Blackstone's Schwarzman Sees SoftBank's Son in League of His Own

(Bloomberg) -- The head of the world’s biggest private equity firm sees few financial institutions as aspiring as his own Blackstone Group LP. A new fund from Masayoshi Son’s SoftBank Group Corp. may be the exception.

“He’s bold, he’s sleepless, he’s aggressive, and he’s picked an area in which to invest which, for the most part, doesn’t have cash flow,” Blackstone Chief Executive Officer Steve Schwarzman said of Son on a conference call with analysts Thursday. “He’s an outlier in terms of his -- not to beat the phrase -- vision.”

Son’s Vision Fund, a technology-focused pool with a $100 billion target, has taken stakes in scores of companies including Uber Technologies Inc., Slack Technologies Inc., WeWork Cos. and Chinese ride-hailing company Didi Chuxing. The fund made about 100 investments last year with a total value of $36 billion, according to research firm Preqin.

For a more typical private equity investor like Blackstone, that model is unusual. The buyout industry usually goes after more established companies that kick off significant cash, not least because they can use that consistent flow to layer on leverage and juice returns. Bets on earlier-stage technology businesses present different risks.

“The amount of money that can be deployed in a whole industry that really suffers from lack of cash flow -- in effect negative cash flows to get to break even -- that’s a highly specialized set of characteristics,” Schwarzman said. “What he’s done, quite brilliantly actually, is gone out to be the defining institution in that asset class.”

Howard Marks, co-chairman of Oaktree Capital Group LLC, wrote about the Vision Fund’s risk in a memo in July. He was skeptical of whether skill or luck had driven its success and questioned whether it could stay disciplined when deploying a sum of its size in the technology industry.

“The willingness of investors to invest in a shockingly large fund for levered tech investing with a questionable structure is a further indication of an exuberant, unquestioning market,” he wrote at the time.

--With assistance from Olivia Zaleski

To contact the reporter on this story: Melissa Mittelman in New York at mmittelman@bloomberg.net.

To contact the editors responsible for this story: Elizabeth Fournier at efournier5@bloomberg.net, Michael Hytha

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