Seven tech-focused investment trusts worth exploring:
Investing strategically in growth and innovation through technology has become an increasingly popular approach for investors seeking to stay ahead of the curve. A growing number of investors are turning to technology investment trusts to achieve this, as they offer a more nuanced and focused approach compared to broader stock market trackers.
With the recent Magnificent Seven earnings season in full swing, technology stocks are at the forefront of many investors' minds. It's likely that you already have substantial exposure to the technology sector through your stocks and shares ISA or pension, as the Magnificent Seven companies make up just under 21% of the MSCI World Index and over 30% of the S&P 500.
While your tracker funds provide significant passive exposure to technology companies, some investors may wish to take a more proactive approach. Adding a technology-focused investment trust to your portfolio could be an effective way to enhance your growth potential.
Annabel Brodie-Smith, communications director of the Association of Investment Companies (AIC), explains, "Investment trusts are managed by professional fund managers, who select a portfolio of companies and assets, offering investors exposure to a diversified portfolio and reducing their investment risk."
Moreover, investment trusts have a fixed pool of capital, allowing their fund managers to take a long-term view of the portfolio, ensuring they are never forced sellers of holdings. This makes investment trusts particularly suitable for hard-to-sell smaller technology companies or private companies.
We have identified seven investment trusts that could help boost your portfolio's technological potential, with four offering the opportunity to diversify away from Magnificent Seven over-concentration while still increasing your tech exposure.
Three Investment Trusts for Tech and Magnificent Seven Exposure
- Allianz Technology Trust – With approximately 41.7% of its assets in the Magnificent Seven, this trust offers overweight exposure to these stocks, while avoiding Tesla.
- Polar Capital Technology – Polar Capital Technology has roughly the same exposure to the Magnificent Seven as the S&P 500, spread across all seven companies. This trust takes an active approach, seeking out companies offering long-term growth potential by capitalizing on long-term, structural trends, while avoiding hype-driven valuations.
- Scottish Mortgage Investment Trust – Scottish Mortgage focuses on disruptive growth companies and holds around 14.2% of its assets in the Magnificent Seven. In addition to the four Magnificent Seven companies it holds, the trust invests in several innovative private companies, such as SpaceX and Mercadolibre.
Four Tech Investment Trusts to Reduce Magnificent Seven Concentration
For investors looking to reduce their reliance on the Magnificent Seven, these four trusts offer tech exposure without added concentration:
- Edinburgh Worldwide – With a global focus on smaller, innovative companies, Edinburgh Worldwide invests heavily in software, Aerospace & Defense, and Biotechnology, providing exposure to higher-growth potential companies, including SpaceX and Oxford Nanopore.
- Herald Investment Trust – The Herald Investment Trust takes a global approach, investing in technology and communications. Top holdings include online review site Trustpilot and Nvidia partner Super Micro Computer.
- Augmentum Fintech – With a focus on financial technology companies, Augmentum Fintech specifically targets private businesses. Some notable investments include neobank Tide, investment platform Interactive Investor, and global payment platform Volt.
- Seraphim Space Investment Trust – This trust targets an international portfolio of space technology businesses, with holdings in drone company QuadSAT, space internet venture AST SpaceMobile, and space exploration firm Voyager.
If you're looking for a ready-made basket of investment trusts to put your money into, consider the XYZ investment trust portfolio.
[1] The Enrichment Data offers a useful comparison of potential advantages of technology-focused investment trusts and tracker funds. Investors need to consider factors such as active management, access to unlisted or smaller companies, potential outperformance, leverage, lower costs, diversification, intraday trading, and minimum investment, among others, when choosing between the two options. The most suitable approach will depend on an investor's individual risk tolerance, investment goals, and time horizon.
- In the realm of finance, some investors might find it beneficial to supplement their existing technology exposure through tracker funds by adding a technology-focused investment trust to their portfolio, like the Allianz Technology Trust or Polar Capital Technology, for enhanced growth potential.
- Investors aiming to lessen their dependence on the Magnificent Seven might want to consider Scottish Mortgage Investment Trust, which offers a diversified portfolio, investing in four of the seven companies, while also significantly investing in innovative private companies like SpaceX and Mercadolibre.
- For those seeking global tech exposure beyond the Magnificent Seven, exploration of trusts such as Herald Investment Trust, Augmentum Fintech, or Seraphim Space Investment Trust could provide a more diversified portfolio, with holdings in various technology sectors and private companies.
