How bad news was good for Pictet AM

Asset Class in Focus

The recent Facebook data harvesting scandal and new data regulations from Europe that spooked investors turned out to be good news for Nolan Hoffmeyer, Geneva-based co-manager of Pictet Asset Management’s Digital Fund.

Nolan Hoffmeyer, Pictet Asset Management

“We have seen some negative headlines early this year, particularly the Facebook and Cambridge Analytica [data harvesting] scandal. So we have been adding to our positions,” Hoffmeyer told FSA in a recent visit to Hong Kong.

In March, news broke that the data of around 87 million Facebook users were leaked around three years ago. Aleksandr Kogan, a lecturer at Cambridge University, collected Facebook data from an app that presented itself as a personality test. However, the data was sold to Cambridge Analytica, a data analytics firm that worked with Donald Trump’s election team.

After the news broke, Facebook’s stock was down 15%, according to Hoffmeyer. However, he bought more of the stock, believing that the news would not have a long-term impact on the company as it was not directly involved in the scandal. Additionally, he predicted that the news would not greatly impact Facebook advertising.

“We haven’t seen any advertiser commenting on the scandal saying that they were leaving the Facebook platform after that. If you look at the return of investment an advertiser gets on Facebook, it is higher than any internet platform, so it’s difficult for an advertiser to leave Facebook.”

The stock has since recovered and is up around 23% to date from the end of March, according to Bloomberg data.

Facebook accounts for nearly 5% of the Pictet Digital Fund, versus around 4% in January, according to its fund factsheet.

The Pictet Digital Fund focuses on software companies that have web-based business models. It is one of the firm’s three technology-themed products.

Europe’s GDPR

Another event that spooked investors was the roll out of the European Union’s  General Data Protection Regulation (GDPR) in May. The GDPR, which seeks to strengthen data protection of EU residents, applies to all companies both inside and outside the EU that collect data from EU residents.

Hoffmeyer said that the new regulation required companies dealing with European user data to get the consent from users to be able to use their data.

Hoffmeyer explained that Google and Facebook have a lot of data about its users, which enables them to show online ads that will most likely interest them. “The fear was that companies, such as Google and Facebook, would not get the consent from users and therefore could not do targeted advertising anymore.”

However, the new regulation is more likely to impact smaller online companies than the big ones. “You are more likely to give consent to Facebook and Google, where you go everyday, rather than the small coffee shops where you go once a month.”

Because of this, Hoffmeyer expects that more advertisers will migrate to the bigger platforms. “We will see a shared consolidation of advertising spending on the bigger platforms.”

The fund’s allocation to Google has also increased. In April it was 4.1% of assets up from 3.7% in January.


The three-year performance of the Pictet Digital Fund versus its benchmark index.

 Source: FE. In US dollars.

 

 

 

 

 

 

 

 

 

 

 

 

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