5 global funds that own Facebook
These Morningstar-rated funds with Australian domiciles have the highest rates of exposure to Facebook shares within our coverage universe, and all but one of them hold medal ratings.
These Morningstar-rated funds with Australian domiciles have the highest rates of exposure to Facebook shares within our coverage universe, and all but one of them hold medal ratings.
New details of Facebook's data breach involving Cambridge Analytica continue to be unearthed. A 26 March announcement revealed the US Federal Trade Commission is investigating Facebook's "ability and willingness to protect user information," says Chicago-based Morningstar equity analyst, Ali Mogharabi.
"While this development may raise further doubts regarding Facebook and its user growth and engagement, along with more demand for EU-type regulation in the United States, we remain confident that the company can endure the short-term impact of the data breach.
"At this point, we do not expect a significant long-term negative effect on Facebook’s platform and operations," Mogharabi says.
Australian investors following the topic may be interested to know which locally-domiciled managed funds own Facebook, and to what degree.
Magellan High Conviction
By far, the Morningstar-rated fund with the highest exposure is Magellan High Conviction (19878). Highly regarded, it holds a silver medal rating, with a 12.4 per cent weighting to Facebook. Apple, Microsoft and Amazon also rank among the fund's top-five portfolio holdings.
According to Michael Malseed, senior analyst within Australia's manager research team, the fund "leverages the research process from the highly rated Magellan Global strategy, selecting the best eight to 12 ideas compared with the typical 20 to 40 names held by the main fund".
"Giant-cap multinationals are favoured, which leads to a strong North American bias."
Led by Hamish Douglass, information technology, e-commerce and electronic payments concentration is high, accounting for more than 50 per cent of the portfolio as at the end of 2017.
"However, the manager carefully assesses the portfolio's underlying earnings exposure by geography, and on this basis European and Emerging Markets exposure was around 28 per cent. No single position can exceed 20 per cent of the portfolio and no more than four stocks can be weighted at over 12.5 per cent," Malseed says.
Magellan Global Equities
Magellan Global Equities (15699), from which the above fund is largely derived, holds a gold medal rating, with a 6.1 per cent weighting to Facebook.
Again, it favours giant-cap multinationals, has a strong North American bias and technology is a dominant theme, "and is one of our top picks in the highly competitive global equities sector," Malseed says.
Worldwide Global Equity
Also concentrating on large-cap companies, the team behind C Worldwide Global Equity Trust (4542) focus on its best of 30 stocks in which it has high conviction, which holds a bronze medal rating. Facebook accounts for 3.5 per cent of its total $190 million assets under management as at 28 February, 2018.
While its top five companies are the same as Magellan's above offering, the total portfolio has a much lower US focus--which accounts for 42 per cent, followed by 12 per cent Japan, 11 per cent UK, 7 per cent India and 6 per cent Hong Kong.
"The portfolio's concentration and the themes at play can result in notable return deviations from peers and the benchmark," says Morningstar manager research analyst, Anshula Venkataraman, who notes its "attractive management fee adds appeal".
Having a long and successful history overseas, it has only been available in Australia since 2013.
Capital Group
Another gold medal rated global equity strategy, Capital Group New Perspective (40984) has a 2.6 per cent Facebook weighting, given its focus on multinational blue chips.
While the Australian version has only been around since November 2015, Morningstar director of manager research, Chris Douglas, says the firm "is a great steward of investors' capital…and invstors have been the beneficiary".
Though it has a long term focus on multinationals, country weightings and sector focus can vary significantly--Douglas notes its US stock holdings have ranged from more than 50 per cent to less than 25 per cent over the past 30 years.
Alongside the usual giant-caps Facebook Amazon, Microsoft and Apple, its top-10 positions include Taiwan Semiconductor Manufacturing, ASML Holding, and Broadcom AVGO.
Douglas believes the fund is an appropriate core allocation for international equity exposure.
Zurich
Rounding out the list is Zurich Investments Unhedged Global Growth (17504), which holds a Morningstar neutral rating, with a 2.16 per cent weighting to Facebook.
According to Morningstar manager research analyst, Sarah Fox, "It aims to identify a turnaround in a company’s prospects, meaning they can invest in names with negative earnings or revenue growth".
She says it has a "flexible and slightly more aggressive approach to growth than its peers, but one in which we have yet to gain enthusiasm".
"Though the strategy enjoyed good returns relative to the index and category in 2017, attribution was concentrated largely in technology names including Tencent, Alibaba, and Facebook--which as a sector performed strongly relative to the broader market," Fox says.
She expects the strategy to perform well when cyclical stocks run,"but struggle when there is a preference for traditionally defensive sectors".
"In summary, this strategy has some creditable traits, but we don’t think it’s definitively superior to peers."
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Glenn Freeman is a senior editor at Morningstar.
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