Global technology funds: off the planet
Global Technology Fund Take Off
Whether or not you believe that the economy has undergone a paradigm shift, there is no denying that ‘new economy’ stocks have left their ‘old economy’ counterparts for dead in recent times. Traditional blue chips have struggled as investors have chased higher returns in more dynamic sectors: Technology, Telecommunications and the Internet. The problem for investors is that many of the companies in these sectors are relatively new and own technologies that a
Global Technology Fund Take Off
Whether or not you believe that the economy has undergone a paradigm shift, there is no denying that ‘new economy’ stocks have left their ‘old economy’ counterparts for dead in recent times. Traditional blue chips have struggled as investors have chased higher returns in more dynamic sectors: Technology, Telecommunications and the Internet. The problem for investors is that many of the companies in these sectors are relatively new and own technologies that are difficult to understand. While you are probably aware of the brands Microsoft, Dell Computers, IBM and Amazon.com, less familiar are companies such as I2, QualComm, and SecureNet.
US-company I2 is a provider of business-to-business solutions, connecting manufacturers to suppliers over a vast and complicated network. One of the key reasons why consumers can buy cheap computers from Dell is the technology developed by I2. SecureNet, an Australian company, is a leading global provider of secure e-commerce solutions for Internet applications, remote banking and data critical e-commerce activities. Not very exciting stuff to the average man on the street…until you start looking at increases in their share price. In 1999, shares in I2 increased 15-fold. In just over 15-months, an investment of $1,000 in SecureNet could have been turned into over $40,000.
So how can investors get a piece of this action? What separated these companies from the pack, and allowed them to expand their businesses so quickly? One solution for investors, who have neither the time nor knowledge to research these stocks, is to invest in a Global Technology Fund. Several such funds have been released in Australia during the last 12-months, including the Alliance Capital Tech Fund, BT Time Fund, Colonial First State Technology Fund, AMP Global Technology Fund, and the Merrill Lynch Global Technology Fund.
Fund inflows to these funds have been very strong. Colonial’s fund has proven to be its fastest ever growing fund since it was opened to investment in November last year. These inflows are indicative of a bullish market, with investors looking for new, more aggressive products.
How the Funds Compare
Fund
Investment Philosophy
Major Holdings
Outlook
AMP Global Technology Fund
(Launched in 1984)
Brian Ashford-Russell (since 1984)
Min. Investment = $1,000
Henderson Investors (the UK-based investment arm of AMP) has differentiated their approach to technology investment since 1984 by adopting a global view. There are significant opportunities with this approach as a result of the differences between the performance of technology shares on the share market and the rate of adoption of new technologies by some countries. Henderson Investors are constantly searching for these opportunities.
BEA Systems
I2
Ballard Power
Ciena
Ericsson
Check Point Software Tech
Juniper Networks
Brocade
Texas instrument
Veritas Software
AMP remain enthusiastic about the long-term opportunities in the technology sector. No doubt there will be the usual periodic worries over interest rates and currency crises for which technology will not be immune. However, AMP see nothing in the fundamentals to make them change their view that global technology spending remains in a strong secular uptrend.
BT Time Fund
(Launched in March 2000)
David Mills (since 2000)
Min. Investment = $5,000
The BT TIME Fund gives long term investors the opportunity to invest in a select group of industries around the world that are expected to provide significant growth opportunities over the long term — Telecommunications, Information Technology, and Media Enterprises.
Cisco Systems
Mannesman AG
Nokia OYJ
Microsoft Corp
JDS Uniphase Corp
Nippon TV Network
Nippon Telegraph and Telephone
EMC Corporation
Tokyo Broadcasting
Nortel Networks Corp
These three global industries (Telecommunications, Information Technology and Media Enterprises) are likely to benefit from advances in technology throughout corporates, governments and domestic households.
BT doesn’t believe that you necessarily have to invest in leading edge Internet companies to capture the benefits of the new Information Economy. BT also sees opportunities in the companies that assist businesses to utilise new technologies. For example: Access providers; Infrastructure providers; Software and applications; Media companies.
Alliance Capital Technology Fund
(Launched in 1982)
Peter Anastos
Gerald Malone
Min. Investment = $5,000
The Fund invests primarily in securities of companies that use technology extensively in the development of new or improved products or processes. Within this framework, the Fund may invest in any company and industry and in any type of security with potential for capital appreciation. It invests in well known, established companies or in new unseasoned companies. The Fund may also invest in debt securities and up to 10% of its total assets in foreign securities.
Cisco Systems
Solectron
Dell Computer
Microsoft
America Online
Applied Materials
Sanmina
Nokia
Lexmark
Texas Instruments
Merrill Lynch Global Technology Fund
The Merrill Lynch Global Technology Fund seeks long term capital appreciation by investing in equity securities of issuers that derive a substantial portion of their income from products and services in technology related industries. The Fund has the flexibility to take advantage of the investment opportunities presented by the burgeoning technology industry — wherever such opportunities may arise. Given current world conditions , it is expected that a majority of the Fund’s assets will be invested in securities of issuers in the US, Japan and Western Europe.
Colonial First State Technology Fund
(Launched in November 1999)
Stephen Arnold (since 1999)
Graham Hay (since 1999)
Min. Investment = $1,000
The technology and communications industry is driving changes in the global economy not seen since the industrial revolution. These changes are generating tremendous economic value through improvement s in the availability of information and the speed and ease of communication.
PT Multimedia
United Pan-Europe Comms
SK Telecom
Cisco Systems
Ericsson
China Telecom
Veritas Software
Nokia
Sonera
Yahoo
Colonial believe that selected technology and communications companies that are contributing to changes in the global economy will experience profitability and earnings growth well above that of the overall global equity markets
It is Colonial’ s view that the technology and communications sectors should be viewed as a single group as they constantly see traditional barriers that existed between these particular industries dissolving. Many traditional technology companies are increasingly focussing on the communications sector, potentially one of their largest growth opportunities over the next 10 years.
How do the funds compare?
It seems quite evident that Fund Managers have attempted to structure Funds that incorporate aspects of the technology sector. Managers don’t specifically believe that it is necessary to invest in “dot com” Internet companies in order to realise the anticipated benefits of the New (Information Technology) Economy.
Opportunities are also seen, more predominantly, in the companies that service these Internet companies and the organisations that assist these businesses to utilise new technologies. For example: access providers; software and applications firms and media companies.
“In a gold rush the people who make the money aren’t the speculators. It’s the people who sell the tools that make the money. That’s how we invest in the Information Economy… by finding the companies the transformation depends on… the telcos, the content providers, the network builders” Andre Morony (Chief Investment Offic
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