How can investors get access to the tech and artificial intelligence theme without paying over the odds?

The answer can be found in emerging markets, according to LGIM multi-asset manager Andrzej Pioch. 

He told Asset Allocator the emerging markets tech sector makes up around 30 per cent of the asset class, a similar weight as in the US, but at far cheaper valuations. 

“This works quite nicely to combine US tech, which there is a lot of focus and attention on, with emerging markets, particularly when it's priced at a lower multiple,” he told Asset Allocator. 

Indeed LGIM holds a 9 per cent position in developing world equities, split between the L&G Global Emerging Markets fund and the M&G Global Emerging Markets fund. Our records show this is significantly higher than the peer group average of 5 per cent, and the L&G EM fund is their second-largest position in their balanced model portfolios. 

Pioch is particularly mindful of reducing the dependence on US tech giants and going into emerging markets is not the only way they diversify away from the land of the free, all the while staying ‘very positive’ on the artificial intelligence theme.

They use the in-house L&G Artificial Intelligence ETF, which tracks the Robo AI index and is composed of 50 tech companies – not all of which Pioch thinks will make it out alive. 

The use of this ETF reflects a wider shift from LGIM to using more in-house ‘building block’ products. 

In May we noticed that their entire equity exposure across their ESG portfolios were swapped out for L&G products, the team saying that it was arranged so as to meet future sustainable reporting obligations and lower the overall costs.