Singapore’s GIC accelerates US deals as China cools

Singapore’s sovereign wealth fund GIC has accelerated dealmaking in the US, investing in venture capital funds and technology companies as it searches for growth beyond China.

GIC, whose assets are estimated by analysts to exceed $700bn, has told private equity and venture capital executives this year that it wants to increase exposure to US-focused funds, said three people familiar with the investor’s thinking.

“We cannot suggest opportunities fast enough,” said a partner at one global venture fund with a San Francisco office. “They are eager for what we have from San Francisco to Orlando.”

The focus on the US by one of Asia’s biggest sovereign wealth funds reflects optimism in the resilience of the country’s top technology companies despite last year’s heavy sell-off. The US is also prime hunting ground for artificial intelligence companies as the industry rapidly expands.

It also comes despite a collapse in funding for venture capital groups in the US and falling valuations for private companies. That slowdown could impact GIC’s investment levels over 2023, though interest in the US has remained high this year, the partner said.

But the US remains one of the biggest destinations for capital, especially in tech, as global investors rethink their strategy in China over concerns including geopolitical tensions with the US, an economic slowdown and a crackdown on business.

GIC struck 63 deals involving US-based private companies including in technology, healthcare and property in 2022 and 2021, compared with 39 in 2019 and 2018, according to data by Refinitiv.

By comparison, ITjuzi, a data provider that monitors inflows to China, recorded two direct investments in Chinese companies by GIC last year, down from 16 in 2021.

GIC declined to comment but has previously said it maintains significant exposure to large markets including China.

A venture capitalist with offices in Silicon Valley said the company had held talks with GIC about raising its commitments to US funds, including in the secondary market. The latter is where private stakes in start-ups and VC funds change hands.

GIC “indicated they were looking to ramp up hiring of investment specialists”, the person added. GIC is advertising 18 jobs in the US, according to LinkedIn. One post is for a specialist in the private equity secondary market as well as other senior roles in equities, fixed-income and portfolio management.

Global investors who have relied on growth in China face a challenge finding alternatives. India and other emerging markets including Indonesia have not been able to match the mainland market in size and sophistication, even though their economic growth is higher than in developed markets including the US.

“But there are only so many bets you can make in places like India and Indonesia. The US has much to offer across biotech, utilities, consumer companies and real estate,” said one Asia-based asset manager and adviser who spoke to GIC about its strategy. “However, there has been some question over tech valuations more recently which could affect the strategy.”

The US is GIC’s biggest market, making up 37 per cent of its portfolio according to its 2022 report, compared with 34 per cent in 2021. It does not break down its Asian portfolio, which represented 25 per cent of its holdings in 2022, excluding Japan. Its private market exposure has grown to 17 per cent from 12 per cent between 2022 and 2019.

GIC, which has offices in San Francisco and New York, in April increased its stake in Nasdaq-listed US-Israeli fintech Pagaya, which uses AI to manage assets for financial institutions.

GIC and Singapore’s other state investor Temasek became investors in Stripe, the San Francisco- and Dublin-based payments processing group, in March. Other recent deals include buying out software company Zendesk, an investment in blockchain data platform Chainalysis and joining a consortium to take cyber security platform McAfee private.

Additional reporting by George Hammond in San Francisco