Technology investment trusts offer a smart route towards growth and innovation investing for investors. Some of the biggest names in the stock market are technology companies – but investment trusts can offer investors a more nuanced approach.
With Magnificent Seven earnings season in full swing, technology stocks are front and centre of many investors’ minds.
You’ve probably already got substantial exposure to the technology sector through any tracker funds in your stocks and shares ISA or pension. The Magnificent Seven alone make up just under 21% of the MSCI World Index and just over 30% of the S&P 500. In other words, any broad stock market trackers in your portfolio have a good allocation to big tech stocks.
Sign up to Money Morning
Don’t miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don’t miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
That’s good news, because technology is, and has always been, one of the fundamental drivers of economic growth.
“By investing in technology, investors gain access to fast-growing and innovative companies which are shaping our development,” Annabel Brodie-Smith, communications director of the Association of Investment Companies (AIC) tells MoneyWeek.
While your tracker funds will offer significant passive exposure to technology companies, you may want to take a more active approach. A technology-focused investment trust could make a great addition to your portfolio if so.
“Investment trusts are run by professional fund managers who manage a selection of companies and assets, giving investors exposure to a diversified portfolio and spreading their investment risk,” says Brodie-Smith.
“They have a fixed pool of capital, which allows their fund managers to take a long-term view of the portfolio, so they are never forced sellers of holdings,” she adds. “This makes investment trusts particularly suitable for hard-to-sell smaller technology companies or private companies.”
Here, we’ll highlight seven investment trusts that may give your portfolio a technological boost – including four that can diversify you away from Magnificent Seven over-concentration whilst still increasing your tech exposure.
Three investment trusts for tech and Magnificent Seven exposure
These three investment trusts all offer exposure to some or all of the Magnificent Seven stocks alongside other technology businesses.
Allianz Technology Trust
The Allianz Technology Trust (LON:ATT) is managed by Mike Seidenberg, who worked for tech giant Oracle early in his career and has extensive experience in asset management over the last 25 years.
As of 28 February, 41.7% of ATT’s assets were in the Magnificent Seven; in other words, it is overweight these stocks, when compared to the broader stock market. It has no exposure to Tesla, though, so there is some differentiation away from the group as a whole.
Polar Capital Technology
At around 35.3%, Polar Capital Technology’s (LON:PCT) exposure to the Magnificent Seven is roughly in line with the S&P 500’s – though, given the trust’s thematic focus, it has a much more tech-heavy portfolio than that index. That allocation is spread across all the Magnificent Seven companies.
Lead fund manager Ben Rogoff says that the trust’s strategy actively looks to avoid the hype that can lead to stretched valuations in the tech sector, instead seeking out companies offering long term growth potential by playing on long-term, structural trends.
Scottish Mortgage Investment Trust
One of the largest and most popular investment trusts, Scottish Mortgage (LON:SMT) invests in disruptive growth companies.
As of 2 February, around 14.2% of assets were held in the Magnificent Seven, though this only covered four stocks: Amazon, Meta, Nvidia and Tesla.
SMT’s portfolio includes several innovative private companies, such as top holding SpaceX, Elon Musk’s space exploration company, as well as having significant positions in non-US companies like Mercadolibre, Bytedance, PDD Holdings and Ferrari.
Four tech investment trusts to reduce Magnificent Seven concentration
The three trusts above will all give your investments more tech exposure, but they will to varying degrees add more Magnificent Seven into your portfolio.
There’s some concentration risk here, especially given the valuations of these companies, which “remain high despite the impact of Trump’s tariffs”, says Brodie-Smith.
While “it does make sense to have some exposure to these seven companies – they are large for a good reason… they won’t keep growing at the same rate forever”, she adds. “Investors should consider some broader tech exposure to ensure they don’t miss out on the growth stories of the future.”
If you want to buy into tech but move away from these stocks altogether, these four trusts all offer tech exposure without having any holdings in the Magnificent Seven.
Edinburgh Worldwide
Like Scottish Mortgage, Edinburgh Worldwide (LON:EWI) is managed by Baillie Gifford. It invests in small, innovative companies with a global focus.
Software is its largest industry position with over 20% of assets, while the next two – Aerospace & Defence and Biotechnology – also fall under the broader technology theme. Those three industries collectively account for well over half the trust’s assets.
With a focus on smaller companies, Edinburgh also provides exposure to higher growth-potential companies. SpaceX is again the top holding, but companies like PsiQuantum and Oxford Nanopore offer exposure to nascent industries with plenty of room for growth.
Herald Investment Trust
In a similar vein, the Herald Investment Trust (LON:HRIL) takes a global approach to investing in innovation, specifically within technology and communications.
Top holdings, at time of writing, include online review site Trustpilot and Nvidia partner Super Micro Computer.
Augmentum Fintech
Augmentum Fintech (LON:AUGM) takes a specialist approach by investing in financial technology (fintech) companies. It specifically targets private businesses, and the management team have between them overseen 34 exits.
Some of the names in its portfolio include neobank Tide, investment platform Interactive Investor, and global payment platform Volt.
Seraphim Space Investment Trust
Seraphim Space Investment Trust (LON:SSIT) targets an international portfolio of space tech businesses.
At time of writing some of its top holdings include drone company QuadSAT, space internet venture AST SpaceMobile, and space exploration firm Voyager.
For a ready-made basket of investment trusts to put your money into, you can also consider the MoneyWeek investment trust portfolio.
