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Flash Boys Hero Wins, Wealth Funds Rejoice

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On Friday June 17th, IEX Group Inc., the company founded by Brad Katsuyama, won SEC approval to run a U.S. stock exchange. IEX will be the 13th U.S. national stock exchange certified by the SEC. Before the approval, IEX ran as an alternative trading system. IEX garnered additional fame when it was included in Michael Lewis’ book “Flash Boys: A Wall Street Revolt.”

IEX is unique in terms of exchanges in that it proposed a “speed bump” to reduce trading speed to their exchange by 350 microseconds – effectively limiting the power of high frequency traders to beat out the competition. The mechanics by which the exchange works is actually very basic: a coil of fiber-optic cable which increases the distance the information needs to travel to the exchange.

“We thank sovereign and domestic funds for the broad support they have provided throughout this process, which demonstrates that we are providing real value for the long-term investors that the markets are meant to serve. Getting approval as an exchange gives these investors and the millions of beneficiaries they represent an important new choice that puts their interests front and center,” John Ramsay, Chief Market Policy Officer at IEX commented to the Sovereign Wealth Fund Institute (SWFI).

Sovereign wealth funds, which own large portfolios of listed equities, are eager to work with platforms like IEX given their concerns with high-frequency trading (HFI). For example, in a comment letter to the SEC, Norges Bank Investment Management (NBIM), the manager of Norway’s sovereign wealth fund stated, “We would expect that the ‘speed bump’ as well as other proposed features of IEX, such as the relative simplicity of available order types, would mitigate the potential for such rent extraction.”

Other SEC comment letters weren’t as glowing for IEX. For example, exchange rival New York Stock Exchange stated, “IEX advertises that it is ‘A Fair, Simple, Transparent Market,’ whereas it proposes rules that would make IEX an unfair, complex and opaque exchange.” For now, it appears that the investors’ words were more compelling to SEC officials.

Background on Brad

Brad Katsuyama interned at RBC Capital Markets in the late 1990s, eventually becoming full-time in 2001. Katsuyama eventually become global head of electronic sales and trading at RBC. He left in 2012 to form IEX Group.

Anne Sheehan to Retire, CalSTRS 1st Corp Gov Director

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Anne Sheehan, the first Corporate Governance Director at California State Teachers’ Retirement System (CalSTRS) and the current one, plans to retire March 30, 2018. Sheehan’s team manages an activist portfolio worth around US$ 4.1 billion, seeking to influence and help turnaround its large portfolio holdings in select public companies. Sheehan was hired back in 2008.

Christopher J. Ailman, CalSTRS’ chief investment officer, said in a organization release, “Anne has been my most unconventional, best hire.”

A replacement search is underway.

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Temasek Rides with Google on Go-Jek

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Singapore’s Temasek Holdings has reportedly joined forces with Google LLC and Chinese on-demand service provider Meituan-Dianping as part of a US$ 1.2 billion fundraising effort for Indonesian ride-hailing startup Go-Jek that has put regional rivals like Uber and Singapore-based Grab on notice.

Screen Shot Go-Jek, January 19, 2018

Although exact figures for individual stakes have so far been kept secret, the new infusion of capital puts Go-Jek, incorporated as PT Aplikasi Karya Anak Bangsa, at a valuation of roughly US$ 4 billion. Samsung Venture Investment Corporation also participated in funding, as well as existing private equity investors KKR & Co. LP and Warburg Pincus LLC.

Google’s direct involvement in Go-Jek’s growth – rather than through its Google Ventures unit – highlights its faith in the latent potential of ride-sharing services – and the tech-enabled consumer services sector as a whole – in Southeast Asia. Home to more than 640 million potential customers, the region was identified as the fastest growing emerging market for e-commerce globally in an industry report published jointly by Google and Temasek last December. According to data compiled by the internet-giant and the Singaporean sovereign wealth fund, ride-sharing in Southeast Asia is expected to grow into a US$ 20.1 billion industry by 2025, compared to US$ 5.1 billion in 2017.

2011 Origin Story

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Temasek Leads Series B Round for Chinese Robo Startup Rokid

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Rokid Corporation Limited, a Chinese robotics startup that specializes in smart devices assisted by artificial intelligence (AI), announced the closing of a Series B extension round through its WeChat account on January 18, 2018. The capital-raising effort was led by Singapore’s Temasek Holdings, with additional contributions from Credit Suisse Group, China Development Bank’s overseas investment arm CDIB Capital International, and existing investor IDG Capital. Although Rokid did not disclose the size or terms of the deal in its announcement, the technology company reportedly secured US$ 100 million in funding.

Founded in 2014 by chief executive Mingming Zhu and chief financial officer Eric Wong, Rokid’s core products consist of its smart speakers, the Rokid Pebble and Alien, as well as the newly debuted Rokid Glass augmented reality spectacles. The company’s most exciting offering, however, is its Full Stack Open Platform, a collaborative effort made in partnership with Alibaba that gives third-party developers backdoor access Rokid’s software suite and hardware integration and will – it hopes – help give its offerings the accessibility and recognition they need to thrive outside its home market of China.

Rokid is particularly keen on bringing its products to the U.S., where it believes it can challenge Google and Amazon’s dominance in the smart home arena. Amazon makes the Amazon Echo, while Google has Google Home.

The Series B

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