Sovereign wealth funds holding hundreds of billions of dollars are increasingly investing in private companies that disrupt businesses and doing more co-investments to generate better returns, Middle Eastern and Asian funds said on Wednesday.
“Our view is that the market cap indices tend to focus on what have been winners of the past,” said Jeffrey Jaensubhakij, group chief investment officer of Singapore's GIC Ltd.
“If there are disruptions that are creating winners of the future they won't be in the indices,” he said on the sidelines of an investment conference in the Saudi capital.
GIC has in recent years stepped up investments directly in unlisted firms as low yields spur fund managers to adopt a more hands-on attitude in their search for higher returns.
Speaking on a panel attended by Gulf and Russian sovereign funds, Jaensubhakij said in the past sovereign wealth funds used to operate like endowment funds, focusing on the right allocation between equities, fixed income and other assets.
This worked “wonderfully well” during the 1980s and 1990s when global interest rates were higher, but has changed in recent years as interest rates dropped and equity valuations went up, he said.
“For us it is very important to have an eye out on what is being disrupted,” Jeffrey Jaensubhakij said.
Khaldoon Al Mubarak, chief executive of Abu Dhabi state investor Mubadala said technology was an area where sovereign wealth funds have also been co-investing in, citing investments in Softbank. He said it teamed up in Russia with the Russian Direct Investment Fund for projects.
Mubadala agreed this year to co-invest in Softbank's $100 billion technology fund, alongside the Public Investment Fund, Saudi Arabia's sovereign fund.