by Paul McBeth
"What’s driving this sector long-term is the fact that the correlation between the amount companies spend on technology and their productivity gains is really very close; and we think this has quite a lot of shelf-life to it.
"For the next five years up, it will be quite profitable and growing, and we think that’s more sustainable given that the Federal Reserve has finished a cycle of short-term interest rate tightening."
Owen and assistant vice-president Sharon Weil are in the country this week waving the flag for a couple of new funds, a global technology and a global health and biotech fund, that Wellington Management will manage for JB Were. Structured as Australian unlisted unit trusts, they were launched on September 1 and have an expected MER of 2.4 per cent.
Wellington Management, which manages more than $US200 billion of funds for clients, also handles another five portfolios for JB Were: international, Japan and Europe fund as well as a global small companies and a global high yield fund. The firm also manages funds in this country for NZ Funds Management.
Owen pushed a couple of reasons for investing in tech via managed funds. One was the particular difficulty investors would have in stock selection - "Technology is a creative destruction process, with the new replacing the old" – while another was the greater need to diversify "as the risk in technology remains much higher than in any other subsection".
Although billed as a global investment, the JB Were tech fund will have 95 per cent invested in US-domiciled companies. However, Owen said those companies would generate 25 to 35 per cent of their revenues offshore and the main reason for such a high proportion of American stocks was that the fund would weight more heavily on larger-cap tech companies, which have an average size of US$117 billion.
For the global health and biotech fund, the split is three quarters US and a quarter Europe and Japan. Sharon Weil, in putting the case for investing in this area, noted that the over-65s are the fastest growing group in the US and many other industrialised countries and they spend a much higher amount of their disposable income on healthcare. Also, only 16 per cent of the world population live in industrialised countries but they spend over 90 per cent of total healthcare dollars.
Paul is a staff writer for Good Returns based in Wellington.
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