October 2020 / VIDEO
Coronavirus, Growth and the Outlook for Technology
The pandemic has, in most cases, accelerated trends that were already in place in the technology sector
COVID-19 has represented a significant shock to the economy, and it has had profound implications for the technology landscape as well. The pandemic has in most cases accelerated trends that were already in place; from the penetration of ecommerce across different categories to the adoption of cloud technologies that help enable a distributed workforce, such as video conferencing, to the proliferation of digital and contactless payment options.
Our approach to investing through this period has been to identify companies that we believe will be durable winners over both the near term and the long term. We’re doubling down on companies that we believe are on the right side of change, address large markets and are led by strong management teams that have demonstrated an ability to be adaptable during dynamic environments.
While the mega cap tech companies dominate the news headlines, and also the major stock indices, we believe the best approach to investing through this period is to construct a portfolio of best ideas across a number of different sub-sectors in technology, particularly given the fact that we see strong growth opportunities across many of these areas. We believe this will help mitigate both fundamental and valuation risk.
Longer term, I am bullish about the prospects of technology stocks. We live in a very dynamic environment with a lot of change and a lot of opportunity. Despite very strong recent stock performance, and pockets of elevated valuation, I believe that the underlying fundamentals can support attractive investment returns, particularly over the long term.
Risks – the following risks are materially relevant to the portfolio:
Country risk (China) – all investments in China are subject to risks similar to those for other emerging markets investments. In addition, investments that are purchased or held in connection with a QFII license or the Stock Connect program may be subject to additional risks.
Country risk (Russia and Ukraine) – in these countries, risks associated with custody, counterparties and market volatility are higher than in developed countries.
Issuer concentration risk – to the extent that a portfolio invests a large portion of its assets in securities from a relatively small number of issuers, its performance will be more strongly affected by events affecting those issuers.
Sector concentration risk – the performance of a portfolio that invests a large portion of its assets in a particular economic sector (or, for bond funds, a particular market segment), will be more strongly affected by events affecting that sector or segment of the fixed income market.
Small and mid-cap risk – stocks of small and mid-size companies can be more volatile than stocks of larger companies.
Style risk – different investment styles typically go in and out of favour depending on market conditions and investor sentiment.
General Portfolio Risks
Capital risk – the value of your investment will vary and is not guaranteed. It will be affected by changes in the exchange rate between the base currency of the portfolio and the currency in which you subscribed, if different.
Equity risk – in general, equities involve higher risks than bonds or money market instruments.
Geographic concentration risk – to the extent that a portfolio invests a large portion of its assets in a particular geographic area, its performance will be more strongly affected by events within that area.
Hedging risk – a portfolio's attempts to reduce or eliminate certain risks through hedging may not work as intended.
Investment portfolio risk – investing in portfolios involves certain risks an investor would not face if investing in markets directly.
Management risk – the investment manager or its designees may at times find their obligations to a portfolio to be in conflict with their obligations to other investment portfolios they manage (although in such cases, all portfolios will be dealt with equitably).
Operational risk – operational failures could lead to disruptions of portfolio operations or financial losses.
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