Allianz GI: UK investors must do more to attract tech firms to LSE
A flood of British tech firms dropping London in favour of a New York IPO is only set to increase, a boss at Allianz’s investment arm has warned.
Jeremy Gleeson, technology CIO at Allianz Global Investors, has no UK companies in his global tech fund, citing their high price and small availability.
“One of the problems that we have when we identify a great European company is that we find the equivalent in the US is trading at a discount,” Gleeson told City PM.
“There are fewer high quality technology companies here in Europe, so when one does make a breakthrough, one is acknowledged as being world class, if you’re a European fund manager, that’s the one you have to own,” he said.
The pressure for UK and European fund managers to own home-grown tech companies when there are so few means that American competitors often end up being cheaper.
Gleeson gave FTSE 100 tech firm Sage as an example, noting that while it trades at a similar price to US equivalent Intuit, the American competitor “has a lot more strings in its bow in terms of markets it covers”.
“They’re not just products for small and medium businesses, they do tax products for consumers, and they’ve got other irons in the fire as well,” he explained, meaning that Intuit ends up always being the favoured pick by global investors.
Re-listing risks
It didn’t used to be this way. Gleeson participated in Darktrace’s IPO in 2021, noting that from when the tech company floated to when it was taken over by an American private equity firm, “it only had one small dip below its IPO price, which the company never really got credit for”.
“There was almost like this ‘We don’t want to have a technology company be successful in the UK’,” he said.
“Unfortunately, maybe that has to change a little bit in the UK amongst the investment community, actually be more warm towards technology companies, rather than seeing them with a mistrust to begin with.”
The fund manager also pointed to Arm, a former FTSE 100 constituent, saying it was “really sad” that when the company re-listed, it chose to go to the US, as it would “have helped if UK investors could have had a good experience with arm, then it might have encouraged them to think a little bit more about other UK tech companies”.
“Increasingly, it’s going to make it easier for UK companies to think about listing overseas, and in the US in particular,” he said.
While Gleeson has six of the Magnificent Seven in his top ten companies (only Tesla is missing), he said he was trying to be “benchmark aware” rather than simply buy the biggest tech firms.
“You can go back to the mid to late 2000s, where the predominant players in the technology bencharm were IBM, Nokia, Intel, HP,” he explained, arguing that the benchmark shows what the more successful tech companies have been, rather than what they will be.