POLAR CAPITAL TECHNOLOGY TRUST 2025 OUTLOOK AND 2026 FORECAST

Overview of Polar Capital Technology Trust (PCT)

Polar Capital Technology Trust (LSE: PCT) remains one of the United Kingdom’s most prominent investment trusts focusing on the global technology sector. With a diversified portfolio of high-growth tech companies—primarily listed in the United States—PCT offers UK investors direct exposure to some of the world's leading innovation-driven enterprises. In 2025, the trust’s performance has been marked by both strong tailwinds from AI and semiconductor demand, contrasted with geopolitical risks and macroeconomic uncertainty.

How did PCT perform in 2025?

Throughout 2025, Polar Capital Technology Trust experienced a moderate rebound in net asset value (NAV), following a challenging 2022–2023 period marked by interest rate hikes and valuation corrections in the tech sector. Over the calendar year, PCT delivered a total NAV return of approximately 15.2%, slightly underperforming the broader NASDAQ 100 index. Share price performance was slightly more volatile, tightening the discount to NAV from 11% at the start of the year to about 6% by year-end.

Main portfolio highlights in 2025

• Artificial Intelligence (AI): Holdings in Nvidia, Microsoft, and Alphabet benefited from continued investments in generative AI capabilities.
• Semiconductors: Taiwan Semiconductor Manufacturing Company (TSMC) and ASML played to crucial themes around chip demand and reshoring.
• Software stocks: Salesforce, Adobe, and ServiceNow contributed positively amid enterprise digitisation efforts.
• Cybersecurity: CrowdStrike and Palo Alto Networks saw moderate returns, driven by escalating demand for data protection solutions.

Management shifts and strategic developments

In 2025, PCT's management team, led by Ben Rogoff, continued to tilt the portfolio towards higher-conviction themes including Quantum Computing and edge AI. There was also an increasing emphasis on Asia-based stocks as Western valuations remained elevated. Moreover, the trust introduced improved governance disclosures and expanded shareholder communication initiatives.

UK investor implications in 2025

• Trust structure: As an investment trust, PCT offers investors the benefit of gearing, compounding long-term returns during tech upcycles.
• Dividend policy: As a growth-focused trust, it pays a modest dividend, reinvesting the majority back into the portfolio.
• Discount control mechanisms: Share buybacks were occasionally deployed in 2025 to regulate the share price discount to NAV.

ESG considerations

Environmental, Social, and Governance (ESG) integration advanced in the trust’s investment decisions, although ESG risk scores fluctuated as some tech giants faced scrutiny on privacy practices and AI ethics.

2025 dividend and ongoing charges

PCT declared a minimal dividend of £0.145 per share, with an ongoing management charge of 0.80%, in line with previous years. The trust remains competitive for cost-conscious investors seeking growth exposure to global technology firms.

Market comparisons

Compared to peers such as Allianz Technology Trust and Scottish Mortgage Investment Trust, PCT offered a more focused technology allocation, whereas others incorporated a broader innovation theme. This helped PCT stay resilient through 2025 volatility, but also limited exposure to potential gains outside the core tech sector.

Key growth themes influencing PCT

The performance of the Polar Capital Technology Trust in 2025 was predominantly shaped by several transformative trends. Understanding these themes is essential for anticipating its direction in 2026.

1. Generative AI Investment Boom

PCT continued to capitalise on the surge in generative AI—a trend that dominated tech sector headlines. Key positions in Nvidia, Microsoft, and Alphabet enabled the trust to benefit from demand for AI infrastructure and software platforms. Datacentre investment, accelerated by hyperscale cloud providers, significantly boosted shares of chipmakers and AI-focused software vendors in the portfolio.

2. Semiconductor Supercycle

Geopolitical tension between the US and China underscored the strategic importance of semiconductor sovereignty. PCT’s holdings in ASML, TSMC, and Broadcom rode the new semiconductor capex cycle. The global race to build domestic chip manufacturing plants, supported by government subsidies, offered multi-year investment tailwinds.

3. Cybersecurity Expansion

Adoption of hybrid work models and increased cyber breaches created a secular tailwind for cybersecurity. PCT maintained positions in Palo Alto Networks and CrowdStrike, capturing gains from robust enterprise and government expenditure in security infrastructure.

4. Cloud Migration and SaaS Penetration

Business transformation efforts drove demand for cloud-native applications. Investments in companies like Adobe, Oracle, and Salesforce reflected this persistent digitisation wave among enterprises. Strong recurring revenue and pricing power insulated these stocks from broader margin pressures.

5. Quantum Technology and Long-Term Bets

Though still early-stage, PCT began allocating small positions to quantum computing initiatives, such as IonQ and Rigetti. These speculative plays may not materially affect results near-term, but represent high-conviction bets for the next decade’s innovation frontier.

Macro risks affecting PCT in 2025

Despite these strategic tilts, PCT was not immune to macroeconomic turbulence:

• Interest Rate Volatility: Persistent inflation and cautious monetary policy by global central banks constrained tech valuations, particularly among unprofitable or early-stage firms.
• US–China Trade Relations: Trade restrictions surrounding semiconductor equipment and AI collaboration materially impacted PCT’s Asian tech holdings.
• Regulatory Pressures: EU and US legislative actions around digital competition and data privacy introduced compliance costs for large-cap holdings.

Currency performance impact

Given its international portfolio, currency translation effects also influenced performance. The relative strength of the pound against the US dollar in the second half of 2025 slightly diminished returns when converted back to GBP.

Valuation outlook entering 2026

Valuation metrics within the trust remain above long-term averages. However, stronger earnings growth in cloud, AI, and data infrastructure has partially justified premium pricing. The portfolio EV/EBITDA multiple hovered around 18x by year-end 2025—higher than pre-pandemic norms but below 2021’s peak frothiness.

Liquidity and gearing strategy

PCT maintained a modest gearing level of around 5–7%, designed to enhance upside during technology bull markets. Liquidity remained strong, with tight bid-ask spreads and active institutional participation.

Outlook and considerations for 2026

Looking ahead to 2026, Polar Capital Technology Trust faces a rapidly evolving investment landscape marked by both promising innovation cycles and renewed regulatory and macroeconomic risks. For UK investors, attentive observation of key portfolio themes, global policy shifts, and the trust’s strategic positioning will be essential.

1. Artificial Intelligence Monetisation

While 2025 was the year of AI investment proliferation, 2026 may be judged by the monetisation of those investments. As enterprises shift from experimentation to operational deployment, portfolio holdings like Microsoft, Adobe, and ServiceNow could see accelerated revenue growth. The focus will be whether AI platforms can deliver measurable productivity gains and justify their capital intensity.

2. Regulatory Outlook

An evolving regulatory climate—especially in the EU, UK, and US—will likely shift the risk profile of large-cap holdings. Investors should track developments in AI ethics legislation, digital tax regimes, and anti-trust rulings. Polar Capital’s risk management processes, along with its engagement policies, will be tested amid this scrutiny.

3. China Exposure and Supply Chain Resilience

The trust’s modest exposure to Asia-based tech manufacturers requires ongoing monitoring as US–China tensions remain unresolved. However, increased reshoring and near-shoring in countries like India and Vietnam may offset some of the China concentration risk.

4. IPO Activity and New Allocations

Should interest rates stabilise and investor appetite return, a wave of tech IPOs may resume in 2026. PCT's participation in late-stage private equity rounds or IPOs could provide alpha if new listings are priced reasonably. Areas like biotech-IT convergence and robotic process automation are prime candidates for future allocations.

5. ESG Performance

Stakeholder pressure on ESG compliance will continue to weigh on investor perception. The trust faces expectations to improve ESG performance, particularly given controversies linked to some mega-cap names. Quantitative ESG metrics and shareholder proposals will influence governance scorecards.

6. Possible Rebalancing Towards Europe

PCT might consider regional rebalancing if European tech firms—traditionally underrepresented—begin to offer compelling valuations and growth. Opportunities in semiconductors (e.g., Infineon), software (e.g., SAP), and energy-efficient processors may attract future allocations.

7. Dividend outlook and UK taxation

The dividend outlook remains modest, in line with the trust’s growth strategy. However, UK investors need to stay informed of potential taxation changes under a new government in 2026 that may affect capital gains or dividend tax rates on investment trusts.

Investor takeaways for 2026

• Remain focused on long-term trends in AI, cloud, and cybersecurity—they continue to drive earnings momentum in core holdings.
• Be mindful of geopolitical shifts and macro volatility—hedging through diversification across markets and subsectors is key.
• Assess valuation discipline—avoid overexposure to speculative high-multiple growth stocks lacking fundamental tailwinds.
• Track the discount to NAV—it may present tactical buying opportunities if widened unduly due to sentiment, not fundamentals.

Final thoughts

Polar Capital Technology Trust enters 2026 on relatively strong footing, with a portfolio well aligned to longer-term digital consumption trends. While cyclical risks persist, especially at the macro level, the trust’s disciplined management, high-conviction themes, and diversified exposure continue to make it a relevant vehicle for UK-based investors seeking quality global technology exposure over a multi-year horizon.