The surge of interest in artificial intelligence (AI) played a significant role in the US equity market’s strong performance last year. The so-called Magnificent 7 stocks—Nvidia, Meta, Amazon, Microsoft, Alphabet, Apple, and Tesla—each posted impressive gains of at least 49% in 2023, riding the wave of enthusiasm for AI's potential to revolutionise both our work and daily lives.
Yet, we have moved into this year with an observation of diverging paths of these tech giants, with chatters now revolving around underperformer Tesla’s fall from grace. While the faith in technology’s potential remains strong for many, investors are left thinking how to navigate the unpredictable twists and turns of this rapidly evolving market.
If you are interested in capturing just AI growth alone, or broader technology themes, the rule of thumb is to implement through rigorously screened best-in-class funds from global leading asset managers.
However, the technology sector itself is a motley crew. The scope for investment in technology can extend far beyond AI alone. In terms of investing style, some portfolios are highly concentrated, capitalising on a handful of high-conviction innovators from multiple technology-related sectors and themes. On the contrary, some managers adopt a contrarian style to capture the opportunities through quality and value companies that typically have less growth features.
Recognising this, Endowus Investment Office has carefully selected four technology and AI-focused funds for our clients in Hong Kong. These include the Fidelity Global Technology Fund and Franklin Technology Fund, and artificial intelligence-focused funds including the Allianz Global Artificial Intelligence Fund and Thematics AI and Robotics Fund.
This carefully curated list serves as a practical guide for investors in Hong Kong looking to navigate the expansive tech investment field and execute their specific investment strategies effectively. The list of funds and other Best-In-Class strategies are available on Endowus Fund Smart.
Technology Funds
These broader technology funds focus on identifying companies that are set to benefit from the development of technology, such as companies in the tech or communication sectors that produce tech-based products and those that are not in the technology sector but use technology to enhance their value.
Fidelity Global Technology Fund
ISIN: LU1560650563 (USD)
The Fidelity Global Technology Fund takes a unique approach to investing in technology – in contrast to many other technology funds that focus on companies with high growth and momentum, this Fund broadens its universe to include companies that may not be in the rapid growth phase but display strong "value" and quality characteristics. This nuanced approach has proven effective in managing risk and protecting against the downside, which particularly shines during challenging market conditions such as 2022, where the Fund managed to significantly reduce losses compared to its peers. In more favourable market conditions, the Fund has also consistently delivered competitive returns, matching up with major benchmarks such as the MSCI ACWI/IT or MSCI World/IT.
The Fund’s global investment strategy, which spans not only the US but also Europe and Asia, ensures a diversified portfolio that isn't overly dependent on the performance of tech companies from any single region. Incepted in 1999, the Fund has proved itself across multiple market cycles and is managed by an experienced portfolio manager. All in all, the Fund is a compelling choice for those seeking to invest in technology with a disciplined strategy that offers rewarding risk-return opportunities in the long term.
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Franklin Technology Fund
ISIN: LU0109392836 (USD), LU0889565833 (HKD)
The Franklin Technology Fund stands out with its approach of investing in the best ideas across more than 20 different technology sub-sectors (e.g. semiconductors, software, etc) and themes (e.g. digitalisation, AI, etc), resulting in a portfolio of companies that are believed to be long-term, high-conviction leaders and innovators. This approach is not just limited to public companies; the Fund also allocates between 5% to 10% of its portfolio to private companies, showcasing a unique blend of opportunities for investors.
The Fund benefits from the deep expertise of a large team of over 12 investment professionals while being led by Lead Portfolio Manager Jonathan Curtis, with his background in electrical and software engineering coupled with over 30 years of investing experience. Since its inception in 2000, the Fund has navigated through various market cycles and typically shows higher upsides during favourable market conditions thanks to its growth orientation and strong emphasis on US companies. At the same time, it's important to note that it may also experience significant losses during downturns. All in all, the Franklin Technology Fund is a compelling option for investors drawn to the tech sector's dynamic and transformative potential.
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AI Funds
The AI theme-focused funds are designed to capture the rapid adoption and advancement of AI by capitalising on its products, services, and infrastructure, the applications of AI, and/or AI-enabled industries.
Allianz Global Artificial Intelligence Fund
ISIN: LU1548497426 (USD), LU1720051108 (HKD)
The Allianz Global Artificial Intelligence Fund takes a broad approach to investing in AI. This strategy goes beyond the conventional focus on IT, such as big data and robotics, to include AI's far-reaching effects across various sectors like agriculture, energy, and healthcare. Investment in the fund is categorised into three distinct areas. Firstly, “AI Infrastructure” includes companies producing essential components like semiconductors and electronic parts crucial for AI development. Next, “AI Applications” refer to software and platforms leveraging AI for enhanced efficiency, quicker decision-making, and increased automation. Lastly, “AI-enabled industries” encompass companies integrating AI to gain a competitive edge, including non-tech companies.
Under the guidance of Sebastian Thomas and co-portfolio managers James Chen and Stephen Jue, alongside two senior analysts with substantial expertise, the Fund is committed to the long-term potential of AI by identifying companies with robust R&D initiatives and management who are open to innovation. While the fund aims for long-term growth by investing in the advancement of AI technology, investors should be mindful of potential short-term market fluctuations that could impact the fund's performance.
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(Natixis) Thematics AI and Robotics Fund
ISIN: LU1923623000 (USD)
The Thematics AI and Robotics Fund offers investors a unique thematic investment into AI and robotics, focusing solely on companies that are either providers or developers of AI and/or robotics products and services. This Fund captures a broad spectrum of opportunities, ranging from design software to office automation. With a portfolio of 40-60 holdings, the Fund requires a strict selection process, which requires that a company generate a minimum of 20% of its revenue from AI and robotics to be considered for inclusion.
The Fund is managed by Karen Kharmandarian, Chairman & CIO of Thematics Asset Management, alongside Alexandre Zilliox. Mr. Kharmandarian brings over 25 years of industry experience, including a pioneering role in creating and managing the industry’s first active Robotics fund in 2015. This provides a thoughtful choice for investors looking to tap into the growth potential of AI and robotics.
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Keen for more?
To help you explore best-in-class strategies suitable for your investment plan, Endowus offers mutual funds at zero subscription and switching fees, the access to lower-cost institutional share class funds, which are not normally available to retail investors at other distributors. To date, Endowus has created more than US$40 million annual savings for our clients. That’s how you can lower your investing expense over time and keep more returns on your investment.
Check out our other curated technology fund offerings on available through Endowus Fund SmartHong Kong and the Endowus by exploring our investment fund list.
*Annualised returns are calculated based on the returns of the target share class, and the oldest share class of the fund where the target share class is younger than three years. Three-year returns are based on the period from May 2021 to April 2024 unless otherwise stated. Five-year returns are based on the period from May 2019 to April 2024 unless otherwise stated. Returns are translated into USD and are net of fund-level fees.
**Where a fund or portfolio has both HKD and USD share classes, the fees of the USD share class are shown. Total portfolio and fund-level fees include fund total fund-level fees.
***Endowus does not charge a preliminary sales charge or any other additional fees, other than the all-in Endowus Fee.
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