This is how Softbank CEO Masayoshi Son will make $1 billion per year
Masayoshi Son is a very clever man. SoftBank Group Corp., his giant Japanese conglomerate, is in talks with investors to add as much as $15 billion to its Vision Fund, according to Bloomberg News. The $100 billion venture capital fund has already deployed more than $70 billion in tech companies.
Where the Money Is
Alternative managers, followed by active international funds, earn most of the management fees. Son is right on the money. Even if you set aside the race to spot the next Uber-style unicorn, there are other reasons for wanting to double down on this fast-growing and lucrative part of the asset management industry. Management fees for alternative investing, where venture capital belongs, account for 43 percent of total payments for asset management services, up from only 17 percent a decade ago.
The 0.7 percent to 1.3 percent range that SoftBank charges its Vision Fund investors implies that Son could net roughly $1 billion a year in fees – without needing any exits for his unicorns. That return beats what BlackRock Inc. can make from its smart beta ETFs. Son can generate the equivalent of one unicorn a year in fees by just selling himself to investors as a tech visionary.
And he’ll have no trouble finding new believers. While endowments and sovereign funds are already heavily engaged in private markets, high-net-worth individuals, pension funds and insurance companies are still new to the field, and will be eager to get more involved. It makes sense for them to diversify.
Vision Fund, 2.0?
Masayoshi Son will have no trouble forming the next Vision Fund. Pension funds, insurers and high net-worth individuals are all keen to invest in private markets. Still, as impressive as Son may be as a financier and money-raiser, there’s a very real danger here for SoftBank posed by the sheer scale of the investment vehicle he has created.
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