The Rathbone Technology fund fell 17.3% in the three months to 10 May as exposure to small and mid-c...
The Rathbone Technology fund fell 17.3% in the three months to 10 May as exposure to small and mid-cap companies increased its vulnerability to recent volatility.
The frA rated fund, approaching its first anniversary on 25 May is ranked 32nd out of 40 in the Specialist sector over three months on a bid to bid basis. Over one year to 10 May it achieved growth of 105.7% and was ranked eighth.
Hugh Priestley, manager of the fund, says exposure to a larger number of small and mid-cap companies than its competitors led to its outperforming competitors on the way up and underperforming on the way down.
He said: "We invest in 120 companies, rather than the 80 or so of our competitors, and the smaller caps have suffered more during recent volatility and have yet to recover."
Priestley said the fund has focused on business to business internet companies in particular while business to consumer firms are generally regarded as too risky. The fund's most conspicuous business to consumer holding is US bookseller Amazon.com. The portfolio also contains a UK internet play investing in Scoot.com, which he feels will benefit from strong content and subscriber base.
Recently the fund has been adjusted towards a more defensive stance, although the fund still holds a balance of 70% outside the large cap sector.
He said: "We have moved money out of smaller companies to larger caps in case there is more downside to come."
The fund does not follow any global weighting benchmarks and its 45% exposure to the US is lower than the peer average of around 65%, he said. This is to offset the risk of being too dependent on one market.
The remainder of the portfolio is split with 22% invested in the UK, 12% in Europe, 8% in Japan and 5-6% in the Far East.
He said he is not overly concerned by geographic boundaries as he is finding them less relevant as global merger and acquisition activity, such as Vodafone's acquisition of AirTouch, becomes more prevalent. Priestley is not in Vodafone but has holdings in Ericsson and Nokia, which he said have held up well during volatility.
While not bearish on telecoms, Priestley is critical of Colt and Energis, which he feels have not held up so well, and is no longer keen on BT.
Cable and Wireless, however, is a preferred stock as he feels there is value to be found in its price.
His overall view for the technology sector is positive, though markets may have to "go through two to three months of uncertainty until it becomes clear whether Alan Greenspan has steered the US economy in the right direction."
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