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SoftBank Group announces second Vision Fund worth $108 billion, broadens investor base

Reuters     July 26, 2019

SoftBank Group Corp announced on Friday a second Vision Fund aimed at investing in technology firms, saying it has secured memoranda of understanding (MOU) for about $108 billion from companies including Apple Inc and Microsoft Corp.

The Japanese group itself plans to invest $38 billion in the fund, it said in a statement. Others set to join include Taiwan's Foxconn, formally Hon Hai Precision Industry Co Ltd, as well as units of Japan's three mega banks, MUFG, SMFG and Mizuho, SoftBank said.

The second fund's investor base reflects a diversification beyond the Middle Eastern oil money that provided most of the first $100 billion fund's outside capital as it touts industry-beating returns.

"Those investing two years ago were investing in the vision, there was no proof the concept was going to succeed," said Sanford C. Bernstein analyst Chris Lane.

"Given the track record achieved over the last two years Vision Fund 2 has been substantially de-risked," he said.

SoftBank said in May the first fund has generated a 45% internal rate of return for investors in its common shares, or 29% when debt-like preferred shares are included - although the gains are mostly unrealised.

Other investors in the fund include the National Investment Corporation of National Bank of Kazakhstan, Standard Chartered Bank PLC, and undisclosed investors from Taiwan.

"The objective of the fund is to facilitate the continued acceleration of the AI revolution through investment in market-leading, tech-enabled growth companies," the Japanese conglomerate said in its statement.

SoftBank did not name Goldman Sachs Group Inc as an investor. The Wall Street Journal on Wednesday said the U.S. investment bank would invest in the fund.

The first Vision Fund launched two years ago with $60 billion in backing from the sovereign wealth funds of Saudi Arabia and Abu Dhabi and has already burned through much of its capital with investments in over 80 late-stage tech startups.

Following bets on startups include Uber Technologies Inc and WeWork parent The We Company by the first fund, the new fund should allow SoftBank to continue a spending spree that has reshaped the venture capital industry as it outguns less capitalised rivals.

Saudi Arabia and Abu Dhabi were absent from the list of the second fund's investors. SoftBank said it was still talking to more potential investors and that it expected the fund's anticipated capital to grow further.

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