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Liontrust Global Technology Fund

Q1 2021 review
Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.

The Liontrust Global Technology Fund returned -5.6% over the first quarter of the year, versus the MSCI World Technology Index’s return of 0.4% and IA Technology & Telecommunications sector gain of 0.7% (both comparator benchmarks)*.

Broadly, global equities have steadily driven higher in 2021 as the global economy continues to show signs of recovery from the Covid crisis. Under the surface, however, the picture has been more mixed.

Technology, and US based growth equities in general, had a very strong start to the year up to January when their fortunes reversed (with the technology heavy Nasdaq composite hitting a peak on the 12th of February) with fears of inflation seeing treasury yields begin to rise significantly for the first time since the start of the pandemic nearly a year earlier. The rise in inflation and subsequent interest rates resulted in a so-called value rotation as investors began to favour lower duration assets.

In the final days of the quarter, there were further headwinds for technology investors with the unwinding of Archegos Capital, a highly levered hedge fund focused on telecom, media, and technology (TMT) that was forced to unwind 10s of billions of dollars’ worth of gross exposure in the sector after a margin call from its prime brokers.

The best performing part of the portfolio year to date are our positions in semiconductor companies e.g. TSMC (+7.8%) and semiconductor capital equipment manufacturers, KLA Corp (+26.7%) and Tokyo Electron (+13.5%).

2020 saw a huge rise in global demand for semiconductor chips driven by demand for computing equipment due to lockdown forcing workers to look to create or upgrade home offices and increased digitisation of the economy. The pandemic also simultaneously forced temporary factory shutdowns and strain on the global semiconductor supply chain. This has resulted in a global chip shortage and drastic price hikes. TSMC, the world’s largest chip manufacturer now stands as a powerful bottleneck in this crucial industry with a substantial technological edge on its competitors in 5mm and 3mm chip production and has now announced a massive $100bn capex and R&D spending plan for the next 3 years. US-based Intel has been forced to play catchup for several years now, lagging fabless competitors AMD and Nvidia in the design space, and TSMC in manufacturing. It has announced a $20bn investment plan over the next few years, which combined with TSMC and others should see a large boom in this space, at least for the upstream equipment manufacturers.

The largest underperforming segment of our portfolio was in our overweight to software, particularly the high growth names like Avalara (-19.8%), Rapid7 (-18.0%) and RingCentral (-22.1%). All of these were substantial outperformers over the past year, and a substantial pullback from high valuations is not surprising. These high growth (and high duration) stocks were put under pressure from rising long term yields on inflation fears that triggered the aforementioned value (low duration) rally and further buffeted during the Archegos Capital collapse. Critically, however, we have seen no degradation of the underlying companies, their operations, execution, competitive advantages, and most importantly, their investment case.

Q1 saw two modest portfolio additions. Firstly, we opened a position in cybersecurity company Varonis, which is a leader in security solutions in unstructured data. This continues on our portfolio’s cybersecurity theme that has proven critical in the wake of the recent Microsoft and SolarWinds hacks. The second addition was a previous portfolio company, Baidu, the Chinese internet giant, that has had an impressive comeback over the past year and presented an attractive entry point after a substantial recent drawdown

Three positions were exited in the Fund over the quarter. The first was Topicus, a spinout from our holding in Constellation Software. Topicus is a great company reflecting the excellent capital allocation strategy of its parent, and we continue to have exposure as it is remains a sub holding of Constellation Software; however its separate listing presented the Fund with possible liquidity issues due to its small size and our desire to keep the fund highly scalable, thus was sold. The second exit was from a position in Zoom which, after an impressive run now faces both difficult comps and the substantial challenge of maintaining its growth to fulfil its now lofty valuation. Finally, we exited our position in Accenture, again, while a fantastic company, we deemed there to be more promising exposures to the digitisation and cloud migration shift in other portfolio companies.

The outlook on equity markets continues to be optimistic as the global economy continues its recovery from the pandemic with the successful rollout of vaccination programs in the developed world (particularly the US and UK with the EU and others to hopefully follow). A slight wrinkle however is now fear of inflation, caused by the huge increase in money supply during the Covid-19 crisis now meeting a recovery in demand as well as potential supply shortages. We believe, like many, the best protection against inflation is to own strong companies with competitive advantages and pricing power allowing them pass inflating costs down the chain.

Thus, high quality companies providing vital technology goods and services continue to be a fantastic place to invest, both benefiting from and driving digitisation trends now accelerated in the wake of the Covid pandemic. These trends include the rise of ecommerce, the shift to cloud software and cloud infrastructure, digital payments and next generation entertainment. We believe now more than ever it is important to actively seek and discern high performing companies from those whose value is more speculative and that by focusing on a company’s key financial metrics supporting a strong investment narrative and a discounted cash flow valuation we can continue to provide long term outperformance in this exciting sector through careful and attentive active management.

Discrete years' performance (%)**, to previous quarter-end:







Liontrust Global Technology C Acc GBP

40.5% 6.9% 24.9% 18.2% 44.4%

MSCI World Information Technology


12.6% 21.2% 13.5% 42.4%

IA Technology & Telecommunications

56.6% 6.5% 19.3% 9.6% 40.4%


4 3 1 1 2


*Source: FE Analytics as at 31.03.21

**Source: FE Analytics as at 31.03.21. Quartiles generated on 13.04.21.

Understand common financial words and terms See our glossary

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. Investment in funds managed by the Global Equity (GE) team may involve investment in smaller companies - these stocks may be less liquid and the price swings greater than those in, for example, larger companies. Investment in funds managed by the GE team may involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The team may invest in emerging markets/soft currencies or in financial derivative instruments, both of which may have the effect of increasing volatility. Some of the funds managed by the GE team hold a concentrated portfolio of stocks, meaning that if the price of one of these stocks should move significantly, this may have a notable effect on the value of that portfolio.


The information and opinions provided should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.

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