Sovereign wealth funds investing in technology and industrials

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BY : Diego GutiérrezDecember Fri, 2013

Sovereign wealth funds are no longer looking exclusively at assets linked to the commodity or financial services sectors, as they did in the past. They are investing in "alternative" assets, beyond fixed income or equities, such as real estate, infrastructure, private equity and even in technology startups.

The Middle East and Asia are leading technology investment in leading sectors.

Sovereign wealth funds' appetite for strategic and industrial investments comes from the Middle East and Asia, where the most sophisticated funds are already looking for added value, building research centres and developing industrial champions. They are doing so in sectors such as aerospace, telecommunications and other leading industries. Moreover, these funds are increasingly looking for direct investment. In this way, they avoid intermediaries and reduce operational risks by being directly linked to the strategic industrial partner. The agreements entered into by Mubadala with American multinationals such as GE or HP are emblematic from this point of view, as with the European ones. EADS, Sener or Indra. The will to continue building positions in technology sectors was ratified at the end of 2012 when it increased its stake in the capital of the American technology company. AMD (Advanced Micro Devices); becoming, with 19% of the capital, the main shareholder of the Californian company. Some transactions were not completed (e.g. the purchase of 71% from the Spanish aeronautical components and structures manufacturer Aernnova, which was discontinued in mid-2012). All these operations show the growing interest in leading technology and industrial assets, particularly in OECD countries, whether in the US or in Europe.

China overtakes the US as the largest industrial investor in Germany

"Emerging countries are playing a role in the very active in acquiring companies in western countries The main motivation is the acquisition of leading technologies and market share. Emerging countries, led by China and India, are increasingly investing in companies from developed countries. During 2013 China has invested $855M in 36 operations of investment." comments Diego Gutierrez, a corporate finance expert at Abra Invest.

It is also important to highlight the investment appetite of some emerging countries such as China, particularly in Europe's industrial and technological heartland: Germany. Thus, in 2011, China overtook the US as the leading industrial investor in Germany with a total of 158 industrial projects (20% of the total) ahead of the 110 in the US. Medium-sized companies, Germany's industrial heartland, such as Kiekert, Putzmeister or the German PC manufacturer MedionOne after the other, they fell under the control of Chinese companies. Some of the biggest deals in Europe were made further north in Sweden, with the Chinese company's purchase of the Geely Swedish carmaker Volvo in 2010 for more than $1.8 billion.

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