/ TECHNOLOGY /
HERALD INVESTMENT
TRUST
Whereas Allianz Technology and
Scottish Mortgage focus on large
cap stocks and have a heavy tilt
towards the US, Herald IT focuses
on a diversified portfolio of
smaller quoted technology/media
companies, with 59.4 per cent of
the portfolio in the UK, and only
21.5 per cent in the US.
Manager Katie Potts says this
is because US valuations are full
at the moment, although she
admitted she may increase her
exposure in the near future –
Numis explains why.
“Over the last nine years, 66 UK
portfolio companies have been
acquired, but a ‘serious shortage
of capital’ in the UK market
means that these businesses have
been sold primarily to overseas
buyers and a few to private
equity,” the group said.
“Potts believes that the flight
of capital from the quoted UK
equity market has now reached
a point where the fund must
consider reallocating capital. The
manager has decided to open a
research office in New York.”
“Potts still sees numerous
opportunities in the sector and
is more concerned about stock
market movements than the
state of the portfolio companies.
She believes there is now a big
backlog of IPOs which she looks
forward to following.”
Herald has made 698.03 per
cent since opening in 1994 and
has moved largely in line with
its IT Small Media Comms & IT
Cos sector since the latter was
launched in 1995. However,
Numis says its current discount
of 21.2 per cent is attractive. It
has a total expense ratio of 1.1
per cent.
PERFORMANCE OF TRUSTS VS INDEX OVER 10YRS
250%
200%
Scottish Mortgage Investment Trust (202.18%)
Allianz Technology Trust (147.16%)
Herald Investment Trust (85.76%)
150%
FTSE All Share (58.27%)
100%
50%
0%
-50%
Apr 16
Apr 15
Apr 14
Apr 13
Apr 12
Apr 11
Apr 10
Apr 09
Apr 08
-100%
Apr 07
Although this trust sits in the
AIC Global sector, it has a large
exposure to tech stocks and its
numbers certainly warrant a closer
look. It has made 396.36 per cent
under manager James Anderson’s
16-year tenure, compared with
gains of 178.99 per cent from its
sector and 142.25 per cent from its
FTSE All World benchmark.
This performance led
Winterflood to refer to Scottish
Mortgage as “the outstanding
success story of the investment
trust sector in recent years”.
“Managers James Anderson and
Tom Slater take an unconstrained
approach, aiming to identify
strong businesses with the
potential for asymmetric returns,”
said the group.
“We are confident that Scottish
Mortgage is well placed to
outperform over the long term and
in benign market conditions.”
Concerns have been raised that
some of the largest holdings in the
trust – such as Amazon, Facebook
and Google – are trading on
excessive valuations, especially in
light of their limited fixed assets.
However, Anderson believes that
this view is outdated and uses the
example of Facebook to explain
why.
“The network, reach, data and
asset-light economics of Facebook
make $300bn of market value no
undue challenge,” he said. “This
may be 60 times the fixed assets,
but it is no bubble. If any reader
were offered the $5bn of assets that
Facebook deploys, they might be
happy, but they would be
ill-advised to spend them trying to
replicate and displace Mark
Zuckerberg’s empire.”
Scottish Mortgage is on a small
discount of 0.6 per cent and has
ongoing charges of 0.51 per cent.
“You can
push a button
and your car
is driving you
home, staying
in lane, slowing
or accelerating,
depending on
the traffic”
Apr 06
SCOTTISH MORTGAGE
INVESTMENT TRUST
Source: FE Analytics
10
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