Spain’s sovereign wealth fund (SWF) Cofides is readying its first deals under a new €2bn fund that will crowd foreign capital into local greenfield projects. The Foco fund underlines the growing trend of governments mandating SWFs to attract inbound investment. 

Foco is a co-investment fund that will see Cofides, foreign corporates and institutional investors invest in Spanish businesses and projects that are pursuing activities linked to the green and digital transition. 

It was driven by the rationale that investing alongside a state-owned investment partner will reassure foreign investors to back more transformative, potentially higher-risk projects.

“The government [putting] some skin in the game shows it is an important project that will get the necessary visibility, provides comfort that permitting and licensing will go smoothly, and reduces investment risks by covering some of the equity needs and potentially crowding in other financial partners,” says Manuel de la Rocha-Vázquez, secretary general for economic and G20 affairs at the office of Spain’s president. 

Since Foco’s launch on December 27, Cofides has been finalising the fund’s rules and guidelines and assessing its early pipeline. “Around May or June we will [do] the first investments,” said José Luis Curbelo, Cofides’s chairman and CEO. “We will have an important chunk of investments made before this summer.” The first prospective targets are in sectors such as hydrogen, sustainable data centres, biopharmaceuticals, semiconductors and batteries. 

The overarching goal is to mobilise more foreign capital into local greenfield projects. Data from fDi Markets shows foreign direct investment into Spain has been on an upward trajectory since 2017, something Mr Curbelo attributes to its strong credentials in areas driving the new economy such as renewable energy, automation and biochemistry. “The problem is that Spain has a lack of savings,” he said. “We created [Foco] being conscious about the need to mobilise foreign investments to support the … impressive growth of [these] activities.” 

Foco will invest by taking equity stakes in new or existing local companies or joint ventures undertaking projects in Spain linked to green energy, digital transformation, e-mobility, biotechnology and sustainable agriculture. Alternatively, it can invest in local or foreign equity funds that target these sectors in Spain. Its investments must be between €10m and €150m, and cannot exceed that of its co-investment partner — who can be a foreign company, a foreign institutional investor such as a SWF or pension fund, or a Spanish investment fund attracting capital from abroad.

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Co-investment record

Historically, Cofides’s mandate has been to invest in developing countries and help Spanish firms internationalise. It has launched Foco — which accounts for two-thirds of its €6bn in assets under management — at a time when more governments are using their SWFs to attract investment. 

SWFs were traditionally set up as vehicles to invest surplus government reserves abroad to generate returns. However, Foco is part of a new SWF strategy to emerge in recent years that sees them co-invest alongside foreign investors to pursue public policy goals in their home country. Other SWFs with similar co-investment funds include bpifrance and Italy’s CDP. 

According to data provider GlobalSWF, inbound and outbound co-investments by SWFs in 2023 exceeded $30bn for the first time. High-profile inbound deals include partnerships between Saudi Arabia’s PIF and Italy’s Pirelli to build a $550m tire manufacturing facility in Saudi Arabia, and the UAE’s Mubadala and the US’s Resilience to build a biopharma plant in Abu Dhabi.  

Foco was partly inspired by speaking with those managing co-investment funds, but Mr de la Rocha-Vázquez said the real genesis was investor demand. “For the most part, it was inspired by conversations with large international funds — SWFs and pension funds — that were looking for opportunities beyond the [securities] and mature companies which they typically invest in,” he says. “We want to direct them to more greenfield projects and new technologies … But they are cautious, so if we accompany them they have more comfort.”

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