BGF World Technology A2 GBP

Analyst Report
Morningstar's Take
|13/09/2019

by Tom Nations, CFP®
*  This rating and report were issued for a different share class of this fund. The performance and fee structure of this class may vary from that referenced.


Strong conviction in a skilled industry veteran’s specialised process earns BGF World Technology a Morningstar Analyst Rating of Silver.Portfolio manager Tony Kim is a seasoned analyst and manager. He’s spent 23 years analysing tech names, and he was hired from Artisan Partners in June 2013 to become BlackRock’s tech lead and run the US mutual fund version of this strategy. He then assumed control of this Luxembourg-domiciled vehicle in July 2017. Rather than rely on industry specialists, Kim has built a lean three-person team with a flat structure, with each team member responsible for understanding the investment landscape and every name in the portfolio.Kim’s knowledge base frames the strategy’s process. Over his career, he’s mapped a proprietary 1,200-stock investible tech universe that guides him to intriguing growth prospects. To be sure, profitability and valuation are cogs in the process, but Kim seeks disruptive firms that can rapidly capture market share. Indeed, he’ll dip into more small-cap and emerging-markets names than the MSCI ACWI/Information Technology Index and technology Morningstar Category peers. Kim also holds considerable communications services and consumer discretionary stakes.This growth-oriented tack has delivered exceptional returns. From Kim’s June 2013 start on the US mutual version of the strategy through August 2019, that vehicle’s 23.2% annualised return topped its category and beat the benchmark by 5.7 percentage points. And while Kim’s enterprising approach generates above-average volatility, the strategy’s risk-adjusted returns are similarly category-leading. A frothy market environment has benefited Kim’s process, but the strategy did lag in 2018’s second-half market pullback. Kim’s success warrants some caution. His distinct skill set and process are the strategy’s main competitive advantages, leading to key-person risk. Further, Kim’s capacity may be stretched as his growing asset base requires additional resources. Still, in a sector that rapidly produces new, dominant players, few investors have the skill and experience to identify the ongoing shifts like Kim. Combined with a solid parent firm, this strategy is one of the more compelling tech options.

Morningstar Analyst Rating™
To find out how Morningstar rates a fund click here.
Portfolio RoleSupporting Player. The focused nature of sector-specific funds means they are typically best suited to playing a small part in a broader portfolio.
Morningstar Pillars
PeoplePositive
A strong stock-picker with a growing team.
ParentPositive
Acting in enlightened self-interest.
ProcessPositive
Casts a wide net in search of growth.
PerformancePositive
Top of its class.
PriceNegative
Slightly above median.
Morningstar Analyst RatingMorningstar evaluates funds based on five key pillars, which it's analysts believe lead to funds that are most likely to outperform over the long term on a risk-adjusted basis.
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