Ms Sejournet explains: “We have a bottom-up approach. The way we select stocks and build the portfolio is done through a strict investment process where we are able to rank and score the best in class out of the 400 investable companies that are in our universe. This investable process ranks and scores some quantitative and qualitative metrics.”
The process whittles the fund’s universe of stocks down to between 40 and 70 holdings. “The investment process helps us to determine how much weight we allocate to the best and most promising companies within our universe,” she adds.
The manager notes the theme, “the transformation of all industry into the digital”, means the portfolio is exposed to segments such as online advertising, vertical software as a service (SaaS) and e-commerce.
“This theme captures massive growth,” she says. “These [segments] offer a huge source of growth because they capture the set-up of new industries. The vast majority of these 400 investable stocks are US based, so we have a US bias in the investable universe.”
The managers invest beyond the US though, as the most recent additions to the portfolio demonstrate. Ms Sejournet notes they have bought into Nintendo, China Mobile and Baidu among other stocks in the past year. “We most recently initiated a new position into Yoox, which is a major aggregator of e-commerce for online luxury goods, and IAC.”
| EXPERT VIEW - Jon Beckett, consulting CIO and financial author |
Verdict Technology is everywhere and this fund is well placed to capture intersection points between digital themes. This is a focused, benchmark-agnostic portfolio, investing in between 40 and 70 quality stocks with a US bias – with plenty of China, sustainable business models across a range of e-commerce and communication sectors, fintech, advertising and entertainment. The vehicle has a minimum 20 per cent exposure to web-based companies. The fund’s message and construction is better articulated than many peers and it has a track record that looks attractive and offers investors something to gauge skill. |
The key investor information document shows that for the I dy sterling clean retail share class, the fund sits towards the riskier end of the risk-reward scale at level six out of seven. Ongoing charges of 1.2 per cent apply to this share class.
The portfolio has delivered 12.9 per cent in the year to June 17, while the Investment Association Technology and Telecoms sector’s average was just 2.3 per cent, data from FE Analytics shows. The fund generated an impressive 262.7 per cent over 10 years, outperforming its peer group’s average return of 159.4 per cent.
Ms Sejournet identifies some of the top-performing holdings in the portfolio in the past 12 months as Russian telecoms operator Mobile TeleSystems and Seoul-based Gamevil, which publishes video games for mobile devices. She says Yahoo, Facebook and AT&T also helped performance.
“The worst performers year to date are eBay, Expedia and Medidata Solutions, [which] provides software [for] pharmaceutical companies that run clinical trials,” the manager adds.
LinkedIn had been one of the worst performers in the portfolio after disappointing financial results forced management to reset its guidance for 2017. Ms Sejournet notes the share price fell 43 per cent in February on the back of this news. “The sell-off was overdone and we decided to double the position,” she reveals. “We did well. Microsoft bought LinkedIn at the bottom – before the takeover was announced. LinkedIn was one of the weakest performers in the fund and it’s now one of the best contributors.”
Turning to her outlook for the sector, the manager observes: “As the digital transformation continues to impact, within the next [few] years we will continue to see some more upside going into the e-commerce segment, with more retail shifting online.
“The penetration rate for online advertising is still immature in the leisure industry, with video games, books and TV [looking] to shift more and more online, offering a lot more opportunities. We are confident, especially as there are a larger number of connected devices and connected people.”
