How Sovereign Funds Are Reshaping Investment in Digital Economy

our next guest sees this bifurcation between the world's two largest powers having significant implications on how sovereign wealth funds invest well into the future joining us now is winston ma he's the author of the hunt for unicorns and also the former md and head of the north american office of cic the china investment corp china's sovereign wealth fund winston good morning for major pleasure to have you on the show we'll get to your book in just a moment it certainly plays into a lot of the themes we're seeing globally right now but i guess let's use tick tock as a jumping off point and how that as a tangible example winston is perhaps playing into your area of expertise uh what's going on yeah yeah thanks very much david uh thanks for having me here i think tick tock is a great case uh in today's market for various reasons you know number one you know before we get into geo politics uh tick tock is a great example of of the impact of the pandemic driving activities online right because during the pandemic of course you know there's a huge huge increase in zoom downloads as we're having this zoom interview uh it's you know probably less known to the public uh during the first half of 2020 just after zoom uh tick tock was the second in downloads uh in terms of uh app downloads uh so it's a very uh important case right showing the panamic impact on digital activities uh going up and then the second obviously you already touched on is the geopolitics um the detector case showcase highlighted the sensitivity of data uh especially in a cross-border context the important factor is uh uh except for the u.s company apple uh tick tock and its parent company by advance is the only other company that has large user base in both u.s and china so so the tick tock case is is it can be viewed as a test case on cross-border uh data management and then finally you know the tick tock also showcase the the risk of uh tech investment uh in in in in today's market you know in this uh high tension market if you will uh because uh if if the tick tock case cannot be solved in a constructive way you know the app has to be shut down and which means approximately 50 billion value will go like that so david i think you know it's it it can be a tester case uh for many aspects of the new digital economy and you know a lot of these names if not all of these big names winston play into what your book is about talking about how sovereign wealth funds um first i guess are forced to be reckoned with if not already obviously across global financial markets and second how perhaps do you think i guess that's the question do you think that sovereign wealth funds are in in indirectly being used as ways to further national interests well you know that that's the question has has been in the market ever since uh sovereign fund is it has is being created was created uh during the last several decades you know all the sovereign funds are saying we are financial investors and they are setting you know they are trying to set it sets the institutions up in a more market-oriented way but at the same time you know this government aspect is something inherent in these institutions and it's it's just inevitable so i think you know david i think that the right way to look at this is uh we can never uh we can never ignore the government aspect of these investment institutions but the more important question is you know how we can develop a a scheme some construct that these sovereign funds can be can be regulated and also become partners in transactions that can benefit the capital markets and i think the uh for during the financial crisis you know their their capabilities to stabilize the market uh has has been proven right uh because you know in my case you know i joined cic uh uh in two during the last financial crisis you know that's when csu was created and it it made news because it invested billions into morgan stanley which was struggling at the time at the same time you know the sovereign was found in singapore in middle east also invested in wall street troubled banks such as merrill lynch and citibank so during uh last financial crisis the sovereign funds have proved to be a stabilizing force and during this financial crisis the current crisis as we're going through right now they still uh providing the stable stabilizing force to the capital markets with their long-term capital and of course you know at the same time because of the sensitivity of cross-border data and tech transfer uh their transactions are also receiving more regulatory scrutiny right from the uh host countries uh so therefore i think it's just the two sides of of one institution that's the world have to deal with it's not it's unlikely that we can uh just ignore that aspect or uh we just uh overemphasize that aspect but instead if we have a balanced approach we can make the best of these long-term capital i was going to ask you that because you were part of cic as you mentioned can you just very briefly take us through decision-making process in terms of making investments i see i see and do you think broadly speaking sovereign wealth finds their role their dominant role do you think now we're now looking at more net disadvantages more than net benefits that they bring to markets yeah interesting question uh you know certainly you know the decision-making process at csc is very similar to any other uh investment institutions you know the uh four foot direct investing which i spend most of time there uh it's a two two-step due diligence process you know the the first the the the the preliminary due diligence and then you will go to the investment committee to to to to to get to the go ahead uh which means you can spend more money to engage uh financial advisors accountants on support lawyers uh for next level due diligence and then you go to investment committee one more time to get the deal passed or not uh so it's a it's a it's a two two step process uh two investment committee meetings uh to to get you approved you know of course if the deal is super complex you know it may involve more uh additional steps in between uh but overall you know i think it's that's the process done uh in many other financial institutions as well

Channel: Bloomberg Television

Views: 5,211

Keywords: Bloomberg

Id: 8ezg9wH83yw

Length: 7min 11sec (431 seconds)

Published: Thu Oct 01 2020