Q You have partnered T. Rowe Price International to feed your United Global Technology Fund into its Global Technology Equity Strategy. Can you explain how that works, and why the decision was made?
A Under the partnership, UOB Asset Management will invest in T. Rowe Price's Global Technology Equity Strategy through our United Global Technology Fund.
This means that, for the first time, retail investors in Singapore can invest in T. Rowe Price's highly rated portfolio. This portfolio consists of well-known global tech stocks such as Google and Alibaba, as well as companies such as Tesla that are at the forefront of using technology to grow their business.
Q What made you choose T. Rowe Price?
A Within the asset management industry, T. Rowe Price is known for its investment expertise in tech equities as it has been managing dedicated technology portfolios since 2000. It has an experienced team of 20 investment analysts and managers actively managing its Global Technology Equity Strategy.
By working with T. Rowe Price, we can combine our in-depth knowledge of Asian investment markets with its technology investment expertise. These complementary strengths will enable our clients - both retail and institutional - to invest in, and benefit from, the growth in tech companies and technology trends.
Q How is the United Global Technology Fund different from other tech funds in the market?
A The United Global Technology Fund is suitable for investors who are seeking long-term capital appreciation by taking advantage of growth prospects arising from technological innovation.
Fund investors benefit from T. Rowe Price's active management of its Global Technology Equity Strategy. It invests using a proactive bottom-up stock selection approach that is based on the companies' fundamental strengths, such as their business model and the quality of their management team.
Active fund managers are better able to identify potential winners amid continuous technological innovation and a rapidly changing competitive landscape. In contrast, passive fund management relies largely on relevant market indexes, which are based on stock performance and might focus only on large-capitalisation stocks.
Q What types of "tech themes" will be included in the fund portfolio?
A The United Global Technology Fund's portfolio is diversified across a broad spectrum of technology sub-sectors, which include Internet, cloud computing, cyber security and semiconductor capital equipment companies.
The fund also seeks long-term opportunities in applied technology areas such as artificial intelligence, robotics, automotive, and industrial and home automation.
Q What is the macro outlook for the technology sector, and what are its growth prospects?
A Technology is ingrained in the operations of most companies. What we are seeing now though is disruptive capability across almost every industry. Technology is being applied in new ways.
For instance, artificial intelligence and robotics are changing the way cars are produced and operated. Take Tesla - it has harnessed technology to manufacture electric, self-driving cars at a relatively low cost.
Businesses are recognising a shift in the role of technology, as it moves from being a driver of marginal efficiency to being an enabler of radical innovation and disruption. We are convinced this wave of change is structural and inevitable, and will thus create pockets of investment opportunity within the technology sector over the longer term.
Q Most of the fund's holdings are in the United States. What are some of the major risks in the US tech sector at present and for the future?
A The US remains at the forefront of technological innovation. The country's laws governing intellectual property (IP) rights are conducive to creative incubation. It also has a large talent pool with strong entrepreneurial qualities. We expect the US to remain a key player in driving further technological innovation as long as the country maintains its support for the industry and IP laws.
Increasing rhetoric about trade protectionism by the Trump administration could cause a reaction from the rest of the world against US products. Although this could jeopardise the performance of technology firms, a potential repatriation tax proposed by the Trump administration would be positive for companies with overseas operations.
Q How has the tech sector performed against other sectors so far?
A Our data shows that returns for the technology sector have been among the highest compared with those for other sectors over the past 10 years (data referenced up till last month). During the same period, the growth rate for the tech sector was also among the highest compared with that for other sectors.
Q What are your top three tips for retail investors keen on adding a tech fund to their portfolio?
A First, check if the fund is actively or passively managed. With active management, a good fund manager is better able to select potential winners in the technology sector.
Second, review the stocks in the fund's portfolio. Contributions to the fund's performance should be well diversified across various stocks instead of from one single source. Also, ideally, the portfolio should consist of dominant technology players with high entry barriers in their fields, such as Alibaba, and companies that are in relatively nascent stages of development and have significant room for growth, such as Tesla.
Third, consider the track record of the fund manager - it should be one that shows positive returns over the fund's benchmark index for different time horizons such as three, five and 10 years.
Q What are your views on the global equities outlook for 2017?
A Risk assets should outperform as the economic outlook improves and global inflation returns to normal levels. Thus, we remain positive about the outlook for global equities as the world's economy continues to recover.
Further, expansionary monetary policies maintained by many central banks to stimulate their countries' economies would be positive for equities. Potential fiscal stimulus from US policymakers could also boost the American economy, with the impact spilling over to the rest of the world.
However, we remain mindful of policy uncertainties in the US, as well as geopolitical risks in the Korean peninsula and from elections in Europe.
