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TheHuntforUnicorns Thiseditionfirstpublished2021
©2021byWinstonMaandPaulDowns.Allrightsreserved.
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“State-ownedinvestmentfundsarethenewfrontierinvestors,larger insize,influence,andpowerthanthetraditionalWallStreetof investmentbanks,assetmanagers,andhedgefunds.Theyarethe “unicorn-makers”behindthescene.Offeringaseriesofin-depthcase studiesthatcombinebroadperspectivesonthetechinvestmentworld withspecificnationalexamples,thishighlyoriginalbookexaminesa vitalandincreasinglyimportantrelationshipbetweengovernments andglobalizingVCtechmarkets.”
– AnthonyScaramucci,Founder&Managing PartnerofSkyBridge
“MaandDowns’clearandexpansiveinsightsintothesedisproportionatelyimportantandyetlittle-knowninstitutionswillprovecritical,both topractitionersinthefieldofinvestingaswellastothegeneralpublic seekinganswerstothebigpicturequestionsofwhythenewunicorns transformingtheirlivesarosefromthemodernfinancialsystem.”
– RussellRead,CFA,Ph.D,formerCIOfor CalPERS,GIC-Kuwait,andAPFC
“Theprivatesectordoesn’thavetheanswerstoagrowinglistofthe world‘sproblems.ItistheState,workingthroughpowerfulinstitutionssuchassovereignwealthfunds,thathastakenakeyeconomicand investmentrole.Investorsneedtounderstandthesestate-controlled wealthfunds-whattheydoandhowtheydoit–andthisbookprovides atimelyupdatethatfillsagapintheliteratureonglobalfinance.”
– Dato’SeriCheahChengHye,Co-FounderandCo-Chairman, ValuePartnersandNon-ExecutiveDirector,HongKong ExchangesandClearingLtd
“SovereignWealthFunds(SWFs)lieattheintersectionoffinance, politics,macroeconomics,internationalrelations.Thisbooknotonly constitutesperhapsthemostin-depthandinsightfulinvestigation ofsovereigninvestorstodate,butthebookstartsabroaderdebate overglobalizationandstateeconomicinterventioninthecontextof worlddigitalrevolution.InvaluabletoEuropeangovernmentsand businesses,inparticular,astheEUstrivestobecomethethirdtech pillaroftheworldnexttotheUSandChina.”
– Pierre-YvesLucas,HeadofCooperationMongolia, EuropeanUnionandformerAdvisertotheCEO oftheSWFofKazakhstan
“Abookthat,againstthebackdropoftheworld-alteringcoronavirusepidemic,providesathoughtfulguidetotherolesovereigninvestorsplay intheworld-changingdigitaltransformation–andhowoneaccelerates theother.”
– MargaretFranklin,CFA,PresidentandCEO,CFAInstitute
“ThisisastoryaboutTimeMachines.” – AjayRoyan,Co-founderwithPeterThielofMithrilVCFunds
ToAngela–Iloveyoudearly –WinstonMa
ToRebecca,whosesupporthasbeeninvaluable. –PaulDowns
ItisTimetoBuildtheGreatestofTimeMachines—AjayRoyanxi TheInvestmentPartnersofChoice—RussellRead,CFA,Ph.Dxviii IntotheVanguardoftheDigitalTransformation—MargaretFranklin,CFAxx
Foreword ItisTimetoBuildtheGreatestofTimeMachines ThisisastoryaboutTimeMachines.
No,dearreader,youdidnotstumbleuponthesciencefictionaisleatthebookstore.Youare,however,holdingachronicleofthehuntfortheirclosestearthlycousins.
Inthistimelybook,WinstonMaandPaulDownsbringto lighttheoftmysteriousworldoftransformativetechnology startupsandtheburgeoningsovereignwealthfundswho investinthem.Together,theseconstituteagroupofbuilders andinvestorswhohaveemergedastwoofthebiggestforces reshapingtheworldasweknowit.Theiroriginsarediverse, buttheirevolutionhasmanyparallels.Andtheirfuture,and ours,isintertwinedinmorewaysthananyoneanticipated.
Overanearlytwo-decadecareerintechandinvesting,I havecometoappreciatethateverygreattechnologystartupis infactaTimeMachine,thefruitofatribeofmad-geniusprogenitorsintentonhurtlingusintothefuture.Mostfail,and almostallareunprecedentedbypopularopinion.Whenthey succeed,however,theyfamouslyremakewholeindustriesfora generationortwo.
Asthisbookgoestopress,sevenofthetenlargestcompaniesonearthbymarketcapitalizationaretechgiantsdomiciledintheUnitedStatesandChina:Apple,Microsoft,Amazon,Alphabet,Facebook,Alibaba,andTencent.Evenadecade ago,thatlistwouldhavebeensignificantlyvariedtoinclude energy,financial,andindustrialleaderssuchasExxon,ICBC, GE,andCiti.Today,theonly non-tech companiesinthetop-ten areBerkshireHathaway,Visa,andJohnson&Johnson.
LargelyignoredbyWallStreetafterthe2000DotcomBust, thesestartupsmanagedtothrivewiththequietbackingofa newgenerationofinvestors,themselvesoftenstartupfounders whotookprideinbeingfoundercentric.Therewas,andis,a strongelementofcommunityspiritamongthebestfounders andtheirfundingpartners—youpaidthefavorforward,and inturnfoundyourselfworkingwithkindredspiritsconspiringtobrilliantlypullforwardthefuture.Thereexistsanequal measureofwhatonemightcallconstructiveparanoia,thatno matterhowsuccessfulone’senterprisemightbecome,thereis alwayslurkingacompetitorthatmustn’tbeunderestimated. Afterall,thevenerableMicrosoftandApplehadtobecompletelyreinventedbeforetheycouldtaketheirspotsonthat list.Amazon,foritspart,isfamouslyobsessedwith“Day1”.As founderJeffBezosemphasizedinhis2016shareholderletter, “Day2isstasis.Followedbyirrelevance.Followedbyexcruciating,painfuldecline.Followedbydeath.Andthatiswhyitis alwaysDay1.”
Muchhaschangedalreadyforthosewhowouldbuildtolast. AsPeterThielpithilyoutlinedin ZerotoOne,today’stech marketsaredefinedaboveallbyawinner-take-alldynamic.Victorybelongstothe“last-mover”,thefirstcompanytoinnovate andgetsomething“justright”,whichalmostneveristhefirst companytoenterthecategory.Atthezenith,thesumofthe valueofallthecompetitorsinagivencategoryoftenaddsup tolessthanthatofthedominantleader.Andwhat’smore,it takesatleastadecadetoincubateandmaturesuchwinners.
Asaresult,today’swinnersareseeminglymoremature,definitelymuchlarger,andyetimbuedwithanawkward,permanentadolescencethatbeliestheirpower.Gonearetheshotgun IPOsandretailmarketboomlets.They’vebeenreplacedby vastsumsofprivatecapitalfleeingdepressedinterestratesfor thepromiseofenduringgrowth.Andoncesuccessful,eachof thesechampionsbegetswell-fundedcorporatetreasuriesand largecohortsofsuccessfulemployees,bothofwhichbecome enginestofundyetanothergenerationoftransformativeideas.
Today’stechleadersarealsomoreglobal,bothintheir reachandintheirorigins.SiliconValleymighthostanoutsized proportionofstartups,butitisincreasinglyastateofmind divorcedfromlocation.Andhereliesabiggerstory.Fortech startupsarescarcelytheonlytimemachinesinthischronicle.
Beforeateenagedimmigrantjourneythattookmeto Canada,andeventuallytoSiliconValley,Igrewupinwhatfelt verymuchlikeaTimeMachine.1980sAbuDhabiwasatitscore astartupcityonasingle-mindedmissiontopullthefutureforwardasfastashumanlypossible;wherenothingwasconstant saverapidchangeandgrowth.Asthebestfounderswillattest, progresscannothappenwithouttakingrisk.Successdepends ontheunlikelycombinationofvision,focus,skill,drive,and endurance.Andonbeingright.ItwassoforAbuDhabi.
Onceasmalloasisdependentonpearling,AbuDhabitransformedinthespanofjustafewdecadesintooneoftheworld’s mostmoderncity-states.HailingfromIndia,Ifoundmyself livingbetweentwoverydifferentworlds:Anancient,deeply spiritualnativelandwhoseindustriouspeoplechampedatthe bitoftheLicenseRaj;andabustlingmetropolisthatseemedto arisefromnowhere,itsowneconomythemarriageofnature’s gifts,globaltalent,anditsleader’svision.
Similardynamicsunfoldedelsewhere,bothpresagingand followingAbuDhabi’sjourney:Post-WarJapanandSouth Korea,LeeKuanYew’sSingaporeanditsneighboringAsian Tigers,andofcourseChinaunderDengXiaoping.Eachwas rebootedintoastartupmodedesignedtoinspireawhole societytopullthefutureforward.Aswithstartups,therewere spectacularsuccessesamongthecountrieswhotried;and yetmanymorefailures.Atthepeakoftheirtransformative journeys,eachofthesesuccessesweredefinedbyastrongsense ofmissionandcompetentexecutionthattranscendedgovernmentsandledtowidespreadprosperity.Andoncesuccessful, eachoftheseeconomicchampionsbegetwell-fundednational treasuriesandlargepoolsofsovereigncapitaldesignatedto sustainthatprosperityforgenerations.
Butmoreprosperitycomeswithaprice.Thecostof short-termincrementalgrowthisrisingduetogreatercompetitionwithinwell-establishedindustries;andlow-hangingyields havebeenobliteratedbyadecade-longprogramoffinancial repressionacrossthedevelopedworld.Theeconomieswho workedsohardto“arrive”intothedevelopedworldhave foundthatthey,andthosewhomtheyjoined,arebothfaced withtheSisypheanparadoxofconstantanddisruptivechange. Further,asacountryorcompanyevolvesinto“developed”status,itbecomesinuredtosetwaysofdoingthings,comfortable initsnewfoundfinancialprowessandshockinglyvulnerable toinsurgentsbetterabletoharnessthenextgenerationof competitiveinnovations.
Meanwhile,evenaslow-hangingyieldsdisappear,competitivepressureswithintechmeanthatthenextgeneration ofbluewaterinnovationofteninvolvesthetransformation ofhealthcareormaterialsscience,orofphysicalgoodsand servicesemployingsoftwareandautomation.Theseconcepts embodyahigherlevelofriskandcomplexity,andanintrinsicallylongergestationalperiodthantraditionalsoftwareor consumerInternetcompanies.Aninvestorcannotharness theseinnovationsandtheirassociatedequitypremiaunlessit developsacapabilitytoassessnovelideasfromfirstprinciples and isabletounderwriteproductiveriskcapitalwiththe timehorizonappropriatetoeachproject.Thisiswhatclassic venturecapitalfirmslikeminearedesignedtodo,mainly becausetheyaresmallandnimble.
But,asWinstonandPaulablyshow,itisthisrealitythathas causedthesovereignfunds—large,long-term,andnaturally defensiveorganizations—toremarkablyevolveintosomeof themostprolificandcapableinvestorsintransformativetechnologies.
Theunderlyingirony,unsurprisingtomyventureinvestor’s gaze,isthatseveralofthemostcapablefundsarethemselves startups,oftenmirroringthenationaldevelopmentaldynamic thatbegatthem.Some,likeMubadalaofAbuDhabiorCIC ofChina,areyoung,dynamicorganizationsthatsimplydidn’t
existbefore2002.Others,likeTemasekofSingaporeorCDPQ ofQuebec,datefromthe1960sand70sbut,muchlikethe MicrosoftandAppleofrecentyears,havebeenimbuedwith aprogressiveleadershipthat“getsit”.Thenetresultisthat mypeersinventurecapital,whofifteenyearsagowouldlikely nothaverecognizedanyofthemajorsovereignfundssavea fewwhomadepassivefundinvestments,findthemselveshappilypartneredwiththemineverythingfromcancertherapyto cybersecurity,microsatelliteconstellationstonuclearfusion.
Itwouldseem,therefore,thatweareatan“EndofHistory”momentinthegrowthoftechchampionsandsovereign investing,thecategoriesandwinnersdeclaredandenthroned.
Buthistoryisunkindtothecomplacentmonarch.
InFebruary2020,thenovelcoronaviruspandemicdefinitivelyendedtheremarkablysmoothbullmarketthatstartedin March2009.Financeministriesandcentralbanksworldwide unleashedaformidablefiscalandmonetaryfusillade.These acutemeasurescanhelpinthenear-termandpotentially stanchbleedinginthe financial economy.Butthevirushas explodedaneconomicneutronbombacrossthe real economy. Infrastructureisseeminglyintact,buttherearefewhumans insight.Becauseoflageffectsfromtheshock,widespread humansuffering,continuedepidemiologicalrisk,andthe generalinabilityofsupplychainstoeasilybounceback,this bookwillappearinayearwherethereisnaryaprospectfora quick-VorWshapedrecovery.
Severalconstructsthatwehavebecomecomfortablewith inrecentdecadeshavesuddenlybecomeopentodebate.And startupsandsovereignsalikewillplaycriticalrolesindeterminingtheoutcomes.
Herearejusttwosuchquestions:
Deglobalizationvs.Globalization.Thevirushasclosedeven themostopenborders,suchasbetweenWesternEuropeancountries,andreopenedwhatwasthoughttobe adebatelongsettledinfavorofmorefreetradeand commonstandards.Itislikelythateconomiesbecome
increasinglyautarkic,bothforreasonsofpoliticalbelief andphysicalneed.Assuch,investorsandfoundersalike mustplanforaformofdeglobalization.Thiscallsfor anopenmindedapproachtouniqueapproachesthat originatefromoutsidetheideas-bubblethatspansSiliconValleyanditsmimeticglobalproxies.Equally,the efforttouniversallyvaccinateagainstorcurethevirus mightleadtomore,notless,globalcooperation;and moreofanimpetusforcommonapproachestoshared resilience.
Decentralizationvs.Centralization.Thevirushasdisrupted thepowerful,vitalnetworksthatanimatemodernlife, creatinganinstantpreferencefortechnologiesthat increaselocalchoiceandpushpowertotheedgeof thenetwork,thusreducingconcentratedpointsof failure.Examplesincludedistributedpowergeneration andstorage,efficientmicro-factories,portabledigital medicaldevices,anddistributedtrustapplications likeBitcoin.Onemightthinkofthisasaformof autarkyexpressedinproductdesign.Butthereisalso anargumenttobemadeforevenmore centralization; thateconomiesofscaleforcriticalsafetyandproductivitygoodscannotbeachievedwithout more,not less, coordinationamongcountriesandcompanies.
Insum,theworldmustplanfortheworstandwork,determinedlyanddeterministically,forthebest.Here,pastis not prologue.FromSingaporetoNewYork,governmentsandcompaniesarerunningmultipleexperimentsinreal-time.Allwe knowisthatitwillbeaLongRecovery.
Wewillneedtocatchupto,andsurpass,ourformerrate ofgrowth.Andtodosoinawaythatbringsprosperitytobillionsofpeople.Thiswillbeimpossiblewithoutatsunamiof technology-driventransformation,ofentireindustriesandof theinfrastructureneededtosustainthem.Neverhavetheprotagonistsdescribedinthisbookhadamoreimportantmission,forthecomingdecadewillbecomealiveexperimentin
“super-productivity”thattheyareuniquelysuitedtoforesee, finance,andprosecute.
ThetimehascometobuildthegreatestofTimeMachines.
AjayRoyan
AjayRoyancofoundedandrunsMithril,afamilyoflong-terminvestmentfunds fortransformativeanddurabletechnologycompanies.Togetherwithcofounder PeterThiel,AjayinvestsMithril’sfundsincompaniesthatencompass,among otherareas,cybersecurity,nuclearenergy,nextgenerationfinance,medical robotics,industrialautomation,advancedantibodydiscovery,metabolicdisease therapies,andspecializeddataintegration,visualization,andanalysis.
TheInvestmentPartnersofChoice T‘Well,nowthatwehaveseeneachother,’saidtheunicorn,‘ifyou’ll believeinme,I’llbelieveinyou.’”
–LewisCarroll;ThroughtheLookingGlass
histimelyandimportantbookbyWinstonMaandPaul Downsturnsalong-standingprevailingorthodoxyentirelyon itshead,andforgoodreasons!Notsolongago,particularly priortotheonsetoftheGlobalFinancialCrisisof2008-2009, themostsophisticatedandsuccessfulpoolsofinstitutional capitalweremanagedbypensionfunds,insurancecompanies, anduniversityendowmentslargelyinOECDcountrieswhich allocatedtheircapitaltoinvestmentfundmanagersinstocks, bonds,andtosomedegreealsointheprivatemarketsforreal estateandprivateequity.
Largescalewasviewedlargelyasanimpedimentforachievinginvestmentsuccessbecausesmallerfundswereviewedas morenimbleandlesslikelytomoveamarketwhileitwassecuringdisproportionatebenefits(e.g.,byinvestinginsmallcap stocks).Sovereigninvestmentfundswerefewinnumber,lightly staffed,andseeminglyonestepbehindtheirmoreadventurous institutionalfundpeers.
Today,theimpactofthesesamesovereignfundscannotbe understatedbothintermsoftheirimpactontheglobalinvestmentmarketsandeconomicdevelopmentbutalsoonmodern lifegenerally.Indeed,thesignificantchangesweareseeing worldwideinride-sharingversustaxis,awayfrommotor-fueled carsandtowardselectricones,andtowardssharingoffice andhomespacescanallbeattributedinlargemeasureto xviii
theactionsofthesesovereigninvestors.Ratherthanbeing rogueactors,whichwasgreatlyfearedpriorto2008-2009, thesesovereigninvestorshavebecomeastabilizingforce intheglobalcapitalmarketsforstocksandbondsbecause oftheirlonginvestmenttimehorizonsandacceptanceof long-termrisk.
Moreover,ratherthanlargescalebeingadisadvantage, thesesovereignfundshavealsodemonstratedthatlargesize canbecomeanadvantageintermsoftheirabilitytoaccessnew opportunitiesandtheirheightenedcredibilityamongproject managersaroundtheworldwhoincreasinglyviewthemasthe InvestmentPartnersofChoiceforinternationalinvesting.
ItisthisnowfirmlyestablishedroleastheInvestmentPartnersofChoiceforinternationalinvestingthatwillenablethe sovereignfundstohaveadisproportionatelystrongimpacton modernlifeformanydecadestocome.MaandDowns’clear andexpansiveinsightsintothesedisproportionatelyimportant andyetlittle-knowninstitutionswillprovecriticalbothtopractitionersinthefieldofinvestingaswellastothegeneralpublic seekinganswerstothebigpicturequestionsofwhythenewunicornstransformingtheirlivesarosefromthemodernfinancial system.
RussellRead,CFA,Ph.D.,London
RussellRead,CFA,Ph.D.istheformerChiefInvestmentOfficerfortheCalifornia PublicEmployees’RetirementSystem(CalPERS),theGulfInvestmentCorporation(GIC-Kuwait),andtheAlaskaPermanentFundCorporation(APFC)
IntotheVanguardoftheDigitalTransformation Sometimesabookshedslightonalittleknownbutpowerful force.Sometimesitistimelybecauseitcatchestheworldatan inflectionpoint.Rarelydoesabookaccomplishboth.
Withthearrivalof SovereignInvestmentFunds:TheHunt forTechUnicorns fromWinstonMaandPaulDowns,wehave thatrarebeast:abookthat,againstthebackdropofthe world-alteringcoronavirusepidemic,providesathoughtful guidetotherolesovereigninvestorsplayintheworld-changing digitaltransformation–andhowoneacceleratestheother. Theauthorscaptureinafast-paced,engagingformattheway inwhichtheworld’slargestpoolsofcapitalhaveagaincome tothefore,bothaseconomicsuperheroesofthedeveloping worldandthecomic-bookvillainsofthedevelopedmarkets.
Sovereigninvestorshavegonefromstrengthtostrengthas theynavigatedthefirstGulfWar,theGlobalFinancialCrisis, andnowthecoronaviruspandemic.Itisnowonderthatthey havebeencalleduponintimesofcrisis.Theresourcesattheir commandarestaggering:$30trillion,whichmaybeontheconservativeend.Simple,mechanicalportfoliorebalancingatone ofthelargerfundscanalterthecourseoftheworld’scurrency markets.Norway’sfundholds,onaverage,1.5percentofevery listedcompanyonearth.AndastheypivotfromWallStreet torescuetheirhomeeconomies,theresultantdepartureand arrivaloftheircashhoardswillsurelybefeltasmuchinthe corridorsofinvestmentbanksasintheirhomegovernments’ budgetsandstimuluspackages.
Meanwhile,theadventofstay-at-homeordersandsocial distancinghaveonlyacceleratedthetrendtowardthedigitalizationofeverything.Thisdigitaltransformationhasbeen
drivenincreasinglybymassivepoolsofsovereigncapital.Tracingthedramaticriseandrecentfallofsomeunicorns–private companieswithvaluationsofmorethan$1billion—thebook revealsincasestudieshowtheSovereignInvestmentFundsof itstitlehavefueledtheriseofthisonce-rarebreed,backing thelikesofAlibaba,AirBnb,JD.com,Tesla,Uber,WeWork, andthewell-knownunicorn-maker,theSoftbankVisionFund. Andsimilarly,howtheyarethemselvesintegratingAIand blockchainintotheirownoperations–andintotheirthinking aboutmitigatingdigitaldisruptiontotheirportfolios.
ThebookprofilesadiversecastofcharactersfromtheMiddleEasttoCanada,fromSoutheastAsiatoAfrica,fromEurope toAustraliaandfromLatinAmericatoEastAsiaastheyinvest inthedigitaltransformationandaretheythemselvesdigitally transformed.ThefocusmovesonfromthetechhubsofSilicon ValleyandBeijingtocaptureemerginghubsinIndia,Europe andtheMiddleEastaswellasAfrica,acontinentnowentering thedigitaleconomy.
Geographyalsocontributestoagrowingdigitaldivide: ChinaandtheUS,homestotheauthors,eachenvisiona differentdigitalfuture,forcingothernationstopicksideson suchdevelopmentsastheemerging5Gdigitaltechnologyand theInternetofThings.Theactivitiesofsovereigninvestors areincreasinglyperceivedaspresentingrisksaswellbutalso, paradoxically,astheverymeanstocounterthoseperceived risks.Againstthisbackdrop,newfundsarebeinglaunched andexistingfundsarebeingrepurposed.
Thesovereigninvestorsarealsobecomingkeyarbitersof ESGandSDGprinciples.Asmajorholdersofequities,they haveweighedinonsustainability,governance,climatechange andmore.Indoingso,theyhaveunitedacrosscontinents,givingonevoicetotheirtrillionsastheyspeaktothecompanies withwhosemanagementtheyengage.
Theauthors’extensive,hands-oninvolvementinthedeals andoperationsofthislittle-knownworldlendsvibrancyas theyrecountpractical,illustrativeexamplesinanon-pedantic style.Thebookbenefitsfromthecontrastingbackgrounds
xxii Foreword
ofitsauthors.MaisaChinese-bornWallStreetveteranand wasmostrecentlytheNorthAmericaofficeheadofChina InvestmentCorporation(CIC),oneoftheworld’slargest sovereignwealthfunds.Hebringsadepthofinsightfromhis backgroundasalawyer,asadealmaker,andasaninstitutional investor.DownsisAmerican,formerlyapartneringloballaw firmHoganLovellsandhaslongactedasoutsidecounsel formanysovereignfundsacrosscontinents,bringingtobear onthisbookhisdecadesofexperienceworkingondeals, governanceandtraining.Together,theiruniqueperspectives anddifferingapproacheshaveproducedanuancedroadmap tothelittleknownpastandexcitingprospectsofthesegiants. Thebook’stimelymessageisclarionclear:theworld’s sovereigninvestors,the“trilliondollarclub”intheauthors’ parlance,haveshakenofftheirtraditional,passiveinvestor rolesandsteppedintothevanguardofthedigitaltransformationwearealllivingthrough.Nolongersimplychanneling theirtrillionsthroughWallStreethandlers,thesesuperasset ownershaveinsteadbecomeactiveESGguardians,fintech powerhouses,sustainabilitychampionsand–theauthors proposeanewleadingrole–digitaldiplomats.Thankstothe authors,wearenowabletoseeclearlytheperceivedthreat and–hopefully–theopportunitytheypresent.
MargaretFranklin,CFA PresidentandCEO
Charlottesville,Virginia
Authors’NotesandAcknowledgments WinstonMa Attheearlydaysoftheglobalfinancialcrisis2007-2008,I wasaninvestmentbankerandequity-linkedproductstraderon WallStreetinNewYork,andChinaInvestmentCorporation (CIC),thesovereignwealthfund(SWF)ofChina,wasestablishedinBeijingtomanageapartofChina’strilliondollarforeignreserve.Atthattime,SWFwasanewentranttotheglobal capitalmarkets.Iwasamongthefirstgroupofoverseashires byCIC,soImovedtoBeijingandstartedtheexcitingjourney withthesovereigninvestors,inChinaaswellinallcontinents ofAsia,Africa,Australia/Oceania,Europe,NorthAmerica,and SouthAmerica.
After10yearswithCIC,in2019Imovedbackhometo NewYorkandprivatecapitalmarkets.Bythenthesovereign fundswerealreadyrecognizedasimportantparticipantsinthe internationalmonetaryandfinancialsystem.Infact,itwashard toavoidtheheadlinestheiractivitiesattract.Assuch,Ihave becomeanadjunctprofessoratNewYorkUniversity(NYU) SchoolofLaw,teachingacourseonsovereigninvestors,capitalmarkets,andregulatorychallenges.WhenIwasfinalizing thescriptofthisbookinthespringof2020,thecoronavirus pandemicbrokeout,andthesovereignfunds,withtheirmassiveportfoliosoffinancialassets,wereactive(again)atthefront lineofcapitalmarketsturmoilandglobalfinancialcrisis. Therefore,thisbookofsovereigninvestmentfunds andtheirglobaltechinvestmentsisaddedwithanewcontext–worldeconomydownturnandinternationaltensions. Abookonsuchacomplexandfast-movingtopicwouldnot
xxiv Authors’NotesandAcknowledgments
havebeenpossibleifIhadnotbeenblessedtopartnerwithan industryleaderlikePaul,whohaspracticedinternationallaw formorethanfourdecades,andlearnfromanamazinggroup ofmentorsinfinance/investments,lawandtech.
MydeepestthanksgotoDr.RitaandGusHauser,the NewYorkUniversity(NYU)SchoolofLaw,andJohnSexton, thelegendaryDeanofNYULawSchoolwhenIwaspursuing myLL.MdegreeinComparativeLaw.MyPE/VCinvesting, investmentbanking,andpracticingattorneyexperiencesall startedwiththegenerousHauserscholarshipin1997.During hisdecade-longtenureasthePresidentofNYU,Johnkindly engagedmeathisinauguralPresident’sGlobalCouncilashe developedtheworld’sfirstandonlyGNU–the“globalnetwork university.”MyNYUexperiencewasthebaseformyfuture careerasaglobalprofessionalworkinginthecross-border businessworld.
MysincereappreciationtoMr.LouJiweiandDr.Gao Xi-qing,theinauguralChairmanandPresidentofChina InvestmentCorporation(CIC),forrecruitingmeattheinceptionofCIC.Oneofthemostgratifyingaspectsofbeingpartof CICistheopportunitytobeexposedtoawiderangeofglobal financialmarkets’newdevelopments.Theuniqueplatform hasbroughtmetothemoversandshakerseverywhereinthe world,includingSiliconValleyprojectsthatlinkedglobaltech innovationwiththeChinamarket.
ThesamethanksgotoChairmanDingXue-dong,PresidentLiKe-ping,andSupervisoryChairmanJingLiqunwhoI reportedtoatCICinrecentyears.ChairmanJingisnowthe PresidentofAsianInfrastructureInvestmentBank(AIIB).He educatedmeabouttheworksofShakespeare,aswellasguiding meprofessionally.ThereadingsofHamlet,Macbeth,andKing LearimprovedmyEnglishwritingskills,andhopefullythewritingstyleofthisbookismoreinterestingandengagingthanmy previousfinancetextbook“InvestinginChina.”
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Forsuchadynamicbooktopic,Ibenefitedfromthebest marketintelligencefromadistinctivegroupofinstitutional investors,techentrepreneurs,andbusinessleadersatthe WorldEconomicForum(WEF),especiallythefellowsatthe CouncilonLong-TermInvesting,theCouncilforDigital EconomyandSociety,andtheYoungGlobalLeaders(YGL) community.ProfessorKlausSchwab,founderandexecutive ChairmanoftheWorldEconomicForum,hasatremendous visionofasustainable,shareddigitalfuturefortheworld, whichisanimportantthemeofthisbook.
TheWEFCouncilonLong-TermInvestinghasgatheredthe mostforward-thinkingleadershipfrommajorSWFsandpublic pensions,andIlearnedsomuchfromthedynamicdiscussions withthem,includingAlisonTarditi(CIOofCSC,Australia), AdrianOrr(CEOofNZSuper,NewZealand),GertDijkstra (ChiefStrategyofAPG,Netherlands),HiromichiMizuno(CIO ofGPIF,Japan),JagdeepSinghBachher(CIOofUCRegents, USA),Jean-PaulVillain(DirectorofADIA,UAE),LarsRohde (CEOofATP,Denmark),LimChowKiat(CEOofGIC,Singapore),ReubenJeffery(CEOofRockefeller&Co.,USA),and ScottE.Kalb(CIOofKIC,Korea).
Ihaveaspecialfriendshipwiththeleadershipfiguresat majorCanadianpensions,becauseforafewyearsIwasthe HeadofCICNorthAmericaofficebasedoutofToronto, Canada.BlakeHutcheson(CEOofOMERS/OxfordProperties)wasthelandlordofmyofficeontheBayStreet.Michael Sabia(CEOofCDPQ),RonMock(CEOofOTPP),Andre Bourbonnais(CEOofPSP),andIweretogetherforthe investmentpanelofBloomberg2015CanadaSummit.Mark MachinandMarkWiseman,thecurrentandformerCEO ofCPPIB,havebeenfriendsoflongstandingandkindly supportedmyNYUprogramonSWFs,pensionsandother assetowners,forwhichIamenormouslygrateful.
Mygratitudegoestomanyotheroutstandingfriends, colleagues,practitionersandacademics,whoprovidedexpert opinions,feedback,insightsandsuggestionsforimprovement. Foranecdotes,pointers,andconstantrealitychecks,Iturned
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tothembecausetheywereatthefrontlineofindustryand businesspractices.Iwouldparticularlyliketothankthefriends attheWestSummitFund,whichIsetupatCICin2009for cross-borderinvestmentsbetweenSiliconValleyandChina. Forthepast10years,wehadafunjourneytogether.
SpecialthankstoFrankGuarini(NYU’50,LL.M.’55),the seven-termNewJerseycongressmanandalong-termfriend fromtheNYUlawschoolcommunity.Withincrediblevision andgenerosity,hecontinuestogivemeinvaluableguidance, evenwhenheisinhis90s.Thetimewiththisadmirable leaderhasreshapedmywayofthinkingaswellasmeasa person.HehasbeenatremendousmentorandIthankhim forcontinuouslybeingagreatcheerleader.
Onitsjourneyfromacollectionofideasandthemestoa coherentbook,themanuscriptwentthroughmultipleiterationsandameticulouseditorialandreviewprocessbytheJohn WileyteamledbythebookcommissioningeditorGemma Valler.Ourlong-termcollaborationstartedwithmy2016book China’s MobileEconomy (among“best2016businessbooks forCIOs”byi-CIO.com),andweareworkingtogetheron anothernewbook“TheDigitalWoe”asasequel(forthcoming December2020).ThemanagingeditorPurviPatelandcopyeditorCarolineMcPhersoncontributedsubstantiallytothe finalshapeofthebook.SpecialthankstoGladysGanadenfor herdesignofthebookcoverandfigures.
Andlastinthelineupbutfirstinmyheart,Ithankmywife, AngelaJu-hsinPan,whogavemeloveandsupport.Youarea truepartnerinhelpingmeframeandcreatethiswork.Thank youforthepatienceyouhadwhileIwreckedourweekendsand eveningsworkingonthisbook.
Acknowledgements PaulDowns Aglobalpandemicputsmuchinperspective,summoning gratitudetothefore.AsIwritethisinquarantine,theonly soundspunctuatingtheodd,pervasivesilenceofManhattan arethesirensofthefirstresponders.ItistothemImustfirst acknowledgegratitude.Togetherwiththosewhoarekeeping thelogisticsoffood,medicalcareandbasicservicesfunctioningasIsitsafelyatmylaptoplivingthedigitaltransformation thatisthefocusofthiswork.
Manyothershavebeeninstrumentalinbringingthis booktofruition.Mycolleaguesinthepracticeoflawhave impartedtheknowledgeonthistopicthatisnottobefound intheserverracksoftheinternet.Two,inparticular,aided myunderstandingoftheworldportrayedinthisbook:Brett Dick,whoauthoredthego-tobookontheUStaxtreatment ofsovereigninvestorsandhissuccessorinthatrole,Babak Nikravesh,whoalsoaccompaniedmeoncountlessvisitsto manyofthesovereigninvestorswhofillthesepages,always offeringinsightandgoodcompany.
ThanksaredueaswelltoHoganLovellswhomadepossibletheannualSovereignInvestorConferencethatbrought togetherthoughtleadersfromthesovereigninvestorsfeatured inthisbook.Thepanelparticipantsandkeynotespeakersprovidedvaluable,empiricalinsightstothethemesofthisbook.
Reachingbackintime,Imustalsorecognizethecontributionoftwoprofessorswhocontributedtomyappreciationof internationalbusinesstransactions:HalScott,whosecourseat HarvardLawSchoolprovidedthebuildingblocksforacareer
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ininternationalbusinesslaw;andthelateSergioLePera,FacultyofLaw,UniversityofBuenosAires,whosementorshipin comparativelawhasstoodthetestoftime.
Inthepresent,noonehasbeenmorevaluablethanmy co-author,Winston,whoseinsight,skillededitingandgood naturedcollaborationhavepoweredthisbook.
Myfamilydeservemygreatestthanksforindulgingmein thisproject--aswellasintheprecedingdecadesoftraveland latenightconferencecallsthatlaidthefoundationofexperienceuponwhichthisbookisbuilt.MydaughtersLexand Liv,bothofwhomprovidedgreatsupport(whileoccupiedfull timerespectivelyataunicornandatcollege).Andmostfundamentally,myremarkablespouse,RebeccaDowns,whowas myrealitycheckandpatientsourceofsanityasthisproject absorbedme.
