European investor interest in technology-oriented funds with a specialist focus is growing, according to the latest issue of The Cerulli Edge―European Monthly Product Trends.

Demand for technology funds shot up in 2020 as society at large sought digital substitutes for everyday activities. Assets under management (AUM) of technology-oriented funds domiciled in Europe almost doubled last year, driven by sustained inflows and positive performance. Although interest in technology cooled somewhat in 2021, demand remains encouraging in 2022, but the focus of technology has reverted from enabling working from home to problem-solving in areas such as climate change, artificial intelligence (AI), virtual reality, and cybersecurity, according to the research.

“Growth in technology funds in Europe has slowed relative to 2020’s pandemic-driven flurry, but shows encouraging signs as investors positively react to a series of longer-term initiatives, including a need for technology-driven solutions to global environmental and social challenges,” says Fabrizio Zumbo, associate director, European asset management research at Cerulli.

The increasing specialization of technology funds has not been the only shift observed in the sector. Although global-oriented funds still dominate the European technology fund landscape, investor interest in targeting exposure beyond the tech-heavy U.S. market is growing, says Zumbo. “Despite fears surrounding China’s regulatory crackdown on tech companies, several managers continue to bet that the market presents a major opportunity over the longer term.”