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Best Technology Funds UK

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With the increasing ability of technology companies to produce superior alpha (excess return over the broad market) came the proliferation of technology funds worldwide that seek to provide investors with the ability to participate in the movement of various technology sectors and sub-sectors.

In this article, we will go over the list of some popular Technology Funds in the UK, review each one, and in the end review some of the popular UK brokers that allow users to purchase these funds.

 Popular Technology Funds UK List

The technology sector encompasses many different sub-groups, giving the investors plenty of options to choose from. In the table below, we have listed 10 popular Technology Funds in the UK.

1. Technology Select Sector SPDR Fund 
2. Morgan Stanley Institutional Growth Fund 
3. Fidelity Select Semiconductors Fund 
4. First Trust ISE Cloud Computing Index Fund 
5. Global X FinTech Thematic ETF 
6. T. Rowe Price Science And Technology Fund 
7. ROBO Global Artificial Intelligence ETF 
8. KraneShares CSI China Internet ETF 
9. ARK Funds 
10. Herald Investment Trust 

Technology Funds to Invest in Reviewed

1. Technology Select Sector SPDR Fund

The $37.4 billion in assets under management, Technology Select Sector SPDR Fund (XLK) clearly shows just how popular this fund is in the investment community. Its focus is on mature and established names of the technology sector and is quite top-heavy with close to 21% off assets invested in both Apple and Microsoft.

XLK Fund chart

Since the fund is U.S.-oriented, larger holdings include companies like Visa, Nvidia, Mastercard, PayPal, Intel, Adobe, and others, and allocates 99.60% to stock with the rest in cash. Such a concentrated approach in turn leads to a stellar performance streak of 68.36%, 27.94%, and 26.10% in the last 1,3 and 5-Year periods.

With only a 0.12% expense ratio it is definitely positioned as an affordable option for investors.

2. Morgan Stanley Institutional Growth Fund

The $19.2 billion fund (MSEQX) invests in established and emerging companies predominately in the U.S., but with an option to allocate up to 25% of its total assets in foreign securities. It was able to beat its benchmark for all of one, three, five and 10-Year periods with average annual returns of 115.6%, 42%, 32.2%, and 23.1%.

The fund’s biggest sector weight as of the end of last year was information technology, at 35%, communications at 21%, and 15% of assets parked in health care and consumer discretionary each.

MSEQX price chart

The largest 10 holdings at the end of the year totalled just over 46% of the 41-stock portfolio. Morgan Stanley Institutional liquidity Treasury was the largest holding with 7.83%, followed by Amazon at about 7.5%, with Square, Shopify, Spotify Technology, and Uber Technologies each around 5% in the rest of the top five.

3. Fidelity Select Semiconductors Fund

Semiconductors represent the backbone of the entire new-era economy as they are used in everything from making computers, smartphones, transistors, integrated circuits, cars, machines, data centers, and a variety of other consumer and industrial markets.

FSELX price chart

Fidelity Select Semiconductors Fund (FSELX) is one of the oldest (started in 1985) and largest ($5.713 billion in assets under management) funds that seek to capitalize on the rising usage of semiconductors. As it invests in growth-type companies, its turnover rate is more aggressive with a 131% turnover rate last year. However, this was justified as the fund has posted a 1-Year return of 70.47%, while also gaining 29.11%, 34.39%, and 21.23% in the last 3,5 and 10-Year periods.

Among its 38 holdings (as of the end of last year) Nvidia is in a top-weighted position with close to 19% of total assets, followed by Qualcomm, Micron, NXP Semiconductors, and Intel, all between 6-7% weight in the portfolio.

4. First Trust ISE Cloud Computing Index Fund

First Trust ISE Cloud Computing Index Fund (SKYY) is the first ETF constructed in a way to offer investors exposure to the cloud computing industry. The fund is very popular and widely used among investors for fine-tuning their portfolio exposure both from a short-term, as well as a long-term time horizon.

SKYY price chart

Individual stock weight is capped at 4.5% of assets, with all stocks coming from one of 3 groups: Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS). Currently, its largest holdings include companies like Rackspace Technology, VMware, Oracle, Arista Networks, Microsoft, Alphabet, and others.

With an expense ratio of 0.60%, this fund sits in the middle of the category when it comes to cost-efficiency.

5. Global X FinTech Thematic ETF

This large-cap, financial technology-oriented fund, with its 0.68% expense ratio, provides a cost-effective option for users looking to enter the industry. Founded in 2016, with close to $1.2 billion in assets under management, Global X FinTech Thematic ETF (FINX) invests heavily in the industry disruptors from both U.S. as well as abroad. Among its biggest holdings are leading companies in the industry like Square, Paypal, Afterpay, Adyen as well as Warren Buffett-backed Brazilian payment processing company StoneCo.

FINX price chart

Along with these innovative payment companies, tax and accounting-oriented names like Intuit, Bill.com, and Xero Limited are also present at the peak of the FINX portfolio. With around 55% of assets allocated to the largest 10 positions, all of which were strong performers in 2020, this ETF rewarded its investors with a healthy 54% gain last year. This represents a fourth straight year of gains after notching 50% in 2017, 1% in 2018, and 38% in 2019.

6. T. Rowe Price Science And Technology Fund

By investing in this fund, you are choosing tradition and stability, as both the investment management firm (founded in 1937) and the PRSCX fund itself (1987) have withstood the test of time and proved themselves over and over again as a reliable investment option for investors seeking long-term capital appreciation.

PRSCX price chart

As stated in the fund prospect, at least 80% of capital allocation goes to companies in industries such as electronics, communications, e-commerce, information services, life sciences, media, environmental services, chemicals, synthetic materials, defense, and aerospace. With the track record of 45.80%, 25.50%, 25,20%, and 18,55% in annual total returns for the last one, three, five, and ten year periods, and an expense ratio of acceptable 0.77%.

7. ROBO Global Artificial Intelligence ETF

This newly issued ETF is a potnential vehicle for investors looking at fast-growing robotics, AI, and automation companies around the world. Within the 72 holdings in total from 16 countries, the biggest 5 places are occupied by Chinese technological giant Baidu, iRobot Corporation, Illumina, Etsy and HubSpot. ROBO Global charges 0.68% in annual expense ratio.

THNQ price chart

As the fund came to life in May 2020, it still does not have a longer-term track record or substantial assets under management that investors can rely upon.

8. KraneShares CSI China Internet ETF

With an 8-year track record under its belt and $4 billion in assets under management, KraneShares CSI China Internet ETF (KWEB) is the only ETF that solely focuses on providing investors with exposure to Chinese high-flying software and IT names.

KWEB price chart

It gives investors the chance to participate in the moves of companies like Tencent, Alibaba, Baidu, Pinduoduo, JD.com, Bilibili, and others, and was able to beat other China-oriented ETFs like SPDR S&P China ETF and iShares MSCI China ETF by a margin of 25% in the last year, on the back of powerful moves that high-growth tech companies had after global Covid-19 pandemic increased the pace the technological changes and adoption.

The tradeoff in the form of a 0.73% expense ratio is quite reasonable considering 66.38%, 25.16%, and 124.30% return on one, three, and five year period.

9. ARK Funds

ARK Invest and its founder and CEO Cathie Woods witnessed a meteoric rise in the last several years by offering something completely new to the investing community. It was not only the fact that funds under the ARK umbrella did tremendously well that caught widespread attention; it was also the way how they did it that resonated well especially under the younger generation.

ARKK price chart

ARK is very transparent about its positions and the underlying reasons and assumptions that it makes about every position that it holds or intends to hold. Amazingly, this has not impeded its performance one bit as evidenced by triple-digit returns in all of their actively managed funds last year and close to 550% gain in a 5-Year period for its flagship $24 billion ARK Innovation Fund.

The line of current 7 ETFs (Ark Innovation, ARK Genomic Revolution, ARK Next Generation Internet, ARK Fintech Innovation, ARK Autonomous Technology & Robotics, 3D Printing, and ARK Israel Innovative Technology) will soon be expanded by space-oriented ETF which would track U.S. and global companies involved in space exploration and innovation.

10. Herald Investment Trust

Incorporated in 1993, this £1 billion UK-based fund (LON:HRI) invests primarily in smaller companies from the telecommunications, multi-media, and technology sectors. While the fund has a global investment view, over half of the portfolio (around 53%) is invested in the UK listed companies, and represents a potential option for the investor who wants to focus on the UK market, with large holding companies like GB Group PLC, Diploma PLC, Pegasystems, Five 9 and others.

HRI price chart

The fund posted a 1,3 and 5-Year performance of  92.7%, 86.16%, and 207% respectively, and charges 1.74% for its service which is a bit on the higher end of the spectrum.

What are Technology Funds?

Technology funds invest in equities of technology companies. They are focused on finding new and emerging technologies that have the potential to significantly disrupt the existing business models. Most of the companies that find their way into these funds operate in the IT-related sectors like hardware, software, digital transformation, cloud computing, data analytics, artificial intelligence and machine learning, and others.

Given that these funds are invested in specific segments of the market, they tend to be more volatile than broad-based market funds or ETFs that track the movement of entire SP500 or NASDAQ indexes.

Why Invest in Technology Funds?

There are two distinct features which investors may want to look at before investing in Technology Funds/

The first and most important factor is that behind every fund there is a big team of experienced experts (analysts, portfolio, data specialists, and all other supporting role members) whose job is to closely monitor the fund’s portfolio, and spot all potential obstacles and opportunities within the sector. Fund’s managers do all the hard work for you, and you have the potential to gain exposure to popular names within the particular investment group, on a cost-effective basis.

The second factor is that by investing in the fund, you diversify your risk within the group of candidates. By having a lot of companies within the basket (most funds are invested in upward of 20 holdings in the portfolio), you may potentially decrease the chance of missing out on some winners. Also, a major sell-off in any one individual holding is likely to be muted within the fund, as the other positions would help reduce the drawdown.

The other side of the coin is that, if you are a skillful investor who is able to spot true winners, weed out less impressive companies, and bet big on the strong names, the upside potential can be much higher than when investing in the broad-based fund or ETF.

Technology Funds Brokers

After choosing the fund you may want to invest in, the next step involves reviewing stock brokers that can allow you to invest in these funds.  Factors such as fees and commissions, safety, reliability, financial and technical tools, and selection of assets, should all be taken into consideration when making such a decision.

To help you out with this task, below are the reviews of two UK stock brokers that allow you to purchase Technology Funds:

1. eToro

eToro is a popular stock broker that allows investors that invest in technology funds in the UK.etoro logo This is because the broker supports a vast range of payment types, and allows you to invest on a commission-free basis, while it also doesn’t charge any ongoing maintenance fees.

As the selection of assets goes, there is hardly any other broker that can match eToro’s offer of almost 250 different ETFs to choose from.

SKYY Fund eToro

The minimum investment starts at just $10, so beginning investors don’t need to shell out a fortune to get started. Another feature of this broker is its social trading network. Investors can also find use of its premade portfolio selection feature which groups together popular performing assets within different investing themes.

eToro MarketCopy PortfolioseToro is regulated by the FCA, ASIC, and CySEC, and you are covered by the FSCS, meaning that you can be safe and sound as you will be covered up to £85,000.

Stock Broker Minimum Deposit Fractional Shares? Pricing System Cost of Buying Stocks & ETFs Fees & Charges
eToro $10 Yes – $10 minimum 0% commission on ALL real stocks, spreads for CFDs Market spread is not included when buying real stocks No Deposit fees, $5 withdrawal fee, $10 inactivity fee, no account management fees.

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2. Libertex 

This trading platform is regulated by the Cyprus Securities and Exchange Commission (CySEC) which ensures the safety and security of your investments.

As it is the CFD broker, Libertex invests in contracts based on an asset’s underlying price movements and not the asset itself, while also giving you the option of leverage and short selling, that you won’t find at some conventional share dealing platforms. In other words, you can trade shares with more money than you have in your account.

The ratio of your and borrowed money is capped at 1:5, as per FCA regulations, meaning that a £100 balance would allow you to open a £500 position. However, always be aware that leverage is a double-edged sword so approach it carefully.

libertex etf

Libertex also stands out among other platforms with its policy to not charge any spread, but only a small trading commission on each position.

In terms of payments, Libertex allows you to deposit funds with a debit/credit card, bank wire, or e-wallet, with a minimum deposit of just £10.

75.3% of retail investor accounts lose money when trading CFDs with this provider.

How to Invest in Technology Funds

After going into details about the investing candidates , we will now turn over the process of opening an account and starting your trading journey.

Step 1: Open Your Trading Account

Head over to the homepage of your chosen broker and begin the account set-up process. You will be required to fill in your personal details – including your full name, email address and mobile number. Create a username and password for the platform to continue.

Step 2: Verifiy Your Account

Most reputable brokers in the UK are regulated by the FCA – which is why users may be required to verify their accounts. To do this, simply upload proof of ID (a copy of your driver’s license or passport) and proof of address (a copy of a bank statement or utility bill). Once these documents have been uploaded, your broker should verify them in a couple of minutes.

Step 3: Deposit funds

The next step is to deposit funds into your trading account. Most brokers may support 1 or more of the following payment methods:

  • Credit card
  • Debit card
  • Bank transfer
  • e-wallet

Choose your preferred payment option and deposit the funds into your account.

Step 4: Invest in Technology Funds

Once your account has been funded, proceed to search for any Technology Funds you wish to purchase on your platform’s search bar. Fill in the amount you want to credit into the trade, and confirm your transaction.

 Conclusion

The technological sector, in general, continues to be one of the most lucrative areas to invest in. That being said, big profit opportunities also carry big risks, as these stocks tend to be much more volatile than banks, retail stocks, industrials, etc.

Investors should make sure to properly analyse and research their possible investments prior to entering any positions in the market.

FAQs

Why should I invest in Technology Fund?

Are Technology Companies valued the same way like ones from mature industries?

Is now the right time to invest in Technology Fund?

Can I combine several funds from this list?

How do I make money from investing in the fund?

 
Ilija Rajakovic author check sign Pro Investor

Ilija Rajakovic is a Serbian-based investor and writer. His main focus areas include finance, trading, and macroeconomy. Ilija holds a Master’s Degree in Investment Banking and is pursuing his Ph.D. with a focus on sustainable finance and development. He is actively managing personal investment portfolios and advising private clients. And has run a website which generated actionable stock market ideas and provided insights into global economic landscape in the past. His economic articles have been publshed in highly respected magazines like NIN and Magazin Biznis.

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