Connect with us

U.S. Poised to Eclipse Europe on Direct Sovereign Investor Investments

Published

on

nyc_midtown

Incoming data and research figures from the Sovereign Wealth Fund Institute (SWFI) show that sovereign funds from 2014 to the end of 2016 have been increasing direct investments into North America, specifically the United States, while steadily decreasing direct investments into Europe. 2016 direct investment transaction data is not fully tabulated yet, as the fourth quarter is not finalized. However, we can derive some conclusions from looking at the current data and the transactions amounts will only increase as more of these unaccounted transactions are added in the near future. In addition, the direct transaction data does not include fund commitments (outsourced money management) and only has a small sample of bond purchases. However, with a universe of equity, convertible, real estate, infrastructure and other asset types; these types demonstrate a level of confidence in a recipient country due to the higher perceived risk versus traditional fixed income instruments, according to SWFI researchers.

Europe

Historically, Europe had a bias of receiving more direct investments by sovereign investors compared to North America in regard to equity investments. First, Norway’s Government Pension Fund Global (GPFG) is a major investor in European equities and Gulf-based wealth funds have invested heavily into the continent for decades. On the other hand, in the past, wealth funds had outsourced a good portion of fund management to external fund managers targeting U.S. equities.

SWFI research postulates the slowdown in European direct investments by sovereign wealth funds can be partially attributed to European bank financial woes, greater political risk within the eurozone and the anticipation of Brexit. Internecine strife between pro-EU political movements versus populism has created a level of hesitation in certain sectors of the European investment economy. For example, numerous financial media outlets reported, the Qatar Investment Authority (QIA) was lined up to participate to invest in a capital increase for Banca Monte dei Paschi di Siena S.p.A., the oldest surviving bank in the world. The resounding defeat of Italy’s Prime Minister Matteo Renzi’s proposition appeared to be the final blow to kill the deal for the QIA. However, post-Brexit results, so far, the fourth quarter appears to see a surge in sovereign wealth money flowing back into Europe.

The trend of wealth funds increasing direct investment in the U.S. occurred well before the results of the U.S. election. Asian and Gulf-based wealth funds have been major financial backers of startups in Silicon Valley, such as Square, Uber Technologies and Snap (formerly SnapChat). Other wealth funds have invested in cloud technologies. For example, on January 5, 2017, Australia’s Future Fund joined other investors in a US$ 41 million Series D funding round of Frederick, Maryland-based Fugue, Inc., a company that built an operating system for managing cloud-based workloads. New Enterprise Associates led the venture round. Soon after, the Future Fund also announced they participated in a US$ 45 million Series C round in Campbell, California-based Bitglass, a cloud security access broker operating in the cybersecurity industry. Other investors in this round included New Enterprise Associates, Norwest Venture Partners, Singtel’s investing subsidiary Innov8, and others.

Sovereign Wealth Fund Direct Investments via Geographic Region

Calendar Year Direct Investments in North America – Billions – USD Direct Investments in Europe – Billions – USD
2014 22.99 59.33
2015 27.35 52.85
2016* 29.88 30.6

Source: SWFI’s Sovereign Wealth Fund Transaction Database, Extracted January 5, 2017. Fourth quarter of 2016 is not fully tabulated. Geographic regions are determined by SWFI standardization methodology.

Why Big Startups Prefer Wealth Funds over Mutual Funds

Mutual funds are slowly pulling out of backing private technology companies, while longer-term investors such as sovereign wealth funds are providing the necessary financial firepower. There are a multitude of reasons why large startups prefer sovereign wealth, pension capital, or family office capital versus mutual funds. Mutual fund giants like Fidelity Investments often have to raise or lower valuations on their unlisted holdings. These mutual funds create lower valuations for startups in certain scenarios. Second, wealth funds tend to be more patient, longer-term sources of capital, even more so compared to pensions which have contingent liabilities. Wealth funds do have liabilities, such as oil-based funds, in which its respective government may need to tap the fund for funding the country.

RDIF and Makara Capital form Technology Company Investment Joint Venture

Published

on

The Russian Direct Investment Fund (RDIF) and Singapore-based Makara Capital, a specialist in transaction financing and asset management, signed a deal to form a US$ 200 million joint investment platform to finance breakthrough innovative projects in Russia and Asia. Ali Ijaz Ahmad, the CEO of Makara Capital, is a board director of the Intellectual Property Office of Singapore (IPOS). Ali Ijaz Ahmad served as an adviser to Morgan Stanley and The Carlyle Group. He also had stints at the World bank and Goldman Sachs. Makara Capital was founded in 2005 as a joint venture with Credit Suisse AG and made independent by its founding partners in 2008.

Continue Reading

SVB Financial Group to Acquire Leerink Holdings

Published

on

Linking Boston to the San Francisco Bay Area in the world of pharmaceuticals, SVB Financial Group (SVB) announced that it has entered into a merger agreement to acquire Leerink Holdings LLC, the Boston-based parent company of Leerink Partners LLC, an investment bank focused on the healthcare and life science industries. Jeffrey A. Leerink formed Leerink in 1995. Santa Clara, California-based SVB Financial Group is the parent company of Silicon Valley Bank. SVB is big into life sciences and provides services to many healthcare companies and startups.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Continue Reading

Digital Currencies Gaining Steam Among Central Banks

Published

on

At the Singapore Fintech Festival, International Monetary Fund head Christine Lagarde noted that central banks should consider issuing digital currency, as non-cash payments increased over the years – especially in developed markets. Digital currencies, also known as cryptocurrencies, such as bitcoin have lost tremendous value in recent months. Lagarde is referring to having the central bank issue digital currencies. Lagarde argued that a digital currency would be the liability of the state and not a private company. Saudi Arabia, China, Canada, Sweden, and even Uruguay have tinkered with possibly having digital currencies or some form. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Continue Reading

Popular

© 2008-2018 Sovereign Wealth Fund Institute. All Rights Reserved. Sovereign Wealth Fund Institute ® and SWFI® are registered trademarks of the Sovereign Wealth Fund Institute. Other third-party content, logos and trademarks are owned by their perspective entities and used for informational purposes only. No affiliation or endorsement, express or implied, is provided by their use. All material subject to strictly enforced copyright laws. Registration on or use of this site constitutes acceptance of our terms of use agreement which includes our privacy policy. Sovereign Wealth Fund Institute (SWFI) is a global organization designed to study sovereign wealth funds, pensions, endowments, superannuation funds, family offices, central banks and other long-term institutional investors in the areas of investing, asset allocation, risk, governance, economics, policy, trade and other relevant issues. SWFI facilitates sovereign fund, pension, endowment, superannuation fund and central bank events around the world. SWFI is a minority-owned organization.