Could SoftBank Challenge the Dominance of Blackstone?

Japan’s SoftBank Group Corporation has agreed to buy New York-based Fortress Investment Group LLC for approximately US$ 3.3 billion in cash in a bid to further cement the firm’s ascension into the lucrative world of money management. Fees are the revenue drivers for investment managers. The deal worked out that SoftBank would pay US$ 8.08 per share of Fortress Investment Group, a 38.6% market premium to the firm’s February 13, 2017 closing stock price. The money is not coming out of the SoftBank Vision Fund to fund the deal. Getting into the world of alternative investments, SoftBank can challenge the dominance of firms such as The Blackstone Group and Carlyle Group, as the conglomerate is now in control of hedge fund, credit, private capital and fixed income businesses. Fortress Investment Group had US$ 70.1 billion in assets under management as of September 30, 2016. SoftBank will also get control of Logan Circle Partners, a fixed income shop within Fortress Investment Group, which accounts for US$ 33.4 billion in assets under management.

Deal Flow

The Founder, Chairman and CEO of SoftBank is Masayoshi Son and he is known for being a direct investor, putting capital to work in e-commerce ventures, internet startups, designers and telecommunication businesses. Recent examples include investments in U.K. chip designer ARM Holdings Plc and satellite company OneWeb Ltd. Son, one of Japan’s richest men, has also realized that asset management and building up sources of committed capital can enhance opportunities. Son sees more wealth funds, pensions and endowments moving money into private equity and other illiquid asset classes, while many private equity firms struggle with deal flow. For example, Boston-based Massachusetts Pension Reserves Investment Management Board (MassPRIM), in a recent board meeting approved to increase its allocation to private equity from 10% to 11%, citing top performance in this asset class.

Almost always, private equity firms without sufficient access are challenged when trying to deploy limited partner capital. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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