Overview of Strategic Investment Funds
TABLE 2.7
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27
Illustrative list of strategic alliances between global SIFs and SWFs
DATE
PARTNERS
STRATEGIC ALLIANCE / VEHICLE
MANDATE
2017–18
ADIA, Temasek (Singapore), and NIIF (India)
NIIF Master Fund
To invest in infrastructure sectors in India
July 2018
Compañía Española de Financiación del Desarrolloa (Spain) and State General Reserve Fund (Oman)
€204.4 million Oman-Spain Investment Fund
To invest jointly in Spanish companies with an interest in expanding internationally to Gulf Cooperation Council countries, particularly Oman
March 2018
Ireland Strategic Investment Fund and China’s CIC Capital Corporation
€150 million fund (Donnelly 2018)
To invest in (1) high-growth Irish technology firms aiming to access the Chinese market, and (2) Chinese firms using Ireland as a base for operations in Europe (target sectors include Internet of Things and mobile devices, big data, robotics, and artificial intelligence)
December 2016
Ithmar Capital (Morocco) and NSIA-NIF
Joint venture for Trans-African Gas Pipeline Project
To finance gas pipeline project
Source: World Bank. Note: ADIA = Abu Dhabi Investment Authority; NIIF = National Investment and Infrastructure Fund; NSIA-NIF = Nigeria Sovereign Investment Authority – Nigeria Infrastructure Fund; SIF = strategic investment fund; SWF = sovereign wealth fund. a. Compañía Española de Financiación del Desarrollo manages two SIFs: Fund for Foreign Investments and Fund for Foreign Investment Operations of Small and Medium Enterprises.
NSIA-NIF (Ithmar Capital 2016). India’s NIIF is another good example of a strategic alliance between governments, with the NIIF Master Fund serving as a platform through which foreign SWFs have partaken in, or boosted their commitment to, infrastructure investment in India. In October 2017, NIIF signed an investment agreement worth US$1 billion with the Abu Dhabi Investment Authority, which became the first institutional investor in NIIF’s Master Fund and an owner of NIIF’s management company (PTI 2017). This agreement was followed in September 2018 by Singapore’s Temasek agreeing to invest as much as US$400 million in NIIF to boost infrastructure financing in the country (Economic Times 2018).
Crowding in commercial capital The secondary, and interrelated, argument for setting up a SIF is also the SIF’s raison d’être: to crowd in commercial capital. In addition to the condition for additionality is the requirement that government capital be used to stimulate and mobilize additional capital, or crowd in commercial capital. As discussed, SIFs are set up precisely to stimulate commercial investment in underserved sectors. This function is again similar to the requirement that DFIs and MDBs must use their capital to mobilize private resources. The World Bank, for example, typically employs a systematic approach to assessing its mode of intervention, focusing first on upstream reforms to determine where market failures really lie and where public capital may best be put to use. The idea is to ensure that policy actions focus first on correcting market failures to unfetter private capital before deploying scarce public capital to fill a financing gap. Several SIFs have been effective in mobilizing additional capital per their mandate, at either the fund level or the project level. As discussed in a prior World Bank policy research working paper on SIFs, the concept of a public