AXA Framlington Global Technology – Change driven by Technology
Joseph Hill | Tue 21 January 2020
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- Around 85% of the fund is invested in the United States, home to some of the world's most well-known technology companies
- The manager thinks digitalisation is a key driver of future growth in the sector
- The fund has delivered higher returns than the broader technology sector over the last ten years
Our view
Jeremy Gleeson, manager of the AXA Framlington Global Technology Fund invests in the shares of companies with progressive, quality management and high potential growth and profitability prospects. He’s an experienced investor and has been managing the fund since July 2007 with the freedom to invest in companies of any size across the world. This could include some exposure to higher risk emerging markets.
The manager can also call upon the support of regional Framlington equity teams to provide an additional level of insight and knowledge. The fund can invest in a fairly small number of businesses, including smaller companies, and both of these factors add risk.
The fund aims to avoid higher risk ‘blue sky’ investments, where companies look attractive but are largely unprofitable and can have high product development costs. Technology is a sector with many interesting, cutting edge companies, but investing in a single theme is higher-risk and a long-term investment approach is essential for investors. A small number of companies with large stock market valuations can also dominate the sector.
The fund doesn’t currently feature on our Wealth 50 list of what we believe are the best funds in each sector.
How’s the fund invested?
The United States has been home to some of the most well-known and fastest growing technology companies in the world, so it shouldn’t be a surprise that 85.2% of the fund is invested here. And many of the fund’s biggest investments will be instantly recognisable household names to both investors and consumers across the world. The likes of Facebook, Amazon, Google parent company Alphabet and Apple all feature in the fund’s top ten investments by size.
But the manager does invest the rest of the portfolio across the globe as you can see in the chart below.
Where does the fund invest?
Source: AXA Framlington, 29/11/2019
One company listed outside of the United States that features in the fund is the UK listed online grocery retailer Ocado. The manager is positive on the company’s use of robotics and believes their partnerships with the likes of Kroger in the US and Groupe Casino in France could be a source of future growth for the business.
Gleeson thinks technology and constant innovation is driving change across the whole economy. And it’s the openness of businesses, consumers and governments to adopting this technology that means change is happening faster than any time in history. He thinks there’s a healthy demand from businesses for innovative technological solutions that can help them become more productive and more efficient. And he’s identified some key themes that he thinks could be sources of growth for the technology sector more broadly over the longer term.
One of these themes is increasing digitalisation across the economy, and cashless payments sits right at its heart. This is why the third largest holding in the fund is Visa. Consumers using cash for purchases is becoming less and less common.
In the UK for example, debit card use overtook the use of cash for retail transactions for the first time in 2017. A trend that should benefit the likes of Visa, should it continue in the future.
Gleeson has recently decided to sell the fund’s holding in Nokia, the telecommunications company, in its entirety. He’s lost faith in the company’s product development capabilities and thinks that this could result in the company losing market share to its competitors.
How’s the fund performed?
The fund has performed well over the long term and has delivered higher returns than the broader technology sector. An investment of £10,000 made ten years ago would be worth £52,621 compared with £51,481 for the same amount invested in the broader global technology index, although past performance is not a guide to the future.
And over the last five years the fund has marginally beaten its sector too, providing a return of 170.4%* to investors, ahead of the 169.6% the FTSE World Technology index returned over the same period. Please remember past performance isn’t a guide to the future.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| Dec 14 -
Dec 15 |
Dec 15 -
Dec 16 |
Dec 16 -
Dec 17 |
Dec 17 -
Dec 18 |
Dec 18 -
Dec 19 |
|
| AXA Framlington Global Technology Fund | 13.2% | 28.5% | 30.0% | 7.0% | 33.8% |
| FTSE World Technology | 8.5% | 35.6% | 26.5% | 2.9% | 40.9% |
Past performance is not a guide to the future. Source: *Lipper IM to 31/12/2019