Polar Capital Technology (PCT) has enjoyed one of its best first half performances with net assets leaping 66% in a market rebound accelerated by the rapid expansion in artificial intelligence to which its portfolio is fully exposed.
Net assets excluding borrowing surged from £3.8bn at 30 April to £6.1bn at 31 October as the investment trust swiftly recovered from April’s lows over US tariff fears with its share price hitting a record high of 476.5p at the end of the six-month period. After a sell-off in November, the shares have rallied again and stand at 475.4p on a 9% discount below net asset value per share of 523.5p.
This return smashed the impressive 48.4% advance in the Dow Jones Global Technology Net Total Return index and puts PCT ahead of its immediate rivals in the Technology sector with a 112.5% total shareholder return over five years.
Fund manager Ben Rogoff said the largest stock contributor to the “remarkable” half-year performance was a 2.2% underweight to Apple, which lagged the benchmark amid tariff concerns and an uncertain AI strategy.
However, he said the real driver was his team’s “AI maximalist” positioning which has seen the 92-stock portfolio entirely built around the broad theme of AI infrastructure and adoption.
Rogoff and co-manager Alastair Unwin have become increasingly wary of the dominance of “Mag7” mega cap tech stocks which now account for around 30% of assets compared to 54% of the Dow Jones Global Technology index.
Nvidia, the $4.5trn AI chip colossus, is PCT’s largest holding at just over 11% of the portfolio. However, this is less than its 14.5% weighting in the index and as its shares surged 90% that cost the trust 1.2% of returns.
Similarly, Alphabet, a 6.7% position that is also “underweight”, lost the trust 0.5% of potential returns as the Google-owner performed better than expected and benefited from a favourable US court ruling.
Rogoff said these were more than offset by the trust’s broader AI-related semiconductor exposure, which included Broadcom, AMD and TSMC, while also benefiting from its overweight exposure to memory chip manufacturers with spectacular returns from SK Hynix, up 221%, and Micron Technology, up 196%.
The fund manager reminded shareholders of the concentration risk in the market and the portfolio. “Today, the 10 largest companies explain 42% of the S&P 500 market cap and trade at a forward P/E ratio of 31 times, well above the remaining 490 stocks at 19 times. However, we continue to view this concentration as an output of the remarkable fundamentals of these companies which also account for c32% of S&P 500 profits,” he said.
More to follow.
