Polar Capital Technology Trust PLC · LSE:PCT
Polar Capital Technology Trust — FY2021 Earnings Presentation
55 slides from Polar Capital Technology Trust's earnings presentation, Jul 22, 2021
Slide 1: Annual Results Polar Capital Technology Trust plc July 2021
Annual Results Polar Capital Technology Trust plc July 2021 polarcapitaltechnologytrust.co.uk This presentation is for use with non-US investors only.
Slide 2: Results as at 30 April 2021
Results as at 30 April 2021 Year ended Year ended Change 30/04/20 30/04/21 (y/y) Net Assets £2,308,597,000 £3,408,763,000 +47.7% NAV per ordinary share 1715.59p 2496.44p +45.5% Price per ordinary share 1774.00p 2364.00p +33.3% Benchmark Change +46.4% Ordinary shares in issue* 134,566,000 136,544,764
Slide 3: PCT as at 30 June 2021
PCT as at 30 June 2021 Year ended Year ended Change As at 30/04/20 30/04/21 (y/y) 30/06/21 Net Assets £2,308,597,000 £3,408,763,000 +47.7% £3,564,401,000 NAV per ordinary share 1715.59p 2496.44p +45.5% 2620.77p Price per ordinary share 1774.00p 2364.00p +33.3% 2368.00p Benchmark Change +46.4% Ordina
Slide 4: Full Year Review
Full Year Review DJ World Technology vs. FTSE World TR since April 2020 % 20 • Global equities (FTSE World +33.7%) delivered strong returns, reflecting the success of the global response to the health, 18 economic and social impacts of the covid crisis and the resilience of a (tech-enabled) global e
Slide 5: Full Year Review
Full Year Review US technology small caps vs. large caps since April 2020 % 80 • Improved market breadth saw small-caps (+52.7%) outpace large- caps (+45.2%) 70 • Strongest subsector returns were generated within Internet (+52.2%) and Semiconductors (+65.9%), the latter performing well 60 in 2H due
Slide 6: The Technology Team
The Technology Team • Technology is at the core of the Polar Capital business • One of the largest technology franchises in Europe with c.US$15.0bn under management • Ten dedicated technology specialists – strong multi-cycle track record Global Technology Polar Capital Technology Automation & Artifi
Slide 7: Investment Framework
Investment Framework 4,000+ universe Dynamic definition of technology Thematic overview Real-world changes in userbehaviour S-Curve inflections What we look for Secular themes / pure-plays Last-generation winners What we avoid Public venturecapital Growth bias – rev/earnings/ cash flow Valuation Pri
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 / decliningOM% Payment network Digital Gaming EM smartphones Sales (blue) eCommerce IT Services Value Trap Unif
Slide 9: Technology Disruption: The Story of the Decade
Technology Disruption: The Story of the Decade Tech has driven all the earnings growth since 2009 Helping growth stocks sharply outperform value Tech vs. Ex. Tech earnings (1985 – May 2020) World Value vs. Growth stocks (1974 – May 2020) Source: FT, Goldman Sachs. Trailing 12-month earnings. It shou
Slide 10: COVID-19 Acceleration: Textbook (wartime) Acceleration
COVID-19 Acceleration: Textbook (wartime) Acceleration PRE-COVID “the business imperative of responding to needs of a new generation of customers, COVID ACCELERATION partners and suppliers who expect transactions to be seamless, real- “As COVID-19 impacts every aspect of time, Facebook-like in exper
Slide 11: COVID-19 Acceleration: Textbook (wartime) Acceleration
COVID-19 Acceleration: Textbook (wartime) Acceleration Cloud Video Electric eCommerce1 Conferencing3 Telemedicine4 Computing2 Vehicles5 16% → 33% +37% 300m / day 10% → 75% +57% eCommerce Y/Y Cloud No of Zoom Share of UK Y/Y Growth as % of retail growth in meeting general in EVs sold sales Q1’20 part
Slide 12: Reopening in a Hybrid world: a New Work Modality
Reopening in a Hybrid world: a New Work Modality • Remote work is not an “aberration” – for most of recorded history, humans have lived and worked from / near home • However, mechanisation / the industrial revolution created centralised mills / factories – division of labour, bureaucracy & specialis
Slide 13: Transforming Offices / Cities
Transforming Offices / Cities • Already in decline pre-pandemic, COVID has proven – in a way that only a crisis can - that companies can get by with less office space • De-urbanisation / cities shrink: freed from daily commutes, people can arbitrage wage differentials (40% 1 higher) and cheaper prop
Slide 14: Transforming Offices / Cities
Transforming Offices / Cities • Already in decline pre-pandemic, COVID has proven – in a way that only a crisis can - that companies can get by with less office space. • De-urbanisation / cities shrink: freed from daily commutes, people can arbitrage wage differentials (40% 1 higher) and cheaper pro
Slide 15: Transforming Home
Transforming Home • More time at home driving a “trillion-dollar reallocation of capital from commercial to residential real estate” 1 – home capex boom • Suburbs have fared relatively well, a trend that may accelerate post lockdown as city centres struggle / hybrid becomes embedded • Did COVID just
Slide 16: Transforming Home
Transforming Home • More time at home driving a “trillion-dollar reallocation of capital from commercial to residential real estate” 1 – home capex boom • Suburbs have fared relatively well, a trend that may accelerate post lockdown as city centres struggle / hybrid becomes embedded • Did COVID just
Slide 17: Transforming Work
Transforming Work • While Remote Work abstracted work from the workplace, the Hybrid model may transform it completely • The Internet ended the correlation between paper and information but pre-pandemic, paper-based records were still critical • Remote work ended this status quo: the need to access
Slide 18: Transforming Work
Transforming Work • While Remote Work abstracted work from the workplace, the Hybrid model may transform it completely • The Internet “ended the correlation between paper and information” but pre-pandemic, paper-based records were still critical • Remote work ended this status quo: the need to acces
Slide 19: Productivity Boom Ahead?
Productivity Boom Ahead? • Lacklustre gains since 2004 - US labour productivity growth has averaged just 1.4%1 pa, half of that achieved between 1948-1973 • Could hybrid work and automation unleash a productivity boom akin to the first Internet-wave? (3% pa 1995-2004)2 • Greater female workforce par
Slide 20: Transforming Work: Case Study – Telemedicine
Transforming Work: Case Study – Telemedicine • Automation and remote work could transform service sector productivity due to stratification of work / scaling of labour • It saves time: 8-10 mins with c.5 mins of wait time vs. in-office visit = 121 mins incl. 101 mins commute / waiting room time1 • I
Slide 21: Core Investment Themes
Core Investment Themes Online Advertising / Cloud Infrastructure Software as a Service Digital Entertainment Commerce / Security Source: Polar Capital. It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities in this document. A list
Slide 22: Core Investment Themes
Core Investment Themes Data Economy / AI Connectivity / 5G Industry 4.0 Payments / Fintech Source: Polar Capital. It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities in this document. A list of all recommendations made within th
Slide 23: Core Investment Themes
Core Investment Themes Estimated Thematic Exposure SaaS / Software "Eating the World" 15.6% Industry 4.0 / Automation 2.2% Cloud Infrastructure / Security 10.8% Digital Entertainment 10.5% Mobility / Connectivity / 5G 17.5% Payments / Fintech 3.8% Data Economy / Artificial Intelligence 19.0% Online
Slide 24: Core Investment Themes
Core Investment Themes Key theme breakdown (31 January 2017 – 30 June 2021) 23% 22% 21% 20% 19% 18% 17% 16% 15% 14% 13% 12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Data Economy / Artificial Intelligence Cloud Infrastructure / Security Digital Entertainment Online Advertising / eCommerce Market hedge /
Slide 25: Digital Marketing / Online Advertising
Digital Marketing / Online Advertising • Global online advertising worth $340bn in 2020E, c. 52% of total worldwide advertising spend1 • Online share of US advertising now commensurate with % time spent in media (51% vs. 20%/33% in 2010)…2 • …but TV + radio + print still c.49% of US ad spending and
Slide 26: eCommerce
eCommerce • eCommerce growth continues unabated and is forecast at $4.2tr in 2020E, representing c.16% of total retail sales1 • Amazon’s share of US e-commerce now 38%, 4% of all retail spend2 • Mobile now an integral part of the shopping experience, accounting for 63.5% of all retail eCommerce 2 •
Slide 27: Software as a Service (SaaS)
Software as a Service (SaaS) • Rental / usage-based model is expanding the software market while threatening incumbent franchises / maintenance • Software as a service (SaaS) targets a $325bn opportunity by 2022, representing 25% of IT spending1 • Focus on the customer experience (CX) driving a fron
Slide 28: Cloud Infrastructure / Security
Cloud Infrastructure / Security • Having debunked many of the earlier barriers to adoption, we expect Cloud migration to accelerate over the coming years • Expect ‘all’ incremental capacity added in cloud: c. 50% of spend by 20192 and 44% of application workloads by 20213 • Cloud deflation to be fel
Slide 29: Digital Entertainment
Digital Entertainment • Video games: $146bn bn market in 2019 → $201bn by 2023E (~8% CAGR), driven by new console cycle, mobile and AR/VR1 • Meteoric rise of Free-To-Play Fortnite (>78m MAU / $2.4bn sales): both risk and opportunity2 • Streaming video : c.200m (vs. 1bn paid TV) subscribers worldwide
Slide 30: The Data Economy / Artificial Intelligence (AI)
The Data Economy / Artificial Intelligence (AI) • 2.5bn gigabytes of data is generated per day but only 1% is stored and analysed; this could increase to 37% by 20251 – e.g. a single AV may generate 4TB of data/ day, equivalent to 3,000 people today1 • AI likely to be the single largest driver of te
Slide 31: Connectivity: 5G / IoT / Edge Computing
Connectivity: 5G / IoT / Edge Computing • Current networks insufficient capacity / latency to support an increasingly connected world (c.29bn devices by 2022)1 • 5G up to 100x faster with low latency (<1ms) → infrastructure spending to reach $26bn by 2022 (CAGR +118% 2018-2022)2 • China 5G leadershi
Slide 32: Industry 4.0: Automation / Simulation
Industry 4.0: Automation / Simulation • The Fourth Industrial Revolution underway driven by Cyber Physical Systems, Internet of Things and Cloud Services • Edge AI, low latency from 5G and advanced machine vision should enable cobots to self-learn tasks • Over 25% of manufacturing tasks that can be
Slide 33: Payments / Fintech
Payments / Fintech • Global mobile payment market set to reach $2.73tr by 2023, representing a 25% CAGR 2018-20231 • 2.1bn consumers expected to make a purchase via a mobile wallet in 2019, >50% in China2 • B2B opportunity: $120tr (vs. $45tr consumer volume) largely cheque-based today ($4-20/transac
Slide 34: Mobility – EV / Autonomous / Environmental
Mobility – EV / Autonomous / Environmental • EVs expected >13% of global auto sales in 2025 from ~3% in 20201. UK to ban ICE 2030 / California 2025 • Europeans bought more EVs and hybrids than diesel vehicles in September 2020 for the first time ever2 • EV have 2x Semi content vs ICE4. Incremental c
Slide 35: Emerging Themes
Emerging Themes Source: Gartner, December 2020. This presentation is for use with non-US investors only. Please refer to the Important Information at the end of this presentation. 35
Slide 36: Emerging Themes
Emerging Themes Source: Gartner, December 2020. This presentation is for use with non-US investors only. Please refer to the Important Information at the end of this presentation. 36
Slide 37: Digital Disruption: Artificial Intelligence (AI)
Digital Disruption: Artificial Intelligence(AI) Collapsing computing costs (1950 – 2019)1 “Artificial Intelligence technologies will be the most disruptive class of technologies over the next 10 years due to radical computational power, near-endless amounts of data, and unprecedented advances in dee
Slide 38: AI / ML in Use Today
AI / ML in Use Today - 2.7bn MAU / 1.8bn DAU, >4 petabytes of data per day… in 2014! 1 - Image recognition / text meaning analysis, translation, suicide prevention, content filtering… - Recommendation engine, auto generation of thumbnails / artwork, post-production - Users spent 1.8 seconds consider
Slide 39: Superhuman AI
Superhuman AI 2016 2017 2019 2020 AlphaGo AlphaZero Pluribus AlphaFold defeats Go world crushes world’s best defeats professional solves the 50-year-old champion Lee Sedol chess engine Stockfish poker players “protein folding problem” • 1920 general purpose core • Reinforcement learning and • First
Slide 40: Natural Language Processing
Natural Language Processing • Voice as a computing interface: humans speak 150 vs. type 40 words per minute on average1 • Dramatic progress in recent years, driven by training data and use of recurrent neural networks – Error rate <5% in 20182 (43% in 19953, 15.2% in 20043, 8% in 20153) vs. human le
Slide 41: Content Creation
Content Creation GameGAN by NIVIDIA1 Portrait of Edmond Belamy, 20182 AI generated article, 20203 I am not a human. I am a robot. A thinking robot. I use only 0.12% of my cognitive capacity. I am a micro-robot in that respect. I know that my brain is not a “feeling brain”. But it is capable of makin
Slide 42: 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 Source: Ned Davis, 2 July 2021. Copyright 2018 Ned Davis Research, Inc. Further distribution prohibited without prior permis
Slide 43: '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 25 20 15 10 5 0 Feb-19 Oct-16 Apr-16 Jan-13 Jun-14 Jan-20 Jun-21 Mar-17 Mar-18 Dec-13 Nov-14 Nov-15 Sep-17 Aug-1
Slide 44: '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, June 2021. 2. Keybanc, June 2021. Includes th
Slide 45: PCT Positioning
PCT Positioning Sector exposure (%) Market cap exposure (%) Software 24.4% Interactive Media & Services 19.3% 91.7% Large Cap (>$10bn) Semiconductors & Semiconductor Equipment 18.1% Technology Hardware, Storage & Peripherals 12.2% Mid Cap (>$1bn - $10bn) 7.9% IT Services 5.3% Small Cap (<$1bn) 0.4%
Slide 46: Appendix
Appendix This presentation is for one-on-one use with non-US professional investors only. Please refer to the Important Information at the end of this presentation. 46
Slide 47: PCT Positioning
PCT Positioning Largest overweights Largest underweights Market cap exposure versus benchmark1 Advanced Micro Devices Alibaba Group Holding Airbnb Alphabet Amazon Analog Devices Applied Materials Apple Large-cap -2.7% Axon Enterprise Autodesk Chegg Broadcom Crowdstrike Holdings Cisco Systems DocuSig
Slide 48: 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 (6 July 2021)1 Trust1 Top 1001 PayPal Holdings 1.56% - 1.56% Apple 7.99% 12.91% -4.92% Advan
Slide 49: Team Biographies
Team Biographies Ben joined Polar Capital in May 2003. He is lead manager of Polar Capital Technology Trust plc and is a Fund Manager of the Polar Capital Global Technology Fund and Polar Capital Automation and Artificial Ben Rogoff – Partner Intelligence Fund. He has been a technology specialist fo
Slide 50: Team Biographies cont.
Team Biographies cont. Fatima joined Polar Capital in April 2006 and has 15 years’ experience. She is a fund manager on the Polar Capital Technology Fund, Polar Capital Technology Trust and Polar Capital Automation and Artificial Fatima Iu Intelligence Fund. She is responsible for the coverage of Eu
Slide 51: Team Biographies cont.
Team Biographies cont. Brad joined Polar Capital in October 2011 as an Investment Analyst and Trader working as part of the European Market Neutral team with a focus on media and internet. In 2014, he joined the Technology team Brad Reynolds as an Investment Analyst. Prior to joining Polar Capital,
Slide 52: Portfolio Structure – Liquidity Profile
Portfolio Structure – Liquidity Profile Liquidity horizon evaluation 16,000 6 14,000 5 12,000 AUM (USDM) 4 Days to liquidate 10,000 8,000 3 6,000 2 4,000 1 2,000 0 - Global Tech AUM $ Strategy AUM $ Days to liquidate 95% (GT) Days to liquidate 95% (Strat) Source: Polar Capital, 30 June 2021. Liquida
Slide 53: Long-Term PCT Performance
Long-Term PCT Performance Performance (NAV / Share Price): 2010 – present1 900% Risk adjusted performance: last 5 years2 1 year 3 years 5 years 800% Absolute Returns 52.4% 114.9% 278.1% Relative Returns 10.4% 18.8% 37.5% 700% Sharpe Ratio 3.1 1.7 1.9 Sortino Ratio 10.5 3.4 4.1 600% Information Ratio
Slide 54: 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 an
Slide 55: 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 (
Polar Capital Technology Trust — FY2021 Earnings Presentation on 6ix