The prospect is enticing. SoftBank boasts an incredible 44 percent “internal rate of return”, an annualised measure of returns, on investments in Internet companies such as Alibaba, Supercell and Yahoo, over the last 18 years. That may be unrepeatable: sector valuations have risen sharply and Son will have to hunt down some pretty big targets. Still, if Son’s team can come anywhere close, investors in the fund and SoftBank will both be happy. For the latter, however, just how happy they could be is unknown.
If this is set up like a traditional private equity fund, SoftBank’s share of the profits, or “carried interest”, could theoretically run into the tens of billions of dollars. Annual management fees could stretch into the hundreds of millions, or billions, too.
But all this is conjecture. SoftBank has not yet said what fees it will charge, or what kind of profit-sharing it will pursue, nor how long it will hold investments for, or to what extent it will use debt to increase the firepower available for deals. Vision will be consolidated by SoftBank, so details may dribble out in earnings reports. For now, Son is offering shareholders a big vision short on specifics.
_______________________________________________________________________
Request a free trial of Breakingviews here.
