Abu Dhabi’s sovereign wealth fund Mubadala Investment Company may invest as much as $25 billion in SoftBank Group Corp.’s second Vision Fund, according to a report by Wall Street Journal.
The $227-billion Mubadala is an existing investor in the Vision Fund, having committed $15 billion to the first fund.
Two weeks ago, SoftBank announced it has gathered some $108 billion for Vision Fund 2. It had signed memoranda of understanding with 12 investors including the sovereign wealth fund of Kazakhstan, Microsoft Corp and Japan’s three mega banks, as well as existing Vision Fund backers Apple Inc and Foxconn.
SoftBank itself is committing $38 billion into the fund, replacing Saudi Arabia’s sovereign wealth fund Public Investment Fund (PIF) as the largest investor. The latter, who committed $45 billion in the first Vision Fund, is not planning to invest as much in Vision Fund 2.
According to the WSJ report, some investors of Vision Fund 2 are planning to make the bulk of the funding commitments via some form of debt. The first Vision Fund had set a precedent in this, as it uses preferred shares that offer a fixed return of 7 per cent.
SoftBank is said to be banking on contributions from potential investors beyond the 12 named entities – those that are not listed in its public statements – and that the figure could include debt or debt-like securities.
The 12 investors listed by SoftBank may not able to contribute more than a few tens of billions of dollars. Citing a Nikkei report, WSJ said several Japanese participants of Vision Fund 2 were investing in the millions, not billions of dollars.
SoftBank launched its first Vision Fund in October 2016 with huge commitments from both PIF and Mubadala Fund, although these two investors were not publicly disclosed as backers for Vision Fund 2.
In June, SoftBank disclosed the first Vision Fund has earned 62 per cent returns so far after making 71 investments for a total of $64.2 billion. But some investors are skeptical whether SoftBank can continue to deliver returns over the fund’s 12-year life span as much of those returns are on paper – which will remain unrealised until the portfolio companies are exited.