Norway’s $1 trillion sovereign wealth fund looks set to join Saudi Arabia and Singapore in investing in unlisted companies as startups delay turning to public listings for capital.
A letter sent by Deputy Governor of Norges Bank Jon Nicolaisen, and CEO of Norges Bank Investment Management Yngve Slyngstad, cites the “decrease in the number of new listings since the early 2000s” and the trend for potential investments staying private for longer “to retain control over decisions and ownership” as a reason for the suggested change in approach.
Norway’s “Oil Fund” dates back to 1990 and currently holds more than $1 trillion in petroleum revenues reinvested in assets. With a population of over five million, the fund is worth an approximate $190,000 per person. Currently,around 65% of assets are in equities with the rest in property and bonds.
Norway's central bank says the shift is needed because of the emergence of alternative providers of long-term capital, such as sovereign wealth funds, large institutional investors, private equity funds and other large companies. They also claim “technological advances” have made it easier to link private companies and potential investors.
The letter is a clear indicator that Norway is seeking greater exposure to private technology groups, particularly those in the U.S. who are able to stay private longer, and go public at a later stage in their development.
Citing recent tech IPOs the letter claims that “the increased availability of capital for private companies means that raising capital is no longer necessarily the main aim of going public.” Adding, “An IPO is also an opportunity for founders, employees and other shareholders to realise their assets. This was clearly illustrated by the listing of Spotify in April 2018 and Slack in June 2019. Both opted for a “direct” listing, and both raised capital from institutional investors less than a year before the IPO.”
However, addressing past controversies, the letter cites its investment in the holding company Delta Topco, the former owner of Formula One Group, and the postponement of its listing on the Singapore Stock Exchange.
Sovereign wealth funds have increasingly become major players in startup funding. Saudi Arabia's Saudi Public Investment fund was one of Uber's largest pre-IPO investors, and held a large stake in SoftBank's initial Vision Fund, while Singapore's Temasek and GIC have several investments in unicorn startups.
In February this year, research from Goldman Sachs revealed a clear shift in "alpha from public to private markets." Analyst Heath Terry commented: “The data would suggest that investors and management teams increasingly prefer to exit via later stage funding rounds given greater scrutiny over public financial disclosures and uncertainty around relative availability of growth capital post-IPO."