Sovereign Wealth, Regional Success

Ancient institutions and the UK’s giants of academia, like Oxford and Cambridge, are not built overnight. Over centuries, these ecosystems have cultivated a culture and global identity with a steady hand. This patience is a driving force of the past, present, and future of the Oxford-Cambridge Arc.

22 Feb 2022 Iain Keys, Partner, Fund Management, Bidwells

Patient capital – a long-term commitment to investment in the anticipation of greater financial, social and environmental returns – is faith in the principal, vision and outcome. To be world-leading, the disparate clusters curated across the Arc must come together with a regional proposition that harnesses its scale.

This is a 30-year mission that’ll be worth the wait, requiring substantial investment into infrastructure, housing, and commercial space to support the growth of research and development, which needs domestic and international capital partners who can commit to the long-term outlook.

Whilst many institutional investors have short-to-medium term investment criteria, the patient capital of sovereign wealth funds is well-aligned to the challenge that scalability of the Arc presents.

Some of the greatest examples of sovereign wealth funds – the Norwegian Government Pension Fund (SWF), the UAE’s Abu Dhabi Investment Authority or the Singaporean GIC – are only a few decades old, but already manage assets in the hundreds and thousands of billions.

According to recent research by the Financial Times, Norway’s SWF is now almost four times larger than the country’s GDP and its annual payments represent a quarter of the state budget. Just as the Arc represents a magnet for UK inward investment, it’s a long-term investment proposition for sovereign wealth funds, a significant asset to the British economy and the source of some of the cutting-edge research and start-ups in emerging sectors that will help to drive global growth and development over the next century. 

Many leading sovereign wealth funds have already seen and contributed to similar growth opportunities in their domestic markets and are well aware of the benefits patience offers to deliver outstanding returns. Oxford and Cambridge’s traditional college investment programmes demonstrate a similar commitment to long-term time horizons, with large portfolios and high volumes of liquidity, and gravitate towards partnerships with funds which factor in the same considerations in their forecasts. There’s a natural symbiosis here, something which the Oxford-Cambridge Arc as a regional framework could take full advantage of.

Sovereign wealth funds are increasingly active investors in the UK economy. In March 2021, Mubadala Investment Company co-invested £1bn into the UK life sciences sector alongside the UK government Life Sciences Investment Programme. Similarly, Xeraya Capital, a venture capital company founded by the Malaysian sovereign wealth fund Khazanah Nasional Berhad, continues to invest heavily in UK healthtec most recently to the tune of $50m in digital health firm Congenica. Abu Dhabi’s Future Energy Company invests in infrastructure, an area of investment which deeply needs patient capital and a long-term vision. These are global agents of change, both in their size and scope, but importantly in their goals that are future-oriented: investing reserves aiming at higher long-term yields and boosting long-term productivity by contributing to hard infrastructure and capital assets.

The new Office for Investment established as a collaboration with 10 Downing Street and the Department for International Trade will act as a conduit for the UK’s sovereign wealth investment, whilst also serving as a flagbearer for investment in a Global Britain. With Britain re-establishing itself as a global hub for business, including recent trade negotiations launched in June 2021 with the £9 trillion Trans-Pacific Partnership, the Arc must be part of the ‘sell’ story that our trade envoys take internationally.

As sovereign wealth funds diversify their base and jurisdiction of investment, the Arc houses many of these opportunities that complement their presence primarily in London, and the right geography to benefit from a wider interconnected ‘Golden Triangle’.

The Arc represents a tried and tested environment: it produces its own talent through its diverse universities and institutions, and attracts talent globally. Sovereign wealth funds will be a play a key role in attracting investment internationally, demonstrating the openness of Global Britain to flows of global capital and its continuing attractiveness as a free, fair, and stable place for investment. We’d be mistaken to think that sovereign wealth funds – with assets under management worth over $10 trillion under their control – are sideline considerations in the region’s global future and the UK’s ambition to become a scientific superpower.