Financing of Inovations and Sovereign Funds

Abstract

Technology turned to be a virtual bedrock of the contemporary global economy. The prospects for successful overcoming of the multiple social, environmental, economic and geo-political strains that are challenging the future of the mankind mainly depend on the technological progress in all spheres of life. The development and large-scale introduction of qualitatively new, in many cases disruptive, technologies demand accumulation and efficient allocation of huge amounts of resources, primarily the financial ones. Since the global financial crisis of 2008–2009 sovereign wealth funds proved to be some of the most well-capitalized institutional investors and substantially increased their role in the international economic architecture. Currently, total disclosed assets under management (AUM) of 95 active state-run funds are estimated at about 9 Trillion US dollars, which presents almost 10% of the total worldwide AUM. Even more importantly, thanks to the structure of capital and statutory mandates, they can take a longer view on value creation and, thus, on operations’ planning as compared to venture funds, PE funds and other counterparts from the private sector. Far-reaching investment horizon is a feature that is critical and highly welcomed in such capital-demanding and volatile sphere as financing of innovations. According to available data, in recent years the leading sovereign wealth funds joined the global race in technologies and noticeably increased their investments in the technological sector, including transition to “green” economy, clean energy, digitalization of production, transportation and distribution, ICT-based services and business platforms. This trend can be traced since mid 2010s. Even in pandemic 2020 sovereign funds were most active in the technology sector (25% of all registered deals). The second and the third places were taken by services (including e-commerce infrastructure) and life sciences (vaccines): 18 and 17.6% respectively. This data is based on the analysis of 165 fresh annual deals worth 42 Billion US dollars. The sovereigns’ trend to get closer to the technological assets (instead of traditional equities and mortgage) is being accompanied by greater in-house expertise and skills, general sophistication of strategies and operational management. This is especially true in cases of direct investments and access to early-stage technology-focused ventures. The empirical evidence allows to expect that in a foreseeable future the sovereign wealth funds will be steadily increasing their roles in financing of global innovations.