'Formidable' small-cap headwind hits Polar tech trust

Tech star Ben Rogoff has blamed the “formidable headwind” of small caps for a 5% fall in NAV for the Polar Capital Technology trust over the six months to 31 October 2011.

Total net assets fell 4.5% to £447m over the half year, while the price per ordinary share fell from 373.5p to 353.5p from the year ended 30 April 2011.

The trust had 10.6% in holdings with a market cap below $1bn, and almost 20% in mid caps of $1bn-$10bn in size as at 31 October 2011.

Large-cap names had proved resilient to market shocks, Rogoff said, with Apple up 15.6% over the reporting period and IBM rising 8.2%.

“The marked underperformance of small-cap stocks created a formidable investment headwind we were unable to overcome, our own net asset value per share falling 5% over the half year,” said Rogoff.

"The trust was also negatively impacted by the poor returns generated by semiconductor companies that were among the hardest hit by deteriorating macroeconomic trends and an inventory drawdown exaggerated by less severe than anticipated supply disruptions post the Japanese earthquake.”

Exposure to Chinese IT services companies also damaged performance – these names were especially weak due to the combination of softening fundamentals and a series of corporate governance and accounting scandals, the manager added.

However, some individual stocks performed well for the portfolio, including Amazon and Google, both 9% higher, and Commvault, up 8.1%.

Looking forward, Rogoff said he does not expect the sovereign debt crisis to escalate into a repeat of 2008-2009, although he admitted risks to this view are on the rise.

“We remain hopeful that despite the considerable 'wall of worry' that exists today, equities should be able to generate solid absolute and superior relative returns,” he said.