Polar Capital Technology Trust PLC · LSE:PCT
Polar Capital Technology Trust — Shareholder Meeting (September 2022)
32 slides from Polar Capital Technology Trust's shareholder meeting presentation, September 2022
Slide 1: Annual General Meeting
Annual General Meeting Polar Capital Technology Trust plc September 2022 polarcapitaltechnologytrust.co.uk This presentation is for use with non-US investors only.
Slide 2: Results As At 30 April 2022
Results As At 30 April 2022 Year ended Year ended Change 30/04/21 30/04/22 (y/y) Net Assets £3,408,763,000 £3,050,985,000 -10.5% NAV per ordinary share 2496.44p 2305.13p -7.7% Price per ordinary share 2364.00p 2040.00p -13.7% Benchmark Change -0.9% Ordinary shares in issue* 136,544,764 132,356,426 -
Slide 3: PCT As At 31 August 2022
PCT As At 31 August 2022 Year ended Year ended Change As at 30/04/21 30/04/22 (y/y) 31/08/22 Net Assets £3,408,763,000 £3,050,985,000 -10.5% £3,026,244,000 NAV per ordinary share 2496.44p 2305.13p -7.7% 2322.11p Price per ordinary share 2364.00p 2040.00p -13.7% 2020.00p Benchmark Change -0.9% Ordina
Slide 4: Full Year Review
Full Year Review DJ World Technology vs. FTSE World TR since April 2021 • Global equities (FTSE World +4% in sterling terms) struggled % 10 following unexpected volte-face by policymakers amid high inflation which weighed on valuations. However, equity market losses were more than offset by pronounc
Slide 5: Full Year Review
Full Year Review US technology small caps vs. large caps since April 2021 % • Market breadth deteriorated - US small-caps significantly 40 underperformed (-10.1%) while large-caps advanced +6.9% (both in GBP terms). At year end, just 19% of Nasdaq stocks traded above their 200 day moving average. 30
Slide 6: The Polar Capital Technology Team
The Polar Capital Technology Team • Technology is at the core of the Polar Capital business • One of the largest technology franchises in Europe with c.US$8.9bn under management • Eight dedicated technology specialists – strong multi-cycle track record Global Technology Polar Capital Technology Auto
Slide 7: Investment Framework
Investment Framework 4,000+ universe Dynamic definition of technology Themes Real-world changes in user behaviour S-Curve inflections What we look for Secular themes/pure-plays Last-generation winners What we avoid Public venture capital Growth bias – rev/earnings/cash flow Valuation Price targets (
Slide 8: Thematic Investing: Hype vs. Reality
Thematic Investing: Hype vs. Reality Searching for revenue growth and cash flow inflections R&D High growth Low growth No growth Pre-Revenue negative OM% expanding OM% stable OM% uncertain / declining OM% Value Trap Mobile Payment Sales (blue) Connected TV Unified Comms eCommerce IT Services EUV Lit
Slide 9: Technology Disruption: The Story Of The Decade
Technology Disruption: The Story Of The Decade Tech has driven earnings growth since 20091 Helping growth stocks sharply outperform value2 Tech vs. Ex. Tech earnings (1985 – July 2022) World Value vs. Growth stocks (1974 – March 2022) Source: 1. Datastream, Worldscope, Goldman Sachs Global Investmen
Slide 10: Technology Outlook
Technology Outlook • IT spending forecast to reach $4.5trn in 2022 representing Worldwide IT spending forecast (millions of US dollars)1 5.9% y/y growth in CC terms – respectable given very Segment 2020 YR 2021 YR 2022 YR 2023 YR difficult comps (+8.1% y/y in 2021). Software 641,367 735,869 806,800
Slide 11: Core Investment Themes
Core Investment Themes Online Cloud Software as Mobility / EV Data Economy / Connectivity / Advertising / Infrastructure / a Service Clean Energy AI 5G Commerce Security Source: Polar Capital. It should not be assumed that recommendations made in future will be profitable or will equal performance o
Slide 12: Core Investment Themes
Core Investment Themes Estimated Thematic Exposure 18.0% Connectivity / 5G/ IoT 16.6% Cloud Infrastructure / Security 16.2% SaaS / Software "Eating the World" 14.7% Data Economy / Artificial Intelligence 11.3% Online Advertising / eCommerce 9.5% Mobility / EV / Clean Energy 5.9% Digital Entertainmen
Slide 13: Core Investment Themes
Core Investment Themes Key theme breakdown (31 January 2017 – 31 August 2022) 25% 24% 23% 22% 21% 20% 19% 18% 17% 16% 15% 14% 13% 12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Jan-17 May-17 Jun-17 Jan-18 May-18 Jun-18 Jan-19 May-19 Jun-19 Jan-20 May-20 Jun-20 Jan-21 May-21 Jun-21 Jan-22 May-22 Jun-22 De
Slide 14: Semiconductors / AI
Semiconductors / AI • Semiconductors now a ‘GDP-plus’ industry with less Semi R&D / fab costs are soaring1 cyclicality thanks to more diversified demand drivers. • The current shortage is the most significant in a generation following COVID disruption and surging post-pandemic / stimulus-related dem
Slide 15: Cloud Computing
Cloud Computing • The Cloud Infrastructure market received a pandemic Location of application workloads (% of total workloads)1 boost with growth accelerating to 35% y/y in 2021, up from +33% in 2020. Unlike other WFH beneficiaries, this acceleration appears highly durable. • Public cloud computing
Slide 16: Software
Software • Software lagged in 2021 after a strong 2019 and 2020. Software continues to take share of IT spending4 • High growth / long duration assets saw -40-70% multiple compression on the back of higher rate expectations / inflation concerns. • Public cloud continues to dominate Amazon, Microsoft
Slide 17: Cybersecurity
Cybersecurity • Explosion in cybercrime – one ransomware attack every Global weekly cyber attacks per organization (2020 – 2021)1 11s, Colonial Pipeline shut down, $1tr/ 1% drag to global GDP. • From IT problem to business imperative - 4.8% of IT budgets in 2011 to 8.4% in 2021. Software growing fas
Slide 18: Internet
Internet • Post-pandemic unwind began in early 2021 as light user US eCommerce growth in online sales 2012 - 20211 engagement which developed into deceleration / pandemic-pull forward before IDFA changes / supply-chain travails further complicated the secular growth narrative. eCommerce growth slowe
Slide 19: Payments / Fintech
Payments / Fintech • The payments space underperformed in 2021 after a eCommerce as a percent of US retail sales1 strong 2020. • Payments more correlated with ecommerce growth than expected; tough comps led to lower estimates. • Ecommerce growth + stimulus impact led companies to mistake cyclical gr
Slide 20: Emerging Themes
Emerging Themes Source: Gartner, August 2022. This presentation is for use with non-US investors only. Please refer to the Important Information at the end of this presentation. 20
Slide 21: The Metaverse
The Metaverse • First coined in 1992, the term ‘Metaverse’ (MV) entered the Mark Zuckerberg x Hernán Cortés - 20211 investment vernacular last year following Facebook’s decision to rename itself ‘Meta’. • What is it? An evolutionary ‘successor state to the mobile Internet’ likely to emerge over time
Slide 22: Technology And The Climate Challenge
Technology And The Climate Challenge • Vast majority of 2030 CO2 emissions savings in a Net Zero Scenario come from technology (renewables & energy efficiency)1 • Target 2030 economy will be ~40% larger but use 7% less energy: 4% annual rate of energy intensity improvement, ~3x last 20 years’1 • $5t
Slide 23: Technology And The Climate Challenge
Technology And The Climate Challenge “The combination of exponentially decreasing costs and rapid Electricity from renewables became cheaper as we increased exponentially increasing deployment is different to anything capacity – electricity from nuclear and coal did not2 observed in any other energy
Slide 24: Technology Valuations
Technology Valuations Absolute sector valuation (PE): Relative sector valuation (PE): Source: Ned Davis, 26 August 2022. Copyright 2018 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For data v
Slide 25: 'Next Generation' Valuations
‘Next Generation’ Valuations Internet valuation (equal cap weighted): Software as a Service (SaaS) valuation: EV/forward 2 year EV/EBITDA levels1 EV/forward 12-month revenue multiples2 30.0x 25.0x 20.0x 15.0x 10.0x 5.0x 0.0x Jul-13 Mar-16 Oct-16 Apr-17 Nov-17 May-18 Nov-18 Dec-19 Jul-20 Jan-13 Jan-1
Slide 26: 'Next Generation' Valuations
‘Next Generation’ Valuations IT security valuation: Cloud vs legacy valuation EV/forward 12 month revenue multiples1 EV/trailing 12 month revenue multiples2 25x 20x EV/ trailing 12 month sales 15x 10x 5x 0x LEGACY CLOUD Source: 1. Citi Research, FactSet, August 2022. 2. KeyBanc, August 2022. Include
Slide 27: PCT Positioning
PCT Positioning Sector exposure (%) Market cap exposure (%) Software 26.8% Semiconductors & Semiconductor Equipment 22.6% 86.0% Large Cap (>$10bn) Technology Hardware, Storage & Peripherals 12.9% Interactive Media & Services 10.6% Mid Cap ($1bn - $10bn) 13.7% IT Services 4.9% Small Cap (<$1bn) 0.4%
Slide 28: PCT Positioning
PCT Positioning Largest overweights Largest underweights Market cap exposure versus benchmark1 Amazon Apple Advanced Micro Devices Adobe Systems Airbnb Alphabet Large-cap -14.2% Arista Networks Applied Materials CrowdStrike Holdings Autodesk CyberArk Software Broadcom E Ink Holdings Cadence Design S
Slide 29: Portfolio Structure – Active Positions & Valuation
Portfolio Structure – Active Positions & Valuation A diversified portfolio, capturing secular growth potential of key themes Valuation Snapshot Technology Index Fund Index Active Fund Index Active Difference (03 August 2022)1 Trust1 Top 1001 Amazon 2.00% - 2.00% Apple 9.86% 18.22% -8.36% Advanced Mi
Slide 30: Portfolio Structure – Liquidity Profile
Portfolio Structure – Liquidity Profile Liquidity horizon evaluation 16,000 6 14,000 5 12,000 4 10,000 Days to liquidate AUM (USDM) 8,000 3 6,000 2 4,000 1 2,000 0 - Mar-20 Apr-20 Dec-19 Dec-17 Nov-18 Dec-18 Nov-19 Jan-20 Feb-20 Nov-20 Dec-20 Nov-21 Dec-21 May-20 Jul-20 Aug-20 Sep-20 Oct-20 Aug-21 S
Slide 31: Important Information
Important Information Polar Capital 16 Palace Street London SW1E 5JD Important Information: This document is provided for the sole use of the intended recipient and is not a financial promotion. It shall not and does not constitute an offer or solicitation of an offer to make an investment into any
Slide 32: Important Information Cont.
Important Information Cont. Polar Capital 16 Palace Street London SW1E 5JD Regulatory Status: Polar Capital LLP is a limited liability partnership number OC314700. It is authorised and regulated by the UK FCA and is registered as an investment adviser with the US Securities & Exchange Commission (“S
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