Sovereign wealth funds are betting big on innovation and technology shifts in areas such as cloud computing, consumer mobile, driverless cars and augmented reality to help drive return growth.
A cadre of high-profile wealth funds have set up shop in the San Francisco Bay Area including Temasek Holdings, Khazanah Nasional and GIC. The Qatar Investment Authority (QIA) has plans for a west coast office. Why? The trend lines are clear, these savvy institutional investors are keen on getting dealflow and access to Silicon Valley’s latest startups.
According to data from the Sovereign Wealth Fund Institute (SWFI), sovereign funds directly invested US$ 13.231 billion into the information technology sector which include mobile, cloud computing, software, e-commerce and other tech industries. In 2010, only US$ 2.06 billion was directly invested in the information technology sector. These tabulated figures only count direct investments, not fund investments. The reasons for the wealth fund ramp up in tech are manifold. First, a greater number of sovereign funds have built up internal resources, moved operations near the battle lines and have expanded business networks, thus increasing deal flow. For example, SWFI hosts conferences, known as Institute Fund Summits, globally in countries such as Singapore, Germany, Hong Kong and the United States. From conversations and increases in wealth fund attendance by internal figures, the consensus seems that wealth funds want more access to deal flow and investment opportunities in a world of “excessive noise”.
Second, sovereign fund behemoths like Singapore’s GIC Private Limited have resiliently formed stable relationships with active tech-focused private equity firms like Silver Lake Partners and Hellman & Friedman. Third, sovereign investors are seen as both strategic and patient capital. Unlike venture funds, sovereign funds like the Abu Dhabi Investment Authority (ADIA) can hold illiquid investments even longer than pension funds and private equity capital. By their very nature, sovereign wealth funds are associated with governments (word – sovereign), which could provide opportunities for startups entering closed or opaque markets.
Unicorns are known as technology startups with a valuation of more than US$ 1 billion. Despite the oil glut and previous excessive volatility in the markets, collectively, sovereign funds amassed a pool of capital exceeding US$ 7.4 billion in assets. Since 2007, these sovereign wealth institutional investors started to become more of a permanent capital source for notable startups, growth companies and unicorns. Many of these investors have bypassed placing capital into venture funds, opting to invest directly.
Sovereign investors have backed a number of storied unicorns such as Uber Technologies, Snap (formerly known as Snapchat), Square, Xiaomi, Flipkart, Airbnb and Spotify. The media had heavily covered Saudi Arabia’s Public Investment Fund (PIF) US$ 3.5 billion investment into Uber. Did the media properly cover Temasek’s investment in Snap?
Regional Venture Investing
Sovereign funds like Saudi Arabia’s Public Investment Fund (PIF) remain active in regional venture markets. PIF backed e-commerce startup Noon, while seeing its rival Souq.com get gobbled up by online giant Amazon. In Oman, 500 Startups is raising a MENA fund for startups working with local institutions like the Oman Investment Fund (OIF).
Sovereign funds remain an important pillar of the venture capital and technology investment community.
New appointments have been made to the Board of the Guardians of New Zealand Superannuation Fund (NZ Super). The appointments were made on July 19, 2018. The three new board members are Catherine Drayton, Simon Botherway and Henk Berkman.
According to the NZ Super press release, “Simon Botherway’s appointment runs from 1 August 2018 to 30 September 2021. He is a professional director with a history in investment, investment regulation and supervision. Other board roles have included his current position as Chair of Serko, a director on Callaghan Innovation and previously being the Chair of the FMA Establishment Board and a member of the Securities Commission.
Henk Berkman will serve from 1 October 2018 to 30 September 2022. He has been Professor of Finance, Department of Accounting and Finance at the University of Auckland since 2008. Mr Berkman has held previous professorial positions at Massey University, University of Sydney and the University of Maastricht.
Catherine Drayton will serve from 1 November 2018 until 30 September 2022. She is a Christchurch-based director who previously led the Assurance and Advisory Practice for PwC in Central Eastern Europe. Her public sector governance experience includes her current role as Chair of Christchurch International Airport and as a member of the University of Canterbury Council. Her experience as a Director of Ngai Tahu Holdings has provided her with iwi governance experience.”
The Alberta Investment Management Corporation (AIMCo) appointed Jacqueline (Jackie) Sheppard as a member of the board of directors for a term set to expire on June 30, 2021. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
Law firm Grant & Eisenhofer won a landmark case for its clients after a seven-year legal duel in Dutch courts. On July 13, 2018, the Amsterdam Court of Appeals officially approved the largest securities settlement ever reached in Europe, paving a path for international insurance company Ageas N.V./S.A. to begin payment of US$ 1.5 billion (€1.3 billion) to multiple groups of institutional and individual investors from Europe and the United States. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
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