Allianz Technology outperforms as “Magnificent Seven” hit turbulence to give its “emerging” leaders portfolio a break

Allianz Technology Trust’s focus on “emerging” technology leaders paid off in the first half as tech titans Apple and Amazon struggled against the turmoil of US tariff policy.

A breakdown in the dominance of “Magnificent Seven” stocks helped Allianz Technology Trust (ATT) beat its benchmark in the first half of the year, holding out the prospect of further outperformance by the top-performing closed-end fund.

The £1.7bn investment trust made a 2.9% investment return in the six months to 30 June, with an 8.7% gain in June alone. This beat the 0.2% drop in the Dow Jones World Technologyindexby 3.1 percentage points in the first half, as tech titans such as Apple faltered in the turmoil over US tariffs and the competitive threat from China’s DeepSeek put some of the Silicon Valley’s champions on the back foot.

Creditable performance

James Carthew, head of investment company research at QuotedData, said: “What, on the face of it, look like fairly pedestrian returns for H1 2025 mask a period of considerablevolatility. All credit to the Allianz Technology team for outperforming in such an environment. The NAV and share price have continued to climb since end June, and in the past few days have surpassed the highs set in February 2025. Nevertheless, in the battle for top spot in the sector, over one-, three- and five years ATT is trailingPolar Capital Technology (PCT), which has taken some punchier underweight positions in stocks such as Apple and Alphabet.”

Chair Tim Scholefield said while artificial intelligence (AI) remained a powerful theme, spawning multiple applications and stoking demand for semiconductors, cloud infrastructure and cybersecurity, performance within the sector was uneven.

“Entertainment stocks surged, semiconductors posted modest gains and software and IT services advanced slightly. In contrast, technology hardware stocks declined sharply, reflecting macroeconomic caution and tariff-related headwinds. Market leadership also broadened somewhat, with mega- and large-cap stocks outperforming, while ‘super-mega caps’ (greater than $1tn) lagged,” he said.

Scholefield cautioned: “While the long-term growth potential of the sector remains compelling, the near-term environment is likely to remain volatile, with many variables influencing both company fundamentals and investor sentiment.”

Greater dispersion of returns helpful

ATT’s outperformance was the result of an overweight to the rally in entertainment tech, propped by strong demand and good results, and an underweight to the slump in hardware as the market worried about Donald Trump’s import taxes.

Fund manager Mike Seidenberg also highlighted the underweight to Apple as a positive, although the i-Phone maker clawed back some of its double-digit decline in the first half with a 14% rally last week after announcing plans to invest $600bn in US production to limit the impact from tariffs.

Cloudflare, the global cloud services providerthat was a top 10 holding at 1.8%, rallied after a salesforce reorganisation improved results.

Music streaming platform Spotify Technology, a 1.6% holding, achieved its first ever annual profit with higher-than-expected subscriber growth. “The stock remains an important holding given its durable demand drivers combined with our high level of conviction in future growth opportunities,” Seidenberg said.

Seidenberg and co-managers Danny Su and Erik Swords are barred from following the full index weights in Apple, Microsoft and AI chip maker Nvidia for fear of becoming overly concentrated in those companies.

The manager said that weighed on the trust’s returns as Nvidia advanced on the improved outlook for chip and AI demand, despite it being ATT’s biggest holding at 10.1% at 30 June. Apple accounted for 6.6% in fourth place behind Microsoft on 9.6% and semiconductor provider Broadcom on 6.9%.

Nevertheless, his analysis showed a greater dispersion in tech performance with the “super-mega cap stocks” over $1tn dipping 4% overall in the first half as the declines in Apple and Amazon offset the gains in Meta Platforms, Microsoft and Nvidia.

“Instead, the market was led by megacap (between $250bn to $1tn) and large-cap stocks (between $30bn to $250bn), with both segments up 6.4%. Meanwhile, mid-cap stocks (between $5bn to $30bn) declined less than 1%, whereas small-cap stocks (less than $5bn) were higher by nearly 4% for the period,” Seidenberg said.

That’s helpful for a actively managed £1.9bn portfolio skewed to what Scholefield called the “emerging leaders below the mega-cap tier.”

Performance analysis

Morningstar data from Deutsche Numis shows its net asset value (NAV) has leaped by 32.6% in the past year, beating the benchmark’s 26.5% gain and reversing a trend of underperformance over three and five years. Over these periods, underlying returns of 83.9% and 115.5% have lagged the Dow Jones World Technology’s 85.6% and 128.6%.

A rebound might mean ATT could maintain its current ten-year record of beating the index. Over the past decade, the portfolio’s total NAV return of 703% at 8 August had beaten the 657.8% of the benchmark. Shareholders didn’t quite get the full performance as the shares have traded below asset value for over three years, and currently stand on a 10% discount. That has reduced their total 10-year return to 653.7%, which is still impressive and the second-best return of any London-listed investment company, behind private equity giant 3i Group’s stunning 959% return and ahead of rival Polar Capital Technology’s 583.9%.

Deutsche Numis analyst Gavin Trodd said since Seidenberg took over from former long-standing manager Walter Price in June 2022, ATT had produced an NAV total return of 111%, equivalent to 27.2% a year, compared to 108% (26.5% a year) for the index and in line with Polar Capital Tech. He said this “is impressive given it has been notably underweight US mega cap tech for the majority of this period.”