Active Vs passive Global index trackers

Thrugelmir

ALLIANZ TECHNOLOGY TRUST PLC (ATT) is a better consistent performer over the past 5 years. Doesn't make the headlines though. A lot rests on ones personal view of Tesla, which certainly divides opinion. 

Stargunner

If you are saying the only reason that SMT has performed so well is because of Tesla why is it’s performance over 10 years so good {better than ATT as well} when Tesla’s share price was stagnant up until about 2 years ago

bowlhead99

Stargunner said:

If you are saying the only reason that SMT has performed so well is because of Tesla why is it’s performance over 10 years so good {better than ATT as well} when Tesla’s share price was stagnant up until about 2 years ago

No denying its 10 year performance is great. However, you can see it was particularly great in the last couple of years, which is part of how it got the stunning 10 year return.

For example, with a chart starting 10 years ago, over the first five years it would have turned £1000 into ~£2000 (doubling in five years); then the next three years it would have turned the ~£2000 into ~£4500 (more than doubling in only three years); then the next two years it turned the ~£4500 into just over £9000 (doubling in only two years)

The fact that SMT is better than ATT *after* 10 years does not mean it was better than ATT *for* 10 years. If you look at a chart starting 16 Oct 2010, they were neck and neck for the first seven years, but due to the different portfolio mix, by end of July 2019, ATT was at +500% while SMT was 'only' about +380% (from eyeballing a chart, not exact). Then all of a sudden 15 months later, SMT has caught up that deficit to end the ten-year period +828% while ATT is at +810%.

That 15 months period is one in which their largest holding, Tesla has gone from being worth $46 a share to $427 a share. No surprise that they had a storming result for the period when combined with the other solid performances of high tech growth companies into and beyond the initial pandemic market shock. But it's certainly valid to say as Thrugelmir did, a lot rests on a "view of Tesla, which certainly divides opinion". 

And it doesn't make any sense to say 'if it's only because of Tesla, why is it so good over 10 years better than ATT as well' ; if SMT had done its own thing with £1000 from 16 October 2010 to 31 July 2019 and then copied the exact same 'low Tesla' portfolio as ATT at that point (and simply growing ~50% over the remaining 14-15 months of the decade), SMT would have ended the 10 year period with its July 2019 £4800 growing to £7300 to while ATT's July 2019 £6000 turned into £9100. 

But due in part to its 'high Tesla' portfolio it didn't grow £4800 to £7300, it instead grew £4800 to £9276.  That late surge of performance boost made it 'win' after 10 years despite having 'lost' after the first 8.75.   It produced an overall return of 9.28x whereas if it had done exactly what it did for the first 8.75 years and then copied ATT for the last 1.25 years, it would have made only 7.3x to ATT's 9.1x.

Of course nobody is complaining of a 9x result or a 7x result or a 5x result after ten years - these are great returns.

And while Allianz is aiming to be a tech fund, and doing a good job of it, SMT is more of a 'general high growth opportunities'  fund that happens to see a lot of opportunities in tech-driven sectors, and doing a good job of it.  So they are not direct competitors, but they are of course competing for the same global pool of investors.

cloud_dog

That's the sort of graph that freightens the investing bejeezus out of me.

Stargunner

I don’t think that it was just Tesla that had such an effect on SMT’s recent performance. If Tesla had of consisted of 5% of SMT’s portfolio at the beginning, although Tesla’s share price has gone up 9 fold that would only contribute 45% to SMT’s performance . I know that due to Tesla’s performance that SMT sold a big chunk of it in August because it had got too big in its portfolio. But I agree that both have performed exceptionally well and I am glad that I have been invested in both.