The AFR – Alex Gluyas – Markets reporter
It’s been a tough few months for Joseph Ziller’s Global Fund.
His portfolio of high-growth companies run by their founders has been on the front line of a violent sell-off in software companies amid fears that artificial intelligence will replicate their services at a lower cost.
The fund sank 11.5 per cent in January alone after its outsized positions in former Wall Street darlings Figma and Palantir were swept up in the carnage. The portfolio is now down 21.9 per cent over the past three months.
Ziller is seeing a range of attractive opportunities amid the pullback in growth stocks. Louise Kennerley
But Ziller has brushed off the hammering of the tech sector and launched his equity strategy on the ASX on Monday as an exchange-traded fund. He believes the correction in the fund’s holdings allows investors to snap up the ETF at an attractive valuation.
“The relative pullback of software stocks on the S&P 500 compared to the whole S&P 500 on a three-month rolling basis has been as aggressive as the peak of the dotcom bust – it’s been very sharp,” he said.
“These times when there is an indiscriminate rotation out of a sector and correlations rise which causes everything to fall, is when the best bargains can be found.”
Ziller is in the early stages of expanding his funds management business which last year caught the eye of high-profile investment house Perennial Partners, which took a 50 per cent stake.
His global strategy, which manages $11 million, has returned 25.1 per cent a year since its 2022 inception, despite the more recent volatility.
While rival growth investors including Hyperion Asset Management have been slashing their exposure to software to stem the bleeding, Ziller has used the pullback to top up some of his higher-conviction bets.
Among those has been Palantir, which develops analytics platforms used by governments and businesses to make sense of vast, complex datasets. The stock has dived 20 per cent this year amid scepticism about its lofty valuation.
Ziller has also bought more shares in Figma, a design tool that lets teams collaborate in real time on digital products such as websites and apps. The fund has held Figma since it floated on the New York Stock Exchange in July, surging 250 per cent in its debut before crashing 81 per cent from its peak.
“Figma has been sold off as a risky software as a service (SaaS) business, but we actually see them as being a beneficiary from AI,” Ziller said.
The market’s anxiety kicked up a gear after AI giant Anthropic released the latest version of a legal plugin that operates within the platform Claude Cowork earlier this month that raised concerns about market disruption.
Ziller said an “investment fog” had settled over the sharemarket as investors struggled to forecast returns for SaaS companies that they think will be disrupted by AI. Price-to-earnings multiples have fallen despite short-term earnings expectations being unchanged.
The fund manager added that the still-solid profit outlook gave him confidence to stick with the portfolio, which also includes electric vehicle maker Tesla, chip giant Nvidia, crypto exchange Coinbase and rocket company Rocket Lab.
“We track our internal return for each stock in the portfolio over the next five years and then aggregate that at the portfolio level, and our five-year return estimate is at the top of its range since the fund’s inception,” he said.
Ziller joins a growing list of high-profile money managers including Jun Bei Liu’s Ten Cap, Doug Tynan’s GCQ Funds and David Allen’s Plato Global Alpha Fund to list their funds on the ASX as an actively managed ETF.
“The ETF improves accessibility, liquidity and operational efficiency,” Ziller said. “It allows advisers to implement and adjust positions intraday, integrate the strategy seamlessly into model portfolios and access daily transparency.”
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