
The Legal & General UCITS ETF Battery Value Chain fund tracks the Solactive Battery Value–Chain Index (the “Index”) & aims to benefit from the long term megatrend that L&G believes will radically transform the way we live and work. The fund focus is to capture the outsized growth potential of battery technology
The Wisdom Tree Battery Solutions ETF (LSE:CHRG) tracks the price and net dividend performance, before fees and expenses, of the WisdomTree Battery Solutions Index (the “Index”) offering investors access to publicly listed firms which are primarily involved in battery and energy storage solutions.
|ETF Name||Ongoing Charge||6 Month Return|
(As at 17/2/2021)
|12 Month Return
(As at 17/2/2021)
|L&G Battery Value Chain ETF (LSE: BATG)||0.49%||56.26%||79.92%|
|WisdomTree Battery Solutions ETF (LSE:CHRG)||0.40%||60.54%||N/A|
*As at 19/2/2021
1 Low Cost Global Tracker Tech Fund
This fund offers investors a low cost way of gaining exposure to global tech firms. This unit trust fund tracks the FTSE World-Technology Index with 10 of the top holdings including Apple, Microsoft, Google, Facebook and Intel Corporation. The fund which is available via Interactive Investor with a low ongoing charge of 0.32%.
How to buy tech funds online
You can invest in a technology fund directly or via a tax wrapper such as an ISA or self Invested Personal Pension. If you are investing on behalf of a child you can invest via a junior ISA or junior SIPP.
You can invest using an investment platform typically from £50 pm.
What is the best investment platform to use for a technology fund?
Today’s investor in 2021 has a lot of options to choose from.
One of the key considerations is cost. However picking the “cheapest” is not as simple as it sounds, as each platform has its own costing model which often makes it difficult to compare like for like.
Below we have outlined what can expect to pay in charges for 4 of the UK’s largest most popular investment platforms based on investing in the L&G Global Technology Index fund.
|Investment Platform||Platform Fees||L&G Tech Index Ongoing Fund Charge||Annual Charge on £10,000||Annual Charge on £40,000||Annual Charge on £100,000||Annual Charge on £250,000|
|Interactive Investor||£9.99 pm flat fee||0.32%||£152||£248||£440||£920|
|Hargreaves Lansdown||0.45% up to £249,999, reducing|
to 0.25% from £250,000 to £1m
|AJ Bell||0.25% on first £250K||0.32%||£57||£256||£570||£1425|
|Fidelity||0.35% from £7,500 to £249,999,|
reducing to 0.2% from £250,000
As you can see the right platform for you will depend on how much you are investing.
Other considerations include:
- How easy is the platform to use and what tools and research is on offer
- What fund discounts are there? different platforms have negotiated different discounts on funds
- Customer reviews – useful in understanding strengths and weaknesses of platform providers
- Level of customer service provided
Important Risk Information:
This website contains information only and does not constitute advice or a personal recommendation in any way whatsoever. The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. The tax efficiency of ISAs is based on current tax law and there is no guarantee that tax rules will stay the same in the future.
Different types of investment carry different levels of risk and may not be suitable for all investors. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment and should read the product literature. If you are in any doubt as to the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.