April 12, 2024

Can these two popular tech funds continue to deliver?

Two of the recent best-sellers on the Fidelity Personal Investing platform have been technology funds, which is perhaps not that surprising given their strong long-term performance record. The sector’s latest earnings announcements were also impressive, but can these popular vehicles continue to deliver?

Why are investors interested in tech companies?

The recent fourth quarter reporting season was strong, with many tech companies beating expectations in the final three months of last year. In fact, the sector as a whole achieved earnings growth of around 13%, compared to 7% for the S&P 500.1

A lot of investor attention has been focused on the Magnificent Seven − Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla − that have been leading the markets higher due to the boom in Artificial Intelligence (AI). Their latest quarterly results were mostly pretty impressive, as my colleague Nafeesa Zaman recently explained.

Chip maker Nvidia, which reported later than the others, forecast first quarter revenue growth of 233%, which caught analysts off guard and saw its value increase by $277bn, the largest ever one day gain in American stock market history.2 The question for investors is how much more is there to come.

Active versus passive?

The two bestselling technology funds provide an interesting contrast, as the £16.1bn Fidelity Global Technology Fund is actively managed and aims to achieve long-term capital growth, whereas the £2.4bn Legal & General Global Technology Index Trust is designed to track the FTSE World Technology benchmark.

Fidelity Global Technology Fund – an active strategy 

The fund manager of the Fidelity Global Technology Fund, Hyunho Sohn, uses a fundamental, bottom-up approach, to identify quality companies with sustainable growth prospects that are trading at attractive valuations. The type of opportunities he tends to favour fall into three main categories: growth, cyclical and special situations.

Growth companies are those focused on innovations or with disruptive technology that are set to experience high earnings growth. Cyclical opportunities typically have strong market positions, whereas special situations are mispriced businesses with recovery potential.

At the end of January the portfolio consisted of 104 stocks with the 10 largest accounting for a third of the assets. The biggest overweight positions relative to the benchmark included the likes of Amazon, Ericsson and Alphabet, while other members of the Magnificent Seven such as Apple and Microsoft were among the most significant underweights.

Fidelity Global Technology – top 10 holdings

  1. Microsoft 
  2. Apple 
  3. Taiwan Semiconductors 
  4. Ericsson 
  5. Qualcomm 
  6. Amazon.com 
  7. Alphabet 
  8. Autodesk 
  9. Fidelity National Information Services 
  10. SAP

Source: Fidelity International, as at 31 January 2024

More on Fidelity Global Technology Fund

Legal & General Global Technology Index Trust – a passive alternative  

Normally an index tracker would be more diversified than an actively managed alternative, but that is not the case with the technology sector due to the dominance of a few US large-cap tech stocks in the benchmark. At the end of January the Legal & General Global Technology Trust had 250 separate holdings, yet the 10 biggest positions represented 66.1% of the assets.3

The six largest were all members of the Magnificent Seven, with a combined weighting of 56.7%. These dominate the portfolio to a far greater extent than the Fidelity fund, as does the US exposure as a whole with a weighting of 84.9% versus 57.4%.3

Legal & General Global Technology Index Trust – top 10 holdings

  1. Microsoft 
  2. Apple 
  3. Nvidia 
  4. Meta Platforms 
  5. Alphabet Class A 
  6. Alphabet Class C 
  7. Broadcom 
  8. Taiwan Semiconductors 
  9. ASML 
  10. Adobe

Source: Fidelity International, as at 31 January 2024

More on Legal & General Global Technology Index Trust

How have they performed?

Having the larger allocation to these ‘winners’ has paid off, as over the last five years the L&G tracker has generated an annualised return of 24.15%, compared to 21.83% from the Fidelity fund. However, its returns have also been more volatile and the concentration risk makes it extremely vulnerable to any sell-off affecting the Magnificent Seven. Please remember past performance is not a reliable indicator of future returns.

How do the costs compare?

One of the main advantages of the passive approach is the cost saving, with L&G Global Technology having ongoing charges of 0.70%3, although this still seems high for a tracker. The equivalent figure for the Fidelity fund is 1.04%, which is pretty normal for a specialist, actively managed mandate.

If you prefer investment trusts

There are also two popular tech-focused investment trusts that regularly appear in our list of bestsellers. Polar Capital Technology and Allianz Technology which are both actively managed and have built up excellent long term track records.

(%) As at 26 Feb 






Fidelity Global Technology Fund 






Legal & General Global Technology Index Trust 






Past performance is not a reliable indicator of future returns

Source: FE, 26.2.19 to 26.2.24.


1 Axa IM, 4.2.24

2 Reuters, 22.2.24

3 Legal & General, 31.1.24

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