But there are signs that more are being swayed by the option of dedicated exposure. While total sales of tech funds may be limited, they remained in the black during the fourth quarter of last year – despite that being a period in which tech stocks suffered a notable derailment. And the past two months for which data is available, April and May, show a renewed uptick in interest from investors.
Add to this the fact there are just 16 funds in the sector, and sales suddenly look very healthy. To put that another way, the typical tech fund has sold better than the average fund in any other equity sector (barring Global) over the past 12 months.
Sentiment
That is very much in keeping with global trends. Technology stocks’ latest surge in performance – the average tech fund is second only to the US Smaller Companies sector when it comes to returns in the first half of 2019 – has led to renewed concerns over herd behaviour. Bank of America Merrill Lynch’s monthly fund manager survey saw 25 per cent of investors rank US technology shares as the world’s most crowded trade in June.
If nothing else, this percentage did represent a marked fall from the 35 per cent who said the same in May. That is perhaps because many are growing more nervous of the sector: the investment bank’s survey also reported that global managers’ allocations to technology shares fell 13 percentage points to a six-month low in June.
That low still constitutes a net overweight of 21 per cent, admittedly. But there are other reasons to be cautious.
Estimates from data provider FactSet predict that the US technology sector will see earnings fall by 7 per cent year on year in the second quarter – a drop matched only by firms operating in the materials sector.
FactSet predicts that US earnings as a whole will contract by 2.8 per cent, an outcome that would mark the first “earnings recession” – two or more quarters of contraction – since 2016.
There is a significant caveat to this data, too. A rejig of benchmark indices earlier this year means that some of the largest US technology companies, specifically social media businesses like Facebook and Google parent Alphabet, are no longer counted as part of the technology sector.
These companies face problems of their own. The Financial Times reported in early June that regulators in the US were considering antitrust investigations into Google, Facebook, Amazon and Apple. Details remain scarce, and the precise targets of any would-be investigations are unclear, but US politicians are also becoming more forthright on the matter.
