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February 25, 2008

Why SWFs are targeting US financials?

This New York Times article on the burning questions surrounding Sovereign Wealth Funds provides an educated guess why these funds are going after financial services companies.
Sovereign wealth fund investment may benefit these financial companies by opening up doors in the fund’s countries for business. However, it also establishes a friendly shareholder position in the company. These sovereign wealth funds are taking mostly non-voting positions and even those that have a vote will lack a right to a designated board seat.

...As these funds grow and begin to invest further with their newfound financial partners, expect them to further branch out and take larger, voting positions in different industries. Sensitive industries, such as defense, technology, and transportation infrastructure will still remain problematic, so expect investment there to be limited and when done to be by sovereign wealth funds of our ostensible allies working with the pre-approval of the U.S. government.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.