There aren’t many fund sectors where it can be said that everything has a long-term gain. While that may be true for funds in the technology category, the top 20 have started to post losses.
The decade’s best-performing technology funds, with at least $100 million in assets under management, have outperformed broader markets with an average return of nearly 20%, Morningstar Direct data show. Over the past 12 months, the funds on this list posted an overall gain of more than 54%, with outliers in the triple digits. So far this year, however, the same funds have barely made it out of the red with an average return of less than 0.6%.
With growth sectors struggling relative to value at the start of the year, Amy Magnotta, co-head of discretionary portfolios at Brinker Capital Investments, says the short term losses is a case in point for advisors to discuss diversification with clients.
“After such strong returns in 2020, advisors could have taken the opportunity to capture profits by reducing exposure then and re-allocate to other areas of the equity market that have lagged,” Magnotta says. “It also argues for broad diversification across sectors and regions within a client’s global equity allocation, rather than concentration in a single sector or style.”
For comparison, index trackers such as the SPDR S&P 500 ETF Trust (
In bonds, the iShares Core U.S. Aggregate Bond ETF (
Aside from their slow start to the year, these long-term leaders also carry with them some significantly higher fees than average. With an overall net expense ratio of more than 100 basis points, the top 20 are more than twice the 0.45% investors paid on average for fund investing in 2019, according to
While a similar screen of the broader universe of technology funds all showed positive returns over the last 10 years, Magnotta says the pricier actively managed leaders in this ranking can still play a positive role in a client’s long-term plan.
“Some assets are cheap for a reason,” an expert says.
“While these funds have generated attractive returns well in excess of the market net of expenses, they warrant a place in a portfolio,” Magnotta says, suggesting that “exposure should also be blended with broad equity market funds with lower expenses, in addition to more inexpensive passively managed strategies, to construct a diversified global equity allocation.”
Scroll through to see the 20 technology sector funds with the best 10-year returns, and at least $100 million in AUM, through May 19. Net expense ratios, loads, investment minimums, and manager names, as well as YTD, one-, three-, five- and 15-year returns and month-end share class flows through May 1 are also listed. The data show each fund's primary share class. Leveraged, institutional and funds with investment minimums over $100,000 have been excluded. All data is from Morningstar Direct.
