Polar’s Rogoff shifts down company size spectrum
Polar Capital’s Ben Rogoff has increased his exposure to small and mid-sized stocks in his technology investment trust, amid an investor flight to large caps in search of safety.
The manager of the £480.8m Polar Capital Technology investment trust said he was moving down the company size spectrum in search of cheaper stocks - pulling the fund’s investment portfolio away from its benchmark index.
“A less benchmark sensitive approach is entirely consistent with our long held view that new cycles are rarely good for incumbents,” he said.
The manager said a new market cycle was seeing companies with activities in areas such as cloud computing, internet applications and what he terms ‘ubiquitous computing’ - for example smartphones - enter the spotlight.
“While this new cycle should disproportionately benefit small and mid-cap companies without legacy exposure, ‘top-down’ concerns have resulted in investors seeking refuge in inexpensive mega-cap ‘stores of wealth’ leading to a significant ‘crowding out’ of smaller companies,” he said.
He said that smaller companies have now given up all the gains they registered in 2010 - making them look attractive on a historic basis.
Last week the board of the trust announced preliminary results for the year to April 30 which showed it had slightly lagged its benchmark.
The trust’s net asset value (NAV) rose by 6.5 per cent in the reporting period, while the Dow Jones World Technology index was up by 8.3 per cent.
On a sector level, the trust’s performance was affected by exposure to semiconductor companies - which suffered after the Japanese earthquake and floods in Thailand.
Returns were also hindered by exposure to the Chinese IT service sector, the manager said, where share prices were weak due to a combination of slowing growth and corporate malfeasance.
Networking stocks also detracted from performance as service provider capital spending slowed in the second half of 2011, Mr Rogoff said.
Looking to the year ahead the manager said mergers and acquisitions (M&A) activity was likely to account for a “significant portion of excess corporate cash and cash flow” as competition intensified.
Mr Rogoff added that while he was “disappointed” not to have directly benefited from more acquisitions during the reporting year, he said he was “hopeful” further M&A would provide headwinds, “disproportionately helping small and mid caps as incumbents continue to retool for the new cycle”.