Retail investors return to dwindling sector after seven years of redeeming assets
Retail investors have begun to move back into technology after seven years of redeeming assets from the dwindling sector.
The IMA Technology and Telecommunications sector posted a £9.8m net inflow in 2009, the first positive yearly sales figure since the classification’s inception in 2001.
Launched with 32 funds in May 2001, the Technology and Telecommunications sector had £2.6bn of assets at its creation.
On the 10-year anniversary of the height of the dotcom bubble, the tech sector now consists of just 10 funds with about £680m under management.
Chelsea Financial Services managing director Darius McDermott says the UK investment industry is still living with scars of the tech bubble’s “catastrophic cocktail of greed and naivety”.
“Investing in specialised sectors as core holdings has all but died off,” McDermott says.
“Some investors who had their fingers badly burnt by the crash have never returned to the markets, niche products now fall under automatic scrutiny, and cynicism among the public of advisers and providers, spawned in the wake of the crash, has to a degree remained.
“The truth is, specialised sectors like technology are high risk; one only has to look at the fortunes of the financial sector, previously thought unshakeable, during 2008 to realise the perils of keeping all of one’s investment eggs in one basket to see why.”
However, McDermott says technology valuations now appear cheap when measured beside other sectors.
“Predictions of company growth are no longer built on pie-in-the-sky predicted revenues, and those companies that survived the crash have built strong balance sheets,” he adds.
“This has been proven in how resilient the sector has been during the credit crunch. We are also entering a cycle of new products and innovations with a consumer demand that can sustain it.”
While the Technology and Telecommunications sector has suffered significant redemptions in recent years, Henderson has noted renewed investor interest in its Global Technology fund.
“It is positive to see investors are recognising some of the current opportunities within the Technology sector,” a Henderson spokesperson says.
“While the wounds of 2001/02 are taking a long time to heal, we have been encouraged with recent interest in the sector and, as with most things, I suspect this will continue to grow as the sector continues to surprise on the upside.”
Tech funds have also gained favour with the multi-managers in recent months.
Jupiter’s John Chatfeild-Roberts introduced technology into his £3.86bn Merlin fund of funds range in the fourth quarter of last year, through the Henderson vehicle and Polar Capital’s Global Technology product.
