Fund of the Fortnight: GAM Star Technology
The latest: GAM Star Technology
Technology funds were considered a mainstream investment during the internet bubble years in the late 1990s, but the subsequent tech crash meant many closed and those that remained took years to recover their value.
Today few remain, and tech funds are a niche investment, shunned by even the more sophisticated investors. GAM has gone against this trend, launching the GAM Star Technology fund in February 2011.
Mark Hawtin has been running the fund since its launch. He is a technology specialist backed by his own team, and though based in London he travels to the west coast of the USA where much of the industry is located as part of his research process. Research is primarily bottom-up, though he also identifies long-term growth themes in the industry and tries to select companies that will benefit from them.
Hawtin invests in companies of all sizes, though typically favours smaller, faster growing companies, recently buying into Twitter at its IPO. He generally tries to avoid the larger, more mature names in the industry – he currently does not hold IBM, Microsoft or Cisco.
The size of these businesses and their maturity (IBM dates back to 1912) means they are unlikely to be as fast growing going forward. However, Hawtin is pragmatic enough to hold them when he considers their valuations attractive enough – Apple and Google are currently top 10 holdings in the fund.
The dominance of these large companies in the index means technology investing isn’t necessarily as risky as it once was – the likes of Microsoft and IBM aren’t likely to disappear anytime soon.
Indeed, the sector as a whole is much less volatile than it was in the internet boom and bust of the late 1990s and early 2000s, and certainly hasn’t been the rollercoaster ride that the financials and mining sectors have provided in recent years.
However, individual tech stocks remain very risky. Often one company comes to dominate a segment of the market, with rivals disappearing into obscurity.
Facebook’s stellar performance since its 2012 IPO makes the headlines, but who now uses rival social network MySpace, bought by News Corporation for $580m back in 2005?
You can reduce this risk by investing via a fund to provide diversification, and by using a manager with the experience to pick winners. Mark Hawtin is such a manager.
Prior to joining GAM in 2008 he was a partner and portfolio manager with Marshall Wace Asset Management, and successfully managed one of Europe’s largest technology, media and telecoms hedge funds for eight years.
The fund is relatively expensive, with an annual management charge of 1% as well as a performance fee. However, Hawtin’s record over his three years on the fund is outstanding.
Technology companies make up just 1.5% of the FTSE All-Share index – this compares to 12% for the MSCI World benchmark, so UK investors are likely to have a low exposure to the industry.
By investing in a specialist fund like GAM Star Technology you can up your weight to the sector, and gain access to some of the world’s fastest growing, most exciting companies.
Tom White is senior research analyst at Bestinvest
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