By Ruth Alexander The average technology fund needs to return some 200% in the coming year to bri...
By Ruth Alexander
The average technology fund needs to return some 200% in the coming year to bring investor's capital back to its original value, after the past year's halving of returns in the technology sector.
According to Standard & Poor's calculations, on a bid to offer basis, even over five years, an investor would need to achieve annualised growth rates of between 13% to 27.6% just to recover their initial investment following the recent market falls.
Last year, technology was one of the more popular Isa choices, according to Autif. In February 2000, technology funds made up 16% of Isa gross retail sales totalling some £175m and in March 2000 made up 14%, with investors putting more than £375m in the sector. In February 2000, technology funds made up 11% of total unit trust and Oeic retail gross sales and in March accounted for 17%.
Since that time, for the year to 1 March 2001, the average global tech fund returned -51.13%. Over three and five year periods, the average compound performance of these funds is 18.99% and 15.15% respectively. Over the year to 1 March, the worst performing fund, Framlington NetNet, has seen its returns fall by 70.51%. To bring a £100 investment in the fund at the end of February 2000 back to its original value, it now needs to return 239.1% over the next year or realise compound returns of 50.24% over a three-year period, or 27.66% over five years. This is not unfeasible based on historic performance from this sector. At the height of the boom in 1999, average annual returns hit a high of 144.2%, according to Standard & Poor's, looking at returns for the calendar year 1999, on a bid to offer basis.
Over that time period, Henderson Global Technology was ranked first, with returns of 171.6%, while the worst performing technology fund, Aberdeen Euro Technology, had one year returns of 93.9%. Craig Walton, marketing director at Framlington, said: "In the past, the fund has shown the ability to achieve that performance (200% returns) and more.
"The internet still has a great deal of potential. There remains a lot of business being transacted over the internet but this is not being reflected in the share price of some internet companies, therefore there is the potential for a big bounce-back."
Justin Modray, marketing manager at Fundsdirect, believes there is only a slim chance that technology funds will be able to make back the money investors have lost over the past year.
An investment held in a technology fund over five years is much more likely to see growth, which returns the original capital, according to Modray, who views five years as a minimum time period and 10 years as ideal.
John Pullar-Strecker, head of technology at Aberdeen Asset Management, and the manager of the Aberdeen Technology fund, said while it is impossible to predict the returns for the fund for the next five years, for the past 15 years it has achieved annualised returns of 23%.
See news analysis, p26-27
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