Jeremy Gleeson took over as manager of the £207m Axa Framlington Global Technology fund in July 2007. He invests in global companies that engage in research and development, manufacturing and design in the technology sector.
He says: “I look at the global technology industry and choose to invest in companies that I believe have a strong growth profile and are fairly valued or undervalued.”
Mr Gleeson describes the investment style at Axa Investment Managers as focused on growth “with valuation in mind”. The manager’s focus on growth stocks means the portfolio tends to hold small and mid-cap companies at the beginning of the growth cycle that are delivering new or disruptive technologies.
Mr Gleeson describes his investment approach as “meeting intensive”, as he spends much of his time meeting industry specialists and the management of companies he may invest in. He also gleans information from research technology firm Gartner and other investment research houses before coming to any conclusion.
“I balance that with relative valuations to understand which companies may or may not be overvalued or undervalued,” he adds.
He admits that macroeconomic factors do come into play when choosing holdings for the fund. “The long-term goal of the fund is to invest in growth stocks, but there are times when I am willing to take a bit of extra risk when investing in those growth stocks. Macroeconomic conditions have a big impact on expenditure levels and technology is a massive beneficiary of capital expenditure,” Mr Gleeson explains.
Over the long term, Mr Gleeson’s fund has outperformed the IMA Technology and Telecoms sector, proving his point that investors in the technology sector are rewarded for investing in growth.
The fund has returned 180.81 per cent in the 10 years to June 23 2014, against a sector average of 134.99 per cent, placing it top quartile. It has remained top quartile over the last five years with a return for investors of 117.19 per cent.
But the fund’s performance has dropped to fourth quartile over one and three years. The manager admits that short-term performance has not been as strong and puts this down to the macroeconomic environment over the last three years. This could be why the fund ranks at level six on a risk/reward profile, while its ongoing charge is 1.59 per cent, according to its Kiid.
Says Mr Gleeson: “The more muted performance we’ve had in the last three years has been born out of the macro environment we have been in. But the long-term performance has been healthy, and I think that demonstrates the investment philosophy that we have; that picking good-quality growth businesses will lead to outperformance over time.”
He identifies several areas in the technology sector that have added to the fund’s performance, including companies like Apple that have benefited from the adoption of smartphones and tablets in recent years. Companies involved in “next generation software” such as cloud computing and software as a service have also helped the fund outperform.
Portfolio changes this year have been minimal, according to Mr Gleeson. He explains: “We felt there were stocks getting maybe a bit ahead of themselves earlier on this year, particularly in the high-growth part of the market, so we took some profits in some of our investments, and more recently we’ve been buying some of those positions back.
“The market has gone through a bit of a rotation. Small caps and growth were in favour at the beginning of the year, then during the spring they fell out of favour, and more recently they have been coming back into favour again.
“As it stands at the moment I actually think the outlook for the technology sector is quite encouraging.”
Expert view
Jon Beckett, UK research lead, Association of Professional Fund Investors:
“The manager has run the fund since 2007, coming from Close Investments, and over his career has picked up numerous category awards. In this fund what you get is about 60 to 70 holdings. This fund is deeply Silicon Valley-centric (over 80 per cent of the fund is US listed) as has become the fashion over the last few years. At £207m this is a mid-sized fund that is nimble enough to buy smaller companies floating onto the market or that remain small in capitalisation. Performance for the fund has lagged the sector through 2013 and into 2014, the fund running more volatility, and this has hurt medium-longer term returns.”
