Hohaus has doubled the weighting on his $332m fund to Asia this year, and says the sector is increasingly dominated by Asian tastes. For this reason he refuses to hold Apple, the biggest tech stock in the world.
"We have actually doubled our Asian weighting over the past year to roughly one-third of the fund," Hohaus said.
"For the first time, we see more IP [intellectual property] rising in those countries than in the West."
"Most idea generation is coming from Asia, with some things like organic LEDs and semiconductor equipment."
Hohaus says that Samsung is leading the smartphone market, with products that are designed for the tastes of the Asian consumer.
"For the first time, we see one of the major markets – smartphones – driven by Asian consumer preferences, namely wider screens," he said.
"Apple has missed its product cycle because it didn’t believe that people wanted bigger screens in this market."
"Consumer preferences in Asia are driving global markets. Apple is doing larger screens from next year, playing a trend that is coming from Asia."
The second-largest holding in the Lombard Odier Technology fund is a 5.9 per cent position in Samsung, which Hohaus says is benefiting from its superior knowledge of the Asian consumer.
"People underestimated how much innovation is coming from Samsung – unbreakeable screens in the next few years, for example," he said.
"On Apple, if you are a company that derives two-thirds of your profits from one product and it is close to 7 per cent of the industry’s profits and you are not innovative, it’s impossible to sustain those margins."
"If you miss one product cycle, it can be a problem to get it back."
Hohaus says Apple is following the normal trajectory of companies in the sector that grow rapidly and stop innovating, a path trodden by Motorola and others many years ago.
After hitting an all-time peak last year, Apple’s shares have since fallen by more than a third, prompting the company to announce it would implement a share buy-back programme to return cash to shareholders.
"The cash return is quite decent, given that buy-back amounts to 3 per cent yield, but that cash can evaporate if you aren’t growing earnings."
The manager has 7.3 per cent in Google, but says that he is not a fan of Facebook.
"We have never held Facebook, except for an hour on the day of its IPO."
"We are not convinced by its business model. It’s a social club and clubs have a limited time span and become less popular over time," he warned.
"Teenagers spend less time on their profiles than they used to. This often leads to lower user numbers over time. It’s an unstable business model."
Many investors are nervous about investing in the sector, given the volatility in stocks such as Apple.
Just a year ago, Apple was top of the tree, and many analysts said it would dominate the sector for years to come.
Hohaus says that experienced management can handle this volatility.
"Stockpicking is extremely difficult," he continued. "You can find a company that you think will be a leader and it can be out of favour in just one year."
"It’s not like food, where Nestle has been the leading company for decades."
"But a fund like ours, which is diversified and has an experienced team, can follow these trends and switch companies."
Lombard Odier Technology is a Luxembourg-domiciled SICAV that was launched in 1998. Hohaus has been manager since 2002.
It is available in either euro or dollar share classes, but not sterling.
The fund has underperformed its MSCI World IT benchmark recently in sterling terms, making 21.85 per cent over three years while the index has made 29.93 per cent.
Performance of fund vs benchmark over 3yrs
Source: FE Analytics
Hohaus says that this is a good time to get into the sector on valuation grounds.
"The tech market is on the same forward P/E as the overall market for the first time in 20 years: there’s no growth premium," he explained.
"It’s the only sector with net cash on the balance sheets, so companies can pay dividends or buy back shares to return cash to shareholders."
Another stock he thinks will benefit from the rise of Asia is Yahoo.
The company owns 20 per cent of Alibaba, a Chinese cross between Amazon and eBay, which Hohaus says is valued at around $100bn. Yahoo has a current market cap of $28bn.
The market gossip in China is that the company will go public in the next 12 to 18 months.
The IT sector in China is still at relatively low levels of GDP compared with the US, meaning that it has a lot of room to grow, the manager explains.
Hohaus adds that Yahoo Japan is the leader in that country for internet searches, while the recovery prospects in the West under its new chief executive are also appealing.
The manager says that the sector now bears no resemblance to what it was in the late 1990s, when many investors were hit in the dotcom crash.
"We are very valuation-sensitive; we always follow the numbers and those show there is no bubble at all."
"There’s no comparison at all to the bubble; companies have learned and kept cash tight to their chest and built much more profitable businesses, with better pricing power."
"They do not just come to market with a concept anymore."
