Long Big Tech’ Crowded Trade Persists: BofA Fund Manager Survey

According to the latest Bank of America (BofA) Fund Manager Survey, the trade known as “Long Big Tech” remains the most crowded investment strategy among fund managers. The survey, conducted in September 2021, revealed that this trade continues to be highly popular despite concerns about potential regulatory actions, stretched valuations, and increasing market competition.

The term “Long Big Tech” refers to a strategy in which investors buy shares of large technology companies such as Apple, Amazon, Microsoft, Google, and Facebook, betting on their continued growth and dominance in the market. These companies have been at the forefront of innovation and have seen unprecedented success over the past decade. Their impact on various industries, from e-commerce to social media, cannot be ignored.

As the survey shows, this widely favored investment strategy holds certain risks. One of the concerns raised is the potential for regulatory actions. Governments around the world have become increasingly wary of the size and influence of Big Tech companies, leading to discussions of antitrust regulations and privacy concerns. If implemented, these regulations could have a significant impact on the profitability and business models of these tech giants.

Another issue that remains a worry for many investors is the stretched valuations of these companies. Over the years, investors have bid up the stock prices of Big Tech companies to high levels, raising fears of a potential bubble. A correction in their valuations could lead to substantial losses for investors heavily concentrated in this trade.

The rapid growth of the technology sector has attracted increased competition. Smaller, more nimble companies have entered the market, challenging the dominance of the Big Tech giants. These emerging players pose a threat to their market share and could disrupt their business models. Investing solely in Big Tech without considering the potential for disruption and innovation from smaller players may prove to be shortsighted.

Despite these concerns, fund managers continue to hold significant positions in Big Tech. This persistence is likely due to the sector’s proven track record of growth and profitability. Big Tech companies have consistently delivered strong earnings and impressive revenue growth over the years. Their position as market leaders in their respective industries provides some stability in uncertain times.

The COVID-19 pandemic has accelerated the reliance on technology in various sectors of the economy. From remote work and e-learning to the digitalization of commerce, the pandemic has highlighted the importance and necessity of technology. This shift has benefited Big Tech companies, as they are at the forefront of providing the necessary infrastructure and solutions to adapt to the new normal.

While the “Long Big Tech” trade remains crowded, investors should approach it with caution and carefully evaluate the risks associated with this strategy. Diversification across sectors and considering investments in emerging players can help mitigate some of the risks associated with investing solely in Big Tech. Staying up to date with regulatory developments and market dynamics is crucial for avoiding potential pitfalls in this trade.

The BofA Fund Manager Survey reveals that the trade of “Long Big Tech” remains the most crowded investment strategy among fund managers. Despite concerns about potential regulatory actions, stretched valuations, and increasing market competition, fund managers continue to hold significant positions in Big Tech due to its proven track record, profitability, and the accelerated reliance on technology driven by the COVID-19 pandemic. Investors should exercise caution and diversify their portfolios to mitigate risks associated with this highly popular trade.