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Global Technology strategy - February 2023

  • 23 March 2023 (5 min read)

Economic indicators have been trending more positively

  • • The technology sector outperformed the broader equity index in February
  • • Positive contribution from our cybersecurity investments
  • • Company results have been met with a positive reaction

What’s happening?

During February, the MSCI World index was largely flat, rising by just 0.2%1 .  The technology sector outperformed the broader equity index with the MSCI World Information Technology index climbing 1.7%1. [All index returns provided in GBP].

The debate over what central banks will do next continues, as economic data suggests that the rate of inflation is subsiding, however other metrics such as the employment market remain robust, stoking concerns that the US Federal Reserve will continue with interest rate hikes to ensure that inflations trends don’t reverse course again.

Portfolio positioning and performance

During the month, the top performing investments in the strategy came from our investments in the cybersecurity space. Palo Alto, the provider of on-premise and cloud based network security solutions reported a positive set of financial results and the shares rallied strongly; Darktrace, the AI cybersecurity firm, rallied after a short report had caused the share price to be weak in the preceding month; Tenable, a provider of vulnerability management software also delivered positive returns during February.

Elsewhere, strong results buoyed the share prices of New Relic (application performance management) and Meta Platforms, whose guidance and plans to curtail expenditure have been positively received by the market.

We added a position in Uber to the fund in February.  The company is executing well on both of its main business units, Mobility and Delivery, enjoying growth in their customer base and engagement with those customers.  Their membership scheme, Uber One, has reached 12 million members.

Outlook

Looking out to 2023, we expect macro-economic and geo-political events to continue to be the main drivers of sentiment within investment markets.  The uncertainty will likely lead to a continuation of the “risk off” investment environment that has prevailed in 2022.  However, there are signs that the steps taken by central banks is having an impact on inflation so, whilst the current narrative is for there to be further interest rate hikes, we should now be closer to where they peak.

The strength of consumer spending remains a concern as expectations are that this will come under further pressure in 2023 due to the combined effect of inflation and higher interest rates.  Businesses exposed to consumer spending have already been noting weaker results and this is likely to be further factored into expectations as companies provide financial guidance for the coming year.

Whilst cognisant of the challenges, we are also aware the technology sector is (still) poised to deliver growth and valuations in the space have contracted significantly in the past 12 months. We do believe that our investment philosophy around identifying long term themes and the companies that will benefit from these themes remains intact despite the near-term challenges.

No assurance can be given that the Global Technology Strategy will be successful. Investors can lose some or all of their capital invested. The Global Technology strategy is subject to risks including; Equity; Smaller companies; Currency; Industry sector or region; Changing technology; Emerging markets; Liquidity.

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