Pension funds and institutional investors are measuring their exposure to Silicon Valley Bank, the high-profile venture capital and startup lender that was shuttered by regulators on Friday and taken over by the Federal Deposit Insurance Corp.
Almost anyone who invests in an index fund can have Silicon Valley Bank to a small degree. For private equity and venture capital firms and their investors, this moment could have as much impact on the private market world as the 2008 global financial crisis, leaving investors laser-focused on their executives’ liquidity, industry insiders say.
Silicon Valley Bank is one of the largest banking relationships for private equity and venture capital partners and their portfolio companies. Sources and the bank’s website say it not only provides debt financing that general partners need to manage their liquidity, including distributions and capital calls, but they and their portfolio companies also have bank accounts with SVB.
“It’s quite significant. There’s quite a bit of panic going on … SVB was a big bank for the private equity industry, especially in technology,” said Sol Zlotchenko, chief product officer and head of private markets strategy at Hazeltree, a provider of finance and liquidity management technology.
Portfolio company managers are worried they won’t be able to access their bank accounts, he said.
Venture capital and private equity managers, including Founders Fund, are advising their clients to withdraw their money from Silicon Valley Bank, sources said.
To allay rising fears in the industry, Silicon Valley Bank earlier this week announced a $500 million commitment from growth equity manager General Atlantic. General Atlantic could not immediately be reached for comment.
Silicon Valley Bank’s woes also prompted another major player in the private equity industry, First Republic Bank, to announce in an SEC filing Friday that it was in good financial shape.
“Silicon Valley Bank was heavily dependent on the technology industry and catered mainly to startups and the investors who fund them,” and the bank took a hit when the Fed began raising interest rates to curb inflation, said Thomas Smale, chief executive of FEI International. -market technology-focused M&A advisory firm, in an email.
“Startups drained their deposits at SVB faster than the bank expected, and new investments had stalled, meaning no fresh money was coming into the bank,” he said.
Top shareholders in Silicon Valley Bank include Vanguard (11%) and BlackRock (8%) in their various index funds and ETFs. For example, on December 31, Silicon Valley Bank represented 0.04% of the iShares Core S&P 500 ETF.
Other money managers and pension funds with exposure include State Street Global Advisors, JP Morgan and Invesco.
Swedish pension fund Alecta owned 4.45% of total outstanding shares, or about $600 million at year-end, according to 13-F filings. The plan oversees about $100 billion in assets.
The Government Pension Fund of Japan owned 0.59% of shares in Silicon Valley Bank.
Silicon Valley Bank is also held in small amounts by pension funds such as California Public Employees’ Retirement System, California State Teachers’ Retirement System, Ohio State Teachers Retirement System, Colorado Public Employees’ Retirement Association, New York State Common Retirement Fund, New York State Teachers’ Retirement System, Florida State Board of Administration, New Jersey State Investment Council, Ohio Public Employees Retirement System, Michigan Retirement Systems and Kentucky Retirement Systems, according to data from Bloomberg and Pensions & Investments.