One and three year outperformance: Allianz Technology Trust

ATT looks set for re-rating after one and three year outperformance…Thomas McMahon

Overview

 
Allianz Technology Trust (ATT) is a highly active fund, which invests across the broad and diversified technology space, capturing the potential of the sector driving most global economic growth. Manager Mike Seidenberg uses his almost three decades’ experience and location in the heart of the action in Silicon Valley to identify the best stock-specific opportunities, assessing changing growth outlooks and valuations. Mike delivered strong outperformance of the benchmark over 2025, in a market in which the Magnificent Seven gathered most of the press. ATT is now substantially ahead of the market over three years too (see Performance).

In fact, the tech mega-caps have been weak in recent months. Nvidia has been roughly flat since August, while Microsoft and Amazon have sold off on the scale of the capex required to build out their AI services. Meanwhile, the market is coming to realise that the business models of many software companies could be permanently impaired by new AI tools. Mike was ahead of the software sell-off, and benefitted from entering 2026 underweight the sector. He is also underweight the mega-caps, not owning Amazon at all for the first time in decades and underweight six of the Magnificent Seven. The trust’s long-standing tilt to the mid-caps remains, as Mike aims to find companies that can outperform in a more discriminating environment.

ATT’s discount has hovered around 10% to 12% for the past two years, in an environment that favoured passives or buying the mega-caps like Nvidia directly. It has been narrowing slightly in recent months though, and we think could narrow further as these trends reverse.

Analyst’s View

AI is going to have immense constructive and destructive effects, and disrupt many business models within the tech sector itself. The first wave of investor interest saw the mega-caps bid up as they were potential beneficiaries, but the reality is now setting in that they have to invest massively, while the scale of any revenue streams remains questionable. Hardware continues to do well, although Mike argues valuations are full in many cases, while software is under threat – some businesses may be fatally wounded, while others may be enhanced, but the market currently finds it hard to distinguish the two. This is precisely the sort of environment in which an active fund should earn its keep. Indeed, with the mega-caps likely to be hamstrung by capex for the coming two years or more, a passive investment could be particularly ill-favoured at this time. Mid-caps have historically been a source of superior earnings growth and share price returns, and in this environment they may play the same role once more. ATT looks well suited for this.

ATT’s portfolio is diversified by theme and managed very actively, Mike reacting to a changing outlook faster than the end investor is likely to be able to. Having a ringside seat in California gives him and his team great access to management and other investors in this rapidly developing sector. Adding back into semiconductors during the Liberation Day sell-off was astute, and benefitted shareholders, as did the decision to dial back software exposure on the earnings outlook and the potential impact of AI well ahead of this January’s crisis point. We have long felt ATT’s double-digit discount to be a glaring opportunity. While the Mag Seven were outperforming and investors could go passive or buy them directly, it is perhaps understandable that it persisted, but with the environment now having decisively changed, we think the recipe for a re-rating is on the table.

Bull

• Strong performance track record
• Diversified technology exposure, greater focus lower down the market-cap spectrum
• Discount may offer a great long-term entry opportunity

Bear

• Single-sector focus increases volatility
• High-growth strategy may underperform in a value-driven market
• Position size limits can hinder relative performance when the largest stocks outperform

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_{Disclosure – Non-Independent Marketing Communication. This is a non-independent marketing communication commissioned by Allianz Technology. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.}

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