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How $100 Billion from the SoftBank Saudi Fund Will be Transformative

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Startups and growth-focused technology companies need to pay close attention to the amount of capital sitting in sovereign wealth.

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Let the unicorns breathe. Unicorns are startups that have valuations of over US$ 1 billion. Tokyo-based SoftBank Group Corporation, overseen by Masayoshi Son, and Saudi Arabia’s Public Investment Fund (PIF) announced the formation of a US$ 100 billion technology-focused fund with a working moniker – SoftBank Vision Fund. The fund, to be based in London, could have less assets than US$ 100 billion dependent on how much it could raise. However, if destiny were to come true, the techie fund would be a multitude times larger than singular private equity funds managed by The Blackstone Group or The Carlyle Group. With regard to funding, SoftBank is kicking in US$ 25 billion over a period of time, while the re-oriented PIF plans to allocate US$ 45 billion over a 5-year span. The fund investment is in line with Saudi Arabia’s Vision 2030 strategy, in which to help diversify the country away from oil, according to Saudi Deputy Crown Prince Mohammed Bin Salman, Chairman of PIF, in a press release. The rest of the fund capital plans to be raised from long-term patient capital such as sovereign funds, pensions and other like-minded investors. Other public institutional investors have had their interest piqued in the technology fund. Abu Dhabi-based Mubadala Development Co. is in discussions with SoftBank on potentially committing a few billion dollars to the fund. Another sovereign investor, the Qatar Investment Authority (QIA), has also expressed a level of interest.

Increased Competition for High-Quality Growth Equity Investments

Startups with strong stories to tell and prospects for growth may fight for higher valuations, as more capital enters from the sidelines. In contrast, to mature startups that have failed to materialize and grow revenue. This formidable undertaking of the vision fund could transformationally impact how venture capital raises money. Historically, startups relied on angel investors and venture capital funds. The capital base has shifted as more large asset owners prefer to go direct, bypassing these fee-generating vehicles. Venture capital firms with less known reputation could be crowded out of investment opportunities, forced to take on higher-risk earlier stage startups, or face overpaying for sections of private companies. The fund could possibly create friction in the private equity growth community by competing for technology buyouts from firms like Thoma Bravo, MSD Capital, Francisco Partners and Vista Equity Partners.

Funding Large-Scale Innovation

More patient capital is steadily flowing into the venture and growth equity ecosystem, according to data from SWFI. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Why BlackRock Angled the EU Toward a Massive Supranational Pension Fund

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BlackRock is the world’s largest asset management firm and the company wields tremendous political power whether operating in the United States, Mexico, and parts of Europe. Before the populist wave that led to Brexit, BlackRock bet large in Europe by increasing headcount and lobbying efforts. By 2015, BlackRock CEO Larry Fink proposed the formation of a cross-border personal pension fund for Europe. Fink was keenly aware of the Capital Markets Union project that was revealed in July 2014 by European Union Commission President Jean-Claude Juncker. For BlackRock, why compete in each eurozone country when you can possibly win a mandate for the whole pie of Europe. The European pension fund market is hyper-competitive for asset management firms. Other asset managers like Vanguard have lobbied Brussels over issues like the cross-border distribution of funds, but data shows that BlackRock is far more active than its U.S. peers.

EU’s Definition of PEPP

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Malaysia’s Federal Land Development Authority Seeks to Restructure

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Malaysia’s Federal Land Development Authority (FELDA), a government agency, is looking to restructure its investment holdings in a bid to reduce debt. The restructuring on the real estate side started in the middle of 2017. The government agency wants to lower its debts of 8.03 billion MYR (US$ 1.94 billion) down to 6.5 billion MYR. The restructuring could take over two years.

FELDA is seeking to dispose of assets which includes real estate in London. FELDA is an investor in student housing in London through its main unit called Felda Investment Corporation (UK properties owned by FIC UK Properties Sdn Bhd). [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Former Iran Central Bank Governor Banned from Leaving Country

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Iran remains in a very fragile financial state as more Iranian bank loans appear to delinquent, while the currency continues to lose value against the U.S. dollar. State-run Tasnim news agency reported that Valiollah Seif, the former Governor of the Central Bank of Iran, is banned from leaving Iran. Seif is under investigation by the Iranian government over possible corruption in the currency market. Some of the central bank’s deputies have been arrested. Abdolnaser Hemmati replaced Valiollah Seif as central bank governor in July 2018. Valiollah Seif was dismissed from his post as governor.

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