The Technology Cycle
Growing Our Investors’ Assets Since 1996
Polar Capital Technology Trust plc provides investors with access to the potential of companies in the global technology sector.
Managed by a team of dedicated technology specialists, the Company has grown to become a leading European investor with a multi-cycle track record – a result of the managers’ approach to investing, with the ability to spot developing technology trends early on and to invest in those companies best placed to exploit them.
2020: Digital Recalibration: New normal service will resume shortly
The current crisis has shown the modern world is built on technology. Trends we have witnessed and written about for many years have accelerated during the crisis, and many will remain at structurally higher levels once the crisis recedes.
This year, we draw on the parallel of television to help illustrate change happening within technology today and the acceleration taking place as a result of COVID-19.
2019: Software Containerisation: Building blocks for the digital economy
Disruption is the zeitgeist of the current technology cycle and numerous industries are reinventing themselves through digital transformation to avoid becoming irrelevant, obsolete or disintermediated.
Last year we discussed how digital transformation is no longer a ‘nice to have’ but is most definitely a ‘business imperative’. Twelve months on and we have seen increased IT spending on digital transformation and budgets allocated away from legacy areas towards next-generation software that is providing valuable building blocks for the digital economy.
2018: Technology Disruption: Recoding the corporate DNA
Twenty years after the dawn of the commercial internet, nearly every sector is now being challenged, improved or replaced by disruptive technology.
Digital transformation is no longer a ‘nice to have’ but is most definitely a ‘business imperative’ as companies respond to a new generation of customers, partners and suppliers whose everyday lives are dominated by technology. They demand the same seamless, real-time transaction experience irrespective of the environment they are that are just starting to be realised by next-generation businesses and emerging technologies.
2017: Infinite Possibilities: Smart machines and the rise of AI
After years in the wilderness it is becoming increasingly clear that Artificial Intelligence (AI) and Machine Learning (ML) are emerging as the next great technology platforms.
We are fascinated by the potential for automation and robotics as the evolution of advanced components such as machine vision, sensors and reduction gears have made highly accurate and repeatable movement possible. The robotics opportunity has also been advanced by e-commerce which is forcing a rethink of the whole supply chain while cobots (robots with enhanced safety control functions) are now able to operate alongside humans in a production line without a safety barrier. This back-end infrastructure designed to garner insight from Big Data has captured the imagination of Silicon Valley and Wall Street alike.
2016: Into the Eye of the Storm: Cloud computing makes landfall
2015 was the ‘end of the beginning for cloud computing and the beginning of the end for traditional IT’.
With c.15% of IT workloads now in public clouds, we expect Cloud adoption to accelerate, and tough times ahead for most enterprise incumbents. To date, disruption has been limited to the absence of growth (as every incremental IT Dollar has gravitated to the public cloud) and some pricing pressure. The next wave will be driven by workload migration, which Gartner believe will see more than $1tr of IT spending shift to new categories as a result of cloud computing by 2020.
As technology companies reinvent industries, create new markets and empower customers, the CEO of GM put it, ‘we’re going to see more disruption in the next 5–10 years than we’ve seen in the last fifty’. This captures perfectly our excitement about the new cycle and is likely to prove valid across most industries now that the Cloud has made landfall.
Information obtained from third party sources has not been independently verified by Polar Capital.
Polar Capital makes no express or implied warranties or representations with respect to such data of its originality, accuracy, completeness, merchantability or fitness for purpose.
2015: Digital Disruption: Transforming the World Bit by Bit
All of the industry's incremental growth is being captured by new technologies and vendors.
Indeed, although there is no denying that most growth-challenged incumbents have become better stewards of capital, this has done nothing to alter our view that enterprise computing is looking increasingly anachronistic.
The new technology cycle continues to be underpinned by three core themes: Internet infrastructure, broadband/Internet applications and mobility, with ‘big data’ playing a galvanising role.
Certainly cloud computing appears to be gathering momentum with companies said to have spent $56.6bn in 2014, while the cloud market is forecast to grow at a CAGR of 22.8% until 2018, six times faster than the overall IT industry.*
We expect a number of exciting emerging themes to become more significant – both in terms of their real-world and portfolio importance over the coming years. These include 3D printing, augmented and virtual reality, drones, electric and autonomous vehicles, the Internet of Things, mobile/connected health, personalised medicine, renewable energy and wearable computing.
* Source: IDC, November 2014.
2014: Redefining knowledge, reimagining industries
Fuelled by smartphone adoption, the Internet is becoming pervasive allowing the technology sector to ‘reimagine’ other industries.
As the new technology cycle enters a second, more pernicious stage, disruptive technologies will begin to substitute, rather than merely complement existing ones. While this may result in a more challenging backdrop for incumbents, next-generation companies have much to gain, and little to lose from new cycle disruption.
The impact of cloud computing cannot be underestimated. Just as the printing press made the ‘cumulative advance of knowledge’ possible, the ability to question vast repositories of digital data in real-time via mobile devices has made librarians of us all. Digital content, collapsing bandwidth costs and proliferation of mobile devices are changing how we consume media while on-demand services have accelerated the trend towards hyper-personalisation.
Anticipating such change and its potential impact across sectors, requires an awareness of world-wide trends, historic parallels and domain expertise.
2013: The New Cycle Forges Ahead: Extracting Value in the ‘Big Data’ Era
The potential to extract value from the vast amount of untapped data in today’s world has led some people to describe data as the next natural resource.
Just as finding new solutions to process today’s datasets offers potential high rewards to entrepreneurs, so too does identifying those companies best placed to prosper in the new technology cycle
The huge datasets created by smartphones and other devices are too big to manage using traditional means, resulting in the development of complex new data-mining solutions.
The technology universe is vast – finding the best technology companies to invest in can also be a daunting task. Our experienced, specialist investment team has a deep understanding of the trends influencing this industry and are well-placed to unearth the most attractive opportunities. The portfolio’s track record since inception is testament to this.
2012: New Cycle: Cleared for Take-Off
Dramatic improvements in cost and speed, together with the adoption of mobile computing, have made the internet as ubiquitous as air travel.
PCT invests a large proportion of its assets in companies involved in the explosion of internet-related technologies.
Technological improvements have had a dramatic impact on the cost/performance equation of both aviation and the Internet, by broadening their appeal. New applications in avionics not only increased the speed, reliability and comfort, but also lowered costs, leading to air travel as we know it.
Echoing these advancements in the aviation market, plentiful bandwidth and cheap computing have presaged the development of a number of key Internet applications – these are likely to provide the best investment opportunities.
But this is not the only place where prospects may lie: we can invest in any attractive company that develops or supplies technological solutions as a core part of its business model. This means our investors gain exposure to the growth potential of areas as diverse as information, media, communications, healthcare, the environment and renewable energy.
2011: Changing the Landscape of Computing: Public Clouds and the Mass Production of IT
Just as the skyscraper ultimately changed the skyline, so we expect the cloud - and the mass production model it delivers - to transform the IT industry beyond recognition over the coming years.
Yet this is not necessarily good news for the best-known technology companies. PCT looks beyond the major players investing in companies with the highest growth potential – however big they are, and wherever they are based.
Public clouds deliver computing at vastly lower prices due to their scale and adoption of technologies which enable much higher usage rates than most enterprises can achieve. With computing needs growing inexorably in this era of austerity, companies and consumers are increasingly choosing cheaper technologies and vendors at the expense of better-known incumbents.
Technology indices are heavily skewed towards the biggest, best-known companies, but these do not necessarily present the most promising investment potential. Benchmark investing can be a value trap. PCT employs a non-benchmark unconstrained approach to investing, giving the freedom to invest in the companies that we believe are the new technology challengers.
2010: Harnessing the Potential of the New Technology Cycle
We’re in the midst of a new technology cycle, driven by cloud computing, internet applications and mobility.
PCT seeks to capitalise on such cycles, harnessing potential growth and exposure to exciting emerging themes by investing in companies believed to have the highest growth potential from across the global technology spectrum.
The technology industry is one of the most vibrant, dynamic and fastest-growing areas of the global economy, with companies in this sector offering the potential for substantially faster earnings growth than the broader market. This growth potential reflects the accelerating rate of adoption of new technologies which are transforming the competitive position of companies – and entire economies –and fuelling a major secular increase in technology spending.
PCT aims to maximise the long-term growth of shareholders’ capital. The manager’s approach enables them to fully harness the investment potential within emerging technology themes. We believe the companies we invest in will be at the forefront of technological innovation and have strong potential to rise in value.