Polar Capital Technology managed to beat the Dow Jones Word Technology Index over the year to the end of April 2015 as its net asset value per share returned 30.7% as compared to 29.5% return on the index. shareholders did even better as the discount narrowed from 3.6% to 1.2%, giving them a 33.9% return on the share price.
The technology sector outperformed the wider market over the period – the FTSE World Index returned 18.2%, the All-Share 7.5% and the S&P 500 24.3%.
The Board has negotiated a change in the way that the management fee is calculated. The 1% base fee will in future be levied on net asset value, and net assets in excess of £800m will attract a reduced base fee of 0.85%. The performance fee is unchanged. The fee changes will take effect from 1st May 2015.
The manager’s report says, in the USA, the most significant positive contributor to performance over the period was the sharp rebound in a number of “next-generation growth stocks” including Splunk (+34%) and Tableau (+95%), together with strong performance of a number of off-benchmark internet positions including Amazon (+53%) and LinkedIn (+81%). However, strongest absolute returns were generated by Palo Alto Networks (+156%) and Proofpoint (+133%) both of which benefited greatly from increased security spending (and investor enthusiasm) following a slew of high-profile cyberattacks.
Outside of the USA they added value in all regions, especially in Japan, where they were assisted by a strong market and a currency hedge in the form of yen borrowings. Relative performance was also positively impacted by underweight positions in a number of large index constituents that delivered disappointing returns during the year, including Hewlett Packard, Samsung Electronics and Qualcomm while zero exposure to IBM proved the most significant stock level contributor to relative performance as the stock fell 4% during a very strong year. The Trust also benefited from M&A activity with three positions – Concur Technology, Integrated Silicon Solutions and Sapient acquired during the year at healthy premiums.
In terms of negatives, relative underperformance was generated by their large but underweight position in Apple and their decision to retain some liquidity plus a modest amount of S&P put protection, (although he says this gave him the confidence to add to high growth / high PE exposure near lows). The trust’s relative performance was also hindered by an underweight position in Microsoft (+32%), which gained 16% during the final month of the year following better than expected first-quarter results.
PCT : Polar Capital Technology fee cut