We have all witnessed the trend of some sovereign wealth funds raising private capital or creating sovereign wealth enterprises to act as an investment manager for private funds. This article is to bring some clarity on why a number of funds are doing this. With Mubadala raising $1.85 billion in medium term notes, Temasek Holdings multiple debt raises in denominated in multiple currencies, and Mumtalakat Holdings bond offering, it shows that SWFs are using their assets, not just their cash as an investment.
First off, most SWFs that are raising capital are the types of sovereign wealth funds that take large stakes in companies. In addition, SWFs that hold large portions of their domestic industry would be the type of funds to engage in this behavior. We most likely would not see the Abu Dhabi Investment Authority or the Norwegian GPFG raise capital or take on bank loans. In some instances, SWFs experience shrinkage of money flows from their respective government; money in the private markets backed by SWF assets can increase their stability and investment performance. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]