MANILA, Philippines – Tech stocks have been hot for years, with giants like Apple, Microsoft, and Amazon becoming some of the world’s most valuable companies. So, how can the average investor get a piece of this booming sector?
One accessible way is through global tech funds, which allow investors to benefit from the growth of the tech industry without the hassle of handpicking individual stocks or dealing with foreign exchange rates. Rappler spoke with Pru Life UK and ATRAM to learn more about their global tech fund that invests in the tech titans that power today’s digital world.
What is a global tech fund?
The term global tech fund doesn’t actually refer to a single type of financial product. Instead, it can mean any collective investment fund focused on global technology stocks. These funds pool money from investors to gain exposure to tech companies worldwide and can come in different forms, like mutual funds, Unit Investment Trust Funds (UITFs), or feeder funds. (READ: EXPLAINER: How mutual funds and UITFs make investing beginner-friendly)
The main appeal here is that you buy into a diversified selection of companies in sectors ranging from software, semiconductors, gaming, and social media platforms. That’s much safer than putting all your money into the stock of just a few companies.
But though investing in this fund quickly gives you exposure to these tech companies, it doesn’t mean you directly own shares in them. When you invest in the fund, you don’t have ownership rights, aren’t entitled to dividends, and don’t get voting rights for the underlying stocks — benefits you would have if you bought the stocks directly.
“Before, tech used to be just considered really as a thematic [investment]. But for us right now, tech should be part of your core in terms of your portfolio,” Andrew Caw, ATRAM’s chief marketing officer, said in a roundtable on September 4. “It should be part of that growth aspect that gives you that kicker to the portfolio.”
‘Ride on the wave of technology’
PRULink Global Tech Navigator Fund is a good example of how global tech funds can work. Offered by insurance giant Pru Life UK, it’s an investment-linked insurance product, meaning it combines life insurance coverage with an investment component. When you invest, part of your premium goes toward life insurance coverage, while the other part is invested in the fund.
Here’s how it works: the investment portion of this product goes into the ATRAM Global Technology Feeder Fund. This is a feeder fund, which doesn’t directly buy stocks. Instead, it pools money from local investors and funnels it into an even larger fund — in this case, Fidelity International’s Global Technology Fund, one of the most respected global asset managers in the world.
Fidelity’s fund holds the actual shares in major tech companies around the world, while ATRAM’s feeder fund gives a way for local investors to benefit from these stocks without having to manage foreign exchanges or buy individual shares. Gone are the days where you need to have a private banking account or US dollars to be able to invest in global companies.
“In a way, this gives our customers the chance to be able to ride on the wave of technology,” Pru Life UK chief product officer Garen Dee said. “The main objective of this fund is really for long-term capital appreciation.”
So, where does your money actually go? The top holdings in this tech fund read like a “who’s who” of the industry. As of June 2024, the fund’s largest investments include tech giants like Microsoft, Apple, Amazon, Google, Samsung, and TSMC. Other well-known names in the mix are Visa, Adobe, Electronic Arts, Ubisoft, Disney, and Netflix.
But with all the chatter about Nvidia and Tesla’s soaring stock prices, you might be wondering why their names are absent from the list. According to ATRAM, that’s by design.
“This fund — how we strategize and manage the product in partnership with Fidelity — is more of a contrarian approach to what the market is,” Caw told Rappler. “We are avoiding the hype stocks.”
Caw told Rappler that the prices of certain stocks, such as Nvidia and Zoom, were “too expensive” compared to the companies’ actual value and fundamentals, which is why the fund opted not to hold them.
And that strategy seems to have worked out. ATRAM’s fund has delivered impressive returns, so much so that it was named the best peso global equity feeder fund in 2024 by the Chartered Financial Analyst Society Philippines. Year to date, it’s given a 17.94% return. Meanwhile, over the past five years, the fund has gotten a cumulative return of 183.59%, which translates to a 23.18% annualized return. This means that, on average, the fund’s value has grown by over 23% each year.
High risk, high reward
While tech funds can be rewarding, they’re not for everyone. With this growth also comes volatility — averaging 16.69% over five years — indicating that returns can fluctuate with market conditions. For instance, in 2022, the fund had a -16.01% return.
“This fund is suitable for our new and existing customers who have an aggressive investment risk appetite,” Dee said. “They have to understand that while there is high returns, the risk is also high. So it’s really suitable for those who can accept that kind of volatility and be able to be there long term.”
On top of market volatility, there’s also foreign exchange risk. Since these funds typically invest in dollar-based assets, your returns can also be affected by the peso-to-dollar exchange rate. In the case of Pru Life UK’s fund, you invest in pesos, but your returns are influenced by dollar movements. This can work for or against you, depending on currency trends.
ATRAM’s chief marketing officer also advises that the fund is best suited for a long-term investment horizon. Investors should plan to keep their money in the fund for over five years to see meaningful capital growth.
And, of course, remember that infamous disclaimer: past performance doesn’t guarantee future results, particularly with the uncertainties of geopolitics and upcoming US elections. The fund’s holdings include companies operating in regions like the United States, China, Taiwan, South Korea, and the United Kingdom — areas sensitive to geopolitical shifts. Investors would do well to stay updated on any rising tensions, as these could impact the semiconductor sector and ripple through the broader tech industry. – Rappler.com
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