‘People are negative about Britain, but shouldn’t be’ Markets Hub £26,210

Katie Potts has made fortunes by investing in home-grown technology talent. She tells Marianna Hunt why she prefers British firms to American ones

While most technology funds are stuffed with big American names such as Apple and Amazon, the Herald Investment Trust prefers lesser known but fast growing British stocks.

The £1.5bn trust invests globally in smaller companies in the technology, communications and multimedia sectors, and almost 50pc of its funds are invested in Britain.

Herald soared in 2020, returning 52pc, well ahead of the average 12pc from rival global smaller companies funds.

At the trust’s helm is veteran fund manager Katie Potts. She tells Telegraph Money what makes the British tech sector so exciting and what changes she will make in 2021.

WHO IS THE FUND FOR? We give investors exposure to fastgrowing smaller companies in the tech and multimedia sectors, which are hard to access as an individual.

We’ve held the companies in our top 20 for 12 years or longer on average, so people should stay invested for at least five years.

HOW DO YOU PICK STOCKS? We select industries we think will grow, such as cybersecurity, and try to find the best companies.

We judge that by looking at how big each company’s potential market is, what its profit margins could be and how much potential it has to grow.

Good management is key, so meeting the company one- on- one is very important. We’re very apprehensive about buying firms before meeting their managers, which made last year difficult.

WHY IS AROUND HALF THE TRUST INVESTED IN BRITAIN? People are negative about Britain but they shouldn’t be. We have lots of entrepreneurial companies here.

Valuations in America are very high, whereas British companies are far cheaper. Over time we plan to

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HOW DID YOU MAKE MONEY DURING THE PANDEMIC? Technology, one of our key sectors, has done well as people have worked from home. Among those firms that have faced difficulties, such as those in the media sector, good management has led them through.

They’ve adapted to online and made the most of the fact that people didn’t go away in the summer so needed other entertainment. Bloomsbury, one of our stocks, did well as it decided not to cut new book launches, whereas other publishers did.

WHAT ARE YOU EXPECTING FOR 2021? We’re a bit nervous as stock valuations are higher than we’ve been used to recently.

We expect some movement away from stocks that have done well from the change to working from home, so are taking some profits from these and putting the money into firms that will do well as people’s spending becomes more normal.

I believe we will all start travelling again and go back to the high street. Valuations for these kinds of stocks are much lower, too.

WHY DO YOU AVOID BIG AMERICAN TECH COMPANIES? We don’t own companies that get too large. When they do we sell out and use the profits to invest in early-stage firms that can grow faster.

YOU INVEST IN FIRMS THAT ARE NOT YET PROFITABLE. HOW DO YOU MANAGE THE RISK? We have more than 300 holdings and almost all make up less than 2pc of the trust. That helps.

WHAT HAVE BEEN YOUR BEST AND WORST INVESTMENTS? We bought GB Group, which helps companies to verify their customers’ identity and detect fraud, in the early 2000s. We bought it when the shares cost 20p and now they are 950p.

A handful of our companies have gone bust. One was Plasmon, which made large hard disc drives – we lost everything on our investment.

DO YOU HAVE YOUR OWN MONEY INVESTED IN THE FUND AND HOW ARE YOU PAID? I do invest in the trust. I founded Herald, the management company, so I get a base salary but also have shares in the business. I earn more if it does well.

What £1,000 invested at launch would be worth now

WHAT WOULD YOU HAVE BEEN IF YOU WEREN’T A FUND MANAGER? I studied engineering at university and wanted to go into manufacturing after graduating. But for my generation it was easier for a woman to work in the City than in industry.