Allianz Technology Trust (ATT) has reported its annual results for the year ending 31 December 2022.
- 2022 was a difficult year for ATT, and the wider technology sector in general. AGT reported a NAV total return of -33.6%, and share price return of -40.4%. This compares to the -26.4% return of its benchmark, the Dow Jones World Technology Index.
- The major change to the trust over 2022 has been the transition of lead portfolio manager, with ATT’s long-standing manager Walter Price having been replaced by Mike Seidenberg.
- ATT’s board has been active in managing ATT’s discount over the year, having repurchased £39m shares, at an average discount of 12.18%.
- No dividend was paid over the year.
ATT’s new lead manager Mike Seidenberg has commented:
“High valuations had been sustained by a very low risk-free interest rate, which had seen the long term cashflows they offered highly prized by investors. In a climate of rising interest rates, these cashflows were worth less. The fastest growing companies – where more of their valuation was tied up in future revenues – proved particularly vulnerable. Even though many companies continued to deliver high growth and outpace earnings expectations, it held back their share price progress.
“The year was generally characterised by a growing gap between operational and share price performance, but there were some weak spots on earnings. Amazon, for example, struggled as the consumer environment weakened, while Meta’s foray into the metaverse proved more expensive and less remunerative than hoped. Companies exposed to advertising revenues proved vulnerable as economic growth slipped, including Alphabet. Nevertheless, there were also pockets of resilience. Demand for iPhones held up, supporting Apple’s earnings, while Microsoft’s cloud computing division helped earnings for the wider business…..
“The reasons for [ATT’s] underperformance are relatively easy to diagnose. The Company has traditionally held a larger weighting in higher growth, mid cap companies. This is, we believe, the long-term sweet spot to find fast-growing, dynamic technology companies. However, this was the area hit hardest in 2022 as investors reappraised valuations in light of the changing interest rate environment.
“This sell-off included areas of structural growth, such as cloud software and cybersecurity. In general, there was little regard for the underlying performance of individual companies. Cybersecurity group Zscaler, for example, was the largest detractor from performance over the year, but beat market expectations on sales and adjusted income and continued to grow rapidly without burning cash. This experience was commonplace: many companies continued to deliver strong revenue growth and earnings, but were battling investor concerns about their future prospects.”