The Hunt for Unicorns: How Sovereign Funds Are Reshaping Investment in the Digital Economy, reviewed

This book, coauthored by Winston Ma and Paul Downs looks at the increasing globalisation of venture capital and it’s quest for higher and higher returns. It is published by Wiley and you can see more about it here.

The Hunt for Unicorns: How Sovereign Funds Are Reshaping Investment in the Digital Economy, reviewed

This book delivers an informative global survey of where money is moving into, who is investing, at national and international level. It is clear sighted in its analysis of the details of different countries and their investment funds. Though, in a time of increased awareness of the need for sustainable investments, the challenges of climate change, and the important of values aligned to investments there seems to be little to no examination of that aspect of the flow of money and it’s potential for positive or negative impact on the planet.

In the index there are no references to impact investments, sustainability or any green issues. This is not to say that none of these investors or investments are not considering these factors, but, as it is not mentioned or discussed here, it does suggest that there is still a separation from profit and planet for many in this space. This book is informative as far as it goes, but is also perhaps indicative of the challenges that we still face if we are not going to see increasingly high profits and an unliveable or even dead planet?

More about the book

Who holds the power in financial markets? For many, the answer would probably be the large investment banks, big asset managers, and hedge funds that are often in the media’s spotlight. But more and more a new group of sovereign investors, which includes some of the world’s largest sovereign wealth funds, government pension funds, central bank reserve funds, state-owned enterprises, and other sovereign capital-enabled entities, have emerged to become the most influential capital markets players and investment firms, with $30 trillion in assets under management (“super asset owners”).

Their ample resources, preference for lower profile, passive investing, their long-time horizon and adherence to sustainability as well as their need to diversify globally and by sector have helped to transform the investment world and, in particular, private markets for digital companies. They have helped create and sustain an environment that has fostered the rise of the likes of Uber, Alibaba, Spotify and other transformative players in the digital economy, while providing their founders and business models the benefit of long-term capital.

Despite this increasingly important impact, sovereign investors remain mostly unknown, often maintaining a low profile in global markets. For the same reason, they’re also among the most widely misunderstood, as many view investments made by sovereign investors as purely driven by political aims. The general perception is that most sovereign investors lack transparency and have questionable governance controls, causing an investee nation to fear exposure to risks of unfair competition, data security, corruption, and non-financially or non-economically motivated investments.

The current global tensions around the AI race and tech competition – and now the corona virus pandemic – have exacerbated such misperceptions, spawning controversies around sovereign investors and capital markets, governments, new technologies, cross-border investments, and related laws and regulations. As such, sovereign capital and the global digital economy are undergoing an unprecedented, contentious moment.

In short, the emergence of sovereign funds symbolizes a major shift of the world’s economic power. For the first time, investment funds from developing countries are playing with OECD financial giants as equals. Furthermore, their investments into high tech enable them to participate at the cutting-edge of the fourth industrial revolution, challenging traditional innovation powerhouses like the US and Germany. For all stakeholders, from tech unicorns, VC funds, asset managers, financial firms, to policymakers, law firms, academics, and the general public, this is the must-have book to get to know these new venture capitalists and “super asset owners”.

More about the authors

WINSTON MA is an investor, attorney, author, and adjunct professor in the global digital economy. Most recently for 10 years, he was Managing Director and Head of North America Office for China Investment Corporation (CIC), China’s sovereign wealth fund. Prior to that, Mr. Ma served as the deputy head of equity capital markets at Barclays Capital, a vice president at J.P. Morgan investment banking, and a corporate lawyer at Davis Polk & Wardwell LLP. He is the author of the best-selling books including Investing in China (2006) and China’s Mobile Economy (2016). Winston was selected as a 2013 Young Global Leader at the World Economic Forum and in 2014 he received the NYU Distinguished Alumni Award.

PAUL DOWNS practiced international law for more than four decades, most recently as a partner at Hogan Lovells in New York, where he co-founded the Sovereign Investor Practice and initiated its annual Sovereign Investor Conference. He has represented sovereign investors transacting in assets globally, has spoken and published on the topic and guest lectured at Columbia and New York University law schools. Mr. Downs served as President of the American Foreign Law Association.

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