By Robert Stock Timing is important when investing in technology and investors must focus on a long-...
By Robert Stock
Timing is important when investing in technology and investors must focus on a long-term basis, according to fund of fund managers from Rothschild Asset Management and Investment Manager Selection (IMS).
Volatility will remain extreme as sentiment drives the market, but the rewards over a two-year period will be justified as there are few other long-term growth possibilities in a slowing economic climate.
Buying into experience and expertise is key in selecting investment funds, according to Gary Potter, who manages the Five Arrows Independent Technology Plus fund of funds with Robert Burdett.
Following this thinking, Potter has recently sold out of Scottish Equitable Technology in favour of more trusted technology managers.
But it is also important for IFAs to delve into underlying portfolios as high exposure to the small cap arena could add an extra layer of risk as banks move to tighten liquidity.
In a volatile market IFAs should avoid committing timing errors by staggering clients money into funds, Potter said.
"The message for IFAs is tread very carefully. We do think that this is the end of the beginning not the beginning of the end. Technology as a sector remains relatively attractive long term but returns won't be as high as they have been and they will still experience volatility and sharp movements in share prices."
Potter, who replaced the Scottish Equitable fund with Henderson Technology, said that in a deflationary climate corporates will continue to look to capital expenditure to boost earnings to improve efficiency and earnings growth, particularly in Europe which lags corporate America.
He sees the current market level as a buying opportunity but also said that the market is recognising technology as far more cyclical than previously thought.
He is cautious about the biotech sector which has seen good recent performance. It is not an area that he and Burdett are looking to add to.
Richard Timberlake of IMS, consultants to funds of funds manager Portfolio, agrees with Potter's emphasis on looking to long term rather than short term gains. However, he believes that there is a strong likelihood that technology shares will correct again during the coming year, perhaps by as much as 25%. Over the next two years, he also believes that the careful investor in the sector could double their client's money. He stresses buying experience, but warns IFAs not to risk committing timing errors but to spread investments into technology.
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