Chart: Asset owner portfolios face limited fallout from SVB collapse
In the wake of the Silicon Valley Bank (SVB) closure last Friday, asset owners from Singapore to New Zealand have confirmed to AsianInvestor that they had limited or no direct exposure to SVB.
If there are direct holdings, in the form of shares and bonds, they mostly account for a few hundred million dollars relative to assets under management that run into billions of dollars for several institutions.
Yet even without direct exposure, it is likely that some asset owners invested in passive strategies could be exposed as the bank was one of the constituents in the widely-followed S&P 500 index and the Russell 3000 Growth index, one expert told AsianInvestor.
One example of exposure via passive investing is the $37 billion New Zealand Super Fund, which held about $6.3 million in SVB shares as on December 31, 2022, through index-linked investments.
"The NZ Super Fund invests in thousands of publicly listed companies around the world: a holding the size of SVB is not, in itself, material to the performance of the Fund which continues to perform well and is ahead of all its performance benchmarks,” a NZ fund spokesperson told AsianInvestor.
That is also the case for Goverment Pension Investment Fund (GPIF), the world’s largest pension fund, which owned about 0.59% of SVB’s shares at the time of its collapse.
“85% of our portfolio holdings were via passive investing and SVB was included in MSCI AWCI as the end of March 2022,” a GPIF spokesperson told AsianInvestor, adding that its SVB exposure would not affect the fund's $1.7 trillion assets under management.
Sovereign wealth fund Korea Investment Corporation,had about $4.6 million invested in SVB shares, a spokesperson told AsianInvestor. That holding is underweight to the benchmark, the spokesperson for the $169 billion entity added.
Meanwhile, Singapore's state-owned investor Temasek has "no direct exposure to the US bank but continues to monitor the situation carefully," a spokesperson from the $298 billion fund told AsianInvestor.
The Hong Kong Monetary Authority’s $509 billion Exchange Fund also has no direct exposure to SVB Financial Group, it told AsianInvestor.
The fund previously said it continues to explore private equity and infrastructure investment post Covid-19.
PRIVATE EQUITY BLOW
Other market participants in the region echoed the statements from the asset owners.
One major private market data provider told AsianInvestor that only a very small proportion of its asset owner clients bank with SVB, while any indirect exposure through their portfolio companies is not visible.
“Generally speaking, asset owners don't bank with SVB directly as they usually use established custodian banks. The exposure that asset owners will have to SVB is if they are limited partners (LPs) engaging in transactions with general partners (GPs) who use SVB for their banking requirements, etc,” an Asia-Pacific client relations manager at the data provider said..
Patrick Tsang, chairman of Tsangs Group, said that while SVB’s sudden collapse represents a heavy blow to private equity and venture capital investments, the family office continues to believe that “2023 will still be the best vintage year for making private equity and venture capital investments for long-term investors”.
“There is no doubt the SVB debacle and its ripple effects on the banking system and private equity and venture capital communities will continue in the next few months,” Tsang told AsianInvestor.
SVB reported relationships with more than 70% of US venture funds and claimed a network of more than half of all venture-backed tech and life science companies in the US, a Cambridge Associates report noted.
“..we expect the disappearance of a significant and experienced provider of capital to the venture capital sector to tighten underwriting standards for startups at any stage, reduce access to capital, and potentially lead to a higher mortality rate for startups. As a result, valuations will likely adjust downward to reflect this changed environment,” it noted.
US PENSION FUNDS' POSITIONS
The failure of SVB has, of course, affected some of the biggest pension funds in the US - again with limited fallout.
California Public Employees Retirement Fund (CalPERS), which manages the largest public pension fund in the United States, had $67 million invested into SVB and around $11 million in Signature Bank at the time of their failures.
“Those will be assets at risk, likely at a loss, but in the grand scheme of things a small percentage of our overall portfolio. We’ll continue to monitor the situation in the upcoming days and weeks and continue to be strategic, agile and patient as a long-term investor,” a CalPERS spokesperson told AsianInvestor.
CalPERS has more than $440 billion in assets.
The California State Teachers' Retirement System (CalSTRS), the largest teachers’ pension fund in the US with $311.5 billion in assets under management, also reported fractional losses on SVB stock.
“As of Thursday, March 9, we held approximately $11 million in Silicon Valley Bank stock, with no bonds. We also have banking and lending exposures through our partners/advisors and portfolio companies.
"As of Friday, March 10, we held approximately $7 million in Signature Bank stock, with no bonds,” Christopher J. Ailman, CIO at CalSTRS, told AsianInvestor.
Ailman also said that the fund is encouraged by the Federal Reserve Board’s news that the Federal Deposit Insurance Corporation is protecting all SVB and Signature Bank depositors.
The chart in this story has been updated.