We had a couple of phonecalls this morning from subscribers expressing surprise that the May issue of Techinvest, which they received on Saturday, did not contain any reference to the Fund. We explained that due to the uncertainties over the ISA status of the Fund (see Update below, dated May 2) at the time of going to print, our legal advisers had strongly counselled us against putting anything in the newsletter that could be construed as promoting it in any way.
We had prepared an article for the newsletter, which we are now free to publish on our web-site. Under the title “CF Techinvest Technology Fund”, it is an edited version of the marketing letter, which had been posted out with the original Key Features Document ten days ago, and reads as follows:
We are pleased to announce that the Fund was finally launched on April 29. We are very excited by this development, which comes more than 18 years after the first issue of Techinvest was published in 1984. Since then we have seen considerable volatility in the technology sector. In particular, the period up to March 2000 saw spectacular gains for many stocks, followed by a prolonged bear market, which saw some even more spectacular collapses.
Here at Techinvest, we have been through it all before. In our first anniversary issue in October 1985 we wrote about the decline in the tech sector benchmark of that time, the FT Electronics sub-index, which, over the previous twelve months, had underperformed the main market by 52 percentage points. This was after the end of a period from the beginning of 1975 to the middle of 1983 when the H and Q technology index, then the main tech sector benchmark in the US, rose by well over 1000%.
In that issue we said: “ There has been an apparent endless sequence of once mighty heroes hitting the dust. In severity, the decline in the Electronics sector can only be compared with the infamous general market collapse of 1974”.
We went on to say: “North American investors of course have seen it all before. Once or twice every decade the technology sector gets overheated and over-rated. As sure as night follows day, gloom follows boom and the sector falls out of bed. Speculators depart the scene, the average investor loses interest and over-reaction occurs. This eventually creates tremendous buying opportunities for the long-term investor.
“It is difficult to escape the impression that the London market is at present in a state of semi-conscious daze when it comes to technology shares”. All the above applies just as much now as then!
The rest, as they say, is history, although sector recovery didn’t set in until two months later in December. Of course, it wasn’t steady progress all the time after that. It never is. There were plenty of thrills and spills along the way. And there was also the small matter of the general market crash in October 1987 which, in the longer perspective of history, proved to be not much more than a blip.
Excellent Time to Launch
Collective investment schemes provide a wider spread of holdings than most investors can afford. Because of this, if managed properly, the risks associated with owning just a few individual stocks are reduced.
We believe that now is an excellent time to launch a fund focused on the technology sector. Between March 2000 and October 2002, the FTSE techMARK 100 index underperformed the FTSE 100 by 82%. Since then, it has ceased to underperform, suggesting that recovery may be at hand.
As highlighted in recent issues of Techinvest, many shares now offer excellent value, often supported by high levels of cash. The recent March issue listed nine with sustainable dividends yielding more than twice that available from the FTSE 100. In addition, many companies have undergone painful restructuring and cost-cuts, leaving them nicely poised for a sharp profit recovery when business levels pick up once more.
Our partners in this venture are Capita Financial Managers (CFM) whose ultimate holding company is The Capita Group. With over 17,000 employees, Capita is one of the UK’s largest companies and a member of the FTSE 100 index. As it already does for over 190 funds, CFM will provide all back-office services for the Fund and will also be responsible for all administrative matters concerning investors, including the processing of orders. Although making all investment decisions in relation to the fund, Techinvest will not be directly handling client money at any time.
The Fund will only invest in the tech sector, mainly in stocks with a London quote. However, up to 25% may be in stocks traded elsewhere, primarily North America. The objective is to achieve capital growth over the long term. As such, the fund is not suitable for short-term investors.
The Fund will make no attempt to duplicate the Trader Portfolio, details of which are published in each issue of the newsletter, though there is likely to be some overlap of holdings. However, the nature and relative sizes of the two mean that what is suitable for one may not necessarily be suitable for the other. In particular, we view it as extremely unlikely that the Fund performance will be near as good as that reported for the Trader Portfolio over the years. Instead, our benchmark will be the FTSE techMARK All-Share index.
The Fund is an open-ended investment company (OEIC) which has been authorised by the Financial Services Authority in the UK. One key difference from a unit trust is that an OEIC has a single price based on net asset value but at a mid-market price, rather than the separate bid and offer prices of a unit trust. This means that changes in the quoted price are controlled by the value of the underlying assets, unlike a unit trust where the bid-offer prices are subject to alteration at the discretion (within limits) of the fund operator, even if the asset value remains unchanged.
As well as facilities for handling lump-sum investments, CFM have a dedicated team handling Savings Plan applications. Making monthly payments into the Fund gives the benefits of pound-cost averaging and means you get more shares when prices fall. This is a practice we strongly favour for risk-averse investors.
Investment Management Team
The fund manager is Conor McCarthy, founder and editor since 1984 of the Techinvest newsletter. Before devoting himself full-time to Techinvest in 1993, Conor spent 30 years working in the telecoms industry for companies in the UK, Canada and Ireland. Between 1982 and 1993 he held project management positions on major projects for a number of countries including Ireland, Kenya and Germany.
Conor has been an advisor to the Dublin-based Montgomery Oppenheim Technology Exempt Unit Trust since its inception in 1994. This is a fund for Irish pension funds with recognised tax-exempt status. It invests in tech companies on a world-wide basis. At the end of December 25.4% of the fund was invested in US and 39.6% in UK stocks.
Conor is also a member of the Advisory Committee of the Campus Companies Venture Capital Fund, set up in May 1998 with funding from an Irish Government agency and the seven principal universities in Ireland, to commercialise academic research.
Anne McIvor is joining Techinvest on June 1 to boost our research capability and to assist in running and managing the Fund. Anne has a BSSc. in Sociology and Politics from Queens University, Belfast, and an MSc (Econ) in Development Management from the London School of Economics. She has spent the best part of 17 years in the City, most of it as an investment analyst, with a focus on European equities, at several well-known stockbrokers.
In more recent times, Anne’s focus has been on small companies, most with a strong tech flavour, and as a contributor to investment publications both hard-copy and on-line .
Stuart West has been with Techinvest since October 2000. Prior to that, he was a civil/structural engineer with 15 years international experience, much of it in the petro-chemical industry.
During this time, he developed a keen interest in the stockmarket and tech stocks in particular. As well as continuing his newsletter contributions, Stuart will also provide research for the Fund.
Keith Woolcock has been appointed consultant to the CF Techinvest Technology Fund. Keith has over 20 years experience in the technology sector, both as a press commentator and as an investment analyst with several leading stockbrokers. Most recently, he was head of the Technology research team in the London offices of leading Japanese bank Nomura.
Keith is well known amongst fund managers and the media for his robust, incisive views. He is highly respected for his prescience in identifying core trends and emerging themes in communications and computer sectors and their impact on companies.
The Initial Offer period started on Tuesday April 29 and, for regulatory reasons, must terminate on Monday May 19. During this time the price is being held fixed at 100p. On top of that, the normal Preliminary Charge of 5% is reduced to 2% until the end of May. The minimum initial lump sum investment is £1000 with no minimum for subsequent investment. The minimum amount per month under the Monthly Savings Plan is £100.
The price will be published daily in the Financial Times. We also intend to make it available on our web site and in the monthly issues of Techinvest. A half-yearly report with commentary will be sent by CFM to each investor in the Fund.
During the Initial Offer period, and for some time thereafter, the Fund will be actively marketed only to current and recent subscribers. While limiting the Fund size, this means that early investors should get the benefits of greater flexibility which comes from active management of a smaller fund.
Techinvest Ltd, together with certain of its principals, intend to invest at least £1m during the Initial Offer period, thereby aligning their interests with other investors.
A Key Features Document which included an Application Form was recently sent to all subscribers. For regulatory reasons this excluded those in the Republic of Ireland.
Additional copies can be obtained from Techinvest or from Capita Financial Managers at 88, Borough High Street, London SE1 1ST; telephone: 020 7556 8800. Any enquiries or requests for help should be directed to this number or to:firstname.lastname@example.org.
Access to the Key Features Document is also available through our web-site a www.techinvest.co.uk; then press the techfund button.
Techinvest Ltd is authorised by the Central Bank of Ireland under the Investment Intermediaries Act 1995. The CF Techinvest Technology Fund is authorised by the Financial Services Authority, as is its authorised corporate director Capita Financial Management Limited. The Fund is not authorised for sale to the public in the Republic of Ireland. Techinvest is the investment manager for the Fund and is separately remunerated for its services. The price of shares in the Fund can go down as well as up.