Sovereign Wealth Funds and Private Equity

Abstract

While the vast majority of SWFs invest in public equity and fixed income vehicles, about half invest in private equity (PE). PE includes several different types of funds investing in companies at different stages of development. Some 78% of SWFs investing in PE invest in buyouts stage funds; 72% in venture capital stage funds; 66% in growth stage funds, while 56% invest in funds investing in companies at the expansion stage. Only 41% have a strategy to invest in distressed company funds while 38% invest in the secondaries funds market. Some 14% of institutional capital raised by PE equity funds in 2015 came from sovereign wealth. This chapter argues that SWF investment in PE funds is more likely to be part of an investment strategy that seeks to maximize returns because investment in PE funds does not afford the SWF direct control over firms bought using PE funds.