How should you select the best fund

Investors should have a suitably high appetite for risk before considering investing in this area, he says, and given the concentrated nature of the sector exposure investors should review the diversification in their portfolio around this position.

Mr Seager-Scott says: “Technology funds are specialist funds, so would probably not be best placed as a core holding.

“It could work to complement existing holdings, especially if an investor wishes to top-up technology sector exposure that may already be held as exposure via other funds, such as a global or US equity fund.

“Investors should also be aware that global technology funds tend to have the majority of their exposure in the US, which could impact the geographical split in their portfolio.”

Only those willing to take a bit more risk with money that does not form the core of their savings should consider investing in a tech fund, says Juliet Schooling Latter, research director of Chelsea Financial Services.

She says: “I look at this areas as more of a satellite investment to complement a portfolio rather than to form its base.”

In order to obtain the best fund for your client, advisers are encouraged to carry out thorough due diligence and make sure you understand the investment process and style of the fund manager, in exactly the same way as would be the case for any fund.

Some tend to be more aggressive than others, according to BestInvest’s Mr Seager-Scott, with a preference for disruptive technologies, whereas others take a more rounded view and have more exposure to hardware.

When talking to managers of funds, Mr Seager-Scott says he would suggest asking about process, and finding out about the manager’s style.

Mr Seager-Scott suggests asking:

1) How much of the portfolio is in mature, profitable companies?

2) How much of the portfolio is in young, rapidly-growing companies?

He says: “Make sure you know what the manager holds, what they look for and how quickly their turn their portfolio over.”

Speaking earlier this summer about Bestinvest’s section process, Mr Seager-Scott says he includes GAM Star Technology in the Premier Selection of rated funds, with a three-star rating.

Chelsea’s Ms Schooling Latter recommends asking a manager if they have to invest in Apple or not. She says the answer will inform you know how much they are tied to the index.

Ms Schooling Latter also recommended asking:

1) Do they have a technological or telecoms background?

2) What is the geographical split (helps give an idea of currency exposure too)?

3) Do they invest in ‘blue sky’ and/or established companies?

A detailed analysis of competing products and supply chain intricacies is best achieved by a dedicated technology sector specialist, says Jeremy Gleeson, manager of the Axa Framlington Global Technology fund.

He says advisers should expect to see the investment approach should be ‘benchmark aware’, rather than benchmark driven so that the fund can invest in ‘new technology’, rather than ‘old commodity’ companies.

Mr Gleeson says: “Our fund, Axa Framlington Global Technology, has a bias towards mid and small-cap stocks reflecting our aim of investing in future ‘growth leaders’.”

“It is important to ask how the team/fund managers are identifying growth opportunities within the technology sector.

“For example, we look for multi-year themes representing the underlying growth drivers within the sector. Identifying secular themes maintains a focus on the longer-term growth picture rather than chasing short term fads.

“It is also crucial to understand how the team communicates with the companies that they invest, or are looking to invest, in.

“Regular meetings with management teams provide a deeper understanding of a company’s business model, management quality, competitiveness of products or services and, ultimately, prospects for revenue and profits growth.”