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'Unhappy' O’Gorman apologises for Henderson Tech performance

'Unhappy' O’Gorman apologises for Henderson Tech performance

Former Citywire AAA-rated manager Stuart O’Gorman has apologised to investors after a strong small-cap rally left his tech fund chasing the index over the past 12 months.

In an investor conference call, the Henderson tech specialist offered a candid appraisal of performance for his Luxembourg-domiciled fund ending the year behind the benchmark.

‘I feel that I have got to start off with an apology,’ said O’Gorman. ‘We are not very happy with where the year ended out. It was always going to happen at some stage, although, in truth, it hasn’t been a disaster.’

The Henderson HF Global Technology fund returned 25.6% over the past 12 months. This is marginally behind its Citywire benchmark, the MSCI ACWI/Information Technology index, which rose 27.06%.

‘What went wrong? I think number one, what went wrong was it was a very, very strong market,’ said O’Gorman. ‘As you know we are pretty conservative, we tend to treat your money as our money.’

‘While that is true, we are still concerned about some of the structural things in the market, such as the level of money printing going on, which we think is looking like it could drive another bubble.’

However, O’Gorman said the make-up of the fund had also made it less inclined to benefit from a wider market rally.

‘Maybe a bigger problem for us though, as you know, we are an index aware fund and we will tend to be much larger cap than the average tech fund.’

‘This helps us to control risk, this helps us to scale things, and, at the moment, we think large caps are looking very cheap.’

'The small cap rally really started going at the end of 2012, now there is a strong divergence between the Russell 2000 and the Russell 1000 indices, it is getting to pretty extreme levels as far as valuations go.’

Portfolio positioning

O’Gorman said he has made no major changes to the portfolio but has marginally upped exposure to semiconductors by 1.4%, while also cutting communications holdings by 2%.

Looking ahead, O’Gorman expects emerging markets to continue to suffer, which he believes would hurt his large-cap holdings in the short-term while opening up buying opportunities in the near future.

‘Large cap is cheap but it is very exposed to the emerging markets, so it is going to suffer some difficult situations for the next six months.’

‘In order to take advantage of these very low multiples you are probably going to have to wait a bit, maybe not six months, but wait for these numbers to reset a bit,’ he said.

Adding resources

Elsewhere on the call, O’Gorman hinted at an expansion of the Henderson technology team, with one person likely to join over the course of the year.

This coincides with the group slightly altering the remit of the team from purely the Henderson Global Technology team to the Henderson Global Technology & Growth team.

‘We have a global growth franchise with about half a billion dollars which is doing pretty well so far, so, going forward, you can expect the numbers to go up from here on the tech side,’ he said.

The Henderson HF Global Technology A2 USD fund has returned 37.1% over the three years to the end of December 2013. This compares to a rise of 41.09% by its index over the same period.

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