Fund puts safety net under tech investors

By PETER GRIFFIN IT writer

The manager of one of the first protected technology investment funds to be offered locally says such funds will allow New Zealand investors to break their traditionally low weighting of tech investment - and to do so safely.

Paul Davis, an American investment expert who manages tech funds from his farm on Banks Peninsula, has been brought onboard by Capital Guaranteed Investments to manage its Orb Technology Fund, which is trying to raise A$25 million to A$150 million ($28.4 million to $170.7 million) to invest across a range of US-listed communications, medical science and IT companies.

The pitch is that New Zealanders can invest at a relatively low entry level - from A$5000 - and have their initial investment protected.

Citibank underwrites the fund, holding back part of the money raised for hedge investments.

The fund has an eight-year term and contributors are guaranteed their initial investment back or 80 per cent of the annual net asset value of the portfolio, whichever is higher.

Davis said New Zealand investors tended to overlook tech stocks. The three sectors targeted by the Orb Technology Fund accounted for 30 per cent of equity market investment worldwide, which he said was a sensible minimum threshold for a tech investment weighting.

"To be underweight in those industries is dangerous. It's not a sensible investment call.

"Because these sectors are dominated by businesses not listed in Australia or New Zealand, investors here don't participate."

Tech Invest, which manages the Orb funds, has targeted 40 companies for investment.

"We look for companies that are undervalued relative to the present value of their free cash flows," said Davis.

Favourites within each sector were narrowed down. In communications, for example, wireless and broadband service providers were favoured, as regular voice and long-distance telephone firms struggled with huge infrastructure but poor growth.

Bellwether stocks may form part of the portfolio. Heavyweights such as Microsoft and Intel have featured in Tech Invest's portfolios in the past.

"We're also going all the way down to companies only worth US$30 million," said Davis, who already manages the A$37 million Technology Investment Fund.

The managing director of ASB Securities, Tim Preston, said funds like Orb were likely to appear increasingly here as enthusiasm for technology investment re-gained momentum. ASB had received strong interest in the fund from customers, he said.

Davis said the complexity of the technology and medical science industries made individual investments relatively difficult to track.

"I started in the software industry ... But I always told myself I wouldn't invest in the stock market until I could afford to do it full-time. Amateur investors get done over."

Closing date for investment in the Orb fund is September 29.