Investing in the future: technology stocks
by David Kelleher
The sharp fall in technology stocks in the major markets has forced many investors to think twice about investing in such markets. Although many tech stocks have proved to be lucrative in the short-term, recent track records have shown that the market still poses high risks.
Investment in dot.coms and Internet companies is still booming, however investors are now looking at something that offers stability and profitability. There is always a risk that something will go wrong.
Despite the risks, investors still look favourably upon stocks that are managed by reliable and established investment houses. At the end of the day, investors are happy to know that their money is being taken care of by professional and reliable people, who are able to analyse and take decisions without taking undue risks.
One of the major investment groups in the world, Royal & Sun Alliance Investments, last month launched the EuroTech Fund and this is now available in Malta through their representatives, Elmo Insurance.
The EuroTech Fund aims to provide investors with the opportunity to participate in the new wave of technology that is fundamentally changing business and society. Through this fund, investors put their money in a wide range of pan-European technology pioneers, and stocks expected to benefit from the application of new technologies.
"Technology is the driving force behind today's markets. We are moving from the old economy to a new one, where technology has become a market in its own right," Trevor Mawhinney, director of RSA's investment services, told The Malta Business Weekly.
"We are not interested in dot.coms or new Internet companies that are basically venture capital. We are focusing mainly on established tech companies such as Medisys, Nokia, Baltimore Technologies, NXT and Vodafone Airtouch. Mobile telephony is one sector that we are actively investing in," Mr Mawhinney said.
He stressed that the group was not involved in short-term speculative funds but quality technology stocks that "have a long-term future".
"The investment process involves taking a long-term view, whereby our clients are given detailed stock analyses. We are bringing equities to a new section of the market," he added.
Many investors have suffered because their investments were irreparably affected by sudden drops in market value. Mr Mawhinney believes that successful Internet ventures depend on two factors.
"The winners in the market will be those having earnings and those who have a good solid management. Success in the e-market will depend on these two factors," Mr Mawhinney said.
Successful fund management also depends on the group taking care of investors' money. A positive track records backed by a first-class fund management team are necessary for a successful venture. Royal & Sun Alliance have built a reputation that is backed by numerous awards. Royal & Sun Alliance Investments has delivered outstanding performance on a consistent basis.
The Group's skills have been independently recognised, on an equally consistent basis. Standard & Poor's has awarded the title of Best UK Investment Management Group three years in a row. In such a competitive market, this is a unique achievement.
"We have shown that we are good at managing money in the major stock markets. These awards for long-term performance encourage people to invest in long-term equities," Mr Mawhinney told The Malta Business Weekly.
The group has assets of over £40bn in the UK and £70bn worldwide. The idea of investment in long-term equities is still in its initial stage in Europe, contrary to the UK where people, thanks to tax incentives, are encouraged to investment in such funds.
"The Group is trying to change this culture. To this end we have set up the management company in Luxembourg. Europeans are more interested in investing in bonds, rather than long-term equities. In the UK for example, people are given tax incentives to invest on the long-term. This is encouraging for them. Also, in the UK provision is made for private investment plans, such as those for life or pension insurance," he explained.
"On the other hand, the European equity markets have taken time to develop. Sweden is one example where investments in funds have boomed, however Spain is still at the beginning. Europe is going through an evolution. With States soon not being able to provide social services, people are seeing the importance of investing in the long-term," Mr Mawhinney said.
The Group is therefore aiming to strengthen its asset gathering in Europe.
"This is a relatively new area for us in Europe so the group decided to set up base in Luxembourg and to launch the funds in smaller markets. This is one reason why we chose Malta. Last year we launched the SICAV funds through Elmo. We have had a very positive response in Malta. As to the new funds, Elmo showed interest in developing a new business and we felt that is the right place to start off," he said.
Mr Mawhinney added that investors are no longer looking for a wide range of investments, and neither are they willing to take excessive risks.
"People are adapting a change in mentality. They are not going to take excessive risk but are willing to be a bit adventurous. Elmo's clients are quite sophisticated or else budding investors. One advantage is that they can bank on our expertise and Elmo's reliability and reputation," Mr Mawhinney said.
The choice of market, he added, depended on the level of trust in the partner who is working with you. "Trust is very important. We have an association with Elmo that goes back nearly 60 years and we are able to trust them.
"On the other hand, what we are offering is exactly what Elmo were looking for," he said.
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