UniSuper has invested $300 million in a global technology mandate as an alpha-seeking play to complement its indexed exposure to large-cap equities in developed markets offshore.
The mandate with T. Rowe Price was the first of at least three discrete global technology investments it aims to make as it seeks active exposures in under-researched sectors of the developed markets, head of equities Simon Hudson told I&T News.
Hudson said UniSuper was in advanced negotiations with at least two other global technology managers likely to receive mandates from its $5 billion global equities portfolio.
“Global technology is a serious position for us.”
After indexing its developed markets exposure in mid-2010, UniSuper CIO John Pearce flagged his aim to make active investments in under-researched sectors in advanced economies, beginning with global technology.
Hudson said the fund initially approached the sector as a beta play, “largely because we liked the industry dynamics and wanted to leverage the best part of the US recovery”.
These dynamics included the reinvestment in technology being made by companies after a decade of sparse spending, which was driven mainly by cost-cutting agendas on the heels of the dotcom crash.
Global technology stocks also provided UniSuper with an exposure it could not get from the Australian market.
“For us it was a case of diversification for all the right reasons – to access an industry which isn’t large in a listed sense in Australia, is highly profitable and growing quickly.”
As it continued researching the sector, it assessed whether active managers could deliver sustainable outperformance, and found that the structural characteristics of the industry supported this.
“It’s not a winner-takes-all dynamic, but it’s close. You get companies that were winners, but go into structural decline and don’t come back, so there are shorting opportunities,” Hudson said. “The alpha opportunities are structural to a degree.”
There were exceptions, of course, with the most notable being Apple, which was revitalised by its suite of mobile devices, namely the iPod, iTunes, iPhone and iPad products.
Hudson said the primary technology market was in the US, but that astute global technology managers paid close attention to the innovations occurring in Asia.
