One professional investor is bearish on ASX tech shares, with their fund selling out of tech shares over the course of 2021 due to "frothiness" in the market.
GQG Partners Inc (ASX: GQG) co-founder, chief investment officer, and chair Rajiv Jain reportedly believes technology isn't going to be a growth sector in the future. Instead, Jain expects the market to turn to energy stocks.
Let's take a closer look at why the fund – which debuted on the ASX after a $1.2 billion Initial Public Offering (IPO) in October – is selling out of tech shares.
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Why is this firm selling out of ASX tech shares?
ASX listed asset management firm GQG Partners reportedly sacrificed potential earnings in 2021 to sell down holdings in tech shares under the conviction the sector's growth will soon slow.
"Our view is you can't wait till the music stops; you've got to make some preparations," Jain told the Australian Financial Review (AFR). "Technology is no longer the next growth spot; it's yesterday's growth spot."
He said the firm began selling down its holdings in tech shares around 12 months ago. Due to the reduced exposure, the firm "underperformed a little" last year, Jain said.
While its own tech sell-down saw the firm forsaking some of its gains, Jain told the publication it was spurred by "telltale signs" pointing to the sector's slowdown. He was quoted as saying:
When there's retail mania in most risky names, crypto, the IPO scene, retail inflows – these are all typical signs of late cycle, not early cycle.
So, what sector does Jain think will take off in the near future? He says the energy sector will be the next big thing.
"We believe the opportunity set has shifted towards some of these more capital and carbon-heavy industries because they're part of the solution," Jain told the AFR. "You need them to make the transition."
What's been going on with the tech sector in 2022?
ASX tech shares have indeed struggled through the start of 2022. The S&P/ASX 200 Info Tech (ASX: XIJ) has slumped 21% year to date while the S&P/ASX All Technology Index (ASX: XTX) has slipped 18%.
Among its biggest fallers is the share price of Advanced Human Imaging Ltd (ASX: AHI). It's fallen 56% since the start of 2022. Meanwhile, Redbubble Ltd (ASX: RBL)'s shares have plunged 45%.
In the ASX 200, the worst-performing tech share of 2022 is Megaport Ltd (ASX: MP1), with a 31% drop.
The sector has likely been weighed down by increasing inflation – often a precursor to interest rate rises.
However, as The Motley Fool Australia recently reported, Tribeca Investment Partners portfolio manager Jun Bei Liu believes the worst could be over for ASX tech shares. She also noted the 2022 sell-off has left some quality shares trading for ultra-low prices.
Xero Limited (ASX: XRO) is her pick of the bunch. Its share price has fallen 23% year to date.
Additionally, Head of Australian equities at T. Rowe Price Randal Janneke flagged Computershare Limited (ASX: CPU) as an ASX tech share to buy in times of high inflation.
Computershare is one of few ASX 200 tech shares recording gains for 2022. It's up 1.9% year to date.
