This technology ETF is up +190% over the last 5 years

The technology sector represents a crucial and ever-evolving part of the global economy, characterized by innovation and rapid change. In this context, this product offers investors direct access to this dynamic megatrend.

We will examine this ETF in detail, evaluating its strengths, potential weaknesses, and the market context in which it operates by offering a complete and detailed review.

Amundi MSCI World Information Technology EUR Acc

Launched on August 16, 2010, this ETF manages a massive assets of 1,478 million euros, testifying to its popularity and market trust. The fund aims to replicate the performance of the MSCI World Information Technology index which includes leading global companies in the technology sector, offering geographical and sector diversification.

The fund employs a synthetic replication strategy through unfunded swap. This means you engage in a trading contract to earn the index’s return, without physically holding the shares. This method can reduce costs but introduces a certain degree of counterparty risk and less accurate tracking of the underlying.

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Expenditure indicator (TER)

With a TER of 0.30% per annum, the fund is relatively cheap compared to other ETFs in the technology sector. This low cost is a positive factor, especially for long-term investors, as lower expenses can have a significant impact on overall returns.

Performance and historical analysis

Amundi MSCI World Information Technology UCITS ETF EUR Acc has shown a remarkable performance path, which deserves in-depth analysis. Since its inception, this fund has achieved an impressive increase of 967.02%, an indicator of its exceptional performance in a rapidly evolving sector such as technology. However, it is crucial to examine this performance in a broader context, taking into account annual variations, market trends, and external factors influencing the technology sector.

Analysis of annual returns:

- 2023: the fund showed a strong recovery with a return of 47.52%, a sign that the technology sector continues to be an engine of growth despite global macroeconomic challenges.
- 2022: represented a difficult period, with a decline of 26.53%. This decline can be attributed to several factors, including international trade tensions, regulatory changes, and changes in monetary policies.
- 2021: a year of strong growth with an increase of 39.26%, supported by a renewed interest in digital technologies and a post-pandemic economic recovery.
- 2020: Even in a year marked by uncertainties due to the global pandemic, the fund recorded an increase of 31.43%, underlining the resilience and growing importance of the technology sector.

Considering the 3 and 5-year returns (+60.50% and +194.69% respectively), the fund has demonstrated an ability to generate appreciable long-term growth. These numbers reflect the dynamism of the technology sector and the fund’s ability to capitalize on emerging trends, such as the expansion of artificial intelligence, cloud computing, and semiconductor innovation.

Factors influencing returns

- Technological innovation. The continuous development of new technologies and the adoption of digital solutions in different sectors have driven demand and growth in the technology sector.
- Global economic changes. Economic fluctuations, monetary policies and trade tensions can significantly affect the technology sector, as evidenced by the fund’s annual returns.
- Evolving consumer behavior. The increase in the use of digital devices and online services has expanded the market for technology companies, positively influencing the fund’s performance.

Risk Profile Overview

The risk profile of the Amundi MSCI World Information Technology UCITS ETF EUR Acc is a crucial aspect to examine to fully understand the potential challenges and implications for investors. An in-depth risk analysis, together with the investigation of the maximum drawdown, offers a clear insight into the nature of the risk associated with this investment.

Volatility of the Fund

Volatility represents the change in the fund’s price over time and is a key indicator of market risk. With annual volatility of 17.55%, the fund is placed in a moderately high-risk range. This volatility is consistent with expectations for an ETF investing in a technology sector characterized by rapid change and innovation.

Maximum drawdown analysis:

- 1-year drawdown. The fund recorded a maximum drawdown of 8.64% in the last year. This indicates that, in the most volatile period, the fund had a significant decline from its peak, but maintained relative resilience.
- 3-Year Drawdown. With a maximum drawdown of 29.34% over three years, the fund has shown greater vulnerability to market fluctuations over a longer time horizon.
- 5 year drawdown. The maximum drawdown of 31.86% over five years reflects the fund’s sensitivity to long-term market changes, an important aspect to consider for investors with an extended time horizon.

Geographical exposure

The Amundi MSCI World Information Technology UCITS ETF EUR Acc offers a global overview of the technology sector, with broad geographic exposure reflecting the diversity and international reach of this sector.

The geographic composition of the fund is dominated by a large presence in the United States, which represents the majority of the portfolio by a significant percentage. In addition to the US, the fund holds positions in other key regions, including Asia (with a particular focus on Taiwan and Japan) and Europe, with a notable portion allocated to the Netherlands. This geographic distribution not only reflects the importance of US markets in the global technology sector but also highlights the growing importance of technology companies in Asia and Europe, offering investors direct access to a diverse mix of technology markets.

Sector exposure

From a sector perspective, the fund covers a broad spectrum of the technology sector, including key areas such as semiconductors, hardware, software, and technology services. Its sector exposure is particularly strong in the semiconductor segment, as evidenced by significant allocation to leading companies such as NVIDIA, Taiwan Semiconductor Manufacturing Company (TSMC), and Broadcom.

This concentration highlights the importance of semiconductors as a critical foundation for the entire technology industry, powering a wide range of applications from artificial intelligence to mobile communication and consumer devices. At the same time, the presence of companies in the software and technology services sectors reflects the fund’s diversification towards areas of rapid growth and continuous innovation.

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Investor Considerations

Investors should evaluate their risk tolerance in relation to the volatility and drawdown potential of the fund. While the fund offers the opportunity to participate in the growth of the technology sector, its exposure to significant risks requires a thoughtful investment approach and, possibly, a diversification strategy.

Conclusions

The Amundi MSCI World Information Technology UCITS ETF EUR Acc has proven to be an effective investment vehicle for capitalizing on the growth of the technology sector. Its impressive return trajectory, along with its ability to navigate through various market cycles, makes it an attractive option for growth-oriented investors. However, its volatility and sensitivity to market changes requires careful consideration and possible diversification within a broader investment portfolio.

Original article published on Money.it Italy 2024-02-01 16:37:24. Original title: Questo ETF tecnologico è salito del +190% negli ultimi 5 anni