Performance, Commentary & Portfolio

Fund Manager’s Review

Allianz Technology Trust’s Net Asset Value (NAV) total return was -13.60% in March, compared to the Dow Jones World Technology Index return of -11.15% both in GBP.

March was a disappointing month for technology stocks amid ongoing uncertainty regarding President Donald Trump’s trade policy. Stock markets weakened sharply at month end ahead of the President’s self-dubbed “Liberation Day” of sweeping tariffs on 2 April, coupled with continued conflict in Ukraine and Gaza and escalating concerns surrounding Iran’s nuclear program. All technology-related industries were lower, led to the downside by headwinds in semiconductors.

Monthly performance trailed the benchmark as positive allocation impacts were offset by short-term stock picking. Performance was aided by a modest cash weight and an underweight position in semiconductors. This was offset by stock selection in software, interactive media and IT services.

Contributors

Independent enterprise identity management platform Okta, Inc. performed well thanks to upside earnings results led by product portfolio expansion. The company appears to be moving past security incidents with improved traction on large customers, while stabilizing trends at small and midsize businesses were consistent with other cloud-software providers.

Our below-benchmark allocation, to graphics processing and related networking leader NVIDIA Corp. aided results as the stock declined double-digits amid a moderation in artificial intelligence (AI)-related hardware names combined with increasingly opaque macroeconomic conditions, as well as trade and tariff policies.

Our allocation to Zscaler, Inc., a provider of web and mobile security, threat protection, cloud application visibility and cloud-enabled networking solutions, contributed to performance as the stock was slightly

higher following upside earnings results led by large-order momentum, its expanding product suite, and upselling to existing customers.

Our relative positioning in Taiwan Semiconductor Manufacturing Co., Ltd. aided relative results, as did our off-benchmark exposure to electrical components maker Amphenol Corp. which benefited from its incremental value exposure.

Detractors

Shares of Atlassian Corp., a developer of project management and software development tools, declined amid overall headwinds in software-related names, combined with a potential for sales cycle elongation in light of the current macroeconomic environment. We continue to hold the stock given its leadership position and potential for future revenue and earnings acceleration.

Our active exposure to social networking platform Reddit, Inc. detracted from performance, due in part to a decline in higher-beta stocks alongside the potential impact from new search algorithms, which we believe make it increasingly challenging to keep pace with larger digital advertising peers. Our conviction in the stock, which benefits from outsized growth and a loyal user base, remains intact.

Our active position in open-source database platform MongoDB, Inc. detracted, as the stock sold off despite upside earnings results as investors were focused on next year’s guidance which came in below expectations on revenue and margin metrics. We continue to hold shares given its leading platform and longer-term growth potential.

Our below-benchmark allocation to enterprise software, cloud storage and cyber security leader Microsoft Corp. and the below-benchmark allocation to social networking, gaming and ecommerce provider Tencent Holdings Ltd. also offset relative performance results for the month.

New buys and sells 

Turnover in March was undertaken at a lower-than-normal level and reflective of the market volatility and given our preference to not to overreact to the broad-based sell-off. We newly purchased shares of two Chinese companies: online marketplace Alibaba Group Holding as well as media and services holding company Tencent Holdings Ltd., in an effort to diversify the portfolio outside of the U.S. combined with the improved investor sentiment and value-related exposure within China. We also bought shares of Intuit Inc., a business and financial management software provider, given its attractive growth versus valuation mix, favorable execution across product lines and durable demand drivers, led in part by exposure to tax preparation services. There were no portfolio sales for the period.

Outlook 

Despite the market downturn experienced over the past several weeks, led by growing uncertainty over trade and tariff policies and a rotation into stocks with greater value exposure, we remain constructive on the technology sector given the potential for earnings growth and its attractive medium-term risk-reward profile. We fully acknowledge that near-term volatility may persist and our expectation is that market leaders who execute well are likely to be rewarded.

Investors are likely to continue to closely monitor interest rate levels, with future cuts forecasted, which are likely to benefit technology companies incrementally. Corporate earnings have been relatively resilient, and valuations appear reasonable given the secular growth potential of the asset class. Our expectation is that merger and acquisition activity may continue to improve and companies which have ample cash may look to purchase new assets at a discount. Amid any sell-offs, we are opportunistically looking to upgrade select names and add to our highest conviction ideas to better position the portfolio for improved performance.

Our focus remains on building the portfolio from a bottom-up perspective with a macro-overview. Technology remains a key enabler across almost every vertical industry, and we will continue to seek stocks which solve difficult problems and can be long-term outperformers. Despite short- term periods of higher volatility, earnings growth ultimately drives stock prices over the long term, and in our view, we are still early in the spending trend supporting this dynamic segment.

Mike Seidenberg
11 April 2025

This is no recommendation or solicitation to buy or sell any particular security. Any security mentioned above will not necessarily be comprised in the portfolio by the time this document is disclosed or at any other subsequent date.

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