Pension and sovereign wealth funds the fastest growing source of capital in tech

New York, 08 Mar 2017

A growing number of pension and sovereign wealth funds are investing in technology industries, with the sector set to become the fastest growing source of capital for technology in 2017.

It comes as venture capital funds, long a leading source of investment in new and emerging technologies, are becoming more vertically-focused and move to explore industry-specific technologies for their own sectors such as construction, engineering, media and communications.

The combination of investment activity from these sources will see more offshore capital flow into the traditionally Silicon Valley-dominated investment space, according to Macquarie Capital.

Sovereign wealth funds, pension funds and venture capital funds invested $US44bn across 1,109 venture capital rounds in 2016 globally, states private equity and venture capital database, PitchBook Data.

While investment activity from pension and sovereign wealth funds is still in its infancy in the technology sector, funds in the Asia-Pacific, Europe and Middle East, are showing increasing interest.

There’s been a driving focus toward technology investment because of how pervasive technology has become at a broad enterprise level and even at a consumer level.

For new entrants to the market, technology has become an attractive area for investment as funds look to diversify their activities.

This pervasiveness also means that venture capital funds, still the leading source of investment in the sector, are turning their sights to technology investment in specific industries, hoping to invest in technology products that feed back into their own sectors. For instance, there are venture capital funds in the construction and engineering industries that are investing specifically in new technologies to be used by and benefit companies in those fields. The technology sector is seeing a lot more activity from corporate venture arms looking to explore into tech and how to integrate that technology into their existing products.

For venture capital funds, as well as the new offshore entrants, the technology market continues to be an exciting space because an emerging product or new idea can generate multi-million dollar businesses.

While technology is still largely a venture capital fund invested market, the potential for businesses in the technology spectrum to expand quickly means the flow of capital from pension and sovereign wealth funds will continue to grow.

A growing number of pension and sovereign wealth funds are investing in technology industries, with the sector set to become the fastest growing source of capital for technology in 2017.

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