Recent weakness in some major Internet companies are viewed as an opportunity to add exposure to these players, according to Citywire AAA-rated Nolan Hoffmeyer, senior investment manager at Pictet Asset Management.
The recent Facebook data privacy scandal and the roll out of General Data Protection Regulation (GDPR) – a new regulation in Europe that requires every company that owns data to obtain consent from users before using sensitive information – in mid-May are creating negative headlines.
As a result, the Internet sector has underperformed and trades at reasonable levels versus other tech sectors so far year to date, he told Citywire Asia.
While there are concerns that the new GDPR regulation might impact big Internet players such as Facebook and Google, Hoffmeyer said these platforms are strong enough to encrypt user data information and resell packages to advertisers without spreading users sensitive information.
Facebook and Google, which provide big advertising platforms, will be able to meet the GDPR criteria, he said.
Hoffmeyer manages the $4.1 billion Pictet Digital fund, which is available to accredited investors in Singapore and high net worth clients in Hong Kong. In Asia, the fund is also available to investors in Thailand and Korea through local feeder funds.
The Pictet Digital fund invests in companies that have at least 20% of their revenue coming from web-based business models. This include companies that are benefiting from online advertising, e-commerce, online video games, online gaming, cloud-based companies.
The digital transformation that is taking place now has also expanded the investable universe for the fund, Hoffmeyer said.
Online advertising surged to $262 billion in 2018 from $65 billion spending in 2009, while e-commerce sales are now on pace to reach $2.8 trillion in 2018, compared with $1 trillion in 2012.
Meanwhile, Internet penetration is at more than 50% this year, compared with less than 25% a decade ago.
With broader access to Internet, digital services have become pervasive and disrupt all industries, from advertising to healthcare.
Hoffmeyer said the Pictet Digital fund has added exposure to online advertising provider such as Facebook and Alphabet, as well as to enterprise software as a service (SaaS) such as Salesforce and Intuit between late last year and beginning of this year.