SoftBank's $100-bn investment fund starts to take shape

Many business titans have made the trek to Trump Tower for a private audience with Donald J Trump since he was elected president, but none have made a bigger splash than Masayoshi Son, the billionaire telecommunications entrepreneur.

“Ladies and gentlemen, this is Masa of SoftBank of Japan and he has just agreed to invest $50 billion in the US and 50,000 jobs,” Trump said, wrapping an arm around the beaming Son last month.

That pledge suggested a wave of money pouring into technology start-ups in Silicon Valley. And it is part of a hugely ambitious $100-billion investment fund — the SoftBank Vision Fund — that Son announced in October.

Yet bankers who are advising the SoftBank fund say that more than three-quarters of the fund’s resources will be directed toward larger investments in private and public markets, rather than into start-ups.

That could mean swooping in to grab a piece of an undervalued technology company trading on the stock exchange or doing a large-scale private equity deal. That’s because investing in technology start-ups is usually constrained by the sector’s ability to absorb large sums, with $1 billion generally considered the very upper limit. In the parlance of finance, money does not scale.

These bankers say that the fund — which has $45 billion from Saudi Arabia, $25 billion from SoftBank and smaller contributions from Apple, Lawrence Ellison of Oracle and others — will also be looking at smaller venture capital forays in artificial intelligence, robotics and financial technology. But given the fund’s size, the major bets will be on large companies.

As the fund approaches its official start date later this month, a team of portfolio managers have emerged to get the investment process started. While Son will have the ultimate say, a small group of Deutsche Bank refugees — led by Rajeev Misra, one of Anshu Jain’s most trusted (and unsung) deputies in the bank’s glory years before the financial crisis — will take on a major role in putting this vast sum of money to work.

Misra was part of a small group of derivatives specialists who left Merrill Lynch in the mid-1990s to create Deutsche Bank's powerful global markets division. He was in many ways the founding father of the Deutsche Bank's headlong — and ultimately contentious — dive into the structuring and selling of exotic investments like credit derivatives and securitised mortgages. To a degree, there is a bit of a start-up feel to the fund's investment team. With just weeks to go before the fund can start investing, the Deutsche Bank veterans — who will be supported by SoftBank analysts in San Francisco and Tokyo — are still settling into their new offices in London’s exclusive Mayfair district.

The team has already received a deluge of résumés, investor pitches and queries from bankers and lawyers — all looking to get a piece of the largest fund start in recent memory. Misra will be joined by Akshay Naheta, a former proprietary trader at Deutsche Bank and founder of Knight Assets, an activist investment firm based in London; and Saleh Romeih, another senior banker from Deutsche Bank.

Working with Misra and his team will be a group of senior SoftBank deal makers who, over the years, have worked closely with Son as he has built up his portfolio of investments. 

They include Alok Sama, chief financial officer for SoftBank International; Ronald Fisher, a board member who has been deeply involved with SoftBank's Sprint stake; and Deep Nishar, a former top executive at Linkedin.

Son, Misra and Fisher will be the key members of the investment committee. Bankers expect that the total investment staff will include about 100 people.

From the outset, growth has been the common theme in regard to investment strategy.

That means that when the SoftBank fund takes a company private, it will not be slashing thousands of jobs to claim efficiencies or to meet interest payments on the loans that backed the deal.

Instead, buyouts will be largely cash, thus helping Son keep true to his vision - to say nothing of his promise to the president-elect — that SoftBank's investments will create thousands of jobs.

For example, when SoftBank bought the British company ARM Holdings, which designs chips used in smartphones, for $32 billion last year, Son promised to double the number of company engineers.

©2017 The New York Times Service