According to the law signed by President Joe Biden on April 24, social media app TikTok must divest from its Chinese parent company ByteDance within 270 days (by January 19, 2025) and be acquired by a US company, or else face a ban.
On Tuesday, TikTok and ByteDance officially filed a lawsuit against the US government, accusing this law of being “unconstitutional” and violating the freedom of speech of American citizens.
As this potentially lengthy legal battle begins, a new report reveals that US pension funds, university endowments, and other institutional investors have over 9 billion dollars invested in funds potentially linked to ByteDance, the Chinese parent company of TikTok.
The Future Union, a non-partisan advocacy organization based in Washington, released a report aimed at helping the US and its allies address “the new cycle of emerging technology and security challenges”.
According to the report released by the Future Union on Wednesday, the lawsuit between ByteDance, the owner of the short video platform with 170 million US users, and the federal government concerning national security and citizen privacy issues could put the over 9 billion dollars at stake, with outcomes tied to the lawsuit’s resolution.
The report found that 39 of the largest public pension funds in the US had invested in ByteDance’s funds between 2012 and 2024. Due to opaque disclosure of information, the numbers in the report are likely lower than the actual figures.
Washington State Investment Board and New York State Common Retirement Fund each invested 1.4 billion dollars in private equity and venture capital firms invested in ByteDance. The Public Employees Retirement System Fund of California also invested over 1 billion dollars in funds related to this social media company.
The New York State Comptroller’s office, which oversees the Common Retirement Fund, stated that the Future Union’s previous report about their holdings was inaccurate and that their limited venture capital investments had no exposure related to ByteDance.
A spokesperson for the New York State Teachers Retirement System clarified that their total investment in ByteDance by the end of 2023 was 47.6 million dollars, not the 579 million dollars as mentioned in the Future Union report.
University endowment funds in the US were also found to have connections to ByteDance. Public funds of a school in Texas were discovered to have approximately 340 million dollars invested in funds related to this Chinese company.
Major endowment funds of universities like the University of Michigan, the University of California system, and Princeton University made significant investments in funds associated with ByteDance.
These investments were facilitated by large private equity and venture capital firms such as KKR and the Carlyle Group.
The report from the Future Union revealed that KKR manages investment portfolios for 24 public pension companies, 4 university endowment funds, and 7 non-profit organizations or foundations that include investments in ByteDance. The Carlyle Group manages portfolios for 12 public pension funds and 2 non-profit organizations or foundations with investments.
The report also stated that the investment risks taken by major institutional investors are prompting a reassessment of the possibility of long-standing geopolitical risks that were previously overlooked in such investments.
The author of the report, Andrew King, indicated that these findings highlight the complexities of Chinese companies’ financing in the US. He added that institutional investors should halt investments in Chinese companies.
He stated, “Any investment in Chinese startups directly conflicts with the interests of the US, US startups, and US innovation.”
Such investments, like initial public offerings or acquisition deals, “are likely to face significantly reduced exit opportunities, constrained by individuals”. The report noted that in recent years, Chinese companies have had fewer opportunities for these transactions, which could result in funds not receiving timely returns on investments or being used for other purposes.
In January of this year, the Future Union also released a report outlining US institutional investors who have invested in funds related to China and Hong Kong, some of which have investments in sensitive technologies that the US government is currently trying to control.
(Adapted from a report by Nikkei News)