In the present, no one has been more valuable than my co-author, Winston, whose insight, skilled editing and good natured collaboration have powered this book.
My family deserve my greatest thanks for indulging me in this project-- as well as in the preceding decades of travel and late night conference calls that laid the foundation of experience upon which this book is built. My daughters Lex and Liv, both of whom provided great support (while occupied full time respectively at a unicorn and at college). And most fundamentally, my remarkable spouse, Rebecca Downs, who was my reality check and patient source of sanity as this project absorbed me.
About the Authors
Winston Wenyan Ma, CFA & Esq.
Winston Ma is an investor, attorney, author, and adjunct professor in the global digital economy. He is one of a small number of native Chinese who have worked as investment professionals and practicing capital markets attorneys in both the United States and China. Most recently for 10 years, he was Managing Director and Head of North America Office for China Investment Corporation (CIC), China's sovereign wealth fund.
At CIC's inception in 2007, he was among the first group of overseas hires by CIC, where he was a founding member of both CIC's Private Equity Department and later the Special Investment Department for direct investing (Head of CIC North America office 2014-2015). He had leadership roles in global investments involving financial services, technology (TMT), energy and natural resources sectors, including the setup of West Summit (Huashan) Capital, a cross-border growth capital fund in Silicon Valley, which was CIC's first overseas tech investment.
Prior to that, Mr. Ma served as the deputy head of equity capital markets at Barclays Capital, a vice president at J.P. Morgan investment banking, and a corporate lawyer at Davis Polk & Wardwell LLP. Nationally certified Software Programmer as early as 1994, Mr. Ma is the book author of China's Mobile Economy (Wiley 2016, among “best 2016 business books for CIOs”), Digital Economy 2.0 (2017 Chinese), The Digital Silk Road (2018 German), China's AI Big Bang (2019 Japanese), and Investing in China (Risk Books, 2006).
Mr. Ma has served on the boards of multinational listed and private companies. He was selected a 2013 Young Global Leader at the World Economic Forum (WEF) and has been a member of the Council for Long-Term Investing and Council for Digital Economy and Society. He is a member of New York University (NYU) President's Global Council since inception, and in 2014 he received the NYU Distinguished Alumni Award.
Paul Downs Esq.
Paul Downs practiced international law for more than four decades, most recently as a partner at Hogan Lovells in New York, where he co-founded the Sovereign Investor Practice and initiated its annual Sovereign Investor Conference. He has represented sovereign investors transacting in assets globally, has spoken and published on the topic and guest lectured at Columbia and New York University law schools.
Mr. Downs served as President of the American Foreign Law Association, is a member of the Association of the Bar of the City of New York, the International Bar Association and the American Bar Association.
He is a current or past director of international companies and not-for-profit organizations, including International House, New York, The Council for the United States and Italy, and the China US Business Alliance. Paul is a graduate of Princeton University and Harvard Law School.
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The authors can be reached on LinkedIn for comments and feedback on The Hunt for Unicorns: How Sovereign Funds Are Reshaping Investment in the Digital Economy.
Preface
Who holds the power in financial markets? For many, the answer will probably be the large investment banks, big asset managers, and hedge funds that are often in the media's spotlight. But increasingly a new group of sovereign investors, which includes some of the world's largest sovereign wealth funds, government pension funds, central bank reserve funds, state-owned enterprises, and other sovereign capital-enabled entities, have emerged to become the most influential capital markets players and investment firms, with $30 trillion in assets under management (“super asset owners”).
Importantly, the rise of sovereign investors is reflected not only in the increase in the size of assets under their management but also in the proliferation of new funds established over the past decade and the anticipated establishment of new funds in countries with recent resource wealth (such as African countries), as well as in regions striving for government-driven economic transformation (e.g., the EU).
Their ample resources, preference for lower profile, passive investing, their long time horizon and adherence to sustainability, as well as their need to diversify globally and by sector, have helped to transform the investment world and, in particular, private markets for digital companies. They have helped create and sustain an environment that has fostered the rise of the likes of Uber, Alibaba, Spotify, and other transformative players in the digital economy, while providing their founders and business models the benefit of long-term capital.
Despite this increasingly important impact, sovereign investors remain mostly unknown, often maintaining a low profile in global markets. For the same reason, they're also among the most widely misunderstood investors, as many view investments made by sovereign investors as purely driven by political aims. The general perception is that most sovereign investors lack transparency and have questionable governance controls, causing an investee nation to fear exposure to risks of unfair competition, data security, corruption, and non-financially or non-economically motivated investments.
As this book goes to press, the pandemic raging around the globe has brought them again to the front pages. Sometimes it's their key role in fostering the rise of the tech unicorns of artificial intelligence (AI) and big data and their big bets on biotech startups searching for treatments and vaccines. More frequently, it's coverage of their role as economic superheroes called upon to rescue the global economy or as comic book villains scooping up Western champions the pandemic has made vulnerable. These simple caricatures do not reflect reality, of course. Revealing the complex reality behind these simplistic depictions is the task of this book.
The current global tensions around the AI race and tech competition – and now the corona virus pandemic – have exacerbated such misperceptions, spawning controversies around sovereign investors and capital markets, governments, new technologies, cross-border investments, and related laws and regulations (see the chart below):
As such, sovereign capital and the global digital economy are undergoing an unprecedented, contentious moment. This book maps the global footprints of these super asset owners; in particular, the three intersecting aspects of their pursuit of digital revolution: their strategy and institutional setup, their investments and impact, and regulatory policy responses.
This book is organized as follows.
Part I: The Trillion-Dollar Club
The two chapters in Part I lay the foundation for the rest of book by identifying key characteristics of the sovereign investors, such as capital size, investment policies, and governance structures. Many of the sovereign investment funds are transforming themselves to better invest into the new digital economy.
Chapter 1: Sovereign Investors Rising in Crisis