The Aegon Technology fund has built up a cash weighting to 10% and shifted into old economy stocks....
The Aegon Technology fund has built up a cash weighting to 10% and shifted into old economy stocks.
Jackie Bowie, who joined from Aberdeen earlier this year, has made the changes since she started running the fund on 5 March, following the departure of previous managers Paul Kleiser and Stuart O'Gorman to Hendersons.
On her arrival, the portfolio was fully invested. Since then, she has raised cash and increased the weightings in hardware technology stocks, particularly PCs. She said: "Old economy technology, as it is known, was originally a growth area in the early 1990s. The sub-sector fell out of favour later in the decade and investors turned towards communications equipment companies.
"We have started to revisit these older economy stocks, as although the growth side is not brilliant, we are more confident of the stability and visibility in these companies."
At the same time Bowie has been cutting back in what was the fund's largest overweight position, communications equipment stocks, because of unreliable earnings numbers.
She said: "There is still a good deal of downside to come with these businesses and even the companies themselves have no visibility. As a result, we have sold off some of the communications equipment holdings and halved other positions so as to take out the overweight and move to being underweight."
Bowie expects greater visibility of earnings for communication equipment companies during the second quarter, at which point she will reconsider her weightings in the sector.
She said: "We are hoping that once all the earnings figures are out at the end of the quarter, we will get a better idea of what will happen going forward. The feeling is that communications will lack visibility even after the first quarter. However, we believe that the numbers will give us a better feel for the software and semi-conductor markets. That is when we will be able to review our strategy again."
Bowie claims there is no change in the management style on the portfolio although she has cut back the number of individual stock positions.
She said: "There were some core holdings and a huge tail of smaller stocks that have been cleaned out. If we kept this long list of small holdings it would be very difficult to keep a tight eye on the portfolio.
"Previously, there were a lot of individual risky positions at a stock level, which have been reduced as the market is not rewarding risky holdings."
Overall she describes her investment style as very much bottom-up combined with sectoral analysis.
She said: "On a sector basis stocks often move in tandem. With the semi-conductor stocks we would look at the sector to see how it is trading relative to the market. We then decide who are going to be our leaders in the portfolio, which does not necessarily mean the largest companies."
She cited Novelis as a company she likes because of its exposure to the move towards copper in the semi-conductor market.
"This defensive move is our control against risk," said Bowie. "We will be keeping an eye on our communications weightings compared to the market. If the sector snaps back, which is likely at some point, we do not still want to be underweight."
Aegon Technology is ranked 56 out of 61 funds in the specialist sector, with three month returns of -30.3% on a bid to bid basis.
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