Allianz Technology Trust reports an NAV increase of 35.6% over 2024, marginally behind the 35.8% return of its benchmark. The board observes that this was achieved without holding the index-matching weights in the largest companies – avoiding excessive concentration risk. The share price increased by 38.1%, as the discount narrowed. As usual, there’s no dividend. The ongoing charges ratio excluding performance fees fell from 0.70% to 0.64%. There weren’t any performance fees for 2024 anyway.

The board is trying to manage the discount, saying that it would consider buying back shares when the discount is consistently over 7% and it judges it appropriate to do so given the prevailing market backdrop. Over 2024, the trust bought back 9,015,787 shares at an average discount of 11.3% and total cost of £32.0m. Since the end of the financial year, up to 12 March 2025 it has repurchased a further 2,729,344 shares at an average discount of 10.3% and total cost of £11.5m.

Extracts from the manager’s report

Once again, the strength of the ‘Magnificent Seven’ and their dominance in the index made it difficult to beat without exposing our shareholders to excessively large positions in potentially volatile stocks. We typically hold below index weights in these stocks to avoid concentration risk in the portfolio. Nevertheless, the AI trend remains a strong one. These mega-themes do not come around very often, and when one emerges, we believe in sticking with it.

The semiconductor sector was an important contributor to overall returns. While Nvidia saw strong gains, it did not contribute to relative returns because we had a below benchmark weight (10% versus 12%) due to risk management constraints. More important for relative returns were our weights in companies such as Taiwan Semiconductor Manufacturing Company (TSMC) and Broadcom, which returned 95.4% and 114.2% respectively. TSMC is not in our benchmark, and we had almost double the index weighting in Broadcom.

The largest sector contribution came from our holding in software companies. We had an overweight position in the portfolio (relative to the benchmark), and our stock picking approach was strong. Holding an underweight position (relative to the benchmark) in hardware companies also contributed to relative returns. Weakness has tended to come in idiosyncratic areas, rather than from any major themes. However, IT services was a difficult area for the company over the year.

It is also worth noting that concentration in the top 10 stocks has increased over the past three years. The dominance of the ‘Magnificent Seven’, coupled with a narrow technology market has seen us use a larger amount of capital to invest in some of the mega caps. This was done to preserve performance, knowing that as the market broadens out, we will use capital from these larger positions and redeploy it into new names among large and mid cap companies.

What were the major stock highlights over the year?

Palantir Technologies provided the largest relative contribution to the portfolio over the year. It was a new buy in August. We liked the company’s leadership position in big data and in the field of data analytics, with a range of products and services. Shares rallied on the continued momentum for AI-related applications as well as news that it would be added to the S&P 500 Index. This should increase liquidity in the stock. We continue to hold it, with the shift in IT spending towards AI showing few signs of weakness.

Microsoft was the one weak spot among the ‘Magnificent Seven’ over the year. We had a significant underweight position versus the benchmark – 8.2% against 14.6%. The group remains a world leader in software, cloud storage and security solutions, and an undoubted pioneer in AI. However, its earnings statement was accompanied by lower forward guidance amid capacity constraints and moderating growth, and as a result we currently intend to maintain a structural underweight.

The final position of note was in Intel Corp. We had an underweight position in this legacy chip maker and then exited it in full at the start of February. Its shares were hit by weaker-than-expected earnings and a lacklustre forecast. The company has lagged behind several of its chip-making rivals in terms of revenue and innovation. The departure of the company’s CEO created further uncertainty toward the end of the year. We keep an eye on the stock, but other chip makers have better exposure to AI and other leading technologies. In our view, once a company is behind in the semiconductor industry, it is difficult to catch up.

Recent new holdings have included Marvell Technology, a developer and producer of semiconductor and related technology across security and networking platforms, secure data processing and storage solutions. It is making important strides in improving the design of its chips and is attracting interest from the hyperscalers. Point-of-sale, cloud-based restaurant management software maker Toast is another recent buy as the company made some interesting product developments. Social networking platform Reddit was another buy in the latter half of the year, plus Paypal, where a revamped management team and new product platform are helping it gain market share.

Another purchase of note was Atlassian Corp, a designer and developer of an enterprise software platform for project management, collaboration and support services. It continues to see a strong pipeline of growth, with product upgrades and migrations to its cloud business.

Where were the weak spots for the company?

Our largest detractor was MongoDB, a document database provider which allows the storage of structured or unstructured data. This makes the development of applications more agile. However, its shares dropped after it issued a weaker-than-expected outlook. This combined with some overall weakness in the software sector. The company’s more cautious stance on growth reflects an overall softening of IT spending among clients and some near-term sale execution challenges. We trimmed our exposure to the stock during the period.

Zscaler also had a tough year. The group is a leader in security-as-a-service offered via a cloud-based security platform. While earnings were strong, the market had hoped for more and the company could not sustain its valuation. The retirement of the company’s CFO created uncertainty around expectations and customer acquisition slowed. We view this as a case of expectations running ahead of the earnings and continue to hold shares given the company’s strong leadership position.

Infrastructure software solutions maker Snowflake was another detractor from performance over the year. The shares were lower following a disappointing sales forecast. The company is facing greater competition in its core data warehouse market business. Investors were also worried about the news that the company’s CEO was stepping down from the role. We reduced our exposure to the stock during the year in favour of companies with better earnings visibility.

ATT : Allianz Technology keeps pace with benchmark despite Mag 7 underweight