Mark Hawtin has built up an impressive record on this fund since its launch in 2011. He has a proven record in the sector, running a technology long/short fund at GAM and having previously run a technology hedge fund at Marshall Wace. Hawtin and his team carry out proprietary research which should give them a knowledge edge and he demonstrates strong awareness of his stocks and the IT industry generally. As the fund differs remarkably from its benchmark, often not holding many of the top stocks, performance will diverge on occasion.
The manager starts by identifying industry themes with multi year growth potential, then looks for stocks that will benefit from these themes. Current themes include enablers, networks and platforms. Sector research includes speaking to industry names, such as chief technology officers, to see how technology is being used and how this is changing. The team carry out fundamental analysis using a “traffic light” system based on five factors - competitive advantage, management, pricing power, growth and valuation. The team create their own valuation models using various factors including discounted cash flow - there can be up to six models per company based on different scenarios for its future. The manager looks for at least 50% upside in a stock, but valuation is not the key factor in stock selection. Good management is important - Hawtin won’t invest in companies he considers to be poorly managed, even if he likes their products. In constructing the portfolio he pays little attention to the benchmark, often holding few of the top 10 names which dominate the index. The manager also makes extensive use of technical analysis in timing trades.