How Sovereign Wealth Funding Can Transform Project DeliveryNovember 16, 2020 | By Wayne O'Neill
In my coaching conversations with service providers and owners, there is an inevitable discussion about how to fund construction project delivery in various markets such as healthcare, higher education, business, and government.
Clients that I talk to have arrived at the point where they have embraced authentic connection, they are working collaboratively through open dialogue and problem-solving, and they are pursuing a larger solution to solve a bigger problem. Now, what about funding for project scope?
In the old way of thinking, you’re talking about debt financing, passing a bond, or pursuing other slow-moving forms of structured debt that end up on the balance sheet. No more — you have financing options!
One of the primary options is tapping into sovereign wealth funds to accelerate project scope creation and delivery.
What Is A Sovereign Wealth Fund?
A sovereign wealth fund is a source of investment income typically originated in pension funds or retirement plans from foreign countries. The managers of these state-owned pension plans are looking to find investment opportunities that meet three primary criteria: security, yield, and long-term returns. Infrastructure projects in strategic markets satisfy the criteria.
As Americans, we are accustomed to riding the daily wave of the stock market to influence our perception of the U.S. economy. However, sovereign wealth purseholders view America as a highly-secure, reliable investment opportunity because of our country’s overall global economic standing. It requires a different type of thinking to move out of the weeds of day-to-day stock market swings to find the 30,000-foot aerial perspective of our country’s economy.
Pension fund managers are sitting on oceans of cash looking to find high-yield, long-term investment opportunities. We talk to our partners on Wall Street on a regular basis about the latest market interest in projects, and cash is sitting out there waiting to be dropped into construction projects in key markets. Why? Because of the security associated with these types of projects and the opportunity for long-term revenue streams generated by the structures once they are operational.
One of the key selling points for sovereign wealth funding to support project scope as compared to traditional debt financing models is that sovereign wealth funding won’t affect an organization’s bond rating. This is especially critical in a market such as healthcare where organizations need a strong bond rating to be able to take on debt at lower rates to support other mission-critical projects, such as acquisitions.
How to Interject Sovereign Wealth Funding into Scope Creation
Tapping into sovereign wealth funding will transform project scope delivery. It will accelerate the timeline to get more projects signed, started, and completed. But, it requires a different type of conversation to truly get all stakeholders onboard.
Many stakeholders are accustomed to the old way of approaching infrastructure project delivery. They are locked into the perceived “safe” way of structuring project delivery through debt financing or bonds. It sounds less risky than tapping into alternative financial models involving cash sourced in foreign countries.
At RESET, we coach our clients on how to have a different type of conversation with stakeholders and target clients on how to bring everyone together to tap into available cash to support project scope.
The key is understanding the importance of a special purpose entity. When you bring together different financial instruments to solve and create scope, you’re not just giving that money to a recipient. All involved parties are part of a special purpose entity. This is how you reach investors that care about the long-term effectiveness of assets.
Our clients learn to care about special purpose entity structure and how to have effective conversations during project scope negotiations. The structure is an incredibly important way for scope to be created and for cash to flow into project delivery, bringing everything together.
RESET Can Facilitate a New Conversation on Project Delivery
We have worked with numerous service providers and owners to push through objections and old ways of thinking about how to finance project scope for largescale construction projects in their markets.
If you or your team becomes stuck at the financial aspect of the conversation, don’t hesitate to reach out to us for assistance. Our team can provide actionable coaching and help facilitate a new type of conversation with involved stakeholders.
Let’s change the conversation in your target client’s market to drive scope creation. We deliver deal flow and scope creation to help your organization generate revenue in a more intelligent, sustainable fashion. The key is understanding how to tap into the alternative financing model of sovereign wealth funding, then connecting the right people to tap into this opportunity.
Contact us today to discuss sovereign wealth funding, special purpose entity, building relationships with stakeholders, and how to have productive conversations to accelerate deal flow. We can help.