Softbank CEO and Chairman Masayoshi Son. Photo: Alessandro Di Ciommo/NurPhoto via Getty Images
SoftBank is considering an IPO for its $100 billion Vision Fund, which would require some regulatory jujitsu to avoid U.S. regulatory prohibitions on non-accredited investors buying into alternative investment funds.
My thought bubble: I'd guess that SoftBank's lawyers can work their way around the SEC, particularly given that the current rules seem to codify a distinction without a difference.
- Retail investors can already buy into special purpose acquisition companies, which act like concentrated buyout funds (albeit with slightly more shareholder protections). They also can invest in publicly-traded private equity firms, which are little more than a collection of opaque underlying funds.
Even if SoftBank doesn't figure this out — or simply opts against it — there are others working toward similar ends.
- Most notable is the rowing cohort of "GP stake" funds, such as Dyal Capital and Goldman Sachs' Petershill.
- The are funds that buy passive, minority positions in other, privately-held private equity firms. They primarily generate returns via firm cash-flows (i.e., a cut of underlying fund fees), but there isn't yet a way to fully exit.
- One possibility is that enough of these firms will launch so that a true secondary market emerges, but there also is talk about trying to bring one of these funds public. Almost a quasi-ETF of private equity funds, like how SoftBank Vision would create a quasi-ETF of tech unicorns.
The bottom line: Private equity remains constrained by its present inability to tap retail investors and defined contribution plans. It has no interest in settling for that status quo.