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A man looks at the logo of SoftBank Group Corp at the company’s headquarters in Tokyo. Source: Reuters/Toru Hanai

SoftBank buys US investment manager Fortress in unusual shift to private equity

EVER since Masayoshi Son abandoned his retirement plans in favor of becoming the world’s top tech investor, SoftBank has made several interesting moves.

Besides making good on its pledge to create 50,000 jobs in the US by investing US$1 billion into satellite startup OneWeb, SoftBank has managed to wrangle the likes of Apple, Qualcomm and Saudi Arabia’s sovereign wealth fund in as backers of its Vision Fund.

SoftBank very recently dropped US$3.3 billion to buy asset manager Fortress Investment Group, which will pay a combined US$1.39 billion to the firm’s three leaders – co-chairmen Pete Briger and Wes Edens, and CEO Randy Nardone.

As reported by Bloomberg, buying Fortress serves SoftBank’s internal interests by building up its in-house investment team. According to a source familiar with the matter, the Fortress deal was for both “human capital” and “investment potential” purposes.

The Fortress buyout is seen by many as a portfolio diversification move for SoftBank that isn’t making too much sense at this stage. In the past, SoftBank has backed companies in the telecommunications, Internet and e-commerce space, which is why an investment into private equity is deemed as out of the ordinary.

Makoto Kikuchi, chief investment officer with the Tokyo-based Myojo Asset Management pointed out that SoftBank likely didn’t need to spend billions to acquire investment talent. “It’s really difficult to figure out what exactly are they after. If the goal is to build investing capabilities in-house, they can easily do it on their own. It also doesn’t seem like they are getting something on the cheap.”

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Bloomberg’s justification for the Fortress deal is two-pronged: SoftBank believes that the private equity business has a promising future and is worth the US$3.3 billion price tag. In addition, its founder Son also believes that Fortress principals Briger, Edens and Nardone could make up a “brain trust” to help SoftBank determine sound global investment opportunities. Whether the trio’s opinions are worth billions is hard to say.

According to a person familiar with the matter, Son sees the private-equity business as promising and also believes that Fortress, led by principals Pete Briger, Wes Edens and Nardone, can become a sort of “brain trust” for SoftBank, helping to track down and analyze investment opportunities around the world. It’s still early days for SoftBank’s foray into the private equity space, so only time will tell if the firm’s hefty investment will pay off.