Low returns on traditional assets have driven many sovereign funds to invest in technology firms. Yield is not the only motivation, however. Concerns about deglobalisation and disruption are crucial.
The volume of sovereign fund deals in private market technologies fell in 2019, after years of growth. Since the 2008 financial crisis, returns on listed assets have waned. Geopolitical tensions have risen and public listings by major technology companies have declined. As a result, sovereign funds looked for profit and power in direct and indirect private market technology investments. Yet the private market technology rush appears to have cooled significantly even before the onset of the Covid-19 pandemic.
Nonetheless, technology remains of strategic importance for sovereign funds across geographies and sectors. This chapter lays out sovereign funds’ existing holdings, strategies and rationales for investment in private market technology, seeking to disentangle the roles of geopolitics, internal investment capacity and governance. As the immediate shock of the pandemic subsides and its longer-term implications unfold, this sector will take on even greater importance.