Polar Capital Technology Trust PLC · LSE:PCT
Polar Capital Technology Trust — Shareholder Meeting (September 2023)
40 slides from Polar Capital Technology Trust's shareholder meeting presentation, Sep 7, 2023
Slide 1: Annual General Meeting Polar Capital Technology Trust PLC
Annual General Meeting Polar Capital Technology Trust PLC 7 September 2023 polarcapitaltechnologytrust.co.uk This is a marketing communication This presentation is for use with non-US professional investors only.
Slide 2: Results As At 30 April 2023
Results As At 30 April 2023 Year ended Year ended Change 30/04/2022 30/04/2023 (y/y) Net Assets £3,050,985,000 £2,828,141,000 -7.3% NAV per ordinary share 2305.13p 2239.48p -2.8% Price per ordinary share 2040.00p 1940.00p -4.9% Benchmark Change +2.9% Ordinary shares in issue* 132,356,426 126,285,544
Slide 3: Polar Capital Technology Trust As At 31 July 2023
Polar Capital Technology Trust As At 31 July 2023 Year ended Year ended Change As at 30/04/2022 30/04/2023 (y/y) 31/07/2023 Net Assets £3,050,985,000 £2,828,141,000 -7.3% £3,306,341,000 NAV per ordinary share 2305.13p 2239.48p -2.8% 2649.55p Price per ordinary share 2040.00p 1940.00p -4.9% 2315.00p
Slide 4: Full Year Review
Full Year Review Dow Jones Global Technology Index vs. FTSE World TR since April 2022 • Global equities (FTSE World TR Index +3.4% in sterling terms) struggled 15 for much of the fiscal year as persistent inflation forced the Federal Reserve to embark on its steepest rate hiking cycle in 40 years, w
Slide 5: Full Year Review
Full Year Review US technology small caps vs. large caps since April 2022 • Market breadth remained poor – overall index returns contrasted with 30 those enjoyed by the average stock, especially during 2022, when just 30% of tech stocks outperformed. This was reflected in the ongoing 25 outperforman
Slide 6: Macroeconomic Headwinds
Macroeconomic Headwinds • Macro environment provides a challenging investment backdrop: higher rates, financial and geopolitical instability, large fiscal deficits • Inflation past the peak but uneven path to reach central bank targets; global inflation forecast to decline to 6.8% in 2023 and 5.2% i
Slide 7: Macroeconomic / Reopening Headwinds
Macroeconomic / Reopening Headwinds • Macro environment provides a challenging investment backdrop: higher rates, financial and geopolitical instability, large fiscal deficits • Inflation past the peak but uneven path to reach central bank targets; global inflation forecast to decline to 6.8% in 202
Slide 8: Technology Outlook
Technology Outlook • IT spending steady: Gartner 2023 global IT spending est. $4.7trn ‘22 (+4.3% y/y) vs 2.7% y/y ‘211 – Spending led by growth in Software (+14% y/y) offsetting weakness in devices (-6% y/y)1 • A low growth year: S&P 500 IT sector revenue / earnings growth for 2023 est. 1.4% / 1.3%
Slide 9: Artificial Intelligence: Not Just Another Theme
Artificial Intelligence: Not Just Another Theme Source: Google images, 1 January 2023. This presentation is for use with non-US investors only. Please refer to the Important Information at the end of this presentation. 9
Slide 10: AI: Technology Inflection – Transformer Models
AI: Technology Inflection – Transformer Models Computational Requirements for Training Transformers2 • Early AI gains driven by deep / reinforcement learning ‘Superhuman’ capabilities in narrow fields: – e.g., AlphaGo, AlphaZero, AlphaFold etc. – e.g., Moderna: increased production of mRNA molecules
Slide 11: AI: Dramatic Pace Of Model Improvement
AI: Dramatic Pace Of Model Improvement “Produce Javascript code that creates a random image that • ChatGPT: A large language model (LLM) developed by OpenAI: looks like a painting of Kandinsky”1 – Showed emergent properties around natural language understanding and generation – Can process image inp
Slide 12: AI: “Sparks” Of Artificial General Intelligence (AGI)
AI: “Sparks” Of Artificial General Intelligence (AGI) Polar Capital Technology Trust plc Artificial Intelligence sparks into life “A question that might be lingering…is whether GPT-4 truly understands all these concepts, or whether it just became much better than previous models at improvising on th
Slide 13: AI: “Sparks” Of Artificial General Intelligence (AGI)
AI: “Sparks” Of Artificial General Intelligence (AGI) GPT-4 passes technical interviews on LeetCode “A question that might be lingering…is whether GPT-4 truly understands all these concepts, or whether it just became much better than previous models at improvising on the fly, without any real or dee
Slide 14: AI: “Sparks” Of Artificial General Intelligence (AGI)
AI: “Sparks” Of Artificial General Intelligence (AGI) GPT-4 outperforms GPT-3.5 across multiple exams1 “A question that might be lingering…is whether GPT-4 truly understands all these concepts, or whether it just became much better than previous models at improvising on the fly, without any real or
Slide 15: AI: A New Interface For Humans To Interact With Computers
AI: A New Interface For Humans To Interact With Computers PC: Text → Graphical User Interface 1980 1990 1980 c10m 1990 c100m users 2000 c500m users Smartphone: Keyboard → Touch 1998 2007 1998 <1m 2007 c330m users 2017 c2.4bn users Source: Google images, 18 August 2023, https://stats.areppim.com/stat
Slide 16: AI: Technology Transitions Drive Huge New Markets
AI: Technology Transitions Drive Huge New Markets +10 Years +5 Years UI Visible Tech Visible Market New Markets Technology Breakthrough Market Transition Growth Created $150bn Packaged Windows 3 GUI 100m users 500m users PC (1990) (1990) Home PC (2000) software market (2005) $570bn ecom, Web Browser
Slide 17: AI: Sizing The Opportunity
AI: Sizing The Opportunity • 25% of current tasks could be exposed to automation by AI1 One quarter of current tasks could be automated by AI2 • Gen AI could put 300m jobs at risk of automation and add 1.5pts to annual productivity growth and 7% to Global GDP (c$7trn)1 • 60% of workers are employed
Slide 18: AI: Timing The Opportunity
AI: Timing The Opportunity • 50% workplace adoption of new technology historically drives an inflection in labour productivity2 – Electric motors and PCs took about 20 years from development to reach 50% penetration – Internet took 12 years… Smartphones took 6 years …. – BUT Generative AI could be q
Slide 19: AI: Fund Exposure
AI: Fund Exposure Indicative percentage of portfolio exposed to Artificial Intelligence (100% stock weights) Narrower “Polar” Methodology Broader Methodology (enablers / ‘beneficiaries’ only) (also includes ‘adopters’) 71.6% 88.0% 12.0% 12.0% 30.7% 30.7% 16.4% 16.4% 14.0% 14.0% 26.5% 26.5% AI Enable
Slide 20: Themes
Themes This presentation is for use with non-US professional investors only.
Slide 21: Core Investment Themes
Core Investment Themes Digital Cloud Advertising / Software & Digital Mobility & EV / Data Economy & Connectivity & Infrastructure / eCommerce / Transformation Energy Transition Artificial Intelligence 5G/ IoT Cybersecurity Payments Source: Polar Capital, 31 July 2023. It should not be assumed that
Slide 22: Digital Advertising
Digital Advertising • Digital advertising $602bn ‘23E +8.5% y/y, c. 67% of total worldwide ad spend, entering a more mature (cyclical) phase1 • AI impacts: • New markets growing in CTV ($20bn 2023E market) and retail media ($45bn)2 – AI-generated digital ad • Advertising headwinds abating: Apple Ide
Slide 23: eCommerce
eCommerce • eCommerce penetration recovered in 2022 and is forecast to gain 1-2ppts share of core retail sales over next few years1 • AI impacts: • Larger platforms have consolidated share: Amazon, Shopify and Walmart captured >60% of US ecom growth between – Product discovery: Better 2019-222 match
Slide 24: Cloud Infrastructure / Cybersecurity
Cloud Infrastructure / Cybersecurity • Strong covid demand has given way to cloud spend optimisation; >$180bn public cloud revenue run-rate has slowed • AI impacts: from c40% y/y to c20% y/y growth but appears to be stabilising1 – Increased demand from AI • Only c29% of workloads running in cloud to
Slide 25: Software / Digital Transformation
Software / Digital Transformation • Digital transformation was a $595bn market in 2022 and projected to grow at a 21% CAGR to 2027 to >$1.5trn. • AI impacts: Software continues to grow as a share of GDP 3 – Premium AI-powered SKUs • Software sector EV/NTM sales multiple compressed by -63% during 202
Slide 26: Data Economy & Artificial Intelligence
Data Economy & Artificial Intelligence • Exponential growth in data/compute. Machine learning (ML) compute doubles every 3.4 months1. Datasphere doubles • AI impacts: every 3 years2 – Requires a new high- • >1/3 of organisations already using gen AI regularly in at least one business function; 3/4 e
Slide 27: Core Investment Themes: Estimated Thematic Exposure
Core Investment Themes Estimated Thematic Exposure Cloud Infrastructure / Cybersecurity Data Economy & Artificial Intelligence Digital Advertising / eCommerce / Payments Connectivity & 5G / IoT Software & Digital Transformation Mobility & EV / Energy Transition Market hedge / beta offset Other 0% 5%
Slide 28: Core Investment Themes: Estimated Thematic Exposure
Core Investment Themes Estimated Thematic Exposure 28% 27% 26% 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% Jul-22 Jul-17 Jul-18 Jul-19 Jul-20 Jul-21 Jul-23 Jan-17 Dec-20 Jun-17 Aug-17 Sep-17 Jun-19 Aug-19 Sep-19 Oct-19 Aug-20 Sep-20 Jan-22 Jun-22 Aug
Slide 29: Technology Valuations
Technology Valuations Absolute sector valuation (PE): Relative sector valuation (PE): At post GFC highs (1992 – present) At / around market level – with superior balance sheet Past performance is not indicative or a guarantee of future returns. Source: Ned Davis, 31 July 2023. Copyright 2018 Ned Dav
Slide 30: '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 ML Internet Index Past performance is not indicative or a guarantee of futu
Slide 31: '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 18 25x 16 20x 14 EV/ trailing 12 month sales 12 15x 10 8 10x 6 4 5x 2 0 0x Security 5 year average 10 year average Legacy Cloud Past performanc
Slide 32: PCT Positioning
PCT Positioning Geographic exposure (%) Top 15 positions Sector exposure 80 75.4% Microsoft 10.0% Semiconductors & Semiconductor Equipment 25.5% 70 Apple 9.6% Software 25.2% 60 NVIDIA 7.3% Interactive Media & Services 13.4% 50 Alphabet 6.9% Technology Hardware, Storage & Peripherals 13.4% 40 30 Meta
Slide 33: PCT Positioning
PCT Positioning Largest overweights Largest underweights PCT relative market cap exposures vs benchmark1 Advanced Micro Devices Adobe Systems 20% Airbnb Alphabet Amazon Analog Devices 15% Arista Networks Apple Baidu Applied Materials 10% Confluent Broadcom 5% Crowdstrike Holdings Cadence Design Syst
Slide 34: Portfolio Structure – Active Positions & Valuation
Portfolio Structure – Active Positions & Valuation A diversified portfolio, capturing secular growth potential of key themes Fund Index Active Fund Index Active Valuation Snapshot Technology Index Difference (31 July 2023)1 Trust1 Top 1001 Advanced Micro Devices 3.16% 1.08% 2.08% Apple 9.59% 16.98%
Slide 35: 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 - Jun-21 Jan-23 Jan-18 Jun-18 Jan-19 Jun-19 Jan-20 Jun-20 Jan-21 Jan-22 Jun-22 Jun-23 Feb-18 Aug-18 Sep-18 Oct-18 Feb-19 Aug-19 Sep-19 O
Slide 36: Appendix
Appendix This presentation is for use with non-US professional investors only.
Slide 37: Team Biographies
Team Biographies • BA (Hons) Modern History, University of Oxford Ben Rogoff • 28 years’ experience Partner • CMI, Aberdeen Fund managers • Economics and Business Economics, Hull University • Completed all levels of the ASIP Nick Evans • CFA charterholder Partner • 25 years’ experience • AXA Framlin
Slide 38: Team Biographies
Team Biographies • BA in History & Politics, Keele University Paul Johnson • MA in History, Keele University Analyst • CFA level 3 • 11 years’ experience • Private Investment Fund • MChem in Chemistry, University of Oxford Nick Williams • CFA level 1 Analyst • 7 years’ experience • Neptune Investmen
Slide 39: Important Information
Important Information Polar Capital, 16 Palace Street, London SW1E 5JD The Company is an investment company with investment trust status and its shares are excluded from the Financial Conduct Authority’s (“FCA”) restrictions on the promotion of non-mainstream investment products. The Company conduct
Slide 40: Important Information Cont.
Important Information Cont. Polar Capital, 16 Palace Street, London SW1E 5JD No reliance: No reliance should be placed upon the contents of this document by any person for any purposes whatsoever. None of the Company, the Investment Manager or any of their respective affiliates accepts any responsib
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