Higher U.S. bond yields could cause investors to herd into technology stocks, according to one fund manager.
While the traditional thinking is that higher yields make bonds more attractive and could see rotation from equities into fixed income, Ben Rogoff, a fund manager at Polar Capital, said that more money could go into technology names.
"I think there's a very strong argument that says that actually you might end up seeing proper herding into companies that could deliver genuine secular growth against a backdrop where markets struggle to add PE (price to earnings ratio) because increased volatility, all things being equal, should demand lower prices," Rogoff told CNBC's "Squawk Box Europe" on Monday.
The 10-year U.S. Treasury yield hovered just under 3 percent on Tuesday. Bonds are usually seen as a safe-haven investment over equities. But with central banks keeping interest rates low in the past few years, government bonds have had low yields. Now, as the U.S. Federal Reserve and other central banks begin to raise interest rates, bond yields should go higher.
Higher bond yields could mean higher borrowing costs for companies. Some technology firms rely heavily on borrowing to fuel their growth. On Monday, Netflix announced plans to raise $1.5 billion in debt, the second time in year it has raised money by issuing bonds. Tesla is another company that relies heavily on raising money through debt.
Rogoff said these two companies in particular could be vulnerable to higher interest rates.
"There are companies like Netflix and ... Tesla, companies that do need somewhat semi-permanent access to markets. And those, ultimate long duration assets would, I think, struggle in a sharply higher rate environment," Rogoff told CNBC.