Fund Profile: Henderson Global Technology Fund

by Ann C. Logue

The Henderson Global Technology Fund set up shop after the tech bubble had long burst and everyone else was home with a hangover. That doesn’t mean the fund hasn’t had a few bad years, but it’s now performing well given that technology is one of the strongest sectors of the U.S. economy. The fund’s largest holdings as of Oct. 31, 2007 were Microsoft Corporation (Nasdaq: MSFT), EMC Corporation (NYSE: EMC) and Focus Media Holding Limited (Nasdaq: FMCN).

Of course, one can define technology almost any way one wants. The fund’s prospectus defines technology-companies as those that “will benefit significantly from advances or improvements in technology,” especially “those engaged in producing, developing, selling, using or distributing technology products, processes or services.” That’s broad enough that almost any company could qualify and that’s the point. The fund won’t get bogged down with investments in a dying sector when the market moves. (Don’t laugh: years ago, I worked for the now-defunct Kemper Financial Services; the company’s first mutual fund, formed in 1948, was the Television Fund. At that time, TV was as cutting edge as it got. Eventually, the fund was renamed the Technology Fund and then it disappeared through a series of mergers.)
Henderson Global Technologies Fund could invest in television, of course, but if television were the future, the Writers Guild of America would not be striking over payments from Internet and DVD sales of television shows. But the fund does have good exposure to companies that are using technology for entertainment, in the United States and overseas. For example, 3.14% of the fund’s holdings are in Google Inc. (Nasdaq: GOOG) and 2.99% is in Apple Inc. (Nasdaq: AAPL); between Google’s YouTube and Apple’s iTunes, both companies offer technological alternatives to television.

One of the fund’s focus areas is a play on one of the hot holiday presents for 2007: the portable global positioning device. Both TomTom (Amsterdam: TOM2.AS) and Trimble Navigation (Nasdaq: TRMB) show up in the Henderson Global Technologies portfolio. It also holds Tele Atlas (Amsterdam: TA.AS), which is being acquired by TomTom. For that matter, there’s the fund’s 3.14% holding in Google, which offers the Google Maps feature.

Prospectus language is one way to maintain flexibility; another is to keep cash on hand, and this fund’s managers do just that. The Global Technologies Fund has almost 6% of its $270 million in assets in cash, which allows the fund managers to take new positions or meet redemptions without selling existing holdings. That’s a bit on the high side, but not unreasonable given the amount of volatility in global markets right now.

About two-thirds of the fund’s assets are invested in U.S. companies. That’s in part because the U.S. is a leader in developing new technologies; even if the products are made overseas (as with Apple’s iPod), the profits accrue here. With the weak dollar, gains on investments in other currencies grow larger when they are translated back, which gives a nice boost to performance. Unless the dollar gets a lot worse, the currency effect will go away next year and possibly reverse itself.

The fund is managed out of the UK but sold to U.S. investors through brokers and financial planners. It carries a hefty 5.75% front load on a minimum investment of $500. The first breakpoint is at $50,000 and the Class A shares carry a 0.25% 12b-1 fee. Sell your account within 30 days of opening it and you’ll be hit with another 2% redemption charge. The expense ratio is 1.87%, which is reasonable for a research-intensive fund like this. The fund also has Class B shares with a contingent deferred sales charge and a 1% 12b-1 charge and Class C shares sold through some brokers with no load but the 1% 12b-1 charge.

If you’re interested in exposure to technology, broadly defined, like a global perspective on the business, and work with a financial advisor, you might want to consider this fund, especially for a retirement plan (the fund has no yield and an annual turnover of 129%, so you can bet there are reportable capital gains every year). Although Henderson isn’t a household-name mutual fund company, it has a few good funds.

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