Technology

Technology investors, late technology adopters
Sovereigns see the emergence of new technologies as a compelling investment opportunity, with long-held investments in the sector with larger funds building specialised teams; but in their own businesses, sovereigns prioritise operational, risk and investment process improvements and integrating technology into the portfolio remains surprisingly muted.

Technology

In theme four, we find sovereigns backing the emergence of new technologies. They are doing so from twin perspectives of the impact of technological advancements in areas of artificial Intelligence (“AI”) and automation on their portfolios, and also on their society. 

Many sovereigns have a mandate to grow and enhance the domestic economy as well as an investment mandate. Accordingly, in addition to establishing venture capital-like portfolios to pursue the early stage opportunities currently seen as plentiful, some also seek to also transfer skills and intellectual property back to their home markets. Their government links help some offer attractive financing and tax arrangements. To support these efforts, some sovereigns have built internal technology teams and / or portfolios (Figure 8 (a-c)), including establishing offices in major tech hubs like Silicon Valley and Beijing. The ability to devote resources to a specific investment theme such as technology takes advantage of sovereigns’ scale and long-time horizon. 

Figure 8a. Proportion of sovereigns with dedicated technology portfolio or team, Sovereigns only (% citations)

Figure 8a. Proportion of sovereigns with dedicated technology portfolio or team, Sovereigns only (% citations) Figure 8a. Proportion of sovereigns with dedicated technology portfolio or team, Sovereigns only (% citations)

Figure 8b.

Figure 8b. Figure 8b.

Figure 8c.

Figure 8c. Figure 8c.

Sample size: 63.

Sovereigns are interested in not just the investment aspects of technology but also the power of technological advancements to disrupt and reshape society (Figure 9). There is a sense of anxiety and pressure among stakeholders - governments, regulators, and investors – to mitigate and even pre-empt negative externalities on society such as loss of employment. As state-owned investors, sovereigns are focused on societal disruption and likely to play an important role in responding.

Development and investment sovereigns are furthest ahead in their thinking about the wider impact of technology. Almost half of development and investment sovereigns with a specific technology portfolio or team are focused on the wider impact beyond investment returns.

Figure 9. Impact of AI on society over the next 10 years, Sovereigns only (% citations)

Figure 9. Impact of AI on society over the next 10 years, Sovereigns only (% citations) Figure 9. Impact of AI on society over the next 10 years, Sovereigns only (% citations)

Sample size: 60.

In their own businesses, sovereigns prioritise process improvements and the integration of technology into the portfolio is surprisingly muted. While some large sovereigns are undergoing large scale technological transformations, many still rely on what is now seen as outdated technology and weak IT infrastructure. Respondents spoke about overreliance on technology that requires human input (such as MS Excel), bringing with it the biases and limitations of human behaviour. The result is likely to be an overhaul of current systems and processes in a move to a more rules-based and continually adaptable (AI) systems.