Manager of £7bn trust has 'told you so' moment on Facebook

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Manager of £7bn trust has 'told you so' moment on Facebook

Tom Slater, who jointly runs the £7bn Scottish Mortgage investment trust, reduced his weighting in Facebook as he foresaw the increased scrutiny in the social media giant that caused the share price to fall by more than 10 per cent.

Facebook and data analytics firm Cambridge Analytica are at the centre of a dispute over the harvesting and use of personal data.

Questions have been asked about whether data pulled from the social media giant was used to influence the outcome of the US 2016 presidential election or the UK Brexit referendum.

Both firms deny any wrongdoing.

The boss of Cambridge Analytica, Alexander Nix, has since been suspended, while Facebook founder Mark Zuckerberg has been called on by a Commons parliamentary committee to give evidence about the harvesting of data.

Scottish Mortgage's Mr Slater was previously very enthusiastic about Facebook and the other big US technology stocks.

But last year he said he was aware the biggest threat to the future of the US technology companies was regulatory, with the companies being found to be too big and broken up by regulators.

He said he became "slightly less keen" on the investment case for Facebook as he was concerned the company's management did not fully appreciate the need to interact with regulators.

Facebook is no longer one of the top 10 largest investments in the Scottish Mortgage investment trust.

Mr Slater said the Chinese technology companies Alibaba, Tencent and Amazon, plus a swathe of healthcare and biotechnology stocks are key drivers of future returns for his trust.

The Scottish Mortgage investment trust has returned 194 per cent over the past five years, compared with 84 per cent for the average trust in the AIC Global sector in the same time period.

Another investment trust manager who was wary of investing in Facebook shares was Simon Edelsten, who jointly runs the £163m Mid Wynd Investment Trust.

Mr Edelsten sold all of his Facebook shares last year and said concerns about "regulatory attention and data breach issues" have been increasing for years and were "a major part" of his decision to sell his shares in the social media giant.

He had also noticed that several big advertisers had expressed concern about the effectiveness of Facebook as a method of advertising.

Mr Edelsten said he found Facebook shares "hard to value" last year, and takes the view that shares which are hard to value tend to fall farther when something goes wrong, prompting him to sell his entire holding.

He has instead invested heavily in robotics companies.

Facebook shares are down for the third day in a row, down 2.5 per cent from their opening price on 21 March.  

david.thorpe@ft.com