Speaking at ETF Stream’s Big Call: Technology Funds event, de Gale (pictured) said the FAANGs, in particular, had all sorts of problems, adding it was very unlikely they would repeat the returns of the last 10 years over the next decade.
De Gale does not hold any of the FAANGs in his top 10 holdings as he believes these giants will eventually be disrupted by the next big story.
Another area he is avoiding is the “overhyped” unicorn universe as valuations had become far too high. Between 2011 and 2014, he explained the majority of tech funds had piled into the funding rounds of these companies as they hunted for yield in the low return environment.
“These companies’ IPOs will be catastrophic as they are charities not businesses,” he added.
Instead, he looks for companies with market caps between $1bn and $100bn that make the shiny technology work as this is the "sweet spot".
“Playing the arms dealer is a successful strategy,” de Gale continued. “Instead of investing in two companies that are beating each other with clubs, invest in the business that is selling the clubs to the two companies.”
One area he is finding value is in a Latin American tech company called MercadoLibre, which is in his top 10 holdings and makes up 4.3% of the fund.
The reason why the tech manager is so bullish is because, unlike the rest of Latin American tech companies, its corporate governance is good and eCommerce has only penetrated 4% of the region compared to around 20% for the US and Europe.
According to the factsheet, the fund has returned 16.4% this year, as at the end of May.