Tag: PCT

Polar Capital Technology Removes Performance Fee

The Polar Capital Technology Trust (PCT) announced their interim results this morning. It includes a statement that the Management Fees are being changed and that includes removal of the performance fee. This is to be welcomed as performance fees do not improve performance and just impose additional costs on investors. Managers have sufficient incentives to perform to the best of their ability without adding such fees.

The changes were summarised in the announcement as follows:               

Current fee arrangements: 

The current base management fee is structured over three tiers:

§  Tier 1:      0.80% on NAV up to and including £2bn  

§  Tier 2:      0.70% on NAV between £2bn and £3.5bn  

§  Tier 3:      0.60% on NAV above £3.5bn 

Performance fee: The performance fee participation rate is 10 per cent. of outperformance above the Benchmark, subject to a cap on the amount which may be paid out in any one year of 1 per cent. of NAV. Further information is provided in note 6 below as well as the Company Annual Report and Accounts for the year ended 30 April 2024.  

New fee arrangements:

The new base management fee will be structured over two tiers, and the performance fee will be removed entirely: 

§  Tier 1:      0.75% on NAV up to and including £2bn

§  Tier 2:      0.60% on NAV above £2bn

Performance fee: none

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Roger Lawson (Twitter: https://x.com/RogerWLawson  )

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NVIDIA and ARM – Did I Miss Out?

Last week saw a boom in the shares of chip producers Nvidia and ARM. These have both powered ahead in the hope that they will benefit from the need to support AI systems and their profits have been moving upwards. Nvidia’s share price is up 35% in 2024 so far. ARM’s share price has doubled since it’s IPO last September and there is much anguish over the fact that this UK company chose to list in the USA.

As an investor in technology companies I have missed out on this bonanza as I don’t have direct holdings in either stock. But an interesting article from the AIC entitled “Which investment trusts hold Nvidia” explains how I and others could have benefited from holding technology focused funds – see https://www.theaic.co.uk/aic/news/press-releases/which-investment-trusts-hold-nvidia    

For example, Polar Capital Technology (PCT) and Allianz Technology (ATT) both hold more than 7% of their funds in Nvidia and PCT is one of my biggest holdings. I also hold shares in Scottish Mortgage (SMT) and JPMorgan Global Growth & Income (JGGI) who also have substantial holdings in Nvidia so I have not missed out altogether.

Why hold funds that hold popular shares rather than the shares directly? Because keeping track of US shares is not easy and the fund managers are probably more in contact with US technology developments than I am. Also these trusts are trading at a discount to their holdings so you are getting the component shares on the cheap.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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AI Tipped for Rapid Adoption by PCT, and Understanding Business Models

It’s summertime and the stock market continues to drift downwards with little share trading. It’s certainly not the time to be trading small cap stocks.  So I decided to catch up on some reading. I always like to read the Annual Report of Polar Capital Technology Trust (PCT) and that’s not just because I hold the shares but because the commentary on the technology market by Ben Rogoff is usually well-informed. This year is no exception but he is betting on AI to be a new growth phase stimulant.

He says: “After decades of unrealised hopes around artificial intelligence, we believe that generative AI is likely to prove the technology’s so-called ‘iphone moment’”, with mass adoption to follow. I am not so sure. There is no doubt that software such as ChatGPT might enhance search engines such as Google and Bing but will they enable lower cost or faster production of products? It might be just another over-hyped technology that will find a place in the market but not cause a revolution.

The latest book I have read is entitled “The Business Model Navigator” by three business school academics Gassman, Frankenberger and Choudury”.

Understanding a company’s business model is very important. I said this in my own book entitled “Business Perspective Investing”: “A company’s business model describes how the organization creates, delivers, and captures value via its adopted business processes. The accounts are only a good pointer to the future if the world, and the markets in which the company operates, are in stasis, i.e. nothing about the market and the company is going to change”.

The Business Model Navigator covers how companies can and have transformed their operations and profitability by adopting new models and includes many examples. It’s full of useful ideas that can be applied to any business.

The book is not light reading so might best be studied by those with an academic bent or business management background but there is certainly good content to fill up your summer holidays.

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

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Polar Capital Technology Trust AGM and Board Apprentices

I attended the Polar Capital Technology Trust (PCT) Annual General Meeting via the Lumi AGM platform today. This was an exemplary example of how to run a “hybrid” AGM with 8 attendees on-line and 4 shareholders physically present. Questions came from both sources, voting was on-line and there were no technical hitches.

The low attendance was probably because we are in the holiday season I would guess. But it proved a useful meeting anyway with a good presentation from fund manager Ben Rogoff. He is always worth listening to and his video presentation should be available on-line, or you can read the Annual Report of the company where he covers technology trends and there is also a supplement on “Hybrid Work” that covers the WFH impact. If you want to keep up with technology trends, Ben’s annual reports are essential reading.

PCT increased the NAV per share by 45% last year but the share price discount has recently widened so the company has been buying back shares – it’s now on a discount of 7.3%. Technology shares have gone out of favour, or some profit taking has happened.

In response to a question about his own holding in the company, Ben said he had been buying shares recently. So have I as I still think technology shares are good value for the long-term.

An interesting aspect of PCT is that they do have a “board apprentice”. The person appointed is not a formal director but attends all board meetings as an observer. This enables them to learn how boards operate and otherwise gain an education. There is an organisation who can provide candidates for such roles – see https://www.boardapprentice.com/

As I said in a previous blog post, there are better ways to increase diversity than imposing quotas for females or other categories on the board. Education is the key. Appointing board apprentices is certainly a better way of improving diversity which I wholeheartedly support.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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