Broker Canaccord Genuity has given the Polar Capital Technology investment trust a ‘buy’ rating based on the view that its portfolio is ready for the next leg of the tech cycle.
The broker said in its 2014 handbook ‘No Room for Complacency’, the net value of the trust’s assets had produced an annualised 2.7 per cent return above its benchmark in the past decade.
“It took several years to exorcise the demons after the implosion of the TMT bubble but the technology sector has made solid progress in recent years, although valuations remain attractive, both relative to the broader market and in a historical context,” the report said.
“The manager has a high conviction that we are at the early stages of a new technology cycle and the portfolio is positioned accordingly.”
The £622m trust is managed by Nick Evans and Ben Rogoff and has delivered 219.3 per cent in five years – significantly outperforming the FTSE World index’s 88.4 per cent during the same period, according to FE Analytics.
In a recent update from the managers, Mr Rogoff said that while new technologies had initially been considered compliments, they were now “better understood as substitutes”.
“The new technology cycle is likely to gain further traction over the coming year,” he said.
“If so, this will further bifurcate the fortunes within our sector, as incumbent vendors bear the brunt of deflation associated with cloud computing and IT budgets reallocate away from legacy technologies.
“While this view has become better understood over the past year, many commentators remain more comfortable explaining away the travails of former leaders, such as Cisco and IBM, as macroeconomic in nature.”
But Mr Rogoff said he was “sceptical” of the view that there was “significant pent-up enterprise demand for legacy technologies”.