Facebook and Twitter face a decade-long reckoning over their role in the US’s political upheaval, cutting their appeal as investments, according to one of the UK’s most successful technology investors.
“We are in an uncomfortable world where the power of companies is so acute that they cannot escape being involved with these [social and political] issues,” said James Anderson, who helps run the £17.5bn Scottish Mortgage Investment Trust.
Owned by asset manager Baillie Gifford, Scottish Mortgage over the past decade has become an unlikely star in the world of tech investing with big and early bets on high-growth companies such as Facebook, Twitter, Apple, Netflix and Tesla. Such wagers helped make it the top performing investment trust in the UK over the past 12 months, with total returns of just over 100 per cent.
In a call with investors and analysts this week, Mr Anderson cautioned that “big tech has taken a step change recently”, as the likes of Twitter and Facebook are left “dealing with the consequences” of the power their platforms have accumulated and will be for a decade.
Big social media platforms have to do a better job balancing disruptive innovation with its effects on society, Mr Anderson added.
The warning comes after last week’s storming of the US Capitol by extremist supporters of Donald Trump intensified the scrutiny of the country’s biggest social platforms. The companies faced a torrent of criticism for failing to stem the spread of pro-Trump conspiracy theories, hate speech and domestic extremism online.
Late last week, Twitter suspended Mr Trump’s account, while Facebook chief executive Mark Zuckerberg said that the president’s accounts with the social media group would be suspended for the remainder of his term in office.
Scottish Mortgage, which first invested in Facebook in 2012 and at one point held an almost 5 per cent stake, disclosed in November that it had sold off its final holdings in the company. The trust owned Twitter shares between 2013 and 2016.
After riding the boom in Big Tech over the past decade, Scottish Mortgage is also starting to trim holdings of some of the other groups that have come to dominate the US stock market.
The trust said in November that it had cut its holdings in Amazon for the first time since buying the shares more than 10 years earlier. Mr Anderson told investors this week that while the company was not planning to exit Amazon entirely, the opportunity the group now presents “has not increased to the degree that the share price has”.
The veteran investor admitted that the trust did mistime its 2017 exit from Apple, whose shares have surged 75 per cent this year. “Sometimes we are way too early,” he said. “We won’t always get it right.”
Scottish Trust is arguably best known for its bet on Tesla. Despite selling a £1.2bn stake in the electric carmaker in September, the US company still accounts for about 10 per cent of the trust’s total assets.