Gartmore is running an 8% cash position in its UK technology fund as it continues to look for buying...
Gartmore is running an 8% cash position in its UK technology fund as it continues to look for buying opportunities amid sector volatility.
The £58m Gartmore UK Techtornado fund uses the FTSE Techmark 100 Index as its benchmark. The index has seen a fall of 25% since the fund was launched on 16 February. The fund itself has seen a fall of 18% since then on an offer to bid basis.
Tim Dainton, who carries out the day to day management of the fund, said the portfolio had a peak cash position of around 16% at the beginning of April and Gartmore has run this position down as the correction presents further buying opport- unities.
Dainton also believes the technology market may have further to fall and is not aiming to be fully invested until he sees that the bottom is being reached. In recent weeks he has bought into stocks including Psion for under £30 and Bookham at £17 to £18. Psion is now trading at £37 and Bookham is trading at around £29. Bookham is developing technology to boost the bandwidth of fibre optic cables, which Dainton sees as a market with high growth potential.
Dainton said: "Since the middle of March there has been a big correction in technology stocks and the fund has not been immune to that. On the way up the market was pretty indiscriminate over stocks but has also been indiscriminate on the way down.
"The fund is run with a bottom-up approach and the type of companies we like are those which are trying to build world leading positions in their markets."
The fund has 65 stocks including Transense, which produces devices that measure variables such as air pressure. Dainton said the firm is developing applications for this technology for use in the car industry. He said Transense's devices can be used to measure the wear on car tyres as well as tyre pressure, which can help to improve car safety and efficiency.
Other applications for this type of technology could be measuring the strain on car gearboxes, crank shafts and steering and Dainton said the company should benefit from the theme of car manufacturers looking to get more technology into cars.
The fund is also able to invest in companies which are not pure technology plays but are looking to benefit from its uses. Dainton is keen on metal trading firm MG, which has set up a metal trading hub over the internet in competition to the London Metal Exchange. MG gets a transaction fee for metal trades carried out using its internet trading facility.
The fund has around 40% in small caps, 35% in mid caps with the balance in the FTSE 100. Gartmore UK Techtornado is run by the group's UK smaller companies team headed by Gervais Williams. Williams manages the Gartmore UK & Irish Smaller Companies Fund. Dainton runs a range of segregated smaller company pension funds and takes part in stock selection across Gartmore's smaller company portfolios.
At the moment the fund has a large stake in the software and computer services sector with a 35%weighting and has 18% in IT hardware. The fund has 8.5% in pharmaceuticals, 6.66% in electricals and electronics and 2.7% in distributors.
Other members of the smaller companies team who are involved in the stock selection on the fund include Frank Manduca, who runs the UK Smaller Companies fund and Simon King, also a small cap fund manager at Gartmore.
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