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Trust Insider: Understanding tech fundamentals through a tale of two trusts
by James Carthew on Jul 30, 2013 at 00:01
Last week I talked about Polar Capital’s Global Healthcare fund and this week its technology trust caught my attention. I was struck by the contrasting fortunes of Polar Capital Technology (PCT) and RCM Technology (RTT), both of which announced results recently.
PCT’s results, covering the year to end April 2013, saw its net asset value (NAV) rising by 5.1% – marginally behind the 6% return for its benchmark, the Dow Jones World Technology Index.
RTT released half-year results for the six months to the end of May 2013. Its NAV was up 27.3%, while the same benchmark was up 15.8%.
The trust has had a good time recently. To give you some directly comparable numbers, RTT’s NAV is up 40.6% over the past year against 22.8% for PCT. Longer term, however, Polar’s fund still comes out on top – up 167% over 10 years against 113% for RTT. The two funds have similar investment objectives. Both portfolios are heavily skewed towards the US, and have the same largest holding, Google.
Neither fund is geared to any great extent or pays a dividend. PCT is managed with a longer tail of holdings but the percentage allocated to the 10 largest holdings is about the same for both funds. The fees are similar; ongoing expenses were 1.2% for both funds in their last accounting year.
The biggest difference between the two seems to be that RTT has a higher weighting to medium-sized companies than PCT.
Same location as stocks
RTT has been managed by Walter Price since May 2007. He is based in San Francisco, which is where a fair proportion of the stocks in the portfolio have their headquarters.
RCM think this gives them an edge (though, as I have discussed before, there does not seem to be much hard evidence that a manager’s location makes a difference to their investment performance). The approach to managing the fund is to try to anticipate which sectors of the technology industry are going to be the future drivers of growth and invest to take advantage of that. This should give them a bias to medium-sized companies at the expense of the mega caps.
They also say they want to be invested in the Microsofts, Apples and Ciscos of the future. Given this, you might find it odd that all three of these stocks are held in the portfolio and that Cisco was one of their top 10 holdings at the end of May 2013.
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