As technology continues to evolve, it is having a growing impact on our lives. At the heart of this evolution are innovative companies driving change across the entire economy – including how we work, shop, build relationships and find information. Businesses, customers and governments are open to adopting change faster than at any time in history. Investing in this dynamic sector offers access to diverse opportunities across both established market leaders and the exciting growth potential of future winners.
AXA Framlington Global Technology Fund is an unconstrained1 multi-cap strategy that seeks capital growth through investment in equities, with a focus on growth companies around the world concentrating on the research, design and development of new technologies.
Who is it for?
- Investors seeking exposure to drivers of potential long-term growth
- Investors targeting exposure to innovative technology companies with potential for long-term profitability and growth
- Investors looking for portfolio diversification
Why consider investing in the technology sector?
Technology has always influenced society and corporate strategy, but the pace of adoption by both consumers and industry has never been faster than it is today. Technology innovation is in a multi-year investment cycle, driven by several underlying long-term investment themes including: globalisation; digitalisation; a drive for efficiency in costs; productivity; communication and collaboration; and broadband adoption – including mobile broadband and ubiquitous computing. We believe there are several key reasons as to why now is a good time to invest in the technology sector:
- Consumer demand for technology is strong and no longer restricted to the ‘traditional segments’ (e.g. PCs, smartphones and video games). Nowadays, new devices are increasingly connected and spreading towards a whole range of applications within our daily life (e.g. automotive, health monitors, home security, home appliances, etc.). By 2025, it is estimated that people will interact with connected devices once every 18 seconds – that is 4,800 times a day!4
- Enterprise spending on technology is growing at a rapid pace. The recent crisis in 2020 has reinforced our views, with many companies significantly investing in technology to maintain some degree of team cohesion whilst working remotely.
- There are several new innovations at an early stage of adoption, including cloud computing, software as a service, cashless payments, the internet of things, 5G, etc.
- We believe the global technology sector represents growth at a reasonable price (GARP), with the relative valuation of the market in line with historical levels.5
How do we invest?
Our investment philosophy is rooted in the observation that it generally takes new technological developments, in concept stage, far longer to be ready for mass distribution than initially expected. This is one of the reasons why new technology seems to disappoint in the early stages. When technology is ready to be commercially deployed, it tends to address a far larger market than initially anticipated. As such, we prefer to focus on identifying businesses expanding their operating models in the high growth ‘emerging’ stage, rather than companies at the ‘blue sky’ or start-up stage of early research and development. This also means we favour ‘new technology’ rather than ‘old commodity’ companies at a more mature, slower growth stage.
We select stocks via a growth-at-a-reasonable-price (GARP) approach. This involves screening for companies that have consistent earnings growth above broad market levels, and which seem to be trading at reasonable valuations. We construct the portfolio in a benchmark-aware – rather than benchmark-driven – manner.
- The first stage is to identify long-term growth themes in the technology sector, avoiding ideas that we consider to be potential fads.
- Next, we seek exposure to those themes through finding companies with strong management teams, dominant market positions, attractive valuations, pricing power and the potential for higher earnings.
- Finally, we aim to identify any market or stock-specific risks which would outweigh a holding’s growth potential in terms of the overall contribution to the portfolio.
“The rapid and constant technological advancements over the years has been crucial for businesses in the sector to remain relevant and satisfy consumers’ ever-increasing expectations. We see the technology sector as a long-term investment theme and expect new innovations to drive further growth in this industry."
Jeremy Gleeson, CFA
Why invest in AXA Framlington Global Technology Fund?
1. Access to growth opportunities
We believe that the technology sector represents growth at a reasonable price (GARP), and see the industry as having strong operating leverage and cashflow with healthy balance sheets – where surplus cash is being used for investments and acquisitions.
2. Exposure to a globally diverse technology market
We view the technology sector as a multi-year investment cycle and, as such, our portfolio is exposed to companies around the world focused on an array of technologies, including cloud computing, software as a service, big data & cybersecurity and the internet of things. We also invest in technology ‘enablers’, which provide the crucial technology to support and develop companies’ digital presence via various channels and devices.
3. Benefit from an actively managed, unconstrained approach
When investing in technology sector, fundamental stock picking with a deep knowledge of companies is paramount. With several hundred meetings with technology executives each year, our detailed coverage of the investment universe helps us identify companies that we believe to display above-average growth prospects in this sector.
Global multi-cap strategy investing in a concentrated portfolio
FT Investment Adviser 100 Club Winner
for Specialist Sectors and Assets Fund of the Year
Over 13 Years*
Existing long-term track record of current technology equity investment team
Global Technology strategy Volatility has increased but so far earnings results have been encouraging
Markets have been volatile despite encouraging quarterly results from the Technology sector.
5G: What you need to know about innovation in mobile technology
Jeremy Gleeson, Portfolio Manager of the AXA Framlington Global Technology Fund, discusses how companies are adapting to innovation in mobile technology.
Global Technology strategy: Investments in areas of technology innovation will continue to see further adoption as we approach 2021
During September, the MSCI World index was effectively flat gaining 0.04%. The technology sector underperformed with the MSCI World Information Technology index, down 1.1% .
1 Unconstrained by benchmark
2 Jeremy Gleeson has managed AXA Framlington Global Technology Fund since July 2007
3 Awarded in the category of “Specialist Sectors and Assets Fund of the Year 2017” on 17 October 2019.
The references to FT Adviser are not an indicator of future performance or places in league tables or awards
4 BofAML “Transforming World: The 2020s”, November 2019.
5 FactSet as at 30 June 2020. Past performance is not a guide to future performance.
* Jeremy Gleeson has managed AXA Framlington Global Technology Fund since July 2007
The capital of the Fund is not guaranteed. The Fund is invested in financial markets and uses techniques and instruments which may be subject to sudden and significant variation, which may result in substantial gains or losses.
Single Sector Risk: As this Fund is invested in a single sector, the Fund’s value will be more closely aligned with the performance of that sector and it may be subject to greater fluctuations in value than more diversified funds.
Currency Risk: The Fund holds investments denominated in currencies other than the base currency of the Fund. As a result, exchange rate movements may cause the value of investments (and any income received from them) to fall or rise affecting the Fund’s value.
Further explanation of the risks associated with an investment in this Fund can be found in the prospectus.
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AXA Framlington Global Technology is a sub-fund of AXA World Funds. AXA WORLD FUNDS ‘s registered office is 49, avenue J.F Kennedy L-1885 Luxembourg. The Company is registered under the number B. 63.116 at the “Registre de Commerce et des Sociétés” The Company is a Luxembourg SICAV UCITS IV approved by the CSSF and managed by AXA Funds Management, a société anonyme organized under the laws of Luxembourg with the Luxembourg Register Number B 32 223RC, and whose registered office is located at 49, Avenue J.F. Kennedy L-1885 Luxembourg.
Past performance is not a guide to current or future performance, and any performance or return data displayed does not take into account commissions and costs incurred when issuing or redeeming units. References to league tables and awards are not an indicator of future performance or places in league tables or awards and should not be construed as an endorsement of any AXA IM company or their products or services. Please refer to the websites of the sponsors/issuers for information regarding the criteria on which the awards/ratings are based. The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. Exchange-rate fluctuations may also affect the value of their investment. Due to this and the initial charge that is usually made, an investment is not usually suitable as a short term holding.
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