Despite concerns over rising infection levels, the Scottish Mortgage Investment Trust (LSE: SMT) share price has held steady over recent weeks. And let’s be clear, the tech-heavy fund has been a clear winner for holders over the last 12 months. Since July 2020, the stock is still up 46%.
Despite this, I’m always on the lookout for alternative investment opportunities that may offer more growth. After all, SMT already had assets of £21bn at the end of June. Here’s another fund I think might be worth considering.
With ‘only’ £3.3bn in assets, the Polar Capital Technology Trust (LSE: PCT) is nowhere near as big as SMT. However, it does have exposure to quite a few of the same stocks. These include online retail giants Amazon and Alibaba, Chinese internet titan Tencent, food delivery firm Delivery Hero and semi-conductor giant ASML. In addition to this, PCT also holds many of the usual suspects: Microsoft, Apple, Alphabet (Google) and Facebook.
As you might expect, PCT’s recent performance has been solid. Its share price is up 17% since July 2020. However, it’s the ascent of the share price over the longer term that shows just how lucrative big tech stocks have been for investors. Since 2016, the stock’s rocketed 238%! That’s a fine result, even though it lags the 357% achieved by the Scottish Mortgage Investment Trust. This difference may be partly due to the latter’s holding in Tesla, which PCT doesn’t own.
Whether this performance will continue is another thing entirely, of course.
In today’s full-year results, PCT’s chair, Sarah Bates, was understandably bullish on the technology sector going forward. In addition to highlighting the “explosion” in cloud computing, Bates also said that more established companies were now showing evidence of their ability to move into new, exciting areas, such as electric vehicles.
Even so, Bates cautioned that we were in “extraordinary times without much of a road map.” In addition to fresh worries over inflation, she warned that the “valuation gap between ‘growth’ and ‘value’ sectors has become very stretched.”
These are important considerations for holders of any tech fund, in my view. As an investor, I suspect the near-term outlook may indeed be tough, due to those high valuations. As vaccination programmes progress, it’s last year’s biggest losers that will likely be 2021/22’s biggest winners. Think airlines, holiday firms and hospitality companies. The threat of increased regulation shouldn’t be ignored either.
SMT vs PCT
Is one of these trusts better than the other? Based on gains so far, yes. However, past performance is no guide to the future. Moreover, both trusts clearly have a focus on ‘disruptive’ technologies that I’m looking to get exposure to.
Notwithstanding this, Scottish Mortgage Investment Trust is the clear winner on fees, at just 0.34%. For exposure to some of the world’s most exciting public (and private) companies, that looks great value. PCT charges 0.93%. On the flip side, the forthcoming departure of long-standing co-manager James Anderson may have unsettled some owners.
As a holder of Scottish Mortgage Investment Trust, I’m happy to stay invested and continue drip-feeding my money in. Despite this, I think PCT may be considered as a suitable alternative, especially if I grow frustrated by the antics of Elon Musk.
I rate both trusts as ‘buys‘ for my own risk-tolerant portfolio.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Paul Summers owns shares in Scottish Mortgage Investment Trust. The Motley Fool UK owns shares of and has recommended Alibaba Group Holding Ltd., Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, Microsoft, and Tesla. The Motley Fool UK has recommended ASML Holding and has recommended the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.