Bloomberg
If you’re an investor, you’ve no doubt heard about how difficult it is for a fund manager to beat the performance of a benchmark index.
One reason for this is that actively managed mutual funds have expenses that erode performance.
But some fund managers can overcome that disadvantage. Fund-research firm Morningstar has provided a list of outperforming mutual funds focused on the technology sector that have five-star ratings, the highest.
For a discussion on fund fees and share classes, please see the bottom of this story.
Outperformance
Here’s a chart showing how the five funds have performed against the S&P 500 information-technology sector over five years:
FactSet
You can see that all have outperformed the S&P 500 information-technology sector significantly over the past five years.
Here are average annual returns for the five funds (listed in alphabetical order) against the S&P 500 information-technology sector after annual expenses. (We have included annual expense ratios provided by Morningstar.):
| Ticker | Total return - 2018 through June 21 | Avg. return - 3 years | Avg. return - 5 years | Avg. return - 10 years | Annual expense ratio | |
| BlackRock Technology Opportunities - Service shares | 20.3% | 24.9% | 26.5% | 14.9% | 1.17% | |
| Columbia Global Technology Growth Fund - Advisor shares | 15.6% | 23.6% | 25.9% | N/A | 1.06% | |
| Fidelity Select Software and IT Services Portfolio | 16.7% | 24.1% | 22.8% | 16.8% | 0.73% | |
| Putnam Global Technology Fund - Y shares | 18.4% | 27.4% | 25.6% | N/A | 1.03% | |
| T. Rowe Price Global Technology Fund | 10.3% | 23.5% | 27.8% | 19.2% | 0.89% | |
| S&P 500 information technology sector | 13.8% | 22.4% | 22.5% | 14.4% | ||
| Sources: Morningstar, FactSet | ||||||
The T. Rowe Price Global Technology Fund was closed to new investors in September. However, it may still interest you to see the top 10 holdings of the fund, below. MarketWatch profiled this fund in June 2017.
Top holdings of each fund
Here are the top 10 holdings (of 104) of the $1.1 billion BlackRock Technology Opportunities Fund as of May 31:
| Company | Ticker | Total return - 2018 through June 21 | Total return - 2017 | Total return - 3 years | Total return - 5 years |
| Amazon.com Inc. | 48% | 56% | 298% | 533% | |
| Microsoft Corp. | 19% | 41% | 136% | 245% | |
| Alphabet Inc. Class A | 11% | 33% | 110% | 165% | |
| Apple Inc. | 10% | 48% | 55% | 246% | |
| Tencent Holdings Ltd. | 1% | 115% | 162% | 579% | |
| Alibaba Group Holding Ltd. ADR | 17% | 96% | 136% | N/A | |
| Facebook Inc. Class A | 14% | 53% | 144% | 721% | |
| Salesforce.com inc. | 35% | 49% | 84% | 260% | |
| Square Inc. Class A | 94% | 154% | N/A | N/A | |
| Autodesk Inc. | 31% | 42% | 157% | 303% | |
| Sources: Morningstar, FactSet | |||||
Here are the top 10 holdings (of 128) of the $1.3 billion Columbia Global Technology Growth Fund as of May 31:
| Company | Ticker | Total return - 2018 through June 21 | Total return - 2017 | Total return - 3 years | Total return - 5 years |
| Microsoft Corp. | 19% | 41% | 136% | 245% | |
| Alphabet Inc. Class A | 11% | 33% | 110% | 165% | |
| Amazon.com Inc. | 48% | 56% | 298% | 533% | |
| Apple Inc. | 10% | 48% | 55% | 246% | |
| Facebook Inc. Class A | 14% | 53% | 144% | 721% | |
| Visa Inc. Class A | 18% | 47% | 100% | 211% | |
| Micron Technology Inc. | 45% | 88% | 143% | 328% | |
| Lam Research Corp. | -4% | 76% | 121% | 314% | |
| Tencent Holdings Ltd. | -2% | 115% | 159% | 602% | |
| Cisco Systems Inc. | 14% | 31% | 64% | 107% | |
| Sources: Morningstar, FactSet | |||||
These are the top 11 holdings (of 58) of the $5.9 billion Fidelity Select Software and IT Services Portfolio as of April 30. We are showing 11 this time because the fund holds two classes of shares for Google parent Alphabet :
| Company | Ticker | Total return - 2018 through June 21 | Total return - 2017 | Total return - 3 years | Total return - 5 years |
| Microsoft Corp. | 19% | 41% | 136% | 245% | |
| Facebook Inc. Class A | 14% | 53% | 144% | 721% | |
| Alphabet Inc. Class C | 11% | 36% | 116% | N/A | |
| Alphabet Inc. Class A | 11% | 33% | 110% | 165% | |
| Adobe Systems Inc. | 42% | 70% | 212% | 456% | |
| Visa Inc. Class A | 18% | 47% | 100% | 211% | |
| Salesforce.com inc. | 35% | 49% | 84% | 260% | |
| Akamai Technologies Inc. | 26% | -2% | 13% | 100% | |
| Mastercard Inc. Class A | 33% | 48% | 116% | 262% | |
| PayPal Holdings Inc | 17% | 87% | N/A | N/A | |
| Cognizant Technology Solutions Corp. Class A | 10% | 28% | 26% | 152% | |
| Sources: Morningstar, FactSet | |||||
Here are the top 10 holdings (of 52) of the $374 million Putnam Global Technology Fund as of March 31:
| Company | Ticker | Total return - 2018 through June 21 | Total return - 2017 | Total return - 3 years | Total return - 5 years |
| Alphabet Inc. Class C | 11% | 36% | 116% | N/A | |
| Microsoft Corp. | 19% | 41% | 136% | 245% | |
| Facebook Inc. Class A | 14% | 53% | 144% | 721% | |
| Visa Inc. Class A | 18% | 47% | 100% | 211% | |
| Alibaba Group Holding Ltd. ADR | 17% | 96% | 136% | N/A | |
| Sino-American Silicon Products Inc. | 69% | 135% | 299% | 291% | |
| Walsin Technology Corp. | 233% | 187% | 2,339% | 4,287% | |
| DXC Technology Co. | -1% | 61% | 240% | 433% | |
| Delivery Hero AG | 33% | N/A | N/A | N/A | |
| Tencent Holdings Ltd. | -2% | 115% | 159% | 602% | |
| Sources: Morningstar, FactSet | |||||
And here are the top 10 holdings (of 32) of the $6.8 billion T. Rowe Price Global Technology Fund as of March 31:
| Company | Ticker | Total return - 2018 through June 21 | Total return - 2017 | Total return - 3 years | Total return - 5 years |
| Tesla Inc. | 12% | 46% | 32% | 249% | |
| Microchip Technology Inc. | 13% | 39% | 113% | 207% | |
| Taiwan Semiconductor Manufacturing Co. | -1% | 31% | 77% | 155% | |
| Fanuc Corp. | -16% | 39% | -8% | 72% | |
| Facebook Inc. Class A | 14% | 53% | 144% | 721% | |
| Tencent Holdings Ltd. | -2% | 115% | 159% | 602% | |
| Alphabet Inc. Class C | 11% | 36% | 116% | N/A | |
| Broadcom Inc. | 2% | 48% | 92% | 657% | |
| Alibaba Group Holding Ltd. Sponsored ADR | 17% | 96% | 136% | N/A | |
| Intuit Inc. | 34% | 39% | 108% | 283% | |
| Sources: FactSet | |||||
Actively traded mutual funds tend to have multiple share classes. Some shares are only available to institutional clients or those investing through retirement accounts. Others are sold through advisers or brokers. Some can be purchased directly from the fund-management company.
The various share classes have differing annual expense ratios and some have front-end sales charges that you should avoid. Investing in an actively managed fund is expensive enough on an annual basis without being slapped with an upfront sales charge ranging from 4.5% to 5.7%.
Morningstar’s list of the five tech-sector funds have five-star ratings. All have more than one share class. We selected one share class for each fund — shares that have no upfront sales charge and can be purchased through a financial adviser, broker or possibly directly from the company.
If you are interested in investing in any of those funds, you will need to do more research, consulting with your broker or adviser or by contacting the mutual fund company directly.
You should also read the fund’s prospectus. It is not as intimidating as you might expect and contains important information about your potential long-term investment.
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Philip van Doorn covers various investment and industry topics. He has previously worked as a senior analyst at TheStreet.com. He also has experience in community banking and as a credit analyst at the Federal Home Loan Bank of New York.
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