Fortress Investment Group Might Be Sold: SoftBank Eyes Options

SoftBank’s interest in selling Fortress Investment Group may well be an attempt to shave costs after an ambitious merger of Sprint Corp. and T-Mobile US Inc. collapsed. Even without a deal, the Vision Fund’s financing arrangements could prove expensive, according to David Menlow, president of IPO Financial Analysis.

SoftBank’s Vision Fund is expected to reach the $100 billion milestones by year’s end, a person familiar with the matter said last week. The offering is the largest ever by a venture capital fund. The Japanese firm holds stakes in both companies.

SoftBank may eventually decide to keep Fortress Investment Group and will decide on the matter later, one of the people said. SoftBank and Fortress declined to comment.

The New York Firm manages more than $40 billion in assets, according to its website, across hedge funds, private equity, and credit investments. It has previously been an investor in Fortress’s funds.

While Fortress Investment Group has generated strong growth and profits, its clients have also suffered through rocky times. As those suffering, the firm often took short positions on some of its investments, betting that their value would fall. It also issued credit default swaps to insure investors against possible losses.

Even before SoftBank acquired Fortress, the Japan-based company’s foray into the world of private equity had soured. The fund’s meteoric rise and its expectation that it could double its assets under management in just three years were stymied when a 2015 commodity slump weighed down the value of assets.

Last year, SoftBank booked $4.5 billion in impairment losses from the value of private equity assets that it acquired as part of the Vision Fund, a regulatory filing show.

SoftBank Chief Executive Officer Masayoshi Son, who has been eyeing asset management as a strategic area for the company, is targeting a deal in the next several months, the people said. In the meantime, SoftBank is considering options for the New York Fortress Investment Group, including the sale of its entire investment in the firm, a real estate and hedge fund firm, the people said.