Allianz Technology Trust (ATT) has released its annual results for the 12 months ending 31 December 2023.
- Over the 12 month period ATT generated a NAV total return of 46.4%, and share price total return of 44.5%. Both slightly underperformed its benchmark, the Dow Jones World Technology Index, which retuned 48.2%.
- ATT attributes this underperformance to its underweight to the ‘Magnificent Seven’ stocks, which is primarily due to the managers avoiding concentration risk within the portfolio.
- The largest contributor to ATT’s performance was its overweight position in Meta. Generally speaking, ATT benefited from the broad-based rally in technology stocks over 2023, with detractors coming from stock-specific issues rather than major themes, with Pay.com and Okta being two examples. The team utilised the third quarter earnings season to identify earnings momentum, and take bolder positions in said companies, which helped ATT further participate in the end-of-year rally.
- No dividend was paid by ATT over 2023, as has historically been the norm for the trust.
- Over the year ATT traded at an average discount of 12.1%. The board repurchased 16.5m shares over the period for a total consideration of £40.2m, repurchasing at an average discount of 12.1%. ATT currently trades on a 11.1% discount.
Mike Seidenberg, ATT’s lead portfolio manager, commented:
“At the start of 2023, valuations were compelling. After a significant market improvement – along with higher earnings – technology companies appear to be trading at around fair value today. That said, there are some tailwinds for the year ahead and we believe the equity market recovery over the past few months can extend into 2024.
“At the December 2023 Federal Open Market Committee meeting, the US Federal Reserve signalled multiple rate cuts could come in 2024. Inflation continues to weaken and, while the jobs market remains buoyant, growth is moderating. With interest rate cuts on the horizon and an economic soft landing expected, investors are likely to be confident enough to look beyond the mega-caps into other parts of the market. Broader earnings growth may accelerate this trend.
“There are going to be bumps along the way and the market might be due for a short-term pause after its recent strength, but there are reasons to be optimistic about the long-term secular growth prospects for technology. These include artificial intelligence and machine learning, the Internet of Things, cyber security, digital assets and mobility. The macroeconomic challenges of the past few years are likely to ease, which should give investors greater confidence.
“The challenges of the past few years have forced companies to look at their cost structures, re-engineer their businesses and cut unprofitable lines. The result is that the survivors are far stronger, with better competitive positions and stronger earnings. We continue to believe the technology sector can provide some of the best absolute and relative return opportunities in the equity markets.”