|SoftBank Plots Deals to Build $300 Billion Asset-Management Arm|
By Giles Turner Caroline Hyde, and Peter Elstrom
September 29, 2017
-- Unit aims to grow to that size over next four to five years
-- Firm already has $93 billion tech fund, plus Fortress assets
SoftBank Group Corp. founder Masayoshi Son has made a name for himself building a telecommunications and technology empire. He’s now planning an expansion in asset management.
The Japanese firm is eyeing further acquisitions in the financial sector in order to potentially create a $300 billion asset management arm that would also house its $93 billion Vision Fund for technology investments, according to people familiar with the matter.
SoftBank agreed to acquire alternative-asset manager Fortress Investment Group LLC for $3.3 billion in February. Since then, SoftBank executives have discussed various investments in the financial sector, from acquiring traditional investment firms to more surprising moves including stakes in major private equity shops such as KKR & Co., said the people, who declined to comment because the plans are private.
The scale of the plans reveals how the Vision Fund will be just one arm of SoftBank’s push into asset management. SoftBank -- which had no assets under management 12 months ago, and has never before managed third-party assets -- is targeting more than $300 billion across its businesses over the next four to five years, one of the people said.
SoftBank may end up with much less or much more money in the asset management business depending on market opportunities, a different person said.
Besides the tech fund, SoftBank’s assets under management also include $40 billion with Fortress, following the U.S. firm’s sale of fixed-income arm Logan Circle Partners.
Considering TargetsIn comparison Blackstone Group LP, the world’s largest alternative-asset manager, has taken 32 years to grow to $371.1 billion under management, as of June 30.
SoftBank is considering a range of targets. A small group of senior executives informally discussed taking a stake in KKR this year, the people said. It is not known how far these discussions went.
A spokeswoman for New York-based KKR, which has a market value of about $16.4 billion, declined to comment. The investment manager oversaw $148.5 billion in private equity holdings, credit assets, real estate and hedge funds as of June 30, up 13 percent from a year earlier.
SoftBank spokesman Matthew Nicholson declined to comment.
The asset management industry is in a state of flux, with smaller players struggling due to growing pressure on fees and the continuing shift to passive strategies. Natixis SA and BNP Paribas SA are among firms exploring a deal with Axa SA’s European asset-management unit, people with knowledge of the matter have said, while Standard Life Plc has combined with Aberdeen Asset Management Plc to form the U.K’s largest active money manager.
SoftBank’s acquisition of Fortress was a departure for the company, which previously focused on deals in telecommunications, internet startups and e-commerce. However, Son and his senior executive team are keen to expand SoftBank’s ability to manage alternative investments, as well as manage the company’s ever-growing portfolio, the people said.
The giant tech-focused Vision Fund, backed by Saudi Arabia, Abu Dhabi, as well as Apple Inc. and Qualcomm Inc., has already become the world’s biggest private equity fund.
Major deals involving the Vision Fund include the $32 billion acquisition of ARM Holdings Plc, the chip designer Son believes will play a key role in the Internet of Things, and billion-dollar investments in Didi, the biggest ride-hailing service in China, and southeast Asian operator Grab.
SoftBank has been assembling an array of former bankers with strong networks in the financial sector. Colin Fan, the former equity derivatives trader and co-head of Deutsche Bank AG’s investment banking and trading unit, joined SoftBank this year, while Rajeev Misra, a former senior banker at Deutsche Bank and UBS Group AG, is the Japanese company’s head of strategic finance and a member of the fund’s investment committee.
The Vision Fund has also been staffing up with investment professionals, hiring 70 people in the front and back office over the past seven months.
The fund, headquartered in London but with offices in Tokyo and Silicon Valley, plans to finish fundraising at $100 billion in the next two months, two of the people said.
— With assistance by Devin Banerjee, Dinesh Nair, Manuel Baigorri, Ruth David, and Pavel Alpeyev