“We do a lot of bottom-up research. In the case of Pokemon Go, for example, this particular game may be more of a fad. We will see how long the game has staying power, but video gaming as a whole is a substantial secular trend,” Spencer told FSA.
“Pokemon Go is just a microcosm [of video gaming]. It captures how strong that demand is,” said Spencer, the lead portfolio manager for the firm’s Global Technology Equity Strategy Fund and research analyst in the firm’s US equity division.
The demand stems from the younger generation, but a broader base of the population is attracted to gaming, which is gaining share from traditional forms of entertainment, he believes.
The major subsectors of tech are software, hardware, semiconductors, internet, communication equipment, networking and companies in sectors that embrace technology advantage, like industrials, he said.
“Tech has rising importance to consumers, and it is disrupting a lot of end-markets, if you think of payment, marketing and media, for example. By investing in technology, you have the opportunity to benefit [from disruption].”
However, a big risk of tech investing is the speed of change. Investing on the right side of the industry trends is not easy, he said.
Also, startups could quickly rise to take marketshare from established companies or impact whole sectors through product innovation.
Tech companies also tend to have high valuations due to market expectations for growth. But share prices can quickly plunge if financials don’t meet expectations.
In the past six to 12 months, he has trimmed back some stocks in the software sectors based on valuation, but has incrementally added Japan and Europe into his portfolio following their recent weakness.
Asset Weightings of the fund
| Region | % |
| North America equiities | 61.2 |
| European equities | 16.7 |
| Money Market | 9.3 |
| Asia Pacific equities | 7.8 |
| Japan equities | 1.5 |
| Pacific Basin equities | 6.4 |
Source: FE Analytics, fund’s factsheet (as of 31 May)
Currently, the fund has around 10% exposure to China, and the overall weighting to Asia is roughly 20%, he said. He expects the weighting in Asia to increase to 20-30% over the next 2-3 years.
“China is an extremely important market for technology. Chinese internet companies are actually leaders as they sit on the trends of what’s happening in the industry, like gaming and mobile payments.”
For example, in the context of gaming, he likes Tencent, even though many analysts believe it is trading at high valuations.
The T. Rowe Price Global Technology Equity Fund has outperformed its benchmark — the MSCI ACWI Information Technology Index — since the fund was launched in June 2015, according to FE.
