Sovereign wealth funds are looking to buy data—and they're buying the data companies to acquire them.
The investment arms of sovereigns have become an integral component of financial markets. They invested in some of the West’s troubled banks during the 2008 global financial crisis.
Now sovereign wealth funds are turning their attention to public and private-sector financial-data companies. And they also want to use the data these companies produce to enhance their investment performance.
In June last year, GIC (formerly the Government of Singapore Investment Corporation) acquired 30% of Mergermarket, a global financial intelligence company. Started in the UK in the early 2000s, Mergermarket provides corporate financial news and analysis through a variety of products.
The Canada Pension Plan Investment Board (CPPIB), meanwhile, invested $250 million in Markit as part of the company’s IPO in 2014, which at the time represented a 6% ownership stake. Markit is a global diversified provider of financial information services, helping global clients reduce risk and improve operational efficiency.
Financial data and intelligence companies often turn to sovereign and other institutional investors to increase their capital investments so they can provide new products in the fast-changing markets in which they operate.
In January this year, GIC and CPPIB joined an investment group led by US private-equity giant Blackstone to buy a 55% majority stake in the financial and risk unit of Thomson Reuters. The investment will separate Thomson Reuters’ newsgathering business from other services it provides, such as data analytics and trading tools to financial professionals globally.
The transaction is one of the largest in the private-equity space in recent years. Thomson Reuters stands to gain approximately $17 billion in proceeds from the deal.
Recent transactions also reflect the growing trend of co-investment by sovereign funds with other private-equity and institutional investors. “SWFs shift from investing in private-equity funds to originating and co-investing together with private-equity funds in deals,” says Joseph McCahery of Tilburg Law School. “The choice for co-investment affects deal size, risk-bearing, fees and returns.”