Pension fund officers as a group have kept their traditional long-term perspective when it comes to technology investing. As a result, they feel comfortable with their current portfolios, despite the Nasdaq’s recent rout. They even think that the technology-driven index will rebound from last year’s dismal performance.
Less than 6 percent of the plan sponsors surveyed for this month’s Pensionforum consider their stock portfolios to be overexposed to technology. More than 88 percent feel their exposure to the sector is sufficient.
Only about 8 percent of respondents have considered treating technology as a separate asset class. More than 65 percent keep less than a third of their equity portfolios in tech stocks; about 33 percent place roughly one third of stock assets in the sector.
The survey suggests some differences in approach between large and small funds. Among funds with equity portfolios exceeding $1 billion, more than 40 percent say at least a third is invested in tech stocks. Of those larger funds, 2.6 percent say that tech stocks make up half or more of their equity portfolios. Among funds with less than $1 billion in stocks, nearly 76 percent limit their tech holdings to a third of their assets.
According to plan sponsors, though, the ranks of their money managers that specialize in tech stocks have doubled in the past five years. Some 30 percent of managers specialize in technology investing, compared with slightly more than 15 percent in the mid-1990s. Not surprisingly, the more aggressive tech investors are also the largest funds. About 31 percent of large funds say they have at least one manager that specializes in tech investing; within that 31 percent, 7.5 percent have three to five high-tech specialists. Among small and midsize funds, none has more than two tech specialists.
In the past year 5 percent of plan sponsors have hired a tech specialist, but only about 2 percent say they intend to do so in the coming year. Most sponsors do not seem to have blamed their managers for the Nasdaq’s collapse; just 1.4 percent fired their tech specialists.
What’s ahead for the technology sector? Roughly 10 percent of respondents believe that the Internet-led technology boom has reached its peak, while 16.5 percent say it is just getting started. For nearly three quarters of them, the answer lies somewhere in between.
All in all, pension officers are hopeful about the prospects for the Nasdaq. Slightly more than 70 percent think the index will rise by year-end. Just 9.4 percent expect it to fall. Funds of different sizes have different takes on the question. Smaller pension funds are more pessimistic: 100 percent of funds with less than $100 million in assets believe that the Nasdaq will fall this year, whereas only about 14 percent of funds with assets between $100 million and $500 million think so. Just 5.1 percent of the largest funds believe that the Nasdaq will tumble again in 2001.
Have you ever considered treating technology as a separate asset class?
Yes 7.9%
No 92.1
About how much of your stock assets do technology holdings make up?
Less than one third 65.4%
Roughly one third 33.1
Half 0.7
More than half 0.7
Do you believe your stock portfolio is:
Overexposed to technology? 5.8%
Sufficiently exposedto technology? 88.5
Underexposed to technology? 5.8
Which of the following best describes your primary source of technology exposure?
Active small-cap stocks 36.0%
Passive small-cap stocks 3.6
Active large-cap stocks 42.4
Passive large-cap stocks 13.7
Private equity 1.4
Venture capital 2.9
How many of your money managers specialize in technology investing?
None 71.4%
One 20.0
Two 4.3
Three to five 4.3
More than five 0.0
Five years ago how many of your money managers specialized in technology investing?
None 84.9%
One 9.4
Two 5.0
Three to five 0.7
More than five 0.0
Have you hired any technology investing specialists in the past year?
Yes 5.0%
No 95.0
Do you expect to hire any technology investing specialists in the coming year?
Yes 2.1%
No 92.1
Maybe 5.7
Have you fired any technology investing specialists in the past year?
Yes 1.4%
No 98.6
Do you think the technology boom brought on by the Internet:
Has reached its peak? 10.1%
Is just getting started? 16.5
Falls somewhere in between? 73.4
Between now and the end of 2001, what are your expectations for the Nasdaq?
Down 9.4%
Flat 20.3
Up somewhat 64.5
Up dramatically 5.8
