Polar Capital Tech beats its benchmark again – Polar Capital Technology Trust has reported another year of outperformance. In the year to 30 April 2017, NAV rose by just over 56.0%, over the year to end April 2018, it rose by another 22.7%, taking NAV per share to 1,159.69p and the net assets of the company to £1,551.6m. The share price rose by almost as much, providing a return of 21.2%.
Ben Rogoff and the wider Polar Capital technology team beat the fund’s benchmark, the Dow Jones World Technology index, by 5.6%, building on last year’s 2.7% outperformance.
Ben’s report goes into considerable detail, as usual, and we have provided an extract below. The chairman’s statement says that, in broad terms, his long-term thesis, that cloud computing would have a radical effect on the technology sector, has proved correct. One or two older companies (and perhaps Microsoft is one) have shown signs of reinventing themselves but many spiral downwards and are not included in the portfolio. She says that the portfolio has outperformed in all of its market capitalisation categories and almost all of its geographic regions.
Extract from the manager’s report
“Our total return performance came in ahead of our benchmark, our own net asset value per share rising 22.7% during the year versus a 17.1% gain in the Sterling adjusted benchmark. In the US, the most significant positive contribution to performance was made by Amazon which was also our largest overweight position. In addition, the portfolio benefited from its significant overweight exposure to software- as-a-service (SaaS) companies such as New Relic (+64%), RingCentral (+97%), ServiceNow (+65%) and Zendesk (+60%) which delivered strong growth and multiple expansion. Computer gaming companies also contributed positively, with Ubisoft (+90%) and Nintendo (+60%) particularly strong performers while our small position in payments upstart Square (+144%) proved our third largest absolute contributor during the year. Stock selection was positive across all major regions and across all market-capitalisation tiers.
Relative performance was also positively impacted by underweight / zero positions in a number of large index constituents including IBM, Oracle and Qualcomm that delivered disappointing returns during the year. The portfolio benefited from one acquisition with MuleSoft acquired by Salesforce.com for a 36% premium. Our AMD (-23%) position proved our largest detractor during the year, the stock digested its earlier gains as progress with its new CPU / GPU families failed to drive earnings estimates higher. Chip-rival Intel (+38%), where we were underweight, also hurt our relative performance as growth in its server business reaccelerated driving a valuation re-rating. Performance was also hindered by other underweight positions in a number of positive index contributors such as Cisco (+26%) and Microsoft (+31%), together with a number of next-generation holdings that disappointed including Criteo, CyberArk and Tesla. Our decision to hold a modest amount of liquidity and index put options also detracted from performance in what proved to be another strong year for technology returns.”
PCT : Polar Capital Tech beats its benchmark again