Increased tech exposure might be an answer to volatility
Investors should consider increasing their equities allocation to the technology sector as a means of dealing with heightened uncertainty and the likely increase in volatility in markets over the next 12 months, according to Datt Capital’s managing director and chief investment officer Emanuel Datt.
The combination of COVID-19, China trade and political tensions, the Brexit, and the US election, regardless of outcome, could mean investors would be facing an increasingly uncertain outlook globally despite equity markets appearing to defy both gravity and earnings outlooks, he said.
Datt also stressed that now was the time to rebalance and Datt Capital took the opportunity to de-risk its portfolio by cutting back on non-core equity positions, given that the market as a whole rose steadily since the lows in March.
Also, the upcoming US elections in November would be expected to bring fresh volatility to markets.
“A number of positive catalysts remain on the near-term horizon for our core holdings. We are finding many opportunities in a variety of sectors, all with high growth potential and return profiles,” Datt said.
“The maturation of the tech sector has led to increased investor appetite with many recognising the economic shift from older industries towards the new. The recent market falls and consequent bounce back demonstrated the greater than typical return profiles from tech exposure.”
He went on to say that investors had a number of options to increase their tech exposure and that there were many attractive technology opportunities listed locally on the Australian Securities Exchange (ASX). At the same time, exchange traded funds (ETFs) were a great way to achieve broad exposure to tech without delving too deeply into particular companies.
“For instance, the BetaShares S&P/ASX Australian Technology ETF is focused solely on Australian listed tech exposures whilst a product such as ETFS Morningstar Global Tech ETF provides a broader, more global focused exposure,” Datt said.
“Concern has been expressed about valuations in the Tech sector. However, we believe the valuations reflect the quality of most of the large tech companies.
“For instance, Amazon has truly led to the democratisation of purchasing power in many countries apart from its core US market. It is very difficult to gauge the value of this via conventional and historical forms of valuation; and is a testament to its market power.”
AUTHOR
Oksana Patron
Recommended for you
Pendal is set to shutter its Asian Share Fund in August as it has “little prospect” of significant growth in funds under management.
Australia’s alternative investment market is set to enjoy further evolution and growth thanks to innovation overseas, predicts BlackRock and Franklin Templeton.
Hedge fund manager Minotaur Capital is taking an AI-led approach to sourcing investment opportunities, comparing the adoption of AI to that of Microsoft Excel in the 1990s.
Two JPMAM commentators have warned advisers about the dangers of moving assets into cash during market volatility, describing it as “swopping one risk for another”.
