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Posted inEquities

How bad news was good for Pictet AM

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 I fund .

“We have seen some negative headlines this year, particularly the Facebook and Cambridge Analytica [data harvesting] scandal. So we have been adding to our positions,” Hoffmeyer told our sister publication Fund Selector Asia.

In March, news broke that the data of around 87 million Facebook users had been 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 fell about 17%.

Hoffmeyer said he bought more of Facebook’s stock at the height of the scandal as he thought it would would not have a long-term impact on the company and would not have a serious impact on Facebook’s advertising.

“We haven’t seen any advertiser commenting on the scandal saying that they were leaving the Facebook platform. 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 I 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.

The new regulation requires companies handling European user data to get the consent from users 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.

Francis Nikolai Acosta

Francis is editor for Fund Selector Asia, covering the asset and wealth management industry in Asia. He joined Last Word Media in November 2016. Previously, he was a reporter at Ignites Asia, A Financial...

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