James Rowsell, chief executive at Vermeer Investment Management, has sold his stake in Facebook on concerns surrounding the privacy storm with Cambridge Analytica.
Rowsell, who co-founded Vermeer with Tim Gregory in 2016, said the Vermeer Global fund held 1.3% in the social media giant before selling out last month.
Cambridge Analytica, which has now closed, is alleged to have mined the personal data of 50 million Facebook users to create profiles and target them in the US election campaign in 2016, which was won by Donald Trump.
As a result, Facebook founder Mark Zuckerberg had to testify in front of Congress over how the firm was handling its users' data and privacy.
Zuckerberg apologised for the issue and defended the social media giant, saying the core part of the business, which involves sharing content between users, "does seem to be working fairly well".
He also pledged to do more to stop fake news and fake profiles but admitted it was difficult to "police" the site as the capabilities of artificial intelligence were not yet strong enough.
Shares in Facebook fell 17% during March but have risen since to trade at $179, although this remains below the $185 price it was trading at before the Cambridge Analytica scandal.
Nonetheless, Rowsell, who has 19.3% allocated to technology, said Facebook was the last FAANG stock to be sold by the fund after selling out of Apple last year over concerns about disappointing sales of the iPhone X.
"We initially bought Facebook based on the earnings growth and expectations for the share price; it was very cheap on P/E metrics.
"We do not know if these earnings are real or how much they will be affected by this scandal in the future."
Instead of FAANG stocks, the fund holds more exposure to 'old tech' names such as Microsoft, which is the largest holding at 5.4%, and Cisco.
"We increased our position in Cisco following excellent results and guidance for a return to growth so have doubled it to 4.6%.
"It put the dividend up 14% and is buying back equity so is one of the highest-yielding stocks in the S&P 500. It has also moved to a subscription-based model so is seeing revenues for the first time in a while."
Elsewhere, Rowsell has doubled the fund's cash weighting from 4.3% at the end of 2017 to 10.9%, as a result of disposals.
The Vermeer Global fund has returned 10.4% over one year to 31 March versus returns of 2.1% by the MSCI World index.
Considering adding Income Focus fund
Industry Voice: Two decades of experience have shown us that deploying an ESG focus is entirely complementary to long-term performance goals.
Russ Mould, investment director at AJ Bell, looks at four contributors to the upward march of the FTSE 100.
Next stage of development
Poor practice highlighted