What exactly is the $108bn Vision Fund II? A transformational tool for the advancement of humankind? A tech investment vehicle? Or a private members' club for investment banks, gadget makers and the wealth funds of authoritarian countries?
All of the above, perhaps. The third, cynical, interpretation is not one that Masayoshi Son, SoftBank's boss and tech evangelist, would endorse. But it is supported by a glance at mooted backers of Vision Fund II.
The first Vision Fund burnt through $100bn in two years, generating a windfall for bankers. SoftBank itself paid $894m in investment banking fees last year. If they participate as investors, Standard Chartered and Goldman Sachs would have no guarantees of advisory work. But they would be usefully close to the action.
Apple, Qualcomm and Foxconn also have a side motivation to stay friendly with SoftBank. Its Japanese mobile phone business has more than 40m customers. Japanese banks such as Mizuho are already up to their necks in SoftBank debt. Their exposure would edge up again if they soak up the preferred securities Vision Fund II may issue in imitation of its predecessor.
Kazakhstan may win tech credentials as wealth fund sponsor. It may yet be joined by Saudi Arabia, which wrangled with SoftBank over WeWork. Its human rights record is an embarrassment. But Kazakhstan is hardly exemplary in that respect.
SoftBank trumpets a 29 per cent internal rate of return from May 2017 to this March for the first fund. This excludes the weak performance of the Uber IPO, which has since cut down returns. Most profits are paper gains. Many investees are unprofitable.
The new fund launches at a riskier moment.
Listings opening below their IPO price suggest the tech bubble, which SoftBank helped create, is ending. The Vision Fund is heavily leveraged and has resorted to taking out margin loans.
The most persuasive interpretation of Vision Fund II is as an ominous sign of the times.
© Financial Times