It goes without saying that the vast majority of growth-focused funds haven’t had a great year. Nevertheless, I’ve been taking this as a chance to load up on more Scottish Mortgage (LSE: SMT) shares in preparation for better times.
Today, I’m asking whether I should also be taking a position in another investment trust.
A worthy rival?
Like its better-known rival, Allianz Technology Trust (LSE: ATT) is all about finding the best growth stocks management can find in the disruptive tech space. It’s certainly picked a good location to conduct its search. Allianz’s team is based in San Francisco — close to Silicon Valley.
Performance-wise, this relatively concentrated trust (47 holdings) has done well. Despite falling by a third in value in 2022, the shares have still managed to more than double since October 2017.
For me, this underlines the importance of looking at the long-term performance of any potential investment rather than making a judgement based on just a few weeks or months. It’s what being a Fool is all about.
Having said this, the five-year performance for Scottish Mortgage shares is not as impressive. Here, we see a capital gain of a little over 70%. Moreover, SMT has fallen more than its peer in 2022 (down 41%).
So should I be prioritising the Allianz trust over my position in Scottish Mortgage, especially as the former now trades at a 12% discount to the value of its investments?
Time to hold both?
Well, holding both would give me access to two management teams and their stock-picking prowess. With a market-cap still under £1bn compared to SMT’s £11bn, it can also be argued that ATT is more nimble in its approach and, consequently, possesses greater growth potential.
But there are issues with this strategy. One danger of holding both funds is that my portfolio becomes overly concentrated in one sector. That’s fine when things are going well. But it’s less easy to stomach when other parts of the market are generating better returns. Theoretically, the Allianz fund could also prove more volatile because it holds fewer stocks.
In addition to this, some overlap of holdings is inevitable. Electric car maker Tesla, for example, is SMT’s second-biggest position and the fourth-biggest of Allianz Technology Trust. Am I happy with this much exposure? Elon Musk may have defied his critics to date but the last few months have been tricky for holders to say the least.
Another important thing to highlight is the costs involved. Baille Gifford charges investors only 0.32% for managing Scottish Mortgage. As well as being low for an active fund that deviates substantially from the underlying benchmark, it’s also less than half the ongoing charge of the Allianz trust (0.8%). What may seem like a small difference can really impact returns over the years. And here at Fool UK, we’re big fans of keeping costs as low as possible.
Staying put
As things stand, I’m happy to stick with Scottish Mortgage shares as my main exposure to technology stocks. Maintaining a balanced portfolio (and ensuring a good night’s sleep) means more to me than shooting for the moon.
Even so, it will be interesting to see if both trusts rally to the same extent when market confidence inevitably returns.