Revealed: The Super Funds biggest tech bets – and a white flag in its Facebook fight

The NZ Super Fund’s biggest shareholdings are in Big Tech – and that helped it to record gains in the year to June 30, according to its just-released annual report.

And look for more of the same in 2022, because the Super Fund-backed campaign against Facebook is being wound down – despite recent weeks featuring a maelstrom of bad publicity about harmful content and misinformation on the social media platform.

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In 2019, after the Christchurch mosque shootings, which were livestreamed on Facebook, the NZ Super Fund joined 100 of its peers in a campaign to pressure the social network, and its competitors, to clamp down on harmful content and allow more independent oversight.

The Super Fund will make an announcement about the end of the collaborative campaign next week, a spokesman said.

The fund’s annual report, released on Wednesday, foreshadows the move, with some lengthy commentary on the collaborative campaign.

It includes a summary of a report the fund commissioned from the local Brainbox Institute, which assessed the campaign’s impact on Facebook and its peers over the past two years (the report will be released in full next week).

According to the fund’s summary, Brainbox found that “the measures the platforms introduced are highly likely to significantly mitigate the scale of dissemination of future objectionable content. The platforms continue to make reasonable efforts to reduce the spread of objectionable content … Emerging regulation must be anchored in the language and law of human rights to ensure acceptable and proportionate balancing between rights and freedoms is achieved.”

The Super Fund report said, “[Brainbox’s] review of the changes made by the platforms showed material progress, although the report was also sobering in its conclusion that the challenge of preventing upload has not been, nor cannot currently be, overcome without significant impacts on human rights.”

From the summary, there seem to be similar themes to an earlier report that Brainbox wrote for the Law Foundation, which catalogued a rise in “deep fake” content on social media, but also cautioned that any new legislation designed to clamp down on the trend could inhibit political and personal freedom of expression.

A key barrier to change has been that Facebook founder, CEO and chairman Mark Zuckerberg owns a minority of stock (about 17 per cent) but exercises majority control through his special “super-voting” shares that give him about 58 per cent of voting rights.

The coalition of funds has tried to eliminate the super-voting provision each year – including a push at Facebook’s annual meeting in May this year. But every time, it has been knocked back, with Zuckerberg using his majority control to defeat resolutions that would curb his power.

Similarly, the coalition has tried to remove directors who object to its efforts. But at Facebook’s annual meeting in May, as in previous years, every board member – including Zuckerberg’s top lieutenant Sheryl Sandberg and founding outside investor Peter Thiel – was re-elected.

The coalition never went for the more front-foot option of dumping Facebook shares.

A Super Fund spokesman said a number of specific outcomes of the collaborative campaign would be detailed next week, but what the fund sees as a headline win was detailed in its annual report this week.

The report notes: “In December last year, and directly attributable to the work of the collaboration, Facebook announced that they had strengthened the Audit and Risk Oversight Committee charter to explicitly include a focus on the sharing of content that violates its policies. This move also included a commitment not just to monitor and mitigate such content sharing, but also to prevent it. We believe this represents legitimate strengthening of the governance and accountability mechanisms in place on this issue. It reorients the organisation towards prevention rather than fire-fighting problems as they arise. This is one of the most important outcomes the engagement has achieved.”

The Super Fund spokesman said that although the collaborative effort was ending, individual funds would continue their own efforts to push for reform.

But for some, not enough has changed since the March 2019 tragedy. Yesterday, Eric Feinberg, vice-president of the US-Based Coalition For A Safer Web, told the Herald he could find 15 copies of the Christchurch gunman’s video still on Facebook and Facebook-owned Instagram.

In Feinberg’s opinion, whistleblower Frances Haugen’s testimony to the US Senate this month has proved Facebook has been “all talk”.

The former employee leaked thousands of pages of internal Facebook research to the Wall Street Journal, which said the social network’s attention-seeking algorithms had helped foster political dissent and contributed to mental health and emotional problems among teens, especially girls. Facebook puts profits over safety, Haugen said.

Facebook vice-president of policy and public affairs Nick Clegg said Haugen’s comments were incorrect, and relied on information that was taken out of context. But Facebook also took Instagram for Kids offline shortly after Haugen’s allegations were first published in the Journal.

Recent problematic content has included anti-vaxxers swarming the comments section after Prime Minister Jacinda Ardern’s official Facebook Live feed of her 1pm pandemic briefings, and broadcaster Hilary Barry receiving multiple abusive comments on the social network about her campaign to encourage immunisation – with many of the comments also including misinformation about Covid-19.

Tech commentator and advocate Paul Brislen has been flagging misinformation and hate speech to Facebook for years, and says the platform is still politely shunning most of his reports (as are its peers).

A Spinoff investigation published this week found multiple NZ Facebook groups still hosting misinformation about the pandemic.

And The New York Times said in a September 28 editorial called “Shrink Facebook to Save the World”: “The company’s most shameful human toll — its contribution to violence, human trafficking and abuses by authoritarian governments — has mostly happened in countries outside North America and Western Europe, like India, Honduras, Myanmar, Ethiopia and the Philippines … Years of horrific headlines have not led Facebook to make consistent progress in addressing its problems. “

Whatever the controversy, the Super Fund has done well out of its investment in Facebook, whose shares have nearly doubled since 2019, amid a broader surge in Big Tech stocks.

The NZ taxpayer's $1b stake in Apple

The fund held some $375m worth of Facebook stock as of June 30 this year. In April 2019 its holding was worth $208m.

The Big Tech rally helped the fund make a record 37.96 per cent return on global equities (which make up 75 per cent of its reference portfolio) in 2021, well above its 13.56 per cent average since 2010.

And the next time you buy an iPhone, you’ll know you’re helping to fund your pension.

The Super Fund now owns more than $1 billion in Apple stock (see table), making it the single most valuable holding in its portfolio of around 3800 stocks – which was worth $29.9b as of June 30, with US equities ($17.2b) accounting for the biggest slice.

The fund’s five biggest holdings are now all US tech giants. The cloud computing giants (Amazon, Google and Microsoft) have made huge gains among the pandemic-fuelled explosion in remote working and online shopping.

But the fund’s top 50 is now also littered with chip makers like Nvidia, Intel, Texas Instruments, Taiwan Semiconductor and Broadcom – which have boomed as shortages have driven up pricing amid supply chain issues and huge demand from home-office laptop buyers, locked-down gamers upgrading their PCs and, in Nvidia’s case, a bitcoin mining boom.

The Super Fund has also done well from its multiple stakes in Big Pharma over the past year – including its Pfizer stake which increased in value from $59m to $98m.

And although they don’t make its top 50, the fund has also gained from the rising value of its stakes in other pandemic mainstays like Zoom ($33m), Twitter ($18m) and Slack owner Salesforce ($73m).

There are also some curiosities. The Super Fund lists a $226,000 stake in Gamestop, for example.

There there are what some will see as missed local opportunities – or at least opportunities with local roots. For example, the Super Fund missed out on Xero’s huge run-up this year. It does not hold the stock, but does have a $52m stake in Rod Drury’s arch-nemesis, Intuit.

And the fund missed a payday from Rocket Lab’s Nasdaq listing, having earlier passed on an opportunity for a direct investment while the Kiwi-American company was still private (Australia’s Future Fund did take a punt, and is now at least 50 per cent ahead).

In the local tech sector, the Super Fund’s current direct investments include Datacom ($156m), Kiwibank ($324m), and the Auckland-founded clean energy company Lanzatech (around $120m).

In local listed equities, which account for 5 per cent of its reference portfolio, the Super Fund had a quieter year, with its 10.41 per cent gain falling short of its 10-year average of 14.06 per cent.

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