Tech fund booms as investors retreat from Health and American investments

• Plum’s Tech Giants fund recovers share, now taking close to half all fund inflows

• Meanwhile 60/40 and Healthcare funds lose popularity

• American Dream also loses out, taking just 11% of share in June vs.14% in March

Big tech was back in fashion for investors in Q2, according to the latest analysis from smart money app Plum.

The company’s Tech Giants fund, which tracks the largest global technology companies such as Apple and Microsoft, took close to half (47%) of the overall share of funds investment in June 2023. That’s a notable increase from 37% at the end of Q1, and is by far the highest allocation to this fund in more than a year.

While a larger investment allocation to Tech Giants was seen across all age groups, it seems that older investors aged 55+ in particular had their faith in tech restored in Q2. In June, 46% of their allocation went to Tech Giants, compared with just 28% in March.

As tech grew in share, some other options lost out. One of Plum’s most popular defensive funds, The Medic (focused on health and pharmaceutical companies), saw its share of inflows reduce in June, from 9.4% to 8%. Meanwhile, the Balanced Bundle, made up of 60% stocks and 40% bonds, saw its inflows fall from 10% to 8%, as investors looked to take on more risk.

Preference for exposure to Big Tech has also come at the expense of the broader US market fund, with Plum’s American Dream fund dropping its share to 11% in Q2 from nearly 14% at the end of Q1. American Dream remains popular with 18-24 year olds when compared with other age groups, receiving 14% of allocation from the youngest cohort. However, even this is a substantial reduction from 19% in the previous quarter.

Plum’s CEO and founder, Victor Trokoudes, comments: “Despite a turbulent 12 months in the stock market, the behaviour of our investors in the last quarter suggests renewed confidence and appetite for risk, especially for big tech. Tech stocks are surging in popularity, perhaps in part due to the huge growth in demand for AI and clear potential for these companies to make the most of it. These companies have driven most of the return from the S&P 500 in recent months.”

“Meanwhile, the tech behemoths have been publicly demonstrating their high AI ambitions, from Apple’s VisionPro headset to Meta’s integration of AI into their metaverse. This has led to a new wave of optimism in the industry and, when paired with strong balance sheets and robust revenues despite a challenging economic environment, tech is far more attractive now compared to the tail end of 2022 for many investors.”

“It feels like tech is back, and this time round, no-one wants to miss out, even the more cautious older investors. Consumer confidence has been rising and it appears the US is coming close to the end of its rate tightening cycle, leading to more investors becoming more risk-on.”